2016 ANNUAL REPORT Investec Limited group and company 16 20 annual nancial statements Investec Bank Limited group and company annual nancial statements

Specialist Banking

Corporate information

SECRETARY AND REGISTERED TRANSFER SECRETARIES OFFICE Computershare Investor Services (Pty) Ltd Niki van Wyk 70 Marshall Street 100 Grayston Drive 2001 Sandown 2196 PO Box 61051 PO Box 785700 Sandton 2146 Marshalltown 2107 Telephone (27 11) 286 7000 Telephone (27 11) 370 5000 Facsimile (27 11) 286 7966 DIRECTORATE INTERNET ADDRESS Refer to page 90 www.investec.com For contact details for Investec offices refer to page 195. REGISTRATION NUMBER Reg. No. 1969/004763/06

AUDITORS KPMG Inc. Ernst & Young Inc.

For queries regarding information in this document INVESTOR RELATIONS Telephone (27 11) 286 7070 e-mail: [email protected] Internet address: www.investec.com/en_za/#home/investor_relations.html

Investec Bank Limited group and company annual financial statements 2016 1 1

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CROSS REFERENCE TOOLS

1. Audited information 2. Page references 3. Website 4. Sustainability 5. Reporting standard Denotes information in Refers readers to information Indicates that additional Refers readers to further Denotes our consideration of the risk and remuneration elsewhere in this report information is available on information in our a reporting standard reports that forms part of our website: sustainability report available the group’s audited financial www.investec.com on our website: statements www.investec.com

2 Investec Bank Limited group and company annual financial statements 2016 Contents

1 Investec Bank Limited in perspective Overview of the Investec group’s and Investec Bank Limited’s organisational structure 5 Overview of the activities of Investec Bank Limited 6 Our operational footprint 7 Highlights 8

2 Financial review Financial review 12

3 Risk management and corporate governance Risk management 22 Credit ratings 82 Internal Audit 83 Compliance 84 Corporate governance 85 Directorate 90

4 Remuneration report Remuneration report 92

5 Annual financial statements Directors’ responsibility statement 105 Declaration by the company secretary 105 Directors’ report 106 Independent auditors’ report 108 Income statements 109 Statements of comprehensive income 110 Balance sheets 111 Statements of changes in equity 112 Cash flow statements 116 Accounting policies 117 Notes to the financial statements 126 Contact details 195

Investec Bank Limited group and company annual financial statements 2016 3 One Investec Bank Limited in perspective INVESTEC BANK LIMITED IN PERSPECTIVE 5

ONE

Import (Pty) Ltd Investec Investec Holdings Solutions (Pty) Ltd^ Property Group Group Property 45%** (Pty) Ltd (Pty) Ltd Investec Partners Securities Investec Equity operations Southern African Investec Limited JSE primary listing BSE secondary listing NSX secondary listing 85%* (Pty) Ltd (Pty) Ltd Holdings Holdings Reichmans Management Investec Asset Bank Limited Limited Investec 15% held by senior management in the company. 55% held by third party investors in the company together with senior management of the business. (Pty) Ltd. Previously Blue Strata Trading () Investec Bank All shareholdings in the ordinary share capital of the subsidiaries are 100%, unless otherwise stated. * ** ^ Sharing agreement 20 June 2002 and is available on our website. 20 June 2002 and is available A circular on the establishment of our DLC structure was issued on on of our DLC structure was issued A circular on the establishment 

Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Bank Limited’s organisational structure organisational Bank Limited’s During July 2002 Investec Group Limited (since renamed Investec Limited) implemented Investec Limited) implemented Limited (since renamed Group During July 2002 Investec business on the and listed its offshore (DLC) structure a dual listed companies Stock Exchange. Operating structure In terms of the DLC structure, Investec Limited is the controlling company of our company of our Limited is the controlling Investec In terms of the DLC structure, of company controlling the businesses in Southern plc is Africa and Mauritius and Investec our non-Southern on the JSE Limited African businesses. Investec Limited is listed Limited (referred the . Investec Bank is listed on plc Investec and Limited. as the bank) is a subsidiary of Investec to in this report Overview of the Investec group’s and Investec Investec and group’s Investec of the Overview 85%* Limited Limited Investec Holdings () Management Investec Asset

operations Investec plc Non-Southern African Limited Investec LSE primary listing Bank plc JSE secondary listing & Investment Investec Wealth Investec Wealth Investec plc and Investec Limited are separate legal entities and listings, but are bound separate legal entities and listings, but are Investec plc and Investec Limited are and mechanisms together by contractual agreements Investec operates as if it is a single unified economic enterprise as if Investec plc and have common economic and voting interests Shareholders a single company Investec Limited were ring-fenced to either Investec plc or Investec Limited as there are however, Creditors, between the companies. no cross-guarantees are • • • Salient features of the DLC structure • Investec Limited, which Investec Limited, houses our Southern Mauritius African and been operations, has Africa listed in South since 1986 OUR DLC STRUCTURE AND MAIN OPERATING SUBSIDIARIES AS AT 31 MARCH 2016 AS AT SUBSIDIARIES OPERATING OUR DLC STRUCTURE AND MAIN Transactional banking and Transactional exchange foreign Lending Deposits Investments Private Banking activities positions itself as the ‘investment bank for both credit private clients’, offering and investment services to our select clientele. partnerships, strong Through a community we have created of clients who thrive on being and part of an entrepreneurial Our target innovative environment. market includes ultra high net worth individuals, active wealthy high-income entrepreneurs, self-employed professionals, owner managers entrepreneurs, in mid-market companies and sophisticated investors. High-income and high net worth private clients Private Banking activities Investec Bank Limited operates as a specialist bank within SouthernInvestec Bank Limited Africa. The Investec Limited. managed as a single banking entity within bank is operationally Treasury and trading services Treasury Specialised lending, funds and debt capital markets Advisory and equity capital markets Corporate and Institutional Banking activities a wide range of specialist products, provides services and solutions to select corporate clients, public sector bodies and institutions. The division undertakes the bulk of Investec’s wholesale debt, structuring, proprietary trade trading, capital markets, advisory, finance, import solutions and derivatives business. activities are Our institutional stockbroking conducted outside of the bank in Investec Securities (Pty) Ltd. Corporate and Institutional Banking activities Integrated systems and infrastructure SPECIALIST BANKING SPECIALIST Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Overview of the activities of of activities of the Overview Bank Limited Investec

ONE Principal Investments Corporates/government/institutional clients Investment activities Our Principal Investments division seeks to invest largely in unlisted companies. 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 strategy. by implementing an agreed A material portion of the bank’s principal investments have been to a new vehicle, transferred Investec Equity Partners (IEP). The bank holds a 45% stake in IEP alongside other strategic investors 55% in IEP. who hold the remaining our Central Funding Furthermore, division is the custodian of certain investments. equity and property

6 What we do What we

INVESTEC BANK LIMITED IN PERSPECTIVE INVESTEC BANK LIMITED IN PERSPECTIVE 7 ONE

Mauritius Established 1997 One of the leading international in Mauritius High-quality specialist banking solution to corporate and private clients with leading positions in selected areas high touch Provide personalised service – ability to execute quickly Ability to leverage international, cross-border platforms positioned to capture Well opportunities between the developed and the emerging world – internationally mobile Balanced business model with good business depth and breadth. • • • • • OUR value proposition Our operational footprint Our operational South Africa Strong brand and positioning brand Strong Fifth largest bank Leading in corporate institutional and private client banking activities Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group we operate

Further information on the Specialist Banking management Further information on the Specialist Banking structure is available on our website. 

The specialist teams are well positioned well positioned The specialist teams are services for both personal to provide Private and business needs right across Banking, Corporate and Institutional Banking and Investment activities. and energy Business leader Wainwright Richard delivered with dedication dedication with delivered Specialist expertise expertise Specialist WHERE

2015 2015 2015 2015 2015 2015 2015 2015

0.29% 53.9% 78.1% R88.7bn R177.5bn R221.4bn

R3 673mn 11.4 times 2016 2016 2016 2016 2016 2016 2016 2016 0.26% 53.3% 74.1% R124.9bn R215.2bn R279.7bn R4 295mn 12.6 times FINANCIAL FINANCIAL PERFORMANCE Investec Bank Limited recorded recorded Investec Bank Limited before in profit a 16.9% increase taxation cost to income ratio Improving loss ratio credit Improving Cash and near cash balances 40.8% increased Core loans and advances loans and advances Core 21.2% increased Customer deposits 26.4% increased Ratio of loans and advances to strong deposits remains Low gearing ratios 90 80 70 60 50 40 30 20 10 0 8.3% 14.4% 10.3% 21.9% Percentage 16 % change 15 2015 3 014 39 348 28 899 332 706 14 31 March 31 March 13 2016 3 449 42 597 31 865 12 405 629 31 March 31 March 11 10 09 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group 08 Highlights Trading income Trading Investment income Other fees and other operating income Annuity fees and commissions income Net interest Annuity incomeˆ as a % of total income

07

Where annuity income is net interest income and annuity fees. 0 ONE 000 000 000 000 000 000 ’million Total capital resources resources capital Total liabilities) (including subordinated Headline earnings equity Total assets Total R’million 2 0 8 6 4 2 ^

8 (2015: R8 946 million) 16.1% to R10 388 million Total operating income increased income increased operating Total base supports a solid revenue We have a strong franchise that franchise have a strong We income operating totalling 74.1% of base, totalling a large recurring revenue revenue recurring a large continues to support continues MODEL A DIVERSIFIED BUSINESS BUSINESS A DIVERSIFIED Other financial features TOTAL OPERATING AND ANNUITY INCOME^ R 1 1

INVESTEC BANK LIMITED IN PERSPECTIVE INVESTEC BANK LIMITED IN PERSPECTIVE 9 250 200 150 100 50 0 R’billion ONE 16 15 14 13 (continued) (continued) 12 Highlights 11 10 09 08 Net core loans (RHS) Net core loans and advances (LHS) collateral) as a % of core Net defaults (before loss ratio (income statement impairment charge as a % of Credit advances) (LHS) average core 07 1 5 Percentage 4 0 2 3 DEFAULT AND CORE LOANS 517 16 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group 15 Core loans and advances increased by 21.2% to R215.2 billion by loans and advances increased Core loans and advances of core as a percentage Default loans (net of impairments) 1.46% to 1.06% from decreased to 0.26%, notwithstanding an increase 0.29% from loss ratio improved The credit in impairments collateralised. adequately Net defaults (after impairments) remain of core loans and advances loans and advances of core

14 13 levels have normalised 12 11 10 09 08

07

0 200 400 600 800 ‘million IMPAIRMENTS IMPAIRMENT CREDIT QUALITY CREDIT

R has improved 1 000 review Financial Two 9.6% 279.7 11.0% equity 16 Common tier 1 ratio 15 14 11.3% 11.4% 13 Tier 1 ratio 12 11 31 March 2015 (Basel III) 31 March ratio 14.7% 15.4% Capital Capital 10 adequacy adequacy 09

08 9.6% equity 10.6% 07 Common tier 1 ratio 0 50 100 250 300 200 150 R’billion CUSTOMER ACCOUNTS (DEPOSITS) 10.7% 11.0% Tier 1 ratio Mar 16 31 March 2016 (Basel III) 31 March ratio 14.0% 14.6% Capital The intimate involvement of senior management ensures stringent management of risk stringent management of senior management ensures The intimate involvement and liquidity we and requirements to hold capital in excess of regulatory Our policy has always been philosophy intend to perpetuate this Investec has maintained a stable capital base in place remains A well-established liquidity management philosophy in customer an increase recorded retail deposit franchise and a growing Benefited from deposits of customer deposits is at 74.1% (2015: 78.1%) Advances as a percentage (solo basis) Bank Limited’s average of Investec ended the year with the three-month We which is well ahead of the minimum liquidity coverage ratio at 117.3% (2015: 100.3%) level required. regulatory adequacy from a growing retail deposit franchise retail a growing from Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Highlights (continued) Near cash (other ‘monetisable’ assets) cash placements and guaranteed liquidity Cash

Apr 15 Maintaining a high level of Maintaining a high level available, high-quality readily liquid assets – approximately liability 37.6% of the bank’s base Diversifying funding sources Limiting concentration risk on wholesale Reduced reliance funding.

Continue to focus on: Continue to focus • • • • ONE 0 80 000 60 000 40 000 20 000 Investec Limited Investec Bank Limited R’million 10 CASH AND NEAR CASH TREND 140 000 BENEFITING

CAPITAL ADEQUACY AND TIER 1 RATIOS CAPITAL SOUND CAPITAL AND LIQUIDITY SOUND CAPITAL maintained principles 120 000 100 000

INVESTEC BANK LIMITED IN PERSPECTIVE Two Financial review recession as the commodity cycle, global as the commodity cycle, global recession trade volumes and world economic growth have proved Foreigners slumped lower. portfolio assets net sellers of South Africa’s 2016 mid-December to end March from concerns, on domestic economic growth rating downgrades and fears of credit rates in expectations of higher interest rating the credit the US. In particular, South Africa’s reassessing agencies are in terms of its downward creditworthiness trajectory and rising economic growth government debt ratios. Indeed, the unsupportive global for a commodity exporter environment risks the South African economy stalling if not entering a technical this year, along with the global economic recession, slowdown. Besides the global headwinds, the domestic economy also faces constraints in terms of skills some real labour market shortages, a restrictive although meaningful and infrastructure, has begun on alleviating progress electricity supply constraints. South Bank ranking Africa has seen its World on the ease of doing business slip, but could see an structural improvements unemployment ability to reduce improved The and eliminate poverty. and inequality, advent of 2016 heralded a closer working between government relationship and business, which if successful will allow a social of upward rapid progression more in the earlier years of as occurred mobility, democracy. the country’s Furthermore, South Africa is placed third South Africa is placed third Furthermore, of its corporate in terms of the efficacy and has incubated a large number boards, of companies to international with level, interests of minority shareholder protection banking South Africa’s globally. also third sector is ranked eighth with deep, liquid, sophisticated markets and consistent, sound budgetary policies which allow South Africa to be a key contributor in the global bond market. The International latest Open Budget Budget Partnership’s among Index ranks South Africa third 88 countries, after only New Zealand and 2011 South Africa from Sweden. However, rating downgrades from has seen credit S&P on the deterioration in economic and some fiscal slippage as growth, the ratios deteriorated, although very conservative Budget was a more recently under the new Finance Minister, presented Pravin Gordhan. The financial market upheaval in mid- December 2015 impacted by the Finance of previous abrupt replacement Minister Nhlanhla Nene by temporary the Finance Minister van Rooyen drove JSE and bond yields domestic currency, to elevated risk-aversion levels. Despite of Pravin the appointment soon thereafter the to the Finance Minister role, Gordhan Rand went into the mid-January global debt, commodities and equities market a historic reaching weakened, severely rout low of close to R17.00/USD, with the JSE to 45 493. The mid-January dropping fears of global on growing occurred rout South Africa remains institutionally remains institutionally South Africa solid ratings from the World sound, with Global Competitiveness Economic Forum’s its auditing and as the strength of Survey, are ranked first, and reporting standards exchange the regulation of its securities (JSE) second, in the world 1.5% 2014/15 Economic growth 2015 R56 198 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Financial review Financial

GDP per has fallen 2015/16 Economic growth South Africa faced another year in 2015, as the difficult slump in the commodity cycle intensified, along with the slower growth of key trading partners (notably China), while domestically the most in 25 years drought severe The commodity occurred. and manufacturing sectors saw an industrial sector and GDP recession, consequently growth slipped further to 1.3% last year on year from 1.5% year on year. year’s GDP per capita fell for the first time since the dropping 2009 recession, terms to R56 169 in real and gross R56 198 from national income per capita continued its declining began in 2013. which trend R56 169 1.3% 2016 TWO OUR VIEWS South Africa An overview of the operating environment impacting our business of the operating environment An overview 12

FINANCIAL REVIEW FINANCIAL REVIEW 13 TWO (continued) (continued) (continued) Partly as a result of last year’s market market of last year’s Partly as a result gyrations, our view is that risks to the tilted global outlook have become more organisations, to the downside. Various Bank, such as the OECD, IMF and World is that But our view appear to concur. on a economic fundamentals remain footing – a view if unspectacular, steady, borne data, which have out by the ‘hard’ continued to point to sustained economic Consistent with, and in part growth. on broadly because of, the data remaining track, the last few weeks of the financial most of year saw equity markets recover their January and February losses. Financial review Financial Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group This pattern of declines (oil supply issues two major notwithstanding) reflects to global economic risks. The first relates issues came to a head last China, where of the Chinese August. A depreciation in equity markets a sell-off triggered Yuan about a worldwide as investors fretted after landing’. However, Chinese ‘hard a volatile few weeks, markets recovered as it turned out that global economic to remain fundamentals appeared relatively sound. deflationary The second risk, of a broader, global slowdown, particularly in the sharpened in January and area, Euro February 2016. The immediate trigger for in global markets was lurch a downward banking stocks. In in Eurozone a sell-off part, this could have been driven by fears negative about the impact of the ECB’s rate policy on banks’ profitability. interest a worry emerged that generally, More central banks and other policymakers are running out of scope to combat economic stagnation and deflation. Over and above these two global worries, of Finance Minister Nene in the removal South Africa in December 2015 caused and Banking indices to the JSE All Share fall by over 20% in a matter of days, with experienced over the month little recovery that followed, although the JSE All Share in line with the prior ended March 2016 level. year’s

OUR VIEWS Global stock markets An overview of the operating environment impacting our business impacting our business of the operating environment An overview But that early optimism turned into a challenging year as a whole for financial markets, with the price of risky assets in general, than when the year lower, began. After a surge in the middle of 2015, index in China was the Shanghai share 20% lower by financial year end. In the Stoxx 50 index slid the Euro Eurozone, declined FTSE All Share 19%. The UK’s 7%. In the US, the S&P 500 was more ending the year 0.4% lower. resilient, Commodity prices slid too, especially driven declines were the oil price, where continued bid to partly by Saudi Arabia’s by keeping output maintain market share high and prices low. Equity markets began Equity markets began the financial year in a buoyant mood, with the FTSE 100 breaking UK’s the significant through 7 000 point milestone to set a new high during April 2015. These gains the belief that reflected global economic growth was set to accelerate and and emerging Europe managing economies were their challenges. 2016 3 500 2 033 8.17% 6.45% 9.61% 6.43% 0.46% 1.81% 0.50% 0.59% 2.12% 18 844 17 306 51 705 2015 to 2015 to Average over the over the 31 March 31 March US$49/bbl US$983/oz year 1 April US$1 151/oz 0.1% 3.8% (7.3%) (0.4%) (0.5%) (0.1%) (12.7%) (28.6%) (13.6%) % change Year 2015 1.5% 3 664 2 068 7.80% 6.30% 9.25% 6.11% 0.42% 1.58% 0.50% 0.57% 1.93% ended 17 776 52 182 19 207 56 198 31 March US$56/bbl US$1 188/oz US$1 129/oz

Year 2016 2016 1.3% 3 395 2 060 9.10% 6.92% 7.23% 0.41% 1.42% 0.50% 0.59% 1.79% ended ended 17 685 52 250 16 759 56 169 10.50% 31 March US$40/bbl US$976/oz US$1 233/oz Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Financial review Financial (continued) TWO Dow Jones Rates SA R186 Macro-economic South Africa GDP (% change over the period) Market indicators JSE All share FTSE All share S&P Nikkei Rand overnight rate SA prime overdraft month JIBAR – three UK overnight UK 10 year UK clearing banks base rate month LIBOR – three US 10 year Commodities Gold crude oil Brent Platinum Sources: Datastream, Bloomberg, Office for National Statistics, SARB Quarterly Bulletin. South Africa per capita GDP (real value in Rands, historical revised) value in Rands, historical revised) South Africa per capita GDP (real 14 Operating environment Operating environment BE SHOULD THAT AN OVERVIEW BELOW PROVIDES OF SOME KEY STATISTICS THE TABLE PERFORMANCE REVIEWING OUR OPERATIONAL CONSIDERED WHEN

FINANCIAL REVIEW FINANCIAL REVIEW 15 TWO

(continued) (continued) Net interest income Net interest Fees and commissions. Fees and commissions income arising from Trading customer flow. Fees and commissions. Net interest income Net interest Investment income. Net interest income Net interest Fees and commissions. Net interest income Net interest income arising from Trading balance sheet management activities. Net interest income Net interest Fees and commissions Investment income. – – – – – – – – – – – – – – – – – – – – – – – – – – – – Income statement Income statement as – primarily reflected Financial review Financial

Levels of activity Ability to create innovative innovative Ability to create products Appropriate Appropriate systems infrastructure. Client activity Market conditions/volatility Asset and liability creation Product Product innovation Market risk factors, primarily Market risk factors, primarily volatility and liquidity. The demand for our specialised The demand for our specialised advisory services, which, in turn, by applicable tax, is affected and and other macro- regulatory fundamentals. micro-economic Macro- and micro-economic and micro-economic Macro- market conditions Availability of profitable exit exit of profitable Availability routes Whether appropriate market market Whether appropriate conditions exist to maximise gains on sale Attractive investment opportunities. Distribution channels Ability to create innovative innovative Ability to create products Regulatory requirements Credit Credit spreads. Capital employed in the business Capital employed in the business and capital adequacy targets Asset and liability management  Asset and liability management policies and risk appetite Regulatory requirements Credit Credit spreads. Size of loan portfolio Clients’ capital and infrastructural  Clients’ capital and infrastructural investments Funding requirements Client activity Credit Credit spreads Shape of . Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Income impacted Income impacted primarily by Transactional banking services Transactional Derivative sales, trading and Derivative sales, trading and hedging Advisory services Investments made (including Investments made (including listed and unlisted equities; debt securities; investment properties) Gains or losses on investments Dividends received Deposit and product structuring structuring Deposit and product and distribution Cash and near cash balances Lending activities – – – – – – – – – – – – – – – – – Key income drivers – Key income drivers of financial providing a wide range as a specialist bank The bank operates Mauritius. base in South Africa and services to a select client products and 75 27 51 – 53 66 – 68 71 – 74 Our net interest earnings and net Our net interest asset value may be adversely rate risk. by interest affected Retail conduct risk is the risk that we our customers unfairly and deliver treat outcomes. Wholesale inappropriate conduct risk is the risk of conducting in the market. ourselves inappropriately We may be exposed to investment We risk largely in our unlisted investment portfolio. We may be exposed to country We in sovereign risk i.e. the risk inherent and events in other exposure countries. Employee misconduct could cause to detect. harm that is difficult These risks are These risks are in the summarised briefly further table below with risk in the detail provided of management section this report. pertaining to the For additional information of these risks, management and monitoring provided. see the page references

28 See Investec’s 2016 See Investec’s integrated annual report on our website.  71 – 74 59 – 66 12 – 14 74 and 75 recruit, retain retain may be unable to recruit, We and motivate key personnel.  Compliance, legal and regulatory Compliance, legal and regulatory risks may have an impact on our business. vulnerable to the failure may be vulnerable to the failure We of our of our systems and breaches security systems (including cyber and information security). Liquidity risk may impair our ability to fund our operations. environmental, social Unintended environmental, and economic risks could arise in our lending and investment activities. Market, business and general economic conditions and fluctuations could adversely affect our businesses in a number of ways. Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Financial review Financial (continued) 12 – 14 27 – 50 71 – 74 55 – 58 75 – 81 74 and 75 Operational risk (including financial may failure) crime and process in disrupt our business or result action. regulatory The industry in which we operate is intensely competitive. Credit and counterparty risk Credit exposes us to losses caused by financial or other problems experienced by our clients. Market risk arising in our trading our operational book could affect performance. We may have insufficient capital may have insufficient We and may be unable to in the future additional financing when it secure is required. Reputational, strategic and business risk could impact our operational performance. TWO 16 Additional risks and uncertainties not presently known to us or that we currently deem not presently known to us or that we Additional risks and uncertainties also negatively impact our business operations. immaterial may in the future In our ordinary course of business course of business In our ordinary affect of risks that could we face a number our business operations our business

FINANCIAL REVIEW FINANCIAL REVIEW 17 1.0% (4.5%) 14.6% 19.5% 21.6% 16.1% TWO (> 100.0%) % change – 2.9% 3.2% 15.9% 16.3% 61.7% income 100.0% (continued) (continued) % of total 1 260 290 2015 8 946 1 420 1 454 5 521 31 March Financial review Financial Net interest income Net fee and commission income Investment income Trading income arising from customer ow Trading income arising from balance sheet management and other trading activities Other operating income 3.2% 2.9% 0.0% 2.9% 2.8% (0.1%) 61.7% 16.3% 15.9% 13.1% 16.7% 64.6% R8 946 million total operating income before impairment losses on loans and advances 31 March 2015 31 March income 100.0% % of total (9) 298 293 2016 1 356 1 738 6 712 10 388 31 March Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Net interest income Net fee and commission income Investment income Trading income arising from customer ow Trading income arising from balance sheet management and other trading activities Other operating loss 64.6% 16.7% 13.1% 2.8% 2.9% (0.1%) R10 388 million total operating income before impairment losses on loans and advances 31 March 2016 31 March balance sheet management and other trading activities customer flow Total operating income before impairment income before operating Total losses on loans and advances Other operating (loss)/income – Trading income arising from Trading – Investment income Net fee and commission income Net interest income Net interest R’million % OF TOTAL OPERATING INCOME BEFORE IMPAIRMENT LOSSES ON LOANS AND ADVANCES % OF TOTAL OPERATING INCOME Total operating income before impairment losses on loans and advances increased by 16.1% to R10 388 million (2015: R8 946 million). by 16.1% to R10 388 advances increased impairment losses on loans and income before operating Total analysed below. are The various components of total operating income TOTAL OPERATING INCOME INCOME OPERATING TOTAL Income statement analysis Income statement income statement major category line items on the face of the for the variance in the will highlight the main reasons The overview that follows during the year under review. Overview of 14.4% to R3 449 million (2015: R3 014 million). shareholders in headline earningsto ordinary attributable The bank posted an increase as calculated in terms of Basel III (2015: 15.4%). with a capital adequacy ratio of 14.6% sound The balance sheet remains year ended for the to the results below relate in the review otherwise, all income statement comparatives Unless the context indicates 2015. 31 March 4.8% 11.6% 14.5% 25.5% 23.4% 14.9% 14.9% % change 2.9% 6.3% 7.8% 3.3% 6.8% costs 72.9% 100.0% operating % of total (138) (304) (376) (161) (329) 2015 (3 510) (4 818) 31 March 31 March 2.8% 6.3% 7.2% 3.6% 7.3% costs 72.8% 100.0% % of total operating (154) (348) (394) (202) (406) 2016 (4 033) (5 537) 31 March 31 March Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Financial review Financial (continued) For further information on asset quality refer to pages 42 to 50. For further information on asset quality refer For a further analysis of investment income refer to pages 127 and 128. For a further analysis of investment income For a further analysis of net fee and commission income refer to page 127. For a further analysis of net fee and commission For a further analysis of interest income and interest expense refer to page 126. of interest income and interest expense refer For a further analysis     TWO Total operating costs Total Depreciation Marketing expenses Premises expenses (excluding depreciation) Premises Equipment expenses (excluding depreciation) Business expenses Staff costs (including directors’ remuneration) costs (including directors’ Staff R’million 18 TOTAL OPERATING COSTS OPERATING TOTAL were operating costs at R5 537 million Total The ratio of total operating costs to total operating income amounts to 53.3% (2015: 53.9%). costs and system infrastructure in headcount of: an increase 14.9% higher than the prior year (2015: R4 818 million) largely as a result in variable and an increase Investec Import Solutions); (rebranded initiatives; the acquisition of the Blue Strata group to support growth profitability. given improved remuneration analysed below. The various components of total operating costs are IMPAIRMENT LOSSES ON LOANS AND ADVANCES IMPAIRMENT of loss charge as a percentage the credit R455 million to R517 million. However, from Impairments on loans and advances increased of default loans (net of 2015 to 0.26%. The percentage 0.29% at 31 March from loans and advances has improved core average gross (2015: 1.46%). The ratio of collateral loans and advances amounts to 1.06% taking collateral into account) to core impairments but before at 1.61 times (2015: 1.44 times). satisfactory to default loans (net of impairments) remains Trading income Trading to R591 million 7.5% other trading activities increased customer flow and balance sheet management and income arising from Trading gains. currency higher activity levels and foreign (2015: R550 million) reflecting Investment income unlisted investments portfolio continued to perform 4.5% to R1 356 million (2015: R1 420 million). The bank’s Investment income decreased in the new vehicle to page 51) the bank will equity account its 45% interest of Investec Equity Partners (IEP) (refer well. Following the creation which has a 31 December financial year end. Net fee and commission income Net fee and commission the from of a good performance R1 454 million) as a result 19.5% to R1 738 million (2015: income increased Net fee and commission (rebranded group In addition, the acquisition of the Blue Strata businesses. lending and corporate treasury private banking, corporate income. had a positive impact on net fee and commission Investec Import Solutions) Net interest income Net interest its in a solid increase with the bank benefiting from to R6 712 million (2015: R5 521 million) by 21.6% income increased Net interest loan portfolio.

FINANCIAL REVIEW FINANCIAL REVIEW 19 TWO (continued) (continued) Financial review Financial Staff costs Business expenses Equipment expenses Premises expenses Marketing expenses Depreciation 6.8% 3.3% 7.8% 6.3% 2.9% 72.9% R4 818 million total operating costs 31 March 2015 31 March Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Staff costs Business expenses Equipment expenses Premises expenses Marketing expenses Depreciation 7.3% 3.6% 7.2% 6.3% 2.8% 72.8% R5 537 million total operating costs 31 March 2016 31 March Total shareholders’ equity increased by 10.3% to R31.9 billion (2015: R28.9 billion), largely as a result of retained earnings of retained by 10.3% to R31.9 billion (2015: R28.9 billion), largely as a result equity increased shareholders’ Total advances loans and in core of an increase billion), largely as a result by 21.9% to R405.6 billion (2015: R332.7 increased assets Total and cash and near cash balances. % OF TOTAL OPERATING COSTS % OF TOTAL OPERATING Balance sheet analysis 2015: Since 31 March • • How do you incorporate social environmental, and governance (ESG) considerations into your business? What is your outlook What is your outlook for the coming financial year?   We continue to focus on developing our We people and investing in our communities a number receiving and the environment, in the past year. for our efforts of awards Our flagship educational initiative in South continues to outpace Africa, Promaths the national average for Mathematics continue We and Science in the country. to experience good momentum in our enterprise development programme selected entrepreneurs where (Young Treps) marketing learn valuable skills in strategy, remain vital and finance. Our employees to provide in delivering on our promise exceptional client experiences and hence we continue to focus on attracting, developing talent. In this retaining and most Investec was voted third regard, attractive employer in South Africa in the 2016 Universum Most Attractive Employer awards. Despite the current structural challenges structural challenges Despite the current corporate in the South African economy, opportunities. activity continues to present financial sector and an have a strong We continue which will active private sector, to support momentum in the specialist banking businesses. To continue to organically grow the the continue to organically grow To and transactional banking, property private capital businesses in the streams diversify our revenue To corporate and institutional market a Build sustainability through diversified portfolio of businesses. What are your strategic What are objectives in the coming financial year?  We continue to build our franchise in continue to build our franchise in We client segments. Building and our core developing our client franchises remains and development of integral to the growth committed to our organisation and we are optimising the client experience, ensuring with us as an our target clients do more organisation. Our strategic focus in Southern Africa the following: remains • • • We continue to benefit from the the continue to benefit from We the Private Bank collaboration between & Investment business, with and Wealth the Financial international from recognition as the Best Private Bank and Times Manager in South Africa for the Wealth have made good year running. We third with our digitisation strategy progress which focuses on ensuring that we create a client experience that is both ‘Out of the and ‘high tech and high touch’. Ordinary’ This is part of our strategy to deepen our client with our core relationships strong spectrum of them a broad base, and offer services and products. and answers Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Financial review Financial (continued)

Refer to pages 12 to 14 for Refer to pages 12 to 14 for further information. 

What have been the key developments in your business over the past financial year? Can you give us an Can you give us overview of the market in which environment you have operated over the past financial year?   TWO 20 BUSINESS LEADER Richard Wainwright QUESTIONS The bank reported a positive performance a positive performance The bank reported up 16.9%, driven by with operating profit in the corporate loan book growth strong and private banking businesses. Good positive client activity supported the strong business momentum and franchise The unlisted investment portfolio growth. also performed well during the period. The year ended 31 March 2016 was a 2016 was a The year ended 31 March challenging one for the global financial markets. 2015/16 was characterised by a declining oil price, weak global growth, inflationary and deflationary concerns, rate interest around unpredictability trajectories, and not least geopolitical and the world. uncertainty in our regions

FINANCIAL REVIEW Three Risk management and corporate governance Our risk appetite framework as Our risk appetite framework as set out on page 25 continues to set out on page 25 continues to be assessed in light of prevailing market conditions and group strategy. Credit risk Credit to a select target are exposures Our credit 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 risk taken over well collateralised and credit a short to medium term. These target clients have remained and have active during the financial year, seeking displayed a level of resilience, out opportunities despite the volatility in the markets. well diversified loan book remains Our core property producing rent with commercial 15.8% of loans comprising approximately the book, other lending collateralised by 3.2%, high net worth and private property client lending 47.0% and corporate lending 34.0% (with most industry concentrations Overall summary of the Overall summary of the year in review from a risk perspective Executive management is intimately involved in ensuring stringent management We capital and conduct. of risk, liquidity, continue to seek to achieve an appropriate in balance between risk and reward our business, taking cognisance of all stakeholders’ interests. Notwithstanding a challenging and experienced, the uncertain environment was able to maintain sound risk group The the year in review. metrics throughout within the majority of its risk remained group the various appetite limits/targets across risk disciplines with any exceptions noted by the board. and approved Risk Management units are locally locally are Risk Management units This helps yet globally aware. responsive businesses that all initiatives and to ensure risk parameters operate within our defined seeking new and objectives, continually ways to enhance techniques. believe that the risk management We in place we have systems and processes and adequate to support our strategy are its risk to operate within allow the group appetite tolerance. On pages 23 to 82 with further disclosures provided within the annual financial statements section on pages 109 to 116. publishes additional Pillar III additional Pillar III publishes and other risk information. a in This information is contained separate Pillar III report which can be found on our website.  Investec Bank Limited also All sections, paragraphs, tables and graphs on on which an audit opinion is expressed marked as audited. are in this section of the Information provided on an is prepared integrated annual report Investec Bank Limited consolidated basis, unless otherwise stated. comprise certain of The risk disclosures as required Pillar III disclosures the bank’s in terms of Regulation 43 of the regulations to banks in South Africa. relating Philosophy and approach to risk management risk management Our comprehensive quantifying, involves identifying, process managing and mitigating the risks associated with each of our businesses. and compliance are control Risk awareness, embedded in all our day-to-day activities. risk and capital management A strong is embedded into our values. culture risk exposure monitor and control We market, liquidity, independent credit, through operational, legal risk, internal audit and to is core compliance teams. This approach profile, assuming a tolerable risk and reward growth helping us to pursue controlled our business. across Risk Management operates within Group an integrated geographical and divisional in line with our management structure, ensuring that the appropriate approach, all risks used to address are processes the group. across Risk disclosures provided in line with the in line with provided Risk disclosures of International Financial requirements Instruments: 7 Financial Reporting Standard on (IFRS 7) and disclosures Disclosures by International Accounting capital required of Financial 1 Presentation Standard within this included Statements (IAS 1) are annual report. section of the integrated Overview of disclosure Overview of disclosure requirements Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management Be the custodian of adherence to to Be the custodian of adherence our risk management culture the business operates Ensure risk within the board-stated appetite Support the long-term sustainability an by providing of the group established, independent framework for identifying, evaluating, monitoring and mitigating risk and monitor Set, approve to risk parameters and adherence and ensure the group limits across implemented and adhered they are to consistently and monitor our Aggregate risk classes across exposure risk management Coordinate the organisation, activities across covering all legal entities and jurisdictions reasonable Give the boards assurance that the risks we are identified and exposed to are managed and appropriately controlled risk committees, Run appropriate as mandated by the board. THREE 22 • • • • • • • • Group Risk Group Risk Management to: objectives are

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 23 THREE (continued) (continued) current internal for total capital targets current equity tier 1 adequacy and for our common 10%. Our capital ratio to be in excess of over the period ratios did decline somewhat risk- in our credit of solid growth as a result Capital the year. weighted assets during and we are continued to grow however, with is in line growth comfortable that credit and supported our risk appetite framework that a believe We by sound risk metrics. in excess of 10% common equity tier 1 ratio given our for our business, is appropriate high leverage ratios and we will continue to build our business in a manner that maintains this target. Conduct, operational and risk reputational continue to spend much time and We focusing on operational, reputational, effort risks. and resolution conduct, recovery During the year a customer and market conduct committee was established, with the objective of ensuring that Investec maintains a client-focused and fair outcomes-based culture. high remain Financial and cybercrime priorities, and Investec continually aims in its systems and controls to strengthen obligations to to meet its regulatory order combat money laundering, bribery and corruption. testing framework is stress Investec’s well embedded in its operations and is test the designed to identify and regularly key ‘vulnerabilities under stress’. bank’s testing A fundamental part of the stress is a full and comprehensive process material business analysis of all the group’s risk, activities, incorporating views from the business and the executive – a called the ‘bottom-up’ analysis. process the ‘bottom-up’ analysis, Resulting from scenarios are the Investec-specific stress designed to specifically test the unique portfolio. The attributes of the group’s key is to understand the potential threats and to our sustainability and profitability thus a number of risk scenarios have been developed and assessed. These scenarios form Investec specific stress an integral part of our capital planning also testing process The stress process. process informs the risk appetite review and the management of risk appetite limits and is a key risk management tool of the allows the group This process group. to identify underlying risks and manage them accordingly. Risk management amount to less than 0.4% of total amount to less than 0.4% Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group operating income. low level continue to manage a very We at one-day VaR of market risk with 95% Trading 2016. R4.2 million at 31 March challenging. conditions have remained volatile while the Markets have been very Investec lack of liquidity has continued. near- focused on facilitating the remains The equity term demand of our clients. continued to derivatives business has to a offering their synthetic product grow have diversified client base. All trading areas at low levels kept market risk exposures the year. throughout Capital management Investec has continued to maintain a sound balance sheet with a low gearing ratio of loans to equity ratio 12.6 times and a core leverage ratio of 6.8 times. Our current is 7.3%. have always held capital in excess of We and we intend to requirements regulatory meet our We perpetuate this philosophy. Balance sheet and liquidity risk available, Holding a high level of readily high quality liquid assets remains paramount in the management of our continue to maintain balance sheet. We on interbank wholesale a low reliance lending asset growth. funding to fund core Cash and near cash balances amounted to R125 billion at year end, representing 37.6% of our liability base. Surplus cash balances increased conservative as we remained significantly, given the volatility in the markets. We ended the year with the three-month (solo) average of Investec Bank Limited’s LCR at 117.3%, which is well ahead of were We the minimum levels required. year successful in raising two to three term USD funding at levels last witnessed long-term over five years ago. The bank’s USD liquidity position is very positive and position ahead of any places us in a strong heightened concern over South Africa’s rating downgrade. Our USD risk of a credit augments our surplus cash funding merely loans and advances balances, and core domestic deposits, fully funded from are with our loan to deposit ratio (excluding USD funding) at 74.1%. by customer deposits increased Total 1 April 2015 to R280 billion at 26.4% from 2016. 31 March market conditions (i.e. per extreme value extreme market conditions (i.e. per theory) Proprietary market risk within our trading Proprietary modest with value at risk portfolio remains testing scenarios remaining and stress at prudent levels. Potential losses that could arise in our trading book portfolio tested under extreme when stress Traded market risk Traded Our investment portfolios delivered a a Our investment portfolios delivered sound performance. During the year a sizeable portion of we transferred our unlisted investments portfolio to an investment vehicle called Investec Equity a 45% Partners (IEP) in which we retain Withinterest. the backing of external strategic investors, we believe that IEP is better positioned to deliver value from, this portfolio. Overall, we remain and grow comfortable with the performance of our equity investment portfolios which comprise 2.92% of total assets. Investment risk well below 5.0%). Our focus over the focus over the well below 5.0%). Our and rebalance past few years to realign our risk appetite our portfolios in line with the relative in framework is reflected on our balance changes in asset classes in private sheet, showing an increase other lending, client and corporate and collateralised by in lending and a reduction of our book. as a proportion property by grew loans and advances Net core 2016 31 March 21.2% to R215 billion at private owner-occupied, with residential client lending and corporate portfolios for the majority of the growth representing the financial year in review. in the level of an increase reported We comfortable impairments taken, but remain with the overall performance of the book, loss ratio amounts to 0.26% as the credit and defaults (net of impairments but 1.06% of our book. collateral) are before rates has had little in interest The increase impact on the performance of our book to date, as our target market is less sensitive rate moves to the moderate interest monitor will, however, to date. We incurred our portfolio in light of the increasing has The group rate environment. interest sector to the agriculture minimal exposure in South Africa, and our overall on and to mining and sheet exposure off-balance amounts to 3.4% of our credit resources Given the and counterparty exposures. outlook in South Africa, it is weaker growth although likely that defaults could increase, loss ratio to we would still expect our credit of 30bps within our long-term trend remain to 40bps. – 3.4 6.1x 2015 8.3% 11.4x 2.09% 1.46% 0.29% 1.33% 3.39% 1.96% 78.1% 15.4% 11.4% 11.0% 0.95% 1.21% 28 899 88 691 177 528 221 377 332 706 257 931 – 4.2 6.8x 2016 7.3% 12.6x 1.48% 1.06% 0.26% 0.19% 2.92% 0.63% 74.1% 14.6% 11.0% 10.6% 0.92% 1.23% 31 865 215 239 124 907 279 736 405 629 295 752 # # Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) Income statement impairment change on core loans as a percentage of average gross core loans and advances. assets excluding intergroup loans to total equity. Total before amortisation of acquired intangibles. Where return represents earnings attributable to shareholders after deduction of preference dividends but balances are calculated on a straight-line average. Average Net core loans and advances (R’million) Net core Cash and near cash (R’million) Customer accounts (deposits) (R’million) loans and advances core defaults as a % of gross Gross loans and advances Defaults (net of impairments) as a % of net core loans and advances as a % of net core Net defaults (after collateral and impairments) loss ratio* Credit as a % of total assets credit Structured as a % of total assets Banking book investment and equity risk exposures Level 3 (fair value assets) as a % of total assets at risk (R’million) market risk: one-day value Traded loans to equity ratio Core ratio** gearing Total * ** # Total assets (R’million) assets Total assets (R’million) risk-weighted Total (R’million) equity Total Loans and advances to customers to customer deposits Capital adequacy ratio Tier 1 ratio Common equity tier 1 ratio Leverage ratio Year to 31 March Year Return on average assets Return on average risk-weighted assets THREE 24 A summary of key risk indicators is provided in the table below. table below. in the A summary of key risk indicators is provided Salient features During the year, the bank continued to enhance its stress testing framework. Given the volatility and uncertainty in the market, a number in the market, a number framework. Given the volatility and uncertainty testing the bank continued to enhance its stress During the year, events that unfolded in December 2015 these included for example, the into our processes, incorporated scenarios were of new stress Africa to below investment grade. rating downgrade of South Nene) and a sovereign of Finance Minister (with the removal of its principal risks and the above committees, continued to assess the impact various risk and capital the group’s through The board, to manage in place systems and processes bank has robust has concluded that the its business. The board scenarios on mentioned stress continue to activity would be very subdued, the bank would scenario although business stress under a severe these risks, and that while operation of the bank. and capital balances to support the continued maintain adequate liquidity of the reflection believe this rating upgrade is a during the period. We Fitch rating upgrade from a credit very pleased to receive were We maintaining sound capital and high liquidity years in simplifying and derisking our business, we have made over the past few progress metrics at tolerable levels. risk ratios, and managing credit

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 25 THREE (continued) (continued) Risk management Positioning at 31 March 2016 Positioning at 31 March Capital light activities for Investec Limited contributed Capital light activities for Investec Limited contributed 44% to total operating income and capital intensive activities contributed 56% Recurring income amounted to 74.1% of total Recurring income amounted to 74.1% of total operating income. Refer to page 8 for further information The cost to income ratio amounted to 53.3%. Refer Refer The cost to income ratio amounted to 53.3%. to page 8 for further information The return on equity for the Investec group amounted amounted The return on equity for the Investec group to 11.5% and our return on risk-weighted assets amounted to 1.34% We achieved this internal target; refer to page 80 for achieved this internal to page 80 for We target; refer further information We meet our capital targets; refer to page 80 for to page 80 for meet our capital targets; refer We further information We maintained this risk tolerance level in place maintained this risk tolerance level in place We the year throughout The credit loss charge on core loans amounted to loans amounted to loss charge on core The credit 0.26% and defaults net of impairments amounted loans. Refer to page 42 for to 1.06% of total core further information Total cash and near cash balances amounted cash and near cash balances amounted Total 44.7% of customer to R125 billion representing deposits. Refer to page 62 for further information We meet these internal limits; refer to page 56 for meet these internal to page 56 for We limits; refer further information Our unlisted investment portfolio is R2 803 million, Our unlisted investment portfolio is R2 803 million, 8.7% of total tier 1 capital. Refer to representing page 52 for further information Refer to pages 71 to 74 for further information Refer to pages 74 and 75 for further information Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group We seek to maintain an appropriate balance between revenue earned from earned from balance between revenue seek to maintain an appropriate We should the split in revenue capital light and capital intensive activities. Ideally market conditions be 50:50, dependent on prevailing We have a solid recurring income base supported by diversified revenue revenue income base supported by diversified have a solid recurring We income ratio in excess of 65% and target a recurring streams, We seek to maintain strict control over fixed costs and target a group cost cost a group over fixed costs and target seek to maintain strict control We to income ratio of below 65% We aim to build a sustainable business generating sufficient return to return to aim to build a sustainable business generating sufficient We return on equity and target a long-term over the longer-term, shareholders return on risk-weighted assets ratio range of between 12% and 16%, and a in excess of 1.2% We are a lowly leveraged firm and target a leverage ratio in all our banking banking a lowly leveraged firm and target a leverage ratio in all our are We subsidiaries in excess of 6% We intend to maintain a sufficient level of capital to satisfy regulatory level of capital to satisfy regulatory intend to maintain a sufficient We adequacy and our internal target a capital target ratios. We requirements basis for ratio range of between 14% and 17% on a consolidated a minimum tier 1 ratio of Investec plc and Investec Limited and we target 10.0% 11.0% and a common equity tier 1 ratio above We target a diversified loan portfolio, lending to clients we know and we know and target a diversified loan portfolio, lending to clients We or to a single/connected individual limit our exposure understand. We by the relevant approved company to 5% of tier 1 capital (up to 10% if also have a number of risk tolerance limits and committee). We board targets for specific asset classes There is a preference for primary exposure in the bank’s main operating main operating in the bank’s for primary exposure is a preference There geographies (i.e. South Africa and Mauritius). The bank will accept we have a branch or local banking subsidiary and where exposures we have developed a local to other countries where tolerate exposures facilitating a transaction for a client understanding and capability or we are geography facilities in a foreign who requires and we target a The level of defaults and impairments continues to improve advances loans of less than 0.5% of average core loss charge on core credit scenario), (less than 1.25% under a weak economic environment/stressed loans and we target defaults net of impairments less than 1.5% of total core scenario) (less than 4% under a weak economic environment/stressed We carry a high level of liquidity in all our banking subsidiaries in order to to carry a high level of liquidity in all our banking subsidiaries in order We be able to cope with shocks to the system, targeting a minimum cash to customer deposit ratio of 25% We have modest market risk as our trading activities primarily focus on have modest market risk as our trading activities primarily focus on We trading is limited. supporting client activity and our appetite for proprietary of less than set an overall tolerance level of a one-day 95% VaR We R15 million We have moderate appetite for investment risk, and set a risk tolerance of have moderate appetite for investment risk, and set a risk tolerance of We less than 15% of tier 1 capital for our unlisted principal investment portfolio (excluding IEP) Our operational risk management team focuses on improving business business Our operational risk management team focuses on improving review, through requirements performance and compliance with regulatory challenge and escalation We have a number of policies and practices in place to mitigate reputational, have a number of policies and practices in place to mitigate reputational, We legal and conduct risks • Risk appetite and tolerance metrics • • • • • • • • • • • • • Overall group risk appetite Overall group to covering our risk tolerance and approach appetite statements and policy documents risk has a number of board-approved The group risk The group level. forums identify and manage risk at a group risk. In addition, a number of committees and our principal aspects of appetite framework acts as a guide to risk group mandated risk appetite. The framework sets out the board’s appetite statement and that statement ensures risk appetite capital. The group by the owners of the group’s of the group risk profile determine the acceptable risk appetite statement is a The group all key operating jurisdictions and legal entities. across applied and monitored limits/targets are and geographic detailed risk policy documents at each entity the that supplements and does not replace high-level, strategic framework reviews testing our stress budget, and capital processes, is a function of business strategy, risk appetite framework level. The group (in light framework is reviewed risk appetite is operating. The group in which the group environment and economic and the regulatory our risk profile exists where dictate. A documented process at least annually or as business needs and approved of the above aspects) risk and capital committee and the board risk and to the group and this positioning is presented against our risk appetite is measured capital committee. tolerance framework. overall risk group’s a high-level summary of the The table below provides committee Customer and market conduct forum capital committee Deal forum/ new product new product Group risk and Group committee Group investment Group forum Global forums/ Executive risk review risk review committees DLC social and ethics committee South African Reserve Bank Group risk and capital committee Group Group risk and capital committee Group Financial Conduct Authority Executive risk review forum Executive risk review Bank of England risk forums Group legal Group

bal credit committee bal credit SARB GRCC GRCC FCA ERRF BOE Glo Global market risk forum Global compliance forum committee Global IT steering committee DLC capital Group operational risk committees Group Group asset and liability committees Group capital committee DLC board risk and DLC board Stakeholders INL Audit committee sub-committees DLC nominations and directors affairs affairs and directors PLC DLC audit committees Audit and compliance conduct committee implementation forums (employees, shareholders, government, regulatory bodies, clients, suppliers, communities) government,(employees, shareholders, regulatory Prudential, audit and Investec plc (PLC) and Investec Limited (INL) board of directors of (INL) board Investec plc (PLC) and Investec Limited Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) European Central Bank European Board risk and capital committee Board Bank of Mauritius Bank for International Settlements Basel Committee of Banking Supervision Asset and liability committee PLC Audit These principal risks have been highlighted on page 16. These principal risks  committee Audit Internal sub-committees DLC remuneration DLC remuneration Compliance THREE Governance framework 26 ECB BRCC BOM BIS BCBS The sections that follow provide information on a number of these risk areas and how the group manages these risks. and how the group information on a number of these risk areas provide The sections that follow impact our may in the future included in this report immaterial and not considered currently that are Additional risks and uncertainties financial performance. business operations and In the sections that follow, the following abbreviations are used on numerous occasions: used on numerous are the following abbreviations In the sections that follow, ALCO Risk management framework, committees and forums Risk management framework, level. These committees and forums operate together with Group and manage risk at group A number of committees and forums identify mandated by the board. Risk Management and are An overview of our principal risks An overview of operations or our business could have the potential to affect enters into a number of risks that the group In our daily business activities, and prospects. financial performance

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE

27

THREE (continued) (continued) Day-to-day arrears management and management and Day-to-day arrears reporting forecast arrears regular that individual positions and ensure dealt with in a are any potential trends timely manner committees, which review Watchlist loans, the management of distressed loans and exposures potential problem additional that require in arrears attention and supervision Corporate watchlist forum, which reviews that mayand manages exposures as a result potentially become distressed of changes in the economic environment price movements, or or adverse share vulnerable to volatile exchange that are rate movements rate or interest default and recoveries Arrears, forum which specifically reviews loans and and manages distressed loans for private potentially distressed and clients. This forum also reviews monitors counterparties who have been granted forbearance measures. as exposure to a counterparty that is to a counterparty as exposure quality credit with the adversely correlated It arises when default of that counterparty. together. increase exposure risk and credit also arise and counterparty risk may Credit of the Global role in other ways and it is the and the various Risk Management functions to identify committees independent credit definitions. risks falling outside these CREDIT AND COUNTERPARTY RISK GOVERNANCE STRUCTURE monitor and mitigate measure, manage, To and counterparty risk, independent credit committees exist in each geography credit risk. These we assume credit where committees operate under board-approved delegated limits, policies and procedures. is a high level of executive There and involvement and non-executive review decision-making oversight in the credit forums. It is our policy that all centralised comprised of voting committees are credit independent of the members who are originating business unit. All decisions based on to enter into a transaction are unanimous consent. committee, credit In addition to the group assist in managing, the following processes and measuring and monitoring credit counterparty risk: • • • • Risk management Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Preference is to have exposure only is to have exposure Preference to politically stable jurisdictions that we understand and have preferably operated in before is no specific appetite for There pre- outside of the group’s exposures geographies or product existing core markets should be The legal environment in line tested, have legal precedent and have good with OECD standards corporate governance In certain cases, country risk can be mitigated by taking out political risk insurance with suitable counterparties, deemed necessary and where where economic considered To mitigate country risk, there is a mitigate country risk, there To in the for primary exposure preference The main operating geographies. bank’s we where bank will accept exposures banking subsidiary, have a branch or local countries to other and tolerate exposures facilitating a transaction for we are where facilities in a foreign a client who requires developed a we have geography and where capability. local understanding and with regard risk appetite Investec's credit by the to country risk is characterised following principles: • • • • While we do not have a separate country risk committee, the local and global committees as well as investment credit committees and ERRF will consider, limits analyse and assess the appropriate to assume when required, to be recorded jurisdictions. The local to foreign exposure committee has the authority to credit group country limits within mandate. The approve committee, global investment global credit for committee or ERRF is responsible not country limits that are approving credit within the mandate of local group committees. committees within credit The relevant Investec will also consider wrong-way limits to risk at the time of granting credit In the banking book each counterparty. risk occurs wrong-way environment, the value of collateral to secure where is positively a transaction, or guarantor, of default with the probability correlated For or counterparty. of the borrower from risk resulting counterparty credit (such as transactions in traded products risk is defined OTC derivatives), wrong-way

Settlement risk is the risk that the settlement of a transaction does not take place as expected. Our definition of a settlement debtor (i.e. less is a short-term receivable than five days) which is excluded and counterparty risk due credit from to market guaranteed settlement mechanisms Replacement risk is the financial cost of having to enter into a replacement contract with an alternative market following default by the counterparty, original counterparty. Lending transactions through loans and Lending transactions through advances to clients and counterparties the risk that an obligor will be creates capital unable or unwilling to repay on loans and advances and/or interest granted to them. This category includes we have placed bank placements, where funds with other financial institutions Issuer risk on financial instruments the issuer payments due from where of a financial instrument will not be received to transactions, giving rise Trading risk settlement and replacement (collectively counterparty risk): – – • • Credit and counterparty risk is defined as and counterparty risk is defined Credit (typically an obligor’s the risk arising from to meet failure a client or counterparty) and Credit the terms of any agreement. when funds counterparty risk arises extended, committed, invested, or are contractual otherwise exposed through on- or off- whether reflected agreements, balance sheet. and counterparty risk arises primarily Credit of transactions: types three from • CREDIT AND CREDIT AND RISK COUNTERPARTY DESCRIPTION Credit and counterparty Credit and counterparty risk management Country risk refers to the risk of lending Country risk refers to a counterparty operating in a particular in sovereign country or the risk inherent to i.e. the risk of exposure exposure; 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, credit and the impact on the borrower’s due to local economic and political profile conditions.

A clear definition of our target market A clear definition of our A quantitative and qualitative of assessment of the creditworthiness our counterparties Analysis of risks, including concentration risk (concentration risk considerations include asset class, counterparty and geographical industry, concentration) to made with reference Decisions are risk appetite limits Prudential limits of Regular monitoring and review once existing and potential exposures facilities have been approved A high level of executive involvement in decision-making with non-executive and oversight. review RISK AND COUNTERPARTY MANAGEMENT AND MANAGEMENT AND CREDIT MEASUREMENT OF employed in the Fundamental principles and counterparty management of credit risk are: • • • • • • • and of credit Regular reporting within our counterparty risk exposures operating units is made to management, at the GRCC the executives and the board reviews regularly and BRCC. The board and the appetite for credit and approves counterparty risk, which is documented in risk appetite statements and policy documents. This is implemented and by Group Credit. reviewed to the above Despite strict adherence default risk may arise principles, increased particularly circumstances unforeseen from market volatility and in times of extreme weak economic conditions. portfolio is of the bank’s A large proportion not rated by external rating agencies. We upon internal consideration place reliance and use of counterparties and borrowers, available externally where ratings prepared as support in our decision-making process. internal process, Within approval the credit included in the and external ratings are assessment of the client quality. rating models continue Internal credit to be developed to cover all material asset classes. The internal ratings are incorporated in the risk management and used in and are decision-making process assessment, monitoring and approval credit as well as pricing.

Refer to our sustainability report on our website.  Environmental Environmental considerations and climate- (including animal welfare impacts) related Social considerations (including human rights) Economic considerations. SUSTAINABILITY SUSTAINABILITY CONSIDERATIONS to Investec has a holistic approach which runs beyond sustainability, our own footprint on the recognising and includes our many environment corporate social investment activities and our funding and investing activities. This but for business reasons, is not merely to our responsibility based on a broader Accordingly, and society. environment sustainability risk considerations are committee and by the credit considered investment committee when making lending or investment decisions. There is also oversight by the social and ethics committee) on social committee (board issues. In particular the and environmental taken into account following factors are when a transaction might be approved or declined based on the outcome of the sustainability considerations: • • • RISK APPETITE RISK APPETITE risk appetite limit has set a group The board the maximum framework which regulates we would be comfortable to exposures to diversify and mitigate tolerate in order on an risk. This limit framework is monitored to the GRCC andongoing basis and reported be basis. Should there BRCC on a regular exposures to limits, or where any breaches nearing limits, these exceptions are are specifically highlighted for attention, and any agreed. actions are remedial Concentration risk can also exist where also exist where Concentration risk can to clustered are portfolio loan maturities maturities are single periods in time. Loan on a portfolio and a transaction monitored Group Risk Management, level by Group well as the Lending Operations as originating business units. and counterparty risk is always Credit to the aggregate assessed with reference or to a single counterparty exposure parties to manage of related group concentration risk. Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) We have little appetite for We unsecured debt and require good quality collateral in support of obligations (refer to page 50 for further information).  THREE 28 Target clients include high net worth and/ clients Target or high-income individuals, professionally qualified individuals, established corporates, small and medium enterprises, financial institutions and sovereigns. Corporates must have scale and in their market, an experienced relevance members, management team, able board earningsstrong and cash flow. client-centric in our approach are We and originate loans with the intent of thereby holding these assets to maturity, developing a ‘hands-on’ and long-standing we originate loans that Where relationship. too large for our balance considered are sheet, these may be sold down to mitigate our concentration risk. for Interbank lending is largely reserved those banks and institutions in the group’s geographies of activity which are core exposures systemic and highly rated. Direct to cyclical industries and start-up ventures generally avoided. are CONCENTRATION RISK RISK CONCENTRATION Concentration risk is when large exposures exist to a single client or counterparty, of connected counterparties, or group asset class or to a particular geography, An example of this would be where industry. by affected a number of counterparties are or other similar economic, legal, regulatory factors that could mean their ability to meet correlated. contractual obligations are CREDIT AND COUNTERPARTY CREDIT AND COUNTERPARTY RISK APPETITE for primary exposure is a preference There main operating in the Investec group’s Africa and the UK). geographies (i.e. South exposures will accept The Investec group banking it has a branch or local where above). subsidiary (as explained clients and Our assessment of our consideration counterparties includes core of their character and integrity, and financial competencies, track record emphasis is placed on A strong strength. the historic and ongoing stability of income generated by the and cash flow streams clients. Our primary assessment method ability of the client to meet the is therefore their payment obligations.

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 29 THREE (continued) (continued) provides senior senior Corporate Loans: provides loans to mid-to-large cap secured risk is assessed companies. Credit against debt service coverage from of the cash generation the robustness for the business based on historic and typically act as information. We forecast and have transaction lead or arranger, with management a close relationship and the sponsor Corporate Debt Securities: these are tradable corporate debt instruments, based on acceptable credit purchased fundamentals typically with a medium- the underlying term hold strategy where risk is to South African corporates. This is a highly diversified, granular portfolio a across and spread that is robust, variety of geographies and industries debt Acquisition Finance: provides management funding to proven teams, running small to mid-cap sized risk is assessed companies. Credit the against debt service coverage from Corporate client activities Corporate client activities focus on traditional client-driven We in addition to corporate lending activities, and trading related treasury customer flow execution services. Within lending businesses, the corporate corporate loans, risk can arise from credit finance, power acquisition finance, asset asset-based finance, and infrastructure finance. resource and lending, fund finance activities also undertake debt origination We for corporate clients. Risk Management functions The Credit and counterparty specific credit approve limits that govern the maximum credit to each individual counterparty. exposure In addition, further risk management limits industry and country limits exist through to manage concentration risk. The credit appetite for each counterparty is based of the principal on the financial strength the underlying cash flow to borrower, the transaction, the substance and track of management, and the security record package. Political risk insurance, and other deemed they are insurance is taken where appropriate. Investec has limited appetite for unsecured typically secured risk and facilities are credit on the assets of the underlying borrower. of the lending A summary of the nature risk assumed within some of and/or credit within our corporate lending the key areas below: business is provided • • • Risk management delivers products delivers products An analysis of the private client loan portfolio and asset quality information is provided on pages 48 and 49. An analysis of the lending An analysis of the lending collateralised by property portfolio and asset quality information is provided on pages 48 and 49.   Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Specialised tailored Lending provides facilities to high net worth individualscredit entities. and their controlled Residential Mortgages provides mortgage loan facilities for high-income and high net worth professionals to their individual needsindividuals tailored for as well as vanilla mortgage products target market clients professional Personal Banking and to enable target clients to create manage their wealth. This includes private client mortgages, transactional banking, high net worth lending, exchange banking and foreign offshore • • Private client activities Our private banking activities target high net worth individuals, active wealthy high-income professionals, entrepreneurs, with high- newly qualified professionals income earning potential, self-employed owner managers in small entrepreneurs, to mid-cap corporates and sophisticated investors. to meet the tailored are Lending products of our clients. Central to our requirements philosophy is ensuring the sustainabilitycredit theof cash flow and income throughout cycle. As such, the client base has been and defined to include high netgrouped diversification ofworth clients (who, through income volatility) will reduce income streams, which hasand individuals with a profession historically supported a high and sustainable of the stage in the irrespective income stream economic cycle. the following risk arises from Credit activities: • quality for commercial assets. Debt service assets. quality for commercial in the a key consideration cover ratios are supported by reasonable lending process loan to value ratios. senior debt and other funding provide We strong transactions, with a for property assets for income producing preference sponsor supported by an experienced equity a material level of cash providing investment into the asset. In relation to sovereigns and and to sovereigns In relation S&P and securitisations, Moody’s, Ratings have been Global Credit selected by Investec as eligible ECAIs to banks, corporates and In relation and S&P are debt securities Moody’s as eligible ECAIs recognised available, the If two assessments are conservative will apply more credit or more three are there Where risk weightings, ratings with different to the ratings corresponding the credit two lowest ratings should be referred to and the higher of those two ratings should be applied. Lending collateralised by property at the core Client quality and expertise are to Our exposure philosophy. of our credit market is well diversified with the property prime locations for bias towards strong and focus on tenant exposure residential Credit and counterparty risk is assumed Credit a range of client-driven lending through activities to private and corporate clients and other counterparties, such as financial These institutions and sovereigns. a number of diversified across activities are business activities. CREDIT AND COUNTERPARTY CREDIT AND COUNTERPARTY OF LENDING RISK – NATURE ACTIVITIES • • • applies the standardised The group for calculating capital approach in the assessment of its requirements The and counterparty exposures. credit banking subsidiaries conduct group’s and counterparty their mapping of credit with the mapping in accordance exposures specified by the Central Bank procedures geographies in in the respective Registrar, operates. which the group Exposures are classified to reflect the classified to are Exposures In our risk appetite and strategy. bank’s classified are exposures Pilliar III disclosure, to the Basel asset classes according corporate, bank, which include sovereign, securitisation and specialised equity, retail, categorised into lending (which is further finance; commodities finance; project and estate; real high volatility commercial estate). real commercial income-producing Ratings and Global Credit Moody’s S&P, as eligible external have been nominated assessment institutions (ECAIs) credit for the purposes of determining external ratings. The following elections credit have been made: • An analysis of the corporate client loan portfolio and asset quality information is provided on pages 48 and 49.  high investment grade rated entities high investment grade and systemic that occupy dominant banking positions in their domestic markets investment Corporate advisory and banking activities: Counterparty risk in also is modest. The business this area on an approved shares trades approved on a are largely basis. Settlement trades basis, through delivery versus payment risk only Credit major stock exchanges. occurs in the event of counterparty and would be linked to any fair failure value losses on the underlying security Customer trading activities to facilitate client lending: Our customer trading portfolio consists of derivative rates, foreign contracts in interest exchange, commodities, credit derivatives and equities that are hedging to facilitate a client’s entered The counterparties requirements. typically to such transactions are they have corporates, in particular where exchange to foreign a sizeable exposure due to operating in sectors that include imports and exports of goods and marked to services. These positions are market, typically with daily margin calls in the event exposure to mitigate credit of counterparty default. • • future cash flows of the project(s) cash flows of the project(s) future utilities and power recognised from balance companies as well as the is a There sheet of the corporate. an equity contribution from strong experienced sponsor Finance: debt arranging and Resource structured underwriting together with within hedging solutions mainly underlying the mining sectors. The and mainly precious commodities are Our clients in base metals and coal. established mining this sector are typically domiciled companies which are and publicly listed in South Africa. All by the borrower’s secured facilities are mining from assets and repaid cash flows bonds these are Credit: Structured against a pool of assets, secured mortgages typically UK residential mainly The bonds are or European. investment grade rated, which benefit subordination a high-level of credit from and can withstand a significant level of portfolio defaults Placements: The treasury Treasury function, as part of the daily liquidity, management of the bank’s places funds with central banks and banks and financial other commercial institutions. These transactions are typically short term (less than one month) money market placements agreements. repurchase or secured These market counterparties are • • • Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) robustness of the cash generation of the of the cash generation robustness on historic business. This will be based typically information. We and forecast and benefit from lend on a bilateral basis with management a close relationship provides Asset Based Lending: corporate working capital and secured loans are loans to mid-caps. These by the assets of the business, secured receivable, for example, the accounts In plant and machinery. inventory, lending common with our corporate emphasis is placed activities, strong on backing companies with scale to their industry, and relevance and experienced stability of cash flow, management Small Ticket Asset Finance: provides highly diversified lending to small and medium-sized corporates to and other support asset purchases These facilities business requirements. against the asset being secured are obligation of a direct financed and are the company Large Ticket Asset Finance: provides the finance and structuring expertise and larger lease assets, the for aircraft senior secured majority of which are loans with a combination of corporate, cash flow and asset-backed collateral against the exposure Finance: Power and Infrastructure typically long- arranges and provides assets, term financing for infrastructure power projects in particular renewable and transport, against contracted THREE 30 • • • •

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 31 THREE (continued) (continued) Covenant breaches is a slowdown in the counterparty’s There business activity in operations that signals An adverse trend a potential weakness in the financial of the counterparty strength until exposures credit Restructured watchlist committee decides appropriate otherwise. 1 – 60 days overdue exposures Credit 61 – 90 days. overdue exposures Credit An account is considered to be past due past due to be An account is considered or and less than than zero when it is greater equal to 60 days past due the contractual/ payment due date. Management agreed credit however is not concerned is and there ability to confidence in the counterparty’s the past due obligations. repay The counterparty is placed in special mention to be when that counterparty is considered that may threaten experiencing difficulties ability to fulfil its credit the counterparty’s (i.e. watchlist obligation to the group committee is concerned) for the following reasons: • • • • Ultimate loss is not expected, but may occur if adverse conditions persist. Reporting categories: • • Description Risk management Past due Special mention Arrears, default default Arrears, and recoveries classification category Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group For assets which form part of a part of a For assets which form a portfolio homogeneous portfolio, which impairment is required asset impairments that recognises have not been individually identified. The portfolio impairment takes into account past events and does not cover impairments to exposures events. arising out of uncertain future By definition, this impairment is only which exposures calculated for credit managed on a portfolio basis and are a loss trigger only for assets where event has occurred. IFRS impairment treatment Performing assets Regulatory and Regulatory and economic capital classification ASSET QUALITY ANALYSIS – CREDIT RISK CLASSIFICATION AND PROVISIONING POLICY AND PROVISIONING RISK CLASSIFICATION – CREDIT ASSET QUALITY ANALYSIS for specific impairments makes provision Management that each operating division Credit overseen by Central It is a policy requirement guidelines and in conjunction with established group level of portfolio impairments. This is in accordance and calculates the appropriate with in accordance reported and impairments are losses In the annual financial statements, credit process. with the watchlist committee (IFRS). International Reporting Standards Financial

(continued) The risk that such credit exposure may may exposure The risk that such credit asset is probable become an impaired on to a large extent, The bank is relying, available collateral, or are of repayment The primary sources to service the remaining insufficient amounts, contractual principal and interest on secondary and the bank has to rely These secondary for repayment. sources may include collateral, the sale of a sources and further capital. fixed asset, refinancing The credit exposure is considered to be to be is considered exposure The credit such as uncollectible once all efforts, of collateral and institution of realisation have been exhausted, or legal proceedings, expected to Assets in this category are in the short term since the be written off economic benefits likelihood of future remote. such assets are from resulting Description in sub-standard The counterparty is placed an reflects exposure when the credit weakness that may underlying, well defined loss if not corrected: lead to probable • • • than for more overdue exposures Credit 90 days will at a minimum be included in ‘sub-standard’ (or a lower quality category). (or a lower quality category). ‘sub-standard’ The counterparty is placed in doubtful to is considered exposure when the credit a final but not yet considered be impaired, loss due to some pending factors such as injection new financing or capital a merger, the quality of the which may strengthen exposure. relevant A counterparty is placed in the loss category when: • • Arrears, default default Arrears, and recoveries classification category Sub-standard Doubtful Loss Capability of the client to generate to generate Capability of the client cash flow to service sufficient debt obligations and the ongoing business viability of the client’s Likely dividend or amount on liquidation or recoverable bankruptcy or business rescue and extent of claims by Nature other creditors Amount and timing of expected cash flows Realisable value of security held (or mitigants) other credit Ability of the client to make currency, payments in the foreign denominated currency for foreign accounts. Specific impairments are evaluated on on evaluated Specific impairments are objective a case-by-case basis where has arisen. In evidence of impairment the determining specific impairments, considered: following factors are • • • • • • IFRS impairment treatment Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) Assets in default (non-performing assets) Regulatory and Regulatory and economic capital classification THREE 32 ASSET QUALITY ANALYSIS – CREDIT RISK CLASSIFICATION AND PROVISIONING POLICY AND PROVISIONING RISK CLASSIFICATION – CREDIT ASSET QUALITY ANALYSIS

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 33

THREE (continued) (continued) Further information on credit derivatives is provided on page 58.  Debit and credit balances relate to the to the balances relate Debit and credit same obligor/counterparty balances are Debit and credit and currency denominated in the same have identical maturities are subject to set-off Exposures risk-managed on a net basis risk-managed on a net Market practice considerations. Investec endeavours to implement robust Investec endeavours to implement robust to minimise the possibility processes of legal and/or operational risk through good quality tangible collateral. The legal the risk function in Investec ensures risk mitigants within of credit enforceability 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 that form protection of collateral and credit part of the portfolio. purposes, reporting For regulatory by eligible may be reduced exposures approach collateral. Under the standardised risk mitigation can be achieved credit either funded or unfunded through unfunded credit Where protection. credit upon for mitigation is relied protection to the borrower purposes, the exposure to the is substituted with an exposure after applying a provider, protection to the value of the collateral due ‘haircut’ and/or maturity mismatches to currency and the between the original exposure Unfunded credit collateral provided. includes eligible guarantees and protection on funded we rely derivatives. Where credit in the form of financial collateral, protection the value of collateral is adjusted using the method. financial collateral comprehensive This method applies supervisory volatility adjustments to the value of the collateral, and/maturity and includes the currency discussed above. haircuts In addition to the above accounting set-off accounting set-off In addition to the above the impose criteria, banking regulators following additional criteria: • • • • will be instances there For this reason and counterparty exposures credit where displayed on a net basis in these annual are reported on a financial statements but basis to regulators. gross on credit Investec places minimal reliance risk mitigation derivatives in its credit techniques. Risk management Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group A legally enforceable right to set-off right to set-off A legally enforceable exists is the intention to settle the There asset and liability on a net basis, or to the asset and settle the liability realise simultaneously. Other common forms of collateral in the Other common forms of motor vehicles, asset class are retail addition, the portfolios. In cash and share committee normally requires credit relevant of a or guarantee in support a suretyship client business. transaction in our private in private The second primary collateral is over a high net client lending transactions portfolio. This investment worth individual’s a diversified pool is typically in the form of fixed income, managed funds and of equity, managed are cash. Often these portfolios & Investment. Lending by Investec Wealth against investment portfolios is typically at conservative loan-to-value ratios geared diversification, after considering the quality, and liquidity of the portfolio. risk profile Our corporate, government and institutional a range of collateral clients provide including cash, corporate assets, debtors trading stock, debt (accounts receivable), securities (bonds), listed and unlisted shares and guarantees. mitigation techniques The majority of credit linked to trading activity is in the form of and daily margining. netting agreements legal The primary market standard documents that govern this include the International Swaps and Derivatives (ISDA), Association Master Agreements Global Master Securities Lending (GMSLA) and Global Master Agreement (GMRA). In addition Agreement Repurchase to having ISDA documentation in place with all market and trading counterparties in (OTC) derivatives, a Credit over-the-counter that all mark- Support Annex (CSA) ensures is mitigated daily exposure to-market credit the calculation and placement/ through netting of cash collateral. Where receiving have been signed, the agreements is supported by external enforceability legal opinion within the legal jurisdiction of the agreement. has been applied between assets Set-off liabilities in risk and related subject to credit the annual financial statements where: • •

An analysis of collateral is provided on page 50.  Where a transaction is supported by a Where the mortgage or charge over property, risk is still taken on the primary credit backed lending For property borrower. mortgages, the such as residential following characteristics of the property its the type of property; considered: are location; and the ease with which the and/or resold. could be re-let property by lease is secured the property Where committee prefers the credit agreements, not to lend for a term beyond the maximum ofestate the lease.real Commercial generally takes the form of good quality often underpinned by strong property party leases. Residential property third is also generally of a high quality and based in desirable locations. Residential valuations will property and commercial continue to form part of our ongoing focus on collateral assessment. It is our policy to obtain a formal valuation of every as collateral offered property commercial advancing funds. for a lending facility before valued by desktop are Residential properties valuers, where valuation and/or approved appropriate. CREDIT RISK MITIGATION can be risk mitigation techniques Credit by which Investec defined as all methods risk associated the credit seeks to decrease credit Investec considers with an exposure. as part of the risk mitigation techniques client or assessment of a potential credit a separate and not as business proposal of risk. Credit consideration of mitigation any collateral risk mitigants can include has a pledge of item over which the bank netting and margining agreements, security, covenants, or terms and conditions with the aim of imposed on a borrower to that risk inherent the credit reducing transaction. As Investec has a limited appetite for risk mitigation debt, the credit unsecured technique most commonly used is the preference taking of collateral, with a strong for tangible assets. Collateral is assessed to the sustainability of value with reference Acceptable and the likelihood of realisation. collateral generally exhibits characteristics that allow for it to be easily identified and valued. appropriately Private client activities in our have seen continued growth We client base as we private client portfolio and positioning our actively focus on increasing in this space. portfolio and Our high net worth client in mortgage book growth residential with a total particular has been encouraging of 28.6% over the year. increase has been in both of these areas Growth to our adherence achieved with strong conservative lending appetite. Corporate client activities The overall portfolio continues to mainly as perform well and increased to a mix exposure of increased a result of corporate clients (mid to large) and SOEs from continued funding requests (government guaranteed). Default loans (net of impairments) as a Default loans (net of impairments) loans and advances of core percentage 1.46% to 1.06% as a result from improved and settlements. of write-offs collateralised Defaults for the lending on portfolio declined year by property to mostly related defaults are These year. for land earmarked historical residential to be managed developments and continue does take this process down. However, focus on maximising time as we continue to recoveries. to 0.26% from loss ratio improved The credit in the 0.29% notwithstanding an increase impairment charge. Lending collateralised by property assets are The majority of the property and are investment properties commercial located in South Africa. This portfolio grew in line with our by 10.2% during the year, risk appetite framework. Loans to values conservative and transactions remain We cash flows. supported by strong are backing follow a client-centric approach, balance sheets counterparties with strong expertise. and requisite Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) Further information is provided Further information is on in the financial review pages 12 to 20.  THREE Core loans and advances grew by 21.2% by 21.2% loans and advances grew Core owner- to R215 billion with residential occupied, private client lending, corporate and public sector portfolios representing for the financial the majority of the growth year in review. environment macro-economic The current challenging and volatile with remains on margins. We competitive pressure have maintained a conservative lending Our lending appetite is based approach. with a strong on a client-centric approach focus on client cash flows underpinned by tangible collateral. CREDIT AND COUNTERPARTY CREDIT AND COUNTERPARTY RISK YEAR IN REVIEW has seen review The financial year in factors and a combination of trends and quality impacting on the credit risk. and counterparty assessment of credit 34

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 35 778 444 7 031 6 255 1 091 30 101 10 199 24 503 36 352 15 650 12 755 12 818 16 159 44 820 60 979 191 157 349 134 410 112 Average* THREE 0.1% 6.2% (6.5%) 24.6% 31.7% 75.7% 19.6% 22.1% 20.4% 10.2% 18.8% (19.9%) (19.4%) (27.7%) (47.1%) (18.8%) > 100% > 100% (continued) (continued) % change 13 490 2015 6 261 4 537 1 018 33 422 10 540 10 095 31 378 17 332 12 749 14 879 14 551 43 480 58 031 174 132 316 846 374 877 31 March Risk management 398 539 2016 9 858 7 801 7 973 2 169 26 779 38 912 41 325 13 968 12 761 10 756 17 767 46 159 63 926 208 182 381 421 445 347 31 March Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Pages 22 to 34 describe where and how credit risk is assumed in our operations. where and how credit risk is assumed Pages 22 to 34 describe  Where the average is based on a straight-line average for the period 1 April 2015 to 31 March 2016. Excludes guarantees provided to clients which are backed/secured by cash on deposit with the bank. * ^ Loans and advances to banks and non-bank cash placements Non-sovereign Cash and balances at central banks and cash collateral on securities agreements Reverse repurchase borrowed R’million Sovereign debt securities Sovereign Bank debt securities Other debt securities Derivative financial instruments Securities arising from trading activities Securities arising from Loans and advances to customers (gross) securitised (gross) Own originated loans and advances to customers Other loans and advances (gross) Other assets sheet exposures on-balance Total Guarantees^ Contingent liabilities, committed facilities and other Contingent liabilities, committed facilities and Total off-balance sheet exposures sheet exposures off-balance Total pre-collateral counterparty exposures and credit gross Total enhancements or other credit The tables that follow provide an analysis of the credit and counterparty exposures. an analysis of the credit The tables that follow provide Credit and counterparty exposures increased by 18.8% to R445 billion largely due to growth in loans and advances to customers and cash in loans and advances to customers and cash by 18.8% to R445 billion largely due to growth increased and counterparty exposures Credit line items in the table in the following largely reflected billion and are Cash and near cash balances amount to R125 and near cash balances. placements and sovereign and non-bank cash non-sovereign at central banks, loans and advances to banks, below: cash and balances debt securities. AN ANALYSIS OF GROSS CREDIT AND COUNTERPARTY EXPOSURES AND COUNTERPARTY OF GROSS CREDIT AN ANALYSIS Credit and counterparty risk information Credit and counterparty – 1 524 171 Total Total 236 116 115 367 992 sheet 5 460 3 656 5 145 7 967 6 360 9 858 7 801 15 843 12 761 13 968 41 325 38 912 26 779 balance 405 629 207 272 1 4 3 2 2 2 1 Note ence refer- – – – – – – – – (6) 1 (31) (910) 524 171 236 116 115 453 5 460 1 487 5 145 6 360 5 087 24 208 we deem exposure to have no legal credit Assets that – – – – – – – – – – 398 and 539 2 169 7 973 9 858 7 801 10 756 12 761 13 968 41 325 38 912 26 779 381 421 208 182 exposure Total credit credit Total counterparty Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) Largely relates to exposures that are classified as equity risk in the banking book. Largely relates to impairments. Largely cash in the securitised vehicles. on a deliveryOther assets include settlement debtors where we deem to have no credit risk exposure as they are settled against payment basis. Total on-balance sheet exposures Total Non-current assets classified as held for sale Non-current Loans to group companies Loans to group Intangible assets Goodwill Investment properties Property and equipment Property Other assets Deferred taxation assets Deferred Interest in associated undertakings Interest Other securitised assets Other loans and advances Own originated loans and advances to customers securitised Own originated loans and advances to customers Loans and advances to customers Investment portfolio Securities arising from trading activities Securities arising from Derivative financial instruments Other debt securities Bank debt securities Sovereign debt securities Sovereign Reverse repurchase agreements and cash collateral on securities borrowed agreements Reverse repurchase Non-sovereign and non-bank cash placements Non-sovereign Loans and advances to banks At 31 March 2016 At 31 March banks Cash and balances at central 2. 3. 4. 1. R’million THREE 36 A further analysis of our on-balance sheet credit and counterparty exposures and counterparty our on-balance sheet credit A further analysis of and credit consolidated balance sheet) our on-balance sheet in which class of asset (on the face of the The table below indicates and counterparty risk. credit all assets included in the balance sheet bear Not reflected. are counterparty exposures

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 37 80 88 60 732 190 Total Total 192 618 472 sheet 3 268 1 262 4 535 9 972 1 289 6 261 15 178 12 749 17 332 31 378 10 095 10 540 33 422 balance 332 706 172 993 THREE 4 3 2 2 2 1 Note ence refer- – – – – – – – (2) (continued) (continued) (18) 80 88 60 732 190 192 618 271 299 (1 139) 3 268 1 249 9 972 15 860 we deem exposure to have no legal credit Assets that – – – – – – – – – (continued) (continued) 13 and 490 4 537 1 018 6 261 Risk management 14 879 12 749 17 332 31 378 10 095 10 540 33 422 316 846 174 132 exposure Total credit credit Total counterparty Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Largely relates to exposures that are classified as equity risk in the banking book. Largely relates to impairments. Largely cash in the securitised vehicles. on a deliveryOther assets include settlement debtors where we deem to have no credit risk exposure as they are settled against payment basis. Total on-balance sheet exposures on-balance Total Non-current assets (or disposal groups) classified as held for sale classified as held assets (or disposal groups) Non-current Loans to group companies Loans to group Intangible assets Investment properties Property and equipment Property Other assets Deferred taxation assets Deferred Interest in associated undertakings Interest Other securitised assets Other loans and advances Own originated loans and advances to customers securitised Own originated loans and advances to customers Loans and advances to customers Investment portfolio Securities arising from trading activities Securities arising from Derivative financial instruments Other debt securities Bank debt securities Sovereign debt securities Sovereign Reverse repurchase agreements and cash collateral on securities borrowed agreements Reverse repurchase Non-sovereign and non-bank cash placements and non-bank cash Non-sovereign Loans and advances to banks Loans and advances to At 31 March 2015 At 31 March banks Cash and balances at central 2. 3. 4. 1. R’million exposures and counterparty our on-balance sheet credit A further analysis of 398 13 Total 490 539 4 537 7 801 7 973 2 169 6 261 1 018 9 858 46 159 63 926 14 879 31 378 17 332 12 749 14 551 26 779 41 325 13 968 12 761 10 756 17 767 33 422 10 540 10 095 43 480 58 031 38 912 381 421 445 347 208 182 174 132 316 846 374 877 – – – – – – – – – – – – – – – – – 18 11 32 89 188 935 473 746 778 503 2 215 3 673 6 429 1 123 6 051 8 757 9 535 cation 10 705 11 828 Communi- – – – – – – – – – – – – – – – 40 65 88 87 16 74 83 956 103 312 4 643 2 208 6 916 1 553 1 569 2 273 1 209 7 088 9 468 4 071 11 037 Transport – – – – – – – – – – – – – – – – – – – – – – – 3 3 15 20 65 65 21 1 860 1 863 1 605 1 620 1 685 1 819 tourism Leisure, Leisure, ment and entertain- – – – – – – – – – – – – – – – – – 26 and 276 479 159 4 514 8 931 1 822 2 268 1 640 4 010 7 059 1 800 3 440 1 581 2 509 4 682 6 336 Mining 15 267 10 499 resources – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 398 398 398 490 490 490 Other residential mortgages – – – – – – – – – – – – – – – – – – – – – – 1 11 711 100 263 264 676 111 6 927 7 038 6 441 7 152 7 416 6 251 estate cial real commer- Corporate – – – – – – – – – – – – – – – – – – – – – – 2 3 tion 222 350 170 170 211 222 3 638 3 860 2 749 3 101 3 271 3 424 Construc- – – – – – – – – – – – – – – 16 92 575 136 865 165 843 392 675 658 203 1 142 2 189 9 505 1 235 1 469 1 278 13 241 14 519 13 299 14 534 10 128 Manufac- turing and commerce – – – – – – – – – – – – – – – – – – 1 62 and 126 800 364 252 salers 5 967 1 664 7 693 1 769 2 140 4 036 1 164 5 200 1 781 2 378 1 556 1 726 whole- Retailers – – – – – – – – 13 83 and 299 484 5 924 3 527 7 521 6 212 8 602 3 906 3 569 7 475 3 337 3 137 8 876 8 168 17 332 12 470 89 398 96 873 26 779 37 389 13 968 11 977 14 092 33 422 Finance 106 030 120 122 insurance – – – – – – – – – – – – – – – – 2 30 71 178 109 562 151 156 782 812 544 165 656 765 6 777 7 735 8 908 9 779 8 500 10 591 services Business – – – – – – – – – – – – – – – – 309 270 102 330 213 1 004 1 333 7 801 2 686 6 377 1 917 2 226 6 261 1 546 Public 38 913 31 378 41 325 58 621 40 459 60 847 services business and non- – – – – – – – – – – – – – – – – – 6 7 98 814 368 565 205 990 971 6 923 (utility 4 794 7 236 1 097 4 809 5 119 1 804 2 243 2 808 water 10 044 gas and services) Electricity, – – – – – – – – – – – – – – – – – – – – – – – 1 10 36 869 879 464 464 432 432 1 343 2 256 2 293 2 725 Agriculture – – – – – – – – – – – – – – – – – – – – – – – – 842 2 265 3 107 1 501 5 388 6 889 clients private 38 031 38 031 44 920 41 077 41 077 44 184 Lending – largely to by property collateralised – – – – – – – – – – – – – – – – – – – 90 579 623 3 805 3 536 4 537 7 973 24 845 28 381 74 466 79 672 25 594 29 399 93 596 High net 109 071 102 192 130 573 worth and individuals professional professional Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) Excludes guarantees provided to clients which are backed/secured by cash on deposit with the bank. Total gross credit and counterparty exposures and credit gross Total enhancements or other credit pre-collateral ^ Guarantees^ Contingent liabilities, committed facilities and other sheet exposures off-balance Total Other loans and advances (gross) Other assets on-balance sheet exposures Total Loans and advances to customers (gross) Own originated loans and advances to customers securitised (gross) Other debt securities Derivative financial instruments trading activities Securities arising from Sovereign debt securities Sovereign Bank debt securities Loans and advances to banks and non-bank cash placements Non-sovereign and cash collateral agreements Reverse repurchase on securities borrowed At 31 March 2015 At 31 March Cash and balances at central banks Contingent liabilities, committed facilities and other Contingent liabilities, committed facilities and sheet exposures off-balance Total and counterparty exposures credit gross Total enhancements or other credit pre-collateral Other assets sheet exposures on-balance Total Guarantees^ Loans and advances to customers (gross) Own originated loans and advances to customers securitised (gross) Other loans and advances (gross) Other debt securities Derivative financial instruments trading activities Securities arising from Sovereign debt securities Sovereign Bank debt securities Loans and advances to banks Loans and advances to and non-bank cash placements Non-sovereign and cash collateral agreements Reverse repurchase on securities borrowed R’million 2016 At 31 March banks Cash and balances at central THREE 38 Detailed analysis of gross credit and counterparty exposures by industry counterparty exposures and credit gross Detailed analysis of

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 39 398 13 Total 490 539 9 858 7 801 7 973 2 169 6 261 1 018 4 537 46 159 63 926 43 480 58 031 10 540 17 767 12 749 14 879 14 551 12 761 10 756 38 912 33 422 10 095 31 378 17 332 26 779 41 325 13 968 374 877 174 132 208 182 381 421 445 347 316 846 THREE – – – – – – – – – – – – – – – – – 18 32 89 11 746 778 473 188 935 503 9 535 2 215 6 051 3 673 6 429 1 123 8 757 cation 10 705 11 828 Communi- (continued) (continued) – – – – – – – – – – – – – – – 40 16 83 65 88 87 74 956 312 103 1 553 1 569 1 209 7 088 4 071 4 643 2 208 2 273 6 916 9 468 11 037 Transport – – – – – – – – – – – – – – – – – – – – – – – 3 3 15 65 65 21 20 1 605 1 685 1 819 1 860 1 863 1 620 tourism Leisure, Leisure, Risk management ment and entertain- – – – – – – – – – – – – – – – – – 26 and 276 159 479 4 514 4 010 1 640 1 800 3 440 4 682 8 931 1 822 6 336 2 268 7 059 1 581 2 509 Mining 10 499 15 267 resources – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 398 398 398 490 490 490 Other residential mortgages – – – – – – – – – – – – – – – – – – – – – – 1 11 264 711 263 100 111 676 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group 6 441 7 152 7 416 6 251 6 927 7 038 estate cial real commer- Corporate – – – – – – – – – – – – – – – – – – – – – – 2 3 tion 170 170 222 222 350 211 2 749 3 101 3 271 3 424 3 638 3 860 Construc- – – – – – – – – – – – – – – 16 92 575 843 392 865 165 675 658 203 136 1 235 9 505 1 142 1 278 2 189 1 469 13 299 14 534 10 128 13 241 14 519 Manufac- turing and commerce – – – – – – – – – – – – – – – – – – 1 62 and 800 364 126 252 salers 1 164 5 200 4 036 2 140 1 769 1 556 5 967 1 664 1 726 7 693 2 378 1 781 whole- Retailers – – – – – – – – 13 83 and 299 484 5 924 3 906 3 569 7 475 8 602 6 212 7 521 3 527 8 168 3 137 8 876 3 337 96 873 89 398 12 470 17 332 33 422 14 092 11 977 37 389 13 968 26 779 Finance 120 122 106 030 insurance – – – – – – – – – – – – – – – – 2 71 30 544 178 109 165 765 656 562 156 812 151 782 6 777 7 735 8 500 8 908 9 779 10 591 services Business – – – – – – – – – – – – – – – – 309 270 213 102 330 1 004 1 333 1 546 7 801 2 686 6 377 6 261 1 917 2 226 Public 31 378 38 913 40 459 41 325 58 621 60 847 services business and non- – – – – – – – – – – – – – – – – – 6 7 98 814 368 565 971 205 990 6 923 (utility 1 097 4 794 7 236 2 243 2 808 4 809 5 119 1 804 water 10 044 gas and services) Electricity, – – – – – – – – – – – – – – – – – – – – – – – 1 10 36 869 879 464 464 432 432 1 343 2 256 2 293 2 725 Agriculture – – – – – – – – – – – – – – – – – – – – – – – – 842 2 265 3 107 1 501 5 388 6 889 clients private 38 031 38 031 44 920 41 077 41 077 44 184 Lending – largely to by property collateralised – – – – – – – – – – – – – – – – – – – 90 579 623 4 537 3 805 7 973 3 536 24 845 28 381 74 466 79 672 25 594 29 399 93 596 High net 109 071 102 192 130 573 worth and individuals professional professional Excludes guarantees provided to clients which are backed/secured by cash on deposit with the bank. Non-sovereign and non-bank cash placements Non-sovereign and cash collateral agreements Reverse repurchase on securities borrowed debt securities Sovereign Bank debt securities Other debt securities Derivative financial instruments trading activities Securities arising from Loans and advances to customers (gross) Own originated loans and advances to customers securitised (gross) Other loans and advances (gross) Other assets on-balance sheet exposures Total Guarantees^ Contingent liabilities, committed facilities and other sheet exposures off-balance Total counterparty exposures and credit gross Total enhancements or other credit pre-collateral ^ R’million 2016 At 31 March banks Cash and balances at central banks Loans and advances to and non-bank cash placements Non-sovereign and cash collateral agreements Reverse repurchase on securities borrowed debt securities Sovereign Bank debt securities Other debt securities Derivative financial instruments trading activities Securities arising from Loans and advances to customers (gross) Own originated loans and advances to customers securitised (gross) Other loans and advances (gross) Other assets sheet exposures on-balance Total Guarantees^ other Contingent liabilities, committed facilities and sheet exposures off-balance Total and counterparty exposures credit gross Total enhancements or other credit pre-collateral 2015 At 31 March Cash and balances at central banks Loans and advances to banks Detailed analysis of gross credit and counterparty exposures by industry counterparty exposures and credit gross Detailed analysis of 2015 490 1 343 8 500 5 200 3 271 7 416 1 685 9 535 44 920 10 044 40 459 96 873 14 534 10 499 11 037 109 071 374 877 Total 398 2016 6 923 2 725 7 693 3 860 7 038 1 863 6 916 15 267 44 184 60 847 10 591 14 519 11 828 120 122 130 573 445 347 80 2015 474 522 975 490 A description of the type of A description of the type we corporate client lending on undertake is provided a more pages 29 and 30, and detailed analysis of the corporate client loan portfolio is provided on pages 48 and 49.  6 889 5 250 1 723 3 060 5 029 6 489 3 949 3 484 30 068 39 455 88 271 196 208 balances held with institutions and central balances held with institutions in reflected banks, thus the large balance services’ and the ‘public and non-business sectors. These ‘finance and insurance’ sheet also include off-balance exposures committed items such as guarantees, liabilities, diversified facilities and contingent several industries. across 44 469 436 787 398 2016 2 114 1 683 5 315 4 391 2 845 5 399 3 107 Other credit and Other credit 29 004 54 470 10 585 108 145 229 192 counterparty exposures – 2015 869 4 794 1 004 6 777 8 602 2 140 9 505 2 749 6 441 4 010 1 605 7 088 6 051 79 003 38 031 178 669 – 2016 and advances 2 256 4 809 6 377 8 908 2 378 3 424 6 251 4 682 1 819 4 071 6 429 Gross core loans core Gross 41 077 11 977 10 128 A description of the type of A description of the type and lending private client lending we collateralised by property on undertake is provided detailed page 29, and a more portfolios analysis of these loan 48 and 49. are provided on pages 101 569 216 155  The remainder of core loans and advances of core The remainder to corporate client lending and largely relate industry sectors. across evenly spread are and counterparty exposures Other credit of cash and near cash largely reflective are Summary analysis of gross credit credit of gross Summary analysis by and counterparty exposures industry

collateralised Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) At 31 March R’million High net worth and professional individuals High net worth and professional Lending collateralised by property – largely Lending collateralised by property to private clients Agriculture Electricity, gas and water (utility services) Electricity, Public and non–business services Business services Finance and insurance Retailers and wholesalers Manufacturing and commerce Construction Corporate commercial real estate real Corporate commercial Other residential mortgages Other residential Mining and resources Leisure, entertainment and tourism Leisure, Transport Communication Total THREE by property’ Private client loansPrivate client ofaccount for 66.0% loanstotal gross core asand advances, therepresented by industry classification ‘high net worth and professional individuals lending and 40

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 41 398 Total Total 539 2 169 7 973 9 858 7 801 63 926 46 159 17 767 10 756 12 761 13 968 41 325 38 912 26 779 445 347 381 421 208 182 THREE – – – – – – – – 466 126 204 7 621 5 569 14 437 13 971 70 921 56 484 42 964 > 10 years (continued) (continued) – – – – – 306 304 689 3 530 2 215 1 315 2 100 6 608 1 482 7 645 Five to 44 856 41 326 22 192 10 years – – – 398 40 79 One years Risk management 9 699 2 711 4 954 6 898 5 832 3 591 1 341 23 536 13 837 to five 151 596 128 060 102 216 – – – – – – – Six year 560 850 369 3 364 2 804 2 078 4 689 7 484 to one 34 206 30 842 15 372 months – – – – – – 2 926 389 537 283 147 to six Three Three 8 844 1 453 1 834 23 935 23 009 10 446 months Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group – 6 Up 154 5 190 2 169 3 642 1 073 1 472 7 144 9 858 7 801 18 133 12 943 16 594 26 865 24 922 to three months 119 833 101 700 Excludes guarantees provided to clients which are backed/secured by cash on deposit with the bank. Excludes guarantees provided to clients which are backed/secured Total gross credit and counterparty credit gross Total or other pre-collateral exposures enhancements credit Total off-balance sheet exposures off-balance Total Contingent liabilities, committed facilities and other Guarantees^ Total on-balance sheet exposures on-balance Total Other assets Other loans and advances (gross) Own originated loans and advances to customers securitised (gross) Loans and advances to customers (gross) Securities arising from trading activities Securities arising from Derivative financial instruments Other debt securities Bank debt securities Sovereign debt securities Sovereign Reverse repurchase agreements and agreements Reverse repurchase cash collateral on securities borrowed Non-sovereign and non-bank cash and non-bank cash Non-sovereign placements Loans and advances to banks Loans and advances to Cash and balances at central banks Cash and balances at central ^ R’million Gross credit counterparty exposures by residual contractual maturity at 31 March 2016 maturity at 31 March contractual by residual counterparty exposures credit Gross – – (971) (170) (971) (170) (482) 787 505 660 2015 2015 3 729 2 588 3 717 1 720 2 387 3 729 4 535 (1 141) 0.29% 0.64% 2.09% 1.46% 30.60% 178 669 173 775 178 669 173 775 165 652 177 528 178 669 172 993 177 528 – – (681) (235) (681) (235) (523) 867 726 415 (916) 2016 2016 7 967 2 291 3 690 3 207 1 828 1 653 3 207 0.26% 0.42% 1.48% 1.06% 28.56% 207 272 215 239 216 155 211 807 216 155 211 807 197 412 215 239 216 155 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) An overview the financial year is provided on page 34. of developments during

Loans and advances to customers as per the balance sheet Loans and advances to the balance sheet. advances to customers securitised as per Own originated loans and Specific impairments Portfolio impairments Specific impairments Portfolio impairments Defaults net of impairments enhancements on defaults collateral and other credit Aggregate Net default loans and advances to customers (limited to zero) loans loss ratio (i.e. income statement impairment charge as a % of average gross Credit and advances) Total income statement charge for impairments on core loans and advances income statement charge for impairments on core Total default loans and advances to customers Gross Ratios loans and advances to customers core impairments as a % of gross Total default loans impairments as a % of gross Total loans and advances to customers core defaults as a % of gross Gross loans and advances to customers Defaults (net of impairments) as a % of net core loans and advances to customers Net defaults as a % of net core Default loans that are current and not impaired current Default loans that are impaired loans and advances to customers that are core Gross loans and advances to customers core Gross Current loans and advances to customers Current but not impaired past due loans and advances to customers that are core Gross Gross core loans and advances to customers core Gross Past due loans and advances to customers (1 – 60 days) Past due loans and advances to customers (1 Special mention loans and advances to customers Default loans and advances to customers Current loans and advances to customers Current Average gross core loans and advances to customers loans core gross Average Total impairments Total loans and advances to customers Net core Gross core loans and advances to customers core Gross At 31 March R’million At 31 March At 31 March R’million Loans and advances to customers as per the balance sheet Loans and advances to securitised as per the balance sheet Add: own originated loans and advances to customers Net core loans and advances to customers Net core THREE 42 The tables that follow provide information with respect to the asset quality of our core loans and advances to customers. loans and advances to the asset quality of our core information with respect The tables that follow provide • An analysis of our core loans and advances, asset quality and impairments and advances, asset quality and loans core An analysis of our loans and advances comprise: Core •

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 43 36 2015 144 253 194 543 130 147 962 Total Total 867 518 244 787 795 1 533 1 448 1 322 4 894 1 818 1 653 1 828 1 720 2 387 1 023 THREE – – 94 12 30 185 140 464 197 285 172 790 days 2016 301 110 649 258 125 337 762 > 365 1 037 1 921 1 273 4 348 (continued) (continued) – – 68 14 42 16 94 66 53 days 128 181 – 365 – – Risk management 88 21 80 22 days 213 104 173 108 91 – 180 – – 6 6 4 70 24 32 40 days 104 61 – 90 – – 4 days 254 156 389 418 154 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group 1 – 60 1 117 1 030 – – – – – – 867 787 746 loans 1 054 Current watchlist Total capital exposure exposure capital Total Total capital exposure capital exposure Total Amount in arrears Total capital exposure capital exposure Total Amount in arrears Total capital exposure capital exposure Total Total capital exposure capital exposure Total Amount in arrears Total capital exposure capital exposure Total Amount in arrears R’million At 31 March At 31 March R’million Default loans that are current Default loans that are 1 – 60 days 61 – 90 days 91 – 180 days 181 – 365 days > 365 days loans and advances to customers (actual capital exposure) Past due and default core 1 – 60 days 61 – 90 days 91 – 180 days 181 – 365 days > 365 days loans and advances to customers (actual amount in arrears) Past due and default core At 31 March 2016 At 31 March loans neither Watchlist past due nor impaired Gross core loans and core Gross advances to customers past due but that are not impaired Gross core loans and core Gross advances to customers impaired that are At 31 March 2015 At 31 March loans neither Watchlist past due nor impaired Gross core loans and core Gross advances to customers past due but that are not impaired Gross core loans and core Gross advances to customers impaired that are A further age analysis of past due and default core loans and advances to customers default core A further age analysis of past due and An age analysis of past due and default core loans and advances to customers loans and advances past due and default core An age analysis of 55 5 726 415 360 59 Total Total Total Total 165 160 538 293 245 762 3 207 1 379 1 828 4 348 – – – – 4 4* 1 1* 645 181 464 649 336 139 197 337 days days > 365 > 365 – – – – 1 1* 10 10* 58 42 29 13 16 30 days days 100 110 181 – 365 181 – 365 – – – – 1 1* 14 14* 87 21 days days 287 200 301 124 103 125 91 – 180 91 – 180 – – – – 9 5 6 5 7 7 64 55 30 24 94 12 days days 61 – 90 61 – 90 – – 4 66 59 42 38 224 158 days 157 157 258 days 726 323 323 1 – 60 1 – 60 1 273 – – – – – – – – – – – – 868 loans loans 1 921 1 053 1 921 Current Current watchlist watchlist Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group

Risk management (continued) Largely relates to solvent deceased estates and bonds under registration at the deeds office. Due to the lengthy external process with respect to these Largely relates to solvent deceased estates and bonds under registration at the deeds office. Due to the as special mention and will remain there until settled or their exposures, which are out of the control of Investec, these exposures have been classified credit quality deteriorates. Special mention (1 – 90 days) Special mention (61 – 90 days and item well secured) Sub-standard Special mention (1 – 90 days) Doubtful Special mention (61 – 90 days and item well secured) Sub-standard Doubtful * R’million Past due (1 – 60 days) R’million Special mention Past due (1 – 60 days) Special mention Default Total Total Default Total Total THREE 44 An age analysis of past due and default core loans and advances to customers at 31 March 2016 (based on 2016 (based on 31 March loans and advances to customers at core An age analysis of past due and default actual amount in arrears) An age analysis of past due and default core loans and advances to customers at 31 March 2016 (based on total total 2016 (based on to customers at 31 March loans and advances past due and default core An age analysis of capital exposure)

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 45 49 74 19 Total Total Total Total 505 660 586 417 398 329 3 729 1 344 2 385 4 894 1 352 1 023 1 818 THREE – – – – 41* 26* 41 26 244 936 146 790 962 days days > 365 > 365 1 281 1 037 1 322 (continued) (continued) – – – – 34* 26* 34 26 94 66 68 53 days days 160 194 121 147 181 – 365 181 – 365 – – – – 6* Risk management 19* 6 19 79 22 days days 234 155 253 124 102 130 91 – 180 91 – 180 – – – 2 5 76 74 68 19 28 40 19 17 12 36 days days 144 61 – 90 61 – 90 – – 1 49 36 days 340 340 154 153 543 days 505 490 490 453 417 1 – 60 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group 1 – 60 1 448 – – – – – – – – – – – – 787 746 loans loans 1 533 1 533 Current Current watchlist watchlist

Largely relates to solvent deceased estates and bonds under registration at the deeds office. Due to the lengthy external process with respect to these Largely relates to solvent deceased estates and bonds under registration at the deeds office. Due to the as special mention and will remain there until settled or their exposures, which are out of the control of Investec, these exposures have been classified credit quality deteriorates. Special mention (1 – 90 days) Special mention (61 – 90 days and item well secured) Sub-standard Special mention (1 – 90 days) Doubtful Special mention (61 – 90 days and item well secured) Sub-standard Doubtful * R’million Past due (1 – 60 days) Special mention R’million Past due (1 – 60 days) Special mention Default Total Total Default Total Total An age analysis of past due and default core loans and advances to customers at 31 March 2015 (based on 2015 (based on 31 March loans and advances to customers at core An age analysis of past due and default actual amount in arrears) An age analysis of past due and default core loans and advances to customers at 31 March 2015 (based on total total 2015 (based on to customers at 31 March loans and advances past due and default core An age analysis of capital exposure) – – 5 59 49 19 165 160 538 293 245 762 417 398 329 1 352 1 023 1 818 Actual arrears arrears amount in 55 73 723 414 359 502 652 579 and 2 526 1 379 1 147 2 758 1 344 1 414 capital (actual 211 576 215 239 173 616 177 528 Total net Total advances exposure) exposure) core loans core – – – – – – – (1) (1) (7) (3) (1) (3) (8) (231) (235) (159) (170) ments impair- Portfolio – – – – – – – – – – – – (681) (971) (681) (681) (971) (971) ments impair- Specific 55 74 726 415 360 505 660 586 and 3 207 1 379 1 828 3 729 1 344 2 385 capital (actual 211 807 216 155 173 775 178 669 advances exposure) exposure) Total gross Total core loans core – – – – – – – – – – – 2 1 828 1 828 1 828 2 387 2 385 2 387 that are impaired advances loans and Gross core Gross – – – – 55 74 726 415 360 512 512 505 660 586 555 555 1 653 1 720 but not that are that are past due impaired impaired advances loans and Gross core Gross – – – – – – – – – – 867 867 787 787 past neither 211 807 212 674 173 775 174 562 due nor impaired advances loans and Gross core Gross Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) Special mention (1 – 90 days) Special mention (61 – 90 days and item well secured) Sub-standard Doubtful Special mention (1 – 90 days) Special mention (61 – 90 days and item well secured) Sub-standard Doubtful At 31 March 2016 At 31 March loans and core Current advances Past due (1 – 60 days) R’million Special mention Default Total Total At 31 March 2015 At 31 March and loans core Current advances Past due (1 – 60 days) Special mention Default Total Total THREE 46 An analysis of core loans and advances to customers loans and An analysis of core

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 47 74 55 (170) (971) (235) (681) 586 660 505 (916) 360 415 726 2 385 1 344 3 729 1 828 1 379 3 207 (1 141) 177 528 178 669 173 775 215 239 216 155 211 807 Total core Total THREE loans and customers advances to – – – – 3 3 3 3 52 13 13 80 (115) (143) (115) 168 171 (143) 162 165 3 600 3 715 3 489 5 057 5 200 4 942 Trade Trade finance and other (continued) (continued) – – – – – – – – – – – (1) (6) (4) (7) (4) 71 71 14 14 997 933 1 004 6 373 6 377 6 363 sector (including Public and government central banks) Risk management – – – – – – – – – – – – – – (4) (4) (4) (4) 52 52 8 598 8 602 8 602 11 973 11 977 11 925 services financial sovereign) Insurance, (excluding – – – – – – (32) (38) 64 24 24 (331) (232) (363) 628 692 (270) 505 505 100 47 951 48 314 47 598 49 685 49 955 49 350 sector Corporate Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group 71 42 (133) (519) (189) (306) (652) 562 633 453 (495) 360 402 546 1 518 1 277 2 795 1 161 1 310 2 471 116 382 117 034 113 153 142 151 142 646 139 227 and high net worth individuals professional Private client, Doubtful Sub-standard Special mention (61 – 90 days and item well secured) Special mention (1 – 90 days) Doubtful Sub-standard Special mention (61 – 90 days and item well secured) Special mention (1 – 90 days) Net core loans and advances Net core to customers Portfolio impairments Specific impairments Total impairments Total Total gross core loans and loans core gross Total advances to customers Default Special mention Past due (1 – 60 days) At 31 March 2015 At 31 March and advances loans core Current Net core loans and Net core advances to customers Portfolio impairments Specific impairments Total impairments Total Total gross core loans and core gross Total advances to customers Default Special mention Past due (1 – 60 days) Past due (1 – 60 days) At 31 March 2016 At 31 March loans and advances core Current R’million An analysis of core loans and advances to customers and impairments by counterparty type advances to customers and impairments loans and An analysis of core (8) 8 (19) (51) (98) (45) (71) (22) (40) 13 21 61 (10) (70) (80) (136) (238) (523) 123 (160) (283) Income statement impairments^ – – (12) (12) (60) (70) (80) (51) (14) (24) (19) (97) (65) (136) (916) (143) (210) (140) (421) (290) (205) sheet Balance impairments – – – – – 25 56 24 286 367 839 273 217 490 160 482 666 3 690 1 328 2 167 1 156 credit credit ments enhance- and other collateral Aggregate on defaults – – – – 31 136 106 165 329 736 495 276 194 470 104 366 501 971 3 207 1 005 1 500 Gross Gross defaults 507 6 424 2 660 1 421 4 081 5 211 loans 1 732 1 668 3 400 1 113 2 385 42 622 14 664 73 509 47 076 54 493 34 179 37 677 41 077 216 155 101 569 Gross core core Gross Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) Where a positive number represents a recovery. Large ticket asset finance Small ticket asset finance High net worth and specialised lending Mortgages Residential vacant land and planning Residential real estate – development Residential real Commercial vacant land and planning Commercial Commercial real estate – development real Commercial Commercial real estate – investment real Commercial Total Resource finance Resource Project finance Project Asset finance Other corporate and financial institutions and governments Asset-based lending Acquisition finance Corporate and other lending High net worth and other private client lending Residential real estate Residential real Commercial real estate real Commercial Lending collateralised by property Lending collateralised ^ R’million THREE 48 An analysis of core loans and advances by risk category at 31 March 2016 March advances by risk category at 31 loans and An analysis of core

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 49 – (5) (6) (1) (4) 25 (16) (21) (56) (36) (23) (34) (38) (29) (35) (186) (102) (482) (274) (144) (179) Income THREE statement impairments^ – 1 (7) (18) (32) (31) (71) (52) (93) (127) (115) (198) (151) (127) (151) (179) (251) (489) (222) (430) sheet (1 141) Balance (continued) (continued) impairments – – – 1 1 Net core loans (RHS) Net core collateral) as a % of net Net defaults (before loans and advances (LHS) core loss ratio (income statement Credit impairment charge as a % of average gross loans and advances) (LHS) core 86 76 117 313 517 739 229 333 562 222 443 741 3 717 1 158 1 897 1 303 credit credit ments enhance- and other collateral Aggregate 50 0 250 200 150 100 on defaults Risk management R’billion – – – – 18 72 265 170 481 934 448 314 346 660 303 276 651 16 3 729 1 036 1 484 1 311 Gross Gross defaults 15 517 14 5 597 3 206 1 228 4 434 3 717 loans 1 517 1 590 3 107 1 522 2 372 31 067 16 303 61 635 32 848 46 155 79 003 31 030 34 924 38 031 178 669 Gross core core Gross 13 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group 12 11 10 09 08 07 Where a positive number represents a recovery. 0 Large ticket asset finance Percentage Small ticket asset finance High net worth and specialised lending Mortgages Residential vacant land and planning Residential development Commercial vacant land and planning Commercial Commercial real estate – development real Commercial Commercial real estate – investment real Commercial 1 2 3 4 5 Total Resource finance Resource Project finance Project Asset finance Other corporate and financial institutions and governments Asset-based lending Acquisition finance Corporate other lending High net worth and other private client lending Residential real estate Residential real Commercial real estate real Commercial Lending collateralised by property Lending collateralised ^ R’million ASSET QUALITY TRENDS An analysis of core loans and advances by risk category at 31 March 2015 March advances by risk category at 31 loans and An analysis of core Total Total 3 796 9 464 8 155 7 339 6 573 8 955 5 703 8 093 1 001 17 436 13 370 52 221 37 855 53 383 10 579 20 772 10 940 56 087 12 183 16 628 40 767 58 396 324 386 104 003 107 440 218 782 396 344 127 994 141 684 281 861 – – – – – – – – 15 94 35 22 479 494 666 760 105 482 587 4 395 8 242 1 319 1 354 7 905 Other 26 179 12 288 24 925 26 496 16 628 24 555 credit and credit exposures* counterparty – 713 979 Core 3 796 9 464 8 155 7 245 2 178 9 260 5 703 8 093 16 957 13 355 51 727 25 567 28 458 20 737 10 940 54 733 12 078 32 862 33 841 298 207 104 003 106 774 218 022 369 848 127 994 141 202 281 274 Collateral held against advances loans and Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) A large percentage of these exposures (for example bank placements) are to highly rated financial institutions where limited collateral would be required A large percentage of these exposures (for example bank placements) are to highly rated financial institutions due to the nature of the exposure. Other Guarantees Debtors, stock and other corporate assets Charges other than property Unlisted shares Commercial property investments property Commercial Commercial property developments property Commercial Residential property Debt securities issued by sovereigns Cash Listed shares Other Guarantees Debtors, stock and other corporate assets Charges other than property Unlisted shares Commercial property investments property Commercial Commercial property developments property Commercial Residential property Debt securities issued by sovereigns Cash Listed shares Total collateral Total Other collateral Property charge Property At 31 March 2015 At 31 March Eligible financial collateral Total collateral Total Other collateral Property charge Property At 31 March 2016 At 31 March Eligible financial collateral R’million * THREE 50 COLLATERAL in the table below collateral is provided A summary of total

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 51 THREE (continued) (continued) Investment risk in in Investment risk book the banking moderate represents a our total percentage of managed assets and is within appropriate risk limits Risk management Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group been transferred to a new vehicle, to a new vehicle, been transferred (IEP) on Investec Equity Partners Bank 11 January 2016. Investec alongside Limited holds a 45% stake who hold the other strategic investors The investment 55% in IEP. remaining as an investment in IEP will be reflected continue to in an associate. We help create pursue opportunities to black-owned and controlled and grow companies. Lending the manner in transactions: certain transactions which we structure warrant and profit in equity, results within being held, predominantly shares unlisted companies Property activities: we source development, investment and trading value and trade opportunities to create risk parameters within agreed for profit Central Funding: Central Funding is the custodian of certain equity and investments. property • • • Management of risk Investment committee, market risk management and ERRF Investment committee and ERRF risk management committees Credit and ERRF Investment committee, Investec Property investment committee and ERRF group of IEP on the board Our executive are Investment committee and ERRF For a description of our valuation principles and methodologies refer to pages 146 to 158 for factors taken into consideration in determining fair value. Refer to page 146 for further information.   investments investments Principal Investments: record selected based on the track are of management, the attractiveness of the industry and the ability to build value for the existing business by strategy. implementing an agreed may arise Investments in listed shares on the IPO of one of our investments. Additionally listed investments may we believe that where be considered the market is mispricing the value of the underlying security or where is the opportunity to stimulate there portion A material corporate activity. of the principal investments have Nature of investment risk Nature Listed equities Investment Banking principal investments shares Embedded derivatives, profit lending and investments arising from transactions Investment and trading properties IEP Central Funding investments We have a low level of assets exposed to the volatility of IFRS fair value accounting with level 3 We assets amounting to 0.63% of total assets. VALUATION AND ACCOUNTING METHODOLOGIES VALUATION MANAGEMENT OF INVESTMENT RISK conducted by us, the monitoring and a variety of activities As investment risk arises from transactions and/or type of activity. varies across thereof measurement INVESTMENT RISK INVESTMENT RISK DESCRIPTION book arises Investment risk in the banking the following activities primarily from conducted within the group: • Investment risk in the in the Investment risk banking book Risk appetite limits and targets are set to manage our exposure to equity and investment set to manage our exposure Risk appetite limits and targets are testing against limits and targets as well as stress risk. An assessment of exposures to GRCC. As a matter of course, performed and reported scenario analysis are geographies across well spread concentration risk is avoided and investments are and industries. – – – – _ – (2) 50 205 207 728 105 (176) (176) 2015* 1 169 2 052 equity change through Valuation Fair value stress test stress – 31 15 289 299 211 148 218 289 2015 Total 7 791 2 913 1 605 1 215 1 605 1 083 sheet 11 292 value of On-balance investments Finance and insurance Manufacturing and commerce Mining and resources Real estate Other Business services Communication – – – _ 35 83 420 889 760 511 203 308 385 200 185 2016* 2 187 8.3% 6.3% 6.1% 5.6% 2.7% 40.3% 30.7% change 31 March 2016 (R11.7 billion) 31 March Valuation Dividends stress test stress (2) 27 75 696 318 456 274 177 237 (105) 2016 3 944 3 597 2 803 3 557 5 063 sheet 11 837 value of Realised** On-balance investments Income/(loss) (pre-funding costs) Income/(loss) (pre-funding 4 50 91 (56) (60) 398 451 (107) (2 699) (2 724) Unrealised** AND OTHER EMBEDDED DERIVATIVES AND INVESTMENT IN Additional information AN ANALYSIS OF THE INVESTMENT PORTFOLIO, WARRANTS, PROFIT SHARES ASSOCIATE (IEP) BY INDUSTRY OF EXPOSURE 15% 25% 20% 10% 35% Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) Includes the investment portfolio and non-current assets classified as held for sale as per the balance sheet. As explained on page 51. stress testing parameters are applied: In order to assess our earnings sensitivity to a movement in the valuation of these investments the following In a year of realisation, any prior period mark-to-market gains/losses recognised are reversed in the unrealised line item. In a year of realisation, any prior period mark-to-market Stress test values applied Stress Unlisted investments and IEP Listed equities properties Trading Investment properties and shares profit Warrants, other embedded derivatives Total Warrants, profit shares and other embedded derivatives shares profit Warrants, Investments and trading properties Listed equities 2015 Unlisted investments Total Warrants, profit shares and other embedded derivatives shares profit Warrants, Investment and trading properties Investment and trading Listed equities 2016 Unlisted investments R’million Unlisted investments^ For the year to 31 March For the year to 31 March R’million Listed equities Investment and trading properties and other embedded derivatives shares profit Warrants, Investment in associate (IEP)^^ Total THREE 52 ^^ * ^ The balance sheet value of investments is indicated in the table below. The balance sheet value of investments is indicated SUMMARY OF INVESTMENTS HELD AND STRESS TESTING ANALYSES OF INVESTMENTS SUMMARY ** to revaluation gains posted directly included in tier 1 capital. The bank excludes and loss are profit gains through revaluation Unrealised its capital position. equity from The table below provides an analysis of income and revaluations recorded with respect to these investments. with respect recorded analysis of income and revaluations an The table below provides

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 53 THREE (continued) (continued) Refer to pages 119 and 120.

ACCOUNTING POLICIES  Total assets that have been originated and assets that have been originated Total Client division securitised by the Private 2016 amount to R8.0 billion at 31 March consist 2015: R4.5 billion) and (31 March mortgages (R8.0of residential billion). Within securitisation vehicles loans these amounted than 90 days in arrears greater to R14.5 million. to close has been obtained SARB approval namely Private our historical transactions, (PRM) Limited – Residential Mortgages Residential Series 1 (PRM1), Private Mortgages (PRM) Limited – Series 2 (PRM2), as well as Private Mortgages 1 (PM1) and Private Mortgages 2 (PM2). During the year we arranged one new Investec Private Client originated residential mortgage securitisation transaction 5 (RF) Limited (FS5) Fox Street namely, for R2.85 billion (R1.76 billion at year end). as This RMBS transaction was structured an amortising transaction and the notes held internally by Investec in order are committed to make use of the SARB’s rated liquidity facility (CLF). FS1 to FS5 are has Ratings. The group by Global Credit acted as sole originator and sponsor in these securitisation transactions, which are to be traditional securitisations considered and in which a complete transfer of risk has for regulatory deemed to have occurred has retained capital purposes. The group an investment in all of these transactions. securitisation rules, In terms of current cannot act as liquidity provider the group to these transactions, and thus for these the special purpose structures, Fox Street entity has an internal that liquidity reserve mitigants have has been funded. Credit not been used in these transactions. An exemption notice in terms of securitisation to the rules has been applied for in relation FS1 and FS2 transactions. The FS3 to FS5 within scope of the CLF transactions are Bank’s Act. capital purposes, the For regulatory equity tranche held in the FS1 and FS2 as a deduction transaction, is treated has no against capital. The group in South Africa. exposures resecuritisation Risk management Refer to page 54.  Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Provide an alternative source of funding an alternative source Provide Act as a mechanism to transfer risk the retention Leverage returns through of equity tranches in low default rate portfolios. is risk weighted for regulatory This exposure capital purposes. The liquidity risk associated with this facility is included in the stress and is managed in testing for the group with our overall liquidity position. accordance have also sought out select We markets opportunities in the credit/debt in structured and traded and purchased These have largely been rated credit. instruments within the UK and Europe, totalling R0.8 billion at 31 March 2016 sold a R1.4 billion). We (31 March 2015: number of these investments during the risk weighted These investments are year. capital purposes. for regulatory In addition, we have own originated, securitised assets in our Private Client business in South Africa. The primary motivations for the securitisation of assets to: within our Private Client division are • • • The information below sets out the The information below on over the initiatives we have focused most of these past few years, albeit that curtailed given the business lines have been market and changes in the securitisation Investec given the strategic divestments has undertaken last year. was establishedOur securitisation business time, weover 15 years ago. Over this and of residential have arranged a number mortgage-backed programmes, commercial conduits paper asset-backed commercial party securitisations. (ABCP), and third we have also assisted in Historically, the development of select securitisation party platforms with external third to originating intermediaries. Our exposure and been sold these platforms has reduced down over the last few years and at present funding we have a single limited warehouse line to one platform. sponsor to and we are Furthermore, a standby liquidity facility to Private provide Mortgages 1 (RF) (Pty) Ltd. This facility, which totalled R15 million at 31 March 2016 R200 million), has not (31 March 2015: as off- been drawn on and is reflected in balance sheet contingent exposures analysis. terms of our credit Refer to page 36 for the balance sheet and credit risk classification. Refer to page 79 for further detail.   The bank applies the standardised approach approach The bank applies the standardised capital for in the assessment of regulatory within its banking securitisation exposures book and trading book. The trading book not are at 31 March 2016 exposures no further information material, and therefore is disclosed for these positions. The bank’s definition of securitisation/ The bank’s activities (as explained credit structured below) is wider than the definition as applied capital purposes, which for regulatory largely focuses on those securitisations in has achieved significant which the group believe that the however, We, risk transfer. below is meaningful information provided activities in all these related in that it groups to obtain a fuller picture for a reviewer order of the activities that we have conducted in this space. Some of the information provided and credit below overlaps with the group’s information. counterparty exposure OVERVIEW Securitisation/ structured credit activities exposures CAPITAL REQUIREMENTS CAPITAL In terms of Basel III capital requirements for Investec Bank Limited, unlisted and listed equities within the banking book under the category of represented are ‘equity risk’ and investment properties, embedded derivatives and shares profit in the calculation of capital considered are risk. for credit required STRESS TESTING SUMMARY STRESS TESTING at Based on the information we above, as reflected 31 March 2016, in revenue reversal could have a R2.2 billion is in which there (which assumes a year scenario’ simultaneously stress a ‘severe not all asset classes). This would across could a loss, but to report cause the group impact on have a significantly negative of earnings period. The probability for that in all geographies all these asset classes negatively in which we operate being impacted at the same time is very low, of listed equities although the probability being negatively impacted at the same time is very high. 35 36 646 134 126 772 Total Total Total Total 1 251 2 963 4 419 1 420 – – – – – – – – held, rated) 2 963 2 963 Other C and below (internally 2015 – – – – – – B 36 36 188 188 Analysed as part of the group’s Analysed as part of the group’s loans overall asset quality on core and advances Asset quality – relevant Asset quality – relevant comments Unrated – – – – – CREDIT ANALYSIS and of our credit In terms of our analysis arising from counterparty risk, exposures activities credit securitisation/structured we to which only those exposures reflect at risk. consider ourselves to be have been In addition, assets that Client division securitised by our Private lending as part of our core reflected are and not our securitisation/ exposures as we believe exposures credit structured of and intent the true nature this reflects and activities. these exposures 35 BB 134 178 1 251 1 420 Rated** – – – – – – 772 646 126 303 BBB Total Total – – – – – – – A 458 458 482 held, Other debt securities and other loans and advances Other loans and advances Own originated loans and advances to customers securitised exposure sheet credit Off-balance as these facilities have remained a contingent undrawn and reflect liability on the bank Balance sheet and risk classification credit Other unrated) (internally 36 472 200 2015 4 419 1 420 2 963 4 535 2016 – – – – – – – AA In addition, securitisationsof Investec own originated assets are assessed in terms of the credit risk management philosophies and principles as set out on page 22. R’million 126 126 457  Exposure Unrated – – appetite policy, which details the group’s which details the group’s appetite policy, each and appetite for such exposures, to the relative is considered exposure can use overall risk appetite. We group’s risk mitigation techniques explicit credit prefers group the however, required, where by only and manage these risks to address to which the group exposures approving constant the has explicit appetite through of the risk and consistent application appetite policy. 15 367 – – – – – – – 772 772 2016 7 967 772 646 126 AAA R’million Rated** Exposure Exposure Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) Rated Unrated Other (internally held) R’million At 31 March At 31 March of exposure/activity Nature US corporate loans Structured credit (gross exposure)* (gross credit Structured UK and European RMBS UK and European UK and European RMBS UK and European Loans and advances to customers advances and Loans party intermediary and third platforms (mortgage loans) (with the potential to be securitised) (net exposure) Private Client division assets which have been securitised to third Liquidity facilities provided party corporate securitisation vehicles UK and European corporate UK and European loans Australian RMBS Australian RMBS South African RMBS Total Total Total at 31 March 2016 at 31 March Total Total at 31 March 2015 at 31 March Total THREE 54 **A further analysis of rated structured credit investments credit **A further analysis of rated structured *Analysis of rated and unrated structured credit credit *Analysis of rated and unrated structured RISK MANAGEMENT to exposures or proposed existing All are a securitisation or a resecuritisation basis, with analysed on a case-by-case the from required typically final approval committee. The global credit group’s to the historical analysis looks through of the performance and expected future position of the underlying assets, the as tranche in the capital structure relevant cash flow waterfall well as analysis of the scenarios. under a variety of stress but only External presented, ratings are for information purposes since the bank on its own internal risk principally relies these transaction assessment. Overarching risk level principles is the board-approved At 31 March R’million

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 55 THREE (continued) (continued) The accuracy of the VaR model as a The accuracy of the VaR of potential loss is continuously predictor backtesting. This through monitored hypothetical (clean) involves comparing the the previous arising from trading revenues one-day closing positions with the day’s day on previous calculated for the VaR is the revenue these same positions. If a one-day VaR, negative and exceeds the to have is considered backtesting exception the average Over time we expect occurred. exceptions rate of observed backtesting of the to be consistent with the percentile statistic being tested. VaR In South Africa, we have internal model the SARB for general from approval market risk for all trading desks with the trading and therefore exception of credit trading capital is calculated as a function as well as the 99% of the 99% 10-day VaR together with standardised 10‑day sVaR specific risk capital for issuer risk. and a detailed stress- Backtesting results submitted to the regulator testing pack are on a monthly basis. The table on page 56, contains the for the trading figures 95% one-day VaR businesses and the graphs that follow show of backtesting the total daily 99% the result and loss figures against profit one-day VaR for our trading activities over the reporting period. Based on these graphs, we can i.e. figures, gauge the accuracy of the VaR 99% of the time, the total trading activities than the not expected to lose more are 99% one-day VaR. Risk management Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Market risk management teams review the the teams review Market risk management books. Detailed market risks in the trading daily for each produced are risk reports risk of aggregate trading desk and for the the trading books. distributed to are These reports is There management and traders. for management a formal process and authorisation for any risk recognition of The production excesses incurred. allows for the monitoring of risk reports all positions in the trading book against set at trading limits. Limits are prescribed risk across desk level with aggregate against overall all desks also monitored limits market risk appetite limits. Trading taking into account generally tiered, are risks of traded liquidity and the inherent models for new instruments. Valuation independently are instruments or products trading validated by Market Risk before can commence. Each traded instrument to assess undergoes various stresses potential losses. techniques used to quantify Measurement our trading market risk arising from activities include sensitivity analysis, (sVaR), VaR stressed value at risk (VaR), value expected tail loss (ETL) and extreme testing and scenario theory (EVT). Stress used to simulate extreme analysis are conditions to supplement these core measures. daily at the monitored are VaR numbers 95% and 99% confidence intervals, with limits set at the 95% confidence interval. daily at the 95% also monitored ETLs are and 99% levels as is the worst case loss distribution. Scenario analysis in the VaR considers the impact of a significant trading market event on our current consider the impact of portfolios. We economic yet plausible future extreme events on the trading portfolio as well as not possible worst case scenarios that are necessarily as plausible. Scenario analysis is done at least once a week and is to ERRF. included in the data presented MANAGEMENT AND MANAGEMENT AND TRADED MEASUREMENT OF MARKET RISK

GOVERNANCE STRUCTURE To manage, measure and mitigate market measure manage, To risk, we have independent market risk Management teams in each geography we assume market risk. Local limits where have been set to keep potential losses within acceptable risk tolerance levels. A global market risk forum, mandated by manages of directors, the various boards with the market risks in accordance principles and policies. ‑approved pre and set at the reviewed Risk limits are global market risk forum and ratified at with the risk appetite ERRF in accordance The appropriateness defined by the board. of limits is continually assessed with limits in the event of a at least annually, reviewed significant market event or at the discretion of senior management. TRADED MARKET RISK Traded Market Risk is the risk that the value Traded changes as a of a portfolio of instruments risk of changes in underlying market result equity prices, rates, factors such as interest rates and commodity prices, exchange volatilities. The Market Risk Management team identifies, quantifies and manages this with Basel standards risk in accordance and policies determined by the board. The focus of our trading activities is Our primarily on supporting client activity. trading strategic intent is that proprietary 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. we have exists where Market risk, therefore, from taken on principal positions resulting market making, underwriting, investments trading in the foreign and limited proprietary exchange, capital and money markets. The focus of these businesses is primarily on supporting client activity. TRADED MARKET RISK RISK TRADED MARKET DESCRIPTION Market risk in the the Market risk in trading book – 1.0 1.1 0.9 2.0 Low 0.5 6.4 5.9 3.5 7.6 High

P/L 99% one-day VaR 31 March 2016 March 31 0.1 2.7 3.1 1.6 4.3 31 March 2015 31 March

Average 29 February 2016 February 29 –

1.8 3.0 2.7 3.4 31 January 2016 January 31

Year end Year – 2015 December 31 1.2 1.2 0.5 2.0

Low 30 November 2015 November 30

0.2 4.5 6.4 3.0 8.4

High 2015 October 31 30 September 2015 September 30 0.1 2.1 2.6 1.2 3.8 31 March 2016 31 March

Average 31 August 2015 August 31

0.1 2.1 3.0 1.1 4.2 31 July 2015 July 31

Year end Year

30 June 2015 June 30 31 May 2015 May 31 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group

Risk management (continued) 30 April 2015 April 30 The consolidated VaR for each desk is lower than the sum of the individual VaRs. This arises from the consolidation offset between various asset classes This for each desk is lower than the sum of the individual VaRs. The consolidated VaR (diversification). 6 000 000 2 000 000 aR -2 000 000 -6 000 000 Rand 30 000 000 26 000 000 22 000 000 18 000 000 10 000 000 14 000 000 95% (one-day) Commodities R’million Equities Foreign exchange Foreign Interest rates Interest Consolidated* THREE 99% ONE-DAY VaR BACKTESTING -10 000 000 -14 000 000 56 Average VaR for the year ended March 2016 in the South African trading book, was lower than the previous year due to lower VaR utilisation utilisation year due to lower VaR African trading book, was lower than the previous 2016 in the South for the year ended March VaR Average in one exception (as shown in the resulted and loss data for backtesting profit the main trading desks. Using hypothetical (clean) across The exception was due to normal VaR implies. exceptions that a 99% of two to three graph below), which is below the expected number trading losses. * V

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 57 – 2.5 4.4 3.8 5.0 0.1 9.7 7.7 16.2 13.4 2015 2015 Year end Year 31 March 31 March 8 THREE >9.0 1 9.0 – 5.0 4.5 1.8 7.6 0.2 3.0 2.8 4.4 5.1 Low 2016 7 8.0 (continued) (continued) 5 7.0 19 6.0 1.9 12.9 32.4 72.2 53.0 High 17 5.0 29 4.0 Risk management 35 3.0 5.5 0.2 14.6 13.3 19.9 31 March 2016 31 March Average 31 2.0 38 1.0 7.6 0.4 0 27 30.9 11.7 39.3 Year end Year 18 -1.0 Pro t/loss earned per day (R’million) Pro t/loss 10 -2.0 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group 4 -3.0 -4.0 -5.0 -6.0 -7.0 1 -8.0 <-9.0 The consolidated ETL for each desk is lower than the sum of the individual ETLs. This arises from the correlation offset between various asset classes The consolidated ETL for each desk is lower than the (diversification). The consolidated ETL for each desk is lower than the sum of the individual ETLs. This arises from the correlation offset between various asset classes The consolidated ETL for each desk is lower than the (diversification). 0 5 10 30 40 20 25 15 35 Frequency: Days in a year Interest rates Interest R’million 99% (using 99% EVT) Commodities Equities exchange Foreign Consolidated* * Equities exchange Foreign rates Interest Consolidated* * For the year to 31 March R’million Commodities The histogram below illustrates the distribution of daily revenue during the financial year for our trading businesses. The distribution is The histogram below illustrates the distribution of daily revenue of a total of 250 days in the realised on 190 days out revenue was side and the graph shows that positive trading skewed to the profit R2.1 million (2015: R1.5 million) 2016 was generated for the year to 31 March trading business. The average daily trading revenue PROFIT AND LOSS HISTOGRAMS STRESS TESTING market conditions. The method tested under extreme that could arise if the portfolio is stress The table below indicates the potential losses is a 1-in-8 year possible scenario below calculates the 99% EVT which stress value theory (EVT), the reported used is known as extreme the for EVT numbers distribution. of the tails the to distribution a on fitting rely rather but normality assume do not numbers These event. loss volatility observed during the year. year due to increased notably higher than the previous year are ETL 95% (ONE-DAY) PROFIT AND LOSS management committees (ALCOs) withinmanagement committees operates, geography in which it each core market expertise and local using regional are The ALCOs access as appropriate. supervision independent mandated to ensure rate interest of liquidity risk and non-trading risk appetite. risk within a board-approved maturity complexity, The size, materiality, as well as access and depth of the market considered all inputs to stable funds are and non- when establishing the liquidity rate risk appetite for each trading interest Specific statutory geographic region. may further dictate special requirements policies to be adopted in a region. Detailed policies cover both domestic and funds and set out sources currency foreign and amounts of funds necessary to ensure the continuation of our operations without aim to match-fund undue interruption. We it is practical and where in currencies residual to do so and hedge any efficient deposit exchange risk arising from currency and loan banking activities. and the requirements In terms of regulatory Investec plc (and its liquidity policy, group’s Investec ring-fenced from subsidiaries) are Limited (and its subsidiaries) (and vice therefore versa) and both legal entities are to be self-funded. required risk director, The ALCOs comprise the group the head of balance sheet risk, the head of risk, the head of corporate, the head of risk and institutional banking activities, head of private banking distribution channels, divisional heads, economists, the treasurer, and the balance sheet risk management team. The ALCOs formally meet on a monthly that lie within the exposures basis to review the balance sheet together with market conditions, and decide on strategies to mitigate any undesirable liquidity and interest function rate risk. The Central Treasury is mandated to holistically within each region manage the liquidity mismatch and non- our asset rate risk arising from trading interest and liability portfolios on a day-to-day basis. tight to exercise required are The treasurers concentration of funding, liquidity, control rate risk within and non-trading interest parameters defined by the board-approved Non-trading interest risk appetite policy. are rate risk and asset funding requirements the originating business to from transferred function. the treasury geography, by core The Central Treasury, pricing for all deposit products, directs

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 pages 164 and 165.  The notional principal indicates our activity in the derivatives market and represents size of total outstanding the aggregate contracts at year end. The fair value of a represents derivative financial instrument value of the positive or negative the present had cash flows which would have occurred we closed out the rights and obligations that instrument in an orderly arising from market transaction at year end. Both these only derivatives exposure amounts reflect and exclude the value of the physical financial instruments used to hedge these positions. Under delegated authority of the board, theUnder delegated authority of the board, has established asset and liabilitygroup BALANCE SHEET RISK BALANCE SHEET RISK DESCRIPTION Balance sheet risk encompasses the relating to our asset and financial risks liability portfolios, comprising market funding, concentration, non- liquidity, exchange, rate and foreign trading interest encumbrance and leverage risks on balance sheet. BALANCE SHEET RISK GOVERNANCE STRUCTURE AND RISK MITIGATION Balance sheet risk Balance sheet risk management MARKET RISK – MARKET RISK – contracts, enter into various derivatives We flow for largely on the back of customer exchange, commodity, hedging foreign and rate exposures equity and interest for trading to a small extent as principal financial purposes. These include rate options, swaps and forward futures, The risks associated with agreements. in monitored derivative instruments are the same manner as for the underlying also measured instruments. Risks are range to take into the product across account possible correlations. kept market risk exposures at low levels at kept market risk exposures the year. throughout DERIVATIVES Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) THREE 58 Risk software was changed to be Risk software fully integrated with trading systems, while independence is maintained independent validation of all through valuation models. conditions have remained Trading challenging. Markets have been very volatile while the lack of liquidity has continued. focused on facilitating Investec remains demand of our clients. The the near-term equity derivatives business has continued to a offering their synthetic product to grow have diversified client base. All trading areas TRADED MARKET RISK YEAR TRADED MARKET RISK YEAR IN REVIEW TRADED MARKET RISK RISK TRADED MARKET MITIGATION team The market risk management line that is separate has a reporting the trading function, thereby from The risk ensuring independent oversight. integrated is fully management software allowing trading systems, with source systems to valuation in risk and trading models are be fully aligned. All valuation validation, ensuring subject to independent models used for valuation and risk are office. validated independently of the front to guidelines set according Risk limits are set out in our risk appetite policy and are set on a statistical and non-statistical basis. and ETL. Full Statistical limits include VaR is used historical simulation VaR revaluation over a two year historical period based on an unweighted time series. Every risk factor is exposed to daily moves with proxies only used when no or limited price history one-day is available, and the resultant using is scaled up to a 10-day VaR VaR of time rule for regulatory root the square based on both purposes. Daily moves are returns as appropriate absolute and relative types of risk factors. Time for the different series data used to calculate these moves is updated monthly at a minimum, or more is VaR Stressed if necessary. frequently a calculated in the same way based on volatility. one‑year historical period of extreme period used is mid-2008 to mid- The sVaR to high levels of volatility 2009, which relates in all markets in which the business holds trading position, during the financial crisis. Non-statistical limits include limits on risk transaction to individual products, exposure tenor buckets tenors, notionals, liquidity, market conditions and sensitivities. Current taken into account when setting and are these limits. reviewing

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 59 THREE (continued) (continued) which relates to Funding liquidity: which relates the risk that the bank will be unable cash and/or future to meet current in the flow or collateral requirements normal course of business, without its financial position adversely affecting or its reputation. to the Market liquidity: which relates 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. withdrawals of deposits Unforeseen Restricted access to new funding with rate maturity and interest appropriate characteristics Inability to liquidate a marketable asset in a timely manner with minimal risk of capital loss customer non-payment of Unpredicted loan obligations demand for loans A sudden increased funding in the absence of corresponding maturity. inflows of appropriate Statutory reports are submitted to the submitted to the are Statutory reports in each jurisdiction within regulators relevant which we operate. operates an industry-recognised The group in addition party risk modelling system third information to custom-built management measure, systems designed to identify, risk on manage and monitor liquidity basis. looking and forward both a current bank’s to the The system is reconciled by Internalgeneral ledger and audited and ensuring integrity External thereby Audit of the process. LIQUIDITY RISK Liquidity risk description Liquidity risk is the risk that, despite being capacity to solvent, we have insufficient unable in assets, or are fund increases to meet our payment obligations as they fall due, without incurring unacceptable depositors losses. This includes repaying or maturing wholesale debt. This risk is in all banking operations and can inherent be impacted by a range of institution- specific and market-wide events. down into: Liquidity risk is further broken • • of liquidity risk include: Sources • • • • • Risk management Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group The parameters used in the scenarios are the scenarios are The parameters used in into account taking regularly, reviewed and environments changes in the business objective business units. The input from impact of an is to analyse the possible liquidity, cash flow, economic event risk on so and solvency position, profitability in an liquidity, as to maintain sufficient for a to continue to operate acute stress, in the board- minimum period as detailed risk appetite. approved tests stress further carry out reverse We to identify business model vulnerabilities which tests ‘tail risks’ that can be missed has tests. The group in normal stress required calculated the severity of stress This the liquidity requirements. to breach highly unlikely scenario is considered position, liquidity strong given the group’s withdrawal of an extreme as it requires deposits combined with the inability to take any management actions to breach Investec’s liquidity minima that threatens liquidity position. The integrated balance sheet risk management framework is based on similar methodologies to those contemplated under the Basel Committee on Banking (BCBS) ‘liquidity risk Supervision’s and monitoring’ standards measurement and is compliant with the ‘principles of sound liquidity risk management and supervision’ as well as ‘guidelines for the rate risk in the management of interest banking book’. Each banking entity within the group maintains a contingency funding plan depositors, creditors designed to protect and maintain market and shareholders confidence during adverse liquidity conditions and pave the way for the group a potential funding crisis to emerge from and with the best possible reputation financial condition for continuing operations. The liquidity contingency plans outline extensive early warning indicators, clear lines of communication, and decisive crisis strategies. response audit of the Balance is a regular There Sheet Risk Management function, the of which is determined by the frequency independent audit committees. are weekly and monthly reports Daily, highlighting bank independently produced and key measures exposures activity, and limits and are against thresholds distributed to management, ALCO, the GRCC, function, ERRF, Central Treasury BRCC and the board. establishes and maintains access to stableestablishes and maintains tenor appropriate wholesale funds with the and manages and pricing characteristics, thus providing liquid securities and collateral, and a flexible prudential management to volatile market conditions. response the sole functions are The Central Treasury market for both interface to the wholesale cash and derivative transactions. maintain an internal funds transferWe market prevailing pricing system based on 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 attributed clearly and transparently are understood to business lines and are by business line management, thereby ensuring that price of liquidity is integrated into business level decision-making and and mix of sources drives the appropriate uses of funds. The balance sheet risk management team, geographies based within in their respective Risk Management, independently Group risks, providing quantify and monitor identify, daily independent governance and oversight activities and the execution of the treasury continuously assessing policy, of the bank’s the risks while taking changes in market conditions into account. In carrying out its duties, the balance sheet risk management team monitors historical liquidity trends, sheet on- and off-balance tracks prospective liquidity obligations, identifies and measures internal and external liquidity warning signals which permit early detection of potential liquidity concerns daily liquidity through and further perform scenario reporting, thus analysis which quantifies our exposure, and consistent a comprehensive providing governance framework. The balance sheet identifies risk management team proactively developments, best regulatory proposed adopted risk practice, and measures market, and implements in the broader risk management and changes to the bank’s relevant. governance framework where daily Scenario modelling and rigorous designed to tests are liquidity stress and manage the liquidity position measure such that payment obligations can be met under a wide range of normal company- scenarios. specific and market-driven stress These assume the rate and timing of deposit withdrawals and drawdowns on varied, and the ability to lending facilities are access funding and to generate funds from asset portfolios is restricted. Liquidity Coverage Ratio (LCR) Net Stable Funding Ratio (NSFR) The group maintains adequate The group designed contingency funding plans depositors, creditors to protect and maintain and shareholders adverse market confidence during liquidity conditions. requirements Local regulatory based actual cash Contractual run-off flows with no modelling adjustment ‘Business as usual’ normal environment and we apply rollover where assumptions under benign reinvestment market conditions for liquidity Basel standards measurement: – – conditions based on statistical Stress historical analysis, documented experience and prudent judgement Quantification of a ‘survival horizon’ conditions. The survival under stress horizon is the number of business days cash position the bank’s it takes before turns negative based on statistical historical analysis, documented experience and prudent judgement Other key funding and balance sheet ratios Monitoring and analysing market trends and the external environment. • reflects Our liquidity risk management in light of evolving best practice standards Liquidity risk the challenging environment. the ongoing management encompasses tactical day-to- management of structural, liquidity. day and contingent stress Management uses assumptions-based planning and scenario modelling that considers market conditions, prevailing balance sheet rates and projected interest funding and to estimate future growth, liquidity needs while taking the desired of liabilities into account. and profile nature used to develop our These metrics are and manage funding strategy and measure The funding plan the execution thereof. of our external assets details the proportion funded by customer liabilities, which are wholesale debt, equity and loan unsecured mix capital, thus maintaining an appropriate in of structural and term funding, resulting balance sheet liquidity ratios. strong liquidity risk by quantifying measure We and calculating various liquidity risk metrics and ratios to assess potential risks to the liquidity position. Metrics and ratios include: • • • • • • • • the smooth management This ensures of the day-to-day liquidity position within Daily liquidity stress tests are carried out carried tests are Daily liquidity stress and manage the liquidity to measure obligations position such that payment range of can be met under a wide plausible normal and unlikely but rate scenarios, in which the stressed and and timing of deposit withdrawals drawdowns on lending facilities are varied, and the ability to access funding asset and to generate funds from The objective is portfolios is restricted. in an acute liquidity, to have sufficient to continue to operate for a stress, minimum period as detailed in the risk appetite board-approved ect a Our liquidity risk parameters refl assumptions collection of liquidity stress and regularly reviewed which are updated as needed. These stress factors go well beyond our experience during the height of the recent financial crisis tests stress further carry out reverse We to identify business model vulnerabilities which tests ‘tail risks’ that can be tests. The missed in normal stress has calculated the severity of group the liquidity to breach required stress requirements 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 centrally manages access The group to funds in both domestic and offshore the Corporate and markets through Institutional Banking division The maintenance of sustainable prudent takes precedence liquidity resources over profitability Each major banking entity maintains an internal funds transfer pricing system market rates. based on prevailing function charges out the The treasury price of long- and short-term funding to internal consumers of liquidity, that the costs, benefits, which ensures clearly and and risks of liquidity are attributed to business lines transparently understood by business line and are management. The funds transfer pricing methodology is designed to signal the right incentive to our lending business We monitor and evaluate each banking monitor and evaluate each banking We maturity ladder and funding entity’s mismatch) on gap (cash flow maturity a ‘liquidation’, ‘going concern’ and basis ‘stress’ • • • • • • • • Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) The group complies with the BCBS The group principles for sound liquidity risk management and supervision has committed itself to The group implementation of the updated BCBS guidelines for liquidity risk measurement, and monitoring as phased in standards 2015 from Our liquidity management processes encompass principles set out by the authorities in each jurisdiction, regulatory namely the SARB and BOM The risk appetite is clearly defined by the and each geographic entity must board policies have its own board-approved to liquidity risk management with respect and requirements In terms of regulatory Investec plc liquidity policy, the group’s ring-fenced (and its subsidiaries) are Investec Limited (and its from subsidiaries) (and vice versa) and both be to required therefore legal entities are self-funded in maintain a liquidity buffer We cash, the form of unencumbered government or rated securities with (typically eligible for repurchase the central bank), and near cash well in excess of the statutory requirements against unexpected as protection disruptions in cash flows to Funding is diversified with respect client type and term, product, currency, a satisfactory counterparty to ensure overall funding mix THREE 60 Management and measurement of of Management and measurement liquidity risk performed by banks Maturity transformation intermediation is a crucial part of financial resource that contributes to efficient creation. allocation and credit is vital Cohesive liquidity management our depositors, preserving for protecting our market confidence, safeguarding and ensuring sustainable reputation sources. with established funding growth active liquidity management, Through and stable, reliable we seek to preserve of funding. As such, sources cost-effective considers ongoing access to the group liquidity for all its operations appropriate to be of paramount importance, and our in liquidity philosophy is reflected core day-to-day practices which encompass the set and comprehensive following robust for assessing, of policies and procedures the liquidity risk: measuring and controlling • • • • • • •

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 61 THREE (continued) (continued) On page 161 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. additional liquidity, as well as supplementary additional liquidity, to required information requirements such an event. manage liquidity during that cash This plan helps to ensure can flow estimates and commitments market be met in the event of general events, disruption or adverse bank-specific long-term while minimising detrimental implications for the business. Asset encumbrance if it An asset is defined as encumbered has been pledged as collateral against an is no longer existing liability and, as a result, funding, to secure available to the group satisfy collateral needs or be sold to reduce An asset is the funding requirement. as unencumbered categorised therefore if it has not been pledged against an existing liability. utilises securitisation in order The group to raise external term funding as part of its diversified liability base. Securitisation by the group also retained notes issued are a pool of available to provide which are collateral eligible to support central bank liquidity facilities. transactions uses secured The group to manage short-term cash and collateral needs. Details of assets activity and pledged through repurchase by line item reported collateral pledges are of the balance sheet on which they are on page 111. Related liabilities reflected reported. are also Risk management Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group prospective views of balance sheet growth growth views of balance sheet prospective profile. and a targeted liquidity ability to access funding The group’s by levels is influenced at cost-effective entity’s the maintaining or improving in these ratings rating. A reduction credit on the effect could have an adverse funding costs, and access to group’s ratings are Credit wholesale term funding. factors, including dependent on multiple model, business operating environment, capital adequacy levels, quality of strategy, and earnings, risk appetite and exposure, framework. control As mentioned above, we hold a liquidity in the form of cash, unencumbered buffer available high quality liquid assets, readily typically in the form of government or rated with the securities eligible for repurchase central bank, and near cash well in excess as protection of the statutory requirements against unexpected disruptions in cash managed within flows. These portfolios are targets, and apart from board-approved under going concern acting as a buffer conditions, also form an integral part of liquidity generation strategy. the broader to a net liquidity provider Investec remains the interbank market, placing significantly funds with other banks than our more do We short-term interbank borrowings. on interbank deposits to fund not rely term lending. 2016 1 April 2015 to 31 March From average cash and near cash balances over the period amounted to R105.7 billion. on committed does not rely The group against funding lines for protection We interruptions to cash flow. unforeseen of any circumstances unaware currently are our that could significantly detract from to ability to raise funding appropriate our needs. The liquidity contingency plans outline extensive early warning indicators, clear lines of communication and decisive strategies. Early warning crisis response indicators span bank-specific and systemic strategies address crises. Rapid response and responsibilities, action plans, roles composition of decision-making bodies involved in liquidity crisis management, internal and external communications of sources including public relations, avenues available to access liquidity, conservative parameters and further conservative parameters generate able to validates that we are short-term liquidity to withstand sufficient in the or market disruptions liquidity stress or general event of either a firm-specific market contingent event. with maintain a funding structure We and long-term stable customer deposits in excess of illiquid wholesale funding well target a diversified funding assets. We concentrations by base, avoiding undue market source, investor type, maturity, This validates instrument and currency. a our ability to generate funding from in a variety of range of sources broad geographic locations, which enhances financial flexibility and limits dependence a so as to ensure on any one source satisfactory overall funding mix to support loan growth. acknowledge the importance of our We private client base as the principal source of stable and well diversified funding for continue to risk assets. We Investec’s to attract and service the develop products investment needs of our Private Bank client also have a number of innovative base. We deposit initiatives within our Private retail Banking division and these continued inflows during the to experience strong Fixed and notice customer financial year. during the deposits have continued to grow year and our customers display a strong in our ‘stickiness’ and willingness to reinvest suite of term and notice products. actively Entities within the group participate in global financial markets and is continuously enhanced our relationship investor presentations regular through only allowed Entities are internationally. to wholesale to have funding exposure they can demonstrate markets where deep and that the market is sufficiently to the size liquid, and then only relative have and complexity of their business. We syndicated loan instituted various offshore and diversify term to broaden programmes funding in supplementary markets and capacity enhancing the proven currencies, in the money markets. The group to borrow its core committed to increasing remains deposits and accessing domestic and capital markets when appropriate. foreign Decisions on the timing and tenor of based on accessing these markets are costs, general market conditions, relative Near cash (other ‘monetisable’ assets) Central Bank cash placements and guaranteed liquidity Cash Mar 16 Feb 16 Jan 16 Dec 15 Nov 15 Oct 15 Other nancials Non- nancial corporates Individuals Banks Public sector Small business Sep 15 4.7% 3.9% 43.8% 19.8% 16.1% 11.7% R316 978 million BANK AND NON-BANK DEPOSITOR BANK AND NON-BANK DEPOSITOR CONCENTRATION BY TYPE AT 31 MARCH 2016 Aug 15 Jul 15 Jun 15 May 15 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) Apr 15 Cash Central Bank cash placements and guaranteed liquidity Near cash (other ‘monetisable’ assets) 0 36.6% 51.0% 12.4% 80 000 60 000 40 000 20 000 R124 907 million R’million 140 000 120 000 100 000 THREE INVESTEC BANK LIMITED CASH AND NEAR CASH TREND INVESTEC BANK AN ANALYSIS OF CASH AND NEAR CASH AT 31 MARCH 2016 62

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 63 THREE (continued) (continued) set the time horizon to one month set the time horizon to near to monetise our cash and cash portfolio of ‘available-for-sale’ assets, where treasury discretionary deep secondary markets are there and for this elective asset class; by the ‘contractual’ profile reported way of a note to the tables. – – Behavioural liquidity mismatch tends Behavioural liquidity mismatch tends low to display a fairly high probability, severity liquidity position. Many retail included within deposits, which are repayable customer accounts, are on demand or at short notice on a contractual basis. In practice, these instruments form a stable base for and liquidity operations the group’s base of needs because of the broad this end, behavioural customers. To is applied to liabilities with profiling as the an indeterminable maturity, of many contractual repayments on demand customer accounts are or at short notice but expected cash contractual flows vary significantly from An internal analysis model maturity. is used, based on statistical research of the historical series of products. This is used to identify significant of structural liquidity additional sources deposits that in the form of core In addition, exhibit stable behaviour. with profile behaviour, reinvestment is and attrition based on history, applied to term deposits in the normal course of business. Withbehavioural liquidity to the respect mismatch: • Risk management set the time horizon to ‘on demand’ to monetise our statutory liquid assets for which liquidity is guaranteed by the central bank; Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group As an integral part of the broader As an integral part of the broader we liquidity generation strategy, in the form maintain a liquidity buffer cash, government, of unencumbered or rated securities and near cash against both expected and unexpected cash flows of this The actual contractual profile asset class is of little consequence, as practically Investec would meet any unexpected net cash outflows by or selling these securities. repo’ing We have: – No assumptions are made except as made except as No assumptions are all and we record mentioned below, assets and liabilities with the underlying contractual maturity as determined by for each deal the cash flow profile • • The table that follows shows our The table that follows shows contractual liquidity mismatch. to the directly The table will not agree balance sheet balances disclosed in the cash flows on since the table incorporates basis based on a contractual, undiscounted can be the group the earliest date on which to pay. required advances that loans and The table reflects by stable largely financed to customers are funding sources. With to the contractual liquidity respect mismatch: • Liquidity mismatch The liquidity position position The liquidity remained of the bank sound with total cash cash and near balances amounting to R125 billion – – (809) Total Total Total Total 9 858 8 082 (7 665) (5 836) 34 580 10 164 (31 744) (10 732) (37 242) (31 865) 135 306 207 639 405 629 (279 736) (373 764) – – – – – – (809) (638) years years 6 417 7 361 (2 437) (4 793) 91 981 36 965 > Five > Five 50 168 50 138 (10 231) (18 908) (31 865) 100 911 – – – 26 (501) (112) One One 1 392 1 310 (6 433) (6 990) years years to five to five 13 396 97 241 56 126 (26 806) (91 981) (16 397) (50 138) (57 239) 113 365 (146 600) – – – – – (19) Six Six 250 145 (155) year year 3 651 (9 279) 54 619 23 242 27 288 to one to one (23 954) (10 062) (11 414) (43 469) (16 181) months months (106 264) – – – 40 84 22 (95) 397 (249) (456) to six to six 2 930 Three Three Three Three (1 153) (2 290) (6 806) 66 033 14 423 17 896 (20 915) (90 083) (24 702) months months – – – 45 960 766 232 110 One One (722) (115) 4 653 (6 036) (2 168) 66 489 10 871 16 677 (51 978) (83 277) (61 019) (44 342) months months to three to three to three to three – – – 4 12 94 Up Up (52) (396) 5 818 4 578 (6 011) (2 042) to one to one 18 075 65 529 11 809 22 315 month month (26 706) (38 935) (35 207) (12 892) ^ – – – – 69 (854) (360) 9 582 7 116 2 551 (5 066) 47 454 25 957 47 454 61 902 (26 043) (26 043) 107 177 (126 940) Demand Demand (133 220) Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) As discussed on page 63.

billion and the balance reflects term deposits which have finally reached/are reaching contractual maturity. Includes call deposits of R125 billion and the balance reflects term deposits which R’million R’million Negotiable paper Behavioural liquidity gap Cash and short-term funds – Cash and short-term funds banks Securitised liabilities Cumulative Cash and short-term funds – Cash and short-term funds non-banks Investment/trading liabilities Investment/trading assets Investment/trading assets and statutory liquids Subordinated liabilities Subordinated Securitised assets Other liabilities Advances Liabilities Other assets Shareholders’ funds Shareholders’ Assets Contractual liquidity gap Deposits – banks Cumulative liquidity gap Deposits – non-banks THREE 64 Behavioural liquidity Behavioural liquidity ^ Contractual liquidity at 31 March 2016 at 31 March Contractual liquidity

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 65 THREE (continued) (continued) The liquidity coverage ratio (LCR) short-term is designed to promote by of one month liquidity profile, resilience high ensuring that banks have sufficient quality liquid assets to meet potential The environment. outflows in a stressed BCBS published the final calibration of the LCR in January 2013. The LCR ratio 2015 to 2019 is being phased in from The net stable funding ratio (NSFR) structural is designed to capture issues over a longer time horizon by banks to have a sustainable requiring of assets and maturity structure liabilities. The BCBS published the final consultation document on the NSFR in October 2014. The NSFR ratio will be in 2018. introduced savings rate A low discretionary of contractual and a higher degree by captured savings that are institutions such as pension funds, of asset funds and providers provident management services REGULATORY REGULATORY – BALANCE CONSIDERATIONS SHEET RISK crisis, to the global financial In response have regulators national and supranational regulations changes to laws and introduced and harmonise designed to both strengthen standards global capital and liquidity financial sector and a strong to ensure global economy. defined: were liquidity measures key Two • • has committed itself to The group implementation of the BCBS guidelines standards for liquidity risk measurement framework and the enhanced regulatory to be established. Investec has been on these ratios reporting proactively to the emerging Basel internally according definitions since February 2010. Investec exceeds minimum requirements already to of efforts as a result of these standards our liquidity and funding profile reshape where necessary. South Africa, a member of the G20, has adopted the published BCBS guidelines standards for ‘liquidity risk measurement and monitoring’. certain shortcomings are there However, and constraints in the South African and the banking sector in environment South Africa is characterised by certain such as: structural features • Risk management Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group We sustained strong term funding in term funding in sustained strong We while demanding market conditions weighted focusing on lowering the average cost of funding process Our liquidity risk management and comprehensive. robust remains Investec maintained and improved improved Investec maintained and liquidity position and its strong levels of surplus continued to hold high liquid assets • • During the past financial year the liquidity of the balance sheet has risk profile Investec grew significantly improved. its total customer deposits by 26.4% R221 billion to R280 billion at from Our Private Bank and Cash 31 March 2016. Investments fund raising channels grew deposits by 21.8% to R110 billion over the The wholesale channels saw financial year. year the previous from a marked turnaround by 29.5% to and Rand liabilities increased R170 billion. there contributed to this. Firstly, factors Two inflows to Money Market renewed were to the forced Funds as anxieties relating entry into curatorship of African Bank were Investec gained eased; and secondly, upgrade of following Fitch’s market share national scale long-term rating Investec’s of a to AA- in December 2015 as a result risk profile. resilient Our Rand liquidity was further boosted by several successful medium-term senior bond issues totalling R5 billion. unsecured Investec Bank Limited (solo basis) ended the average financial year with the three-month of its LCR at 117.3%, which is well ahead of the minimum level of 70% required. year term dollar transactions and three Two raised amounting to US$875 million were loan in several club, bilateral and structured deals over the course of the year as the cost of term dollars fell to levels last witnessed long-term over five years ago. The bank’s USD liquidity position is very positive and position ahead of any places us in a strong heightened concern over South Africa’s rating downgrade. Our USD risk of a credit funding augments our cash and near cash fully loans remaining balances, with core funded by domestic deposits. all funding performance across The strong of R36 billion channels has led to a growth to R125 billion in our total cash and near cash balances by the end of the financial year 2016. • BALANCE SHEET RISK YEAR RISK YEAR BALANCE SHEET IN REVIEW The group has The group has to committed itself of implementation the BCBS guidelines risk for liquidity measurement and the standards enhanced regulatory framework to be established The group complies with the BCBS complies with the BCBS The group framework for assessing banking book rate risk (non-trading) interest rate risk The management of interest in the banking book is centralised function and within the Central Treasury to is mandated by the board treasury actively manage the liquidity mismatch rate risk arising and non-trading interest our asset and liability portfolios from is the primary interface to the Treasury wholesale market to exercise is required The treasurer of funding, liquidity, tight control concentration and non-trading interest rate risk within parameters defined by the risk appetite policy Internal capital is allocated for non- rate risk trading interest The risk appetite is clearly defined by to both earnings in relation the board risk and economic value risk. In addition, each geographic entity has policies with approved its own board rate risk to non-trading interest respect rate risk The non-trading interest policy dictates that long-term rate risk is non‑trading interest materially eliminated. In accordance rate swaps interest with the policy, used to swap fixed deposits are and loans into variable rate in the wholesale market with the business, the Together develops strategies regarding treasurer changes in the volume, composition, rate characteristics pricing and interest of assets and liabilities to mitigate the a high rate risk and ensure interest margin stability of net interest degree rate cycle. These are over an interest debated and challenged in presented, and pricing forum the liability product and ALCO MANAGEMENT AND MANAGEMENT AND NON- MEASUREMENT OF RISK RATE TRADING INTEREST in the rate risk Non-trading interest consequence banking book is an inherent activities, and of conducting banking and of retail the provision arises from banking products wholesale (non-trading) the considers and services. The group margin of vital management of banking non-trading importance, and our core in rate risk philosophy is reflected interest day-to-day practices which encompass the following: • • • • • • • • repricing mismatches mismatches curve risk: repricing Yield also expose the bank to changes in the slope and shape of the yield curve imperfect Basis risk: arises from in the adjustments of the correlation rates earned and paid on different instruments with otherwise similar characteristics repricing not Embedded option risk: we are materially exposed to embedded option penalties on risk, as contract breakage fixed-rate advances specifically cover optionality is this risk, while prepayment to variable rate contracts and restricted rate risk has no impact on interest to the interest Endowment risk: refers the arising from rate risk exposure between interest net differential rate rate insensitive assets, interest insensitive liabilities and capital. arises from the timing the timing Repricing risk: arises from in the fixed rate maturity differences of bank and floating rate repricing sheet assets, liabilities and off-balance the derivative positions. This affects between rate margin realised interest costs lending income and borrowing when applied to our rate sensitive portfolios • • • • rate risk of interest The above sources rate margin realised the interest affect between lending income and borrowing costs, when applied to our rate sensitive asset and liability portfolios, which has a income net interest on future effect direct and the economic value of equity. NON-TRADING INTEREST RATE RATE NON-TRADING INTEREST RISK DESCRIPTION otherwise rate risk, Non-trading interest the banking rate risk in known as interest earnings book, is the impact on net interest and sensitivity to economic value as a of unexpected adverse movements result the execution rates arising from in interest business strategies and the of our core and services to delivery of products our customers. rate risk include: of interest Sources • the South African National Treasury has Treasury the South African National regulatory Peaks plans to adopt the Twin in line the industry framework to regulate Assessment with the IMF Financial Sector to (FSAP) recommendations Programme South Africa. Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) There is currently no ‘deposit protection no ‘deposit protection is currently There the However, scheme’ in South Africa. a deposit plan to incorporate regulators scheme within the broader protection and amendments to the recovery framework resolution supply South Africa has an insufficient currency of level 1 assets in domestic demand. to meet the aggregate of a committed The introduction South liquidity facility (CLF) whereby African banks can apply to the Reserve Bank for the CLF against eligible commitment collateral for a prescribed fee. The CLF is limited to 40% of net outflows under the LCR. Investec Bank by the Limited used the CLF offered to augment the LCR SARB, as a buffer, 10% over the financial by approximately Investec Bank Limited exceeds year. for the LCR the minimum requirement 2016 in March A change to available stable funding factor as applied to less than six the financial months term deposits from 35% of The change recognises sector. less than six months financial sector deposits which has the impact of than the amount of greater reducing by six months term deposits required local banks to meet the NSFR, and will in the mitigate any increases therefore overall cost of funds. THREE 66 • various regulatory are Nevertheless, there that prevent and economic barriers domestic flowing out of the liquidity from South Africa has Namely, economy. that limits capital flows, exchange control on along with prudential requirements financial corporates. A positive consequence of the above is that the Rand funding that the South African banks use is contained within the financial the Rand is unlikely system and therefore withdrawal to be drained by currency in or placements sources, off-shore from offshore accounts. challenge, the this systemic address To and national discretion SARB exercised has announced: • • Notwithstanding the above constraints, Investec Bank in South Africa comfortably LCR and exceeds the minimum required NSFR liquidity ratios. Global developments in the financial robust industry have formed a more and to the industry, approach regulatory •

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 67 THREE (continued) (continued) trading desk. Limits exist to ensure to ensure trading desk. Limits exist risk retained is no undesired there area. product within any business or Operationally, non-trading interest rate risk non-trading interest Operationally, guidelines within predefined is transferred the Central the originating business to from or netted and aggregated function Treasury with a holistic Central Treasury providing Treasury Central view of the exposure. balance then implements appropriate a cost-effective sheet strategies to achieve any of funding and mitigates source possible, undesirable risk where residual by changing the duration of the banking liquid asset portfolio, discretionary group’s derivative transactions which or through transfer the risk into the trading books within the Corporate and Institutional Banking division to be traded with the mandate external market. The treasury to market allows for a tactical response opportunities which may arise during rate cycles. Any resultant changing interest rate position is managed under the interest market risk limits. small endowment Investec has a relatively risk due to paying market rates on to banks with all deposits, compared significant low or non-interest-bearing and cheque accounts. Endowment current funding, comprising mainly risk due to free is capital and reserves, share ordinary with the focus on managed passively, measuring and monitoring. The endowment risk is included within our non-trading rate risk measures. interest The BCBS has indicated that after completing and embedding the current (covering capital, leverage and reforms liquidity), the capital framework for interest rate risk on the banking book will be In part this is due to the increase revisited. in the quantum of high-quality liquid assets (HQLA) which banks will need to hold in meeting the new liquidity ratios and rate risk in interest the potential increase The expectation is that Basel will thereon. additional documents in the next produce rate for interest year on minimum standards in the banking book. risk measurement Risk management Treasury also hedges also hedges Central Treasury Treasury hedges material hedges material Central Treasury Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group The aim is to protect and enhance net net and enhance The aim is to protect value in income and economic interest with the board-approved accordance degree a high risk appetite and ensure an margin stability over of net interest rate cycle. Economic value interest that all have the advantage measures and considered cash flows are future can highlight risk beyond the therefore gap earnings The repricing horizon. of the a basic representation provides sensitivity of balance sheet, with the earnings rates to changes to interest gap. This the repricing calculated off allows for the detection of interest rate risk by concentration of repricing income sensitivity buckets. Net interest the change in accruals measures expected over the specified horizon in to a shift in the yield curve, response while economic value sensitivity and testing to macro-economic stress movement or changes to the yield risk implicit the interest curve measures of a change in net worth as a result rates on the current change in interest values of financial assets and liabilities carry out technical interest We rate analysis and economic review of fundamental developments by of this evaluation the results geography, used to estimate a set of forward- are rate scenarios looking interest incorporating movements in the yield curve level and shape, after taking into account global trends These combinations of measures senior management (and provide the ALCOs) with an assessment of the financial impact of identified rate net interest changes on potential future income and sensitivity to changes in economic value that Our risk appetite policy requires fixed rate risk arising from interest the from loans is transferred interest originating business to the Central function by match-funding. In Treasury turn, fixed rate assets with a term of more than one year on a deal-by-deal basis with the use of variable versus fixed rate swaps. The market for interest these vanilla swaps is deep, with the that such hedging is efficient. result Likewise, all fixed rate deposits with a term of than one year to variable rate. more These derivative hedging trades are rate interest executed with the bank’s • • • • Interest rate expectations and Interest risks to the central view perceived shocks to levels and Standard rates and shapes of interest yield curves Historically-based yield curve changes. It is the responsibility of the liability of the liability It is the responsibility and pricing forum, a sub- product the review committee of ALCO, to rate and concentration interest liquidity, products characteristics of all new their issuance, ensuring and approve and non-standard that both standard particularly those deposit products, Banking designed for the Private market curves customers, both match and can be hedged if necessary is set Pricing for all deposit products In doing so we manage centrally. access to funding at cost-effective levels, considering also the stressed liquidity value of the liabilities Balance Sheet Risk Management and analyses independently measures rate repricing both traditional interest value (NPV) mismatch and net present rate sensitivity to changes in interest of risk factors, detailing the sources rate exposure interest The bank maintains an internal funds transfer pricing system based on market rates which charges prevailing out the price of long- and short-term funding to consumers of liquidity and long-term stable funding for provides activity our asset creation rate Daily management of interest and risk is centralised within Treasury is subject to independent risk and ALCO review rate risk is Non-trading interest and analysed by utilising measured tools of traditional interest standard rate epricing mismatch and NPV rate sensitivity to changes in interest detail the sources risk factors. We whether rate exposure, of interest risk, yield curve risk, basis repricing risk or embedded option risk. This is rate performed for a variety of interest scenarios, covering: – – – • • • • • • This is consistent with the standardised This is consistent with the standardised recommended rate measurement interest by the Basel framework for assessing rate risk in the banking book interest rate risk). (non‑trading interest – (809) Total 6 167 419.5 3 718 9 858 8 082 (4 948) (7 665) (2 177) (6 167) (435.7) 15 589 31 263 (37 242) (10 732) (31 867) 365 682 207 639 105 122 All (ZAR) (279 664) (343 237) non-trading – – – – – – – 4 (59) 251 (123) 3 718 7 527 11.6 (1 526) (4 820) (6 727) (6 668) (6 469) (13.3) (ZAR) 30 248 18 999 Other (30 698) Non-rate – – – – – – – – – (1) (11) 440 563 6 727 7 268 8 376 2 352 years 6 024 (1 659) (6 828) (1 660) > Five 1.4 (1.4) AUD – – – – – – 40 (25) (96) 384 (301) year 6 287 8 707 2 188 years (5 636) > One (8 323) 24 452 11 054 13 358 (11 875) (17 933) 4.1 (9.6) EUR but < five – – – – – – – – – (19) (724) year > Six 5 903 2 291 2 446 1 761 1 761 (1 837) (15 252) (11 334) (13 625) (17 832) months 5.9 but < one (5.1) USD – – – – – – 9 40 (10) (123) 1 581 4 382 (1 340) (1 656) 17 237 12 843 14 499 29 218 24 787 (14 827) (16 300) (expressed in original currencies) (expressed months > Three > Three months but < six 3.8 Sensitivity to the following interest rates Sensitivity to the following interest (3.5) GBP – Not (103) (809) (244) 4 394 4 394 8 408 8 560 8 082 9 814 (1 886) (8 968) (4 014) (1 158) 41 954 23 687 > three > three (36 508) months 271 627 188 090 (234 525) (283 043) ZAR 410.2 (352.1) Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) Deposits – non-banks Negotiable paper Other liabilities Deposits – banks Securitised liabilities Investment/trading liabilities liabilities Subordinated Other assets Investment/trading assets and statutory liquids Securitised assets Advances Cash and short-term funds – Cash and short-term funds banks – Cash and short-term funds non-banks 200bps up 200bps down Cumulative repricing gap Cumulative repricing Repricing gap Off-balance sheet Off-balance Balance sheet Shareholders’ funds Shareholders’ Intercompany loans Intercompany Liabilities Assets R’million ’million THREE 68 Interest rate sensitivity gap Interest rate margin realised the interest affect 2016. These exposures rate mismatch at 31 March our non-trading interest The table below shows intervention. costs assuming no management and borrowing between lending income Economic value sensitivity at 31 March 2016 Economic value sensitivity at 31 March rate risk is economic value sensitivity. for monitoring and measuring non-trading interest outlined above, our preference For the reasons no management intervention. rates assuming our economic value sensitivity to a 2% parallel shift in interest The table below reflects rate sensitive portfolios should such a hypothetical scenario arise. the change to the value of the interest The numbers represent impact on our equity. does not have a significant direct This sensitivity effect

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 69 THREE (continued) (continued) Changes since December 2015 quarter 2015 quarter Changes since December year end: in surplus well The average LCR remains decreasing requirements, of regulatory average HQLA by 1.5%, with both the outflows net cash and average stressed by R7 billion. increasing Investec Bank Limited Investec Bank Limited consolidated group: Bank Limited Our two banks, Investec (IBL) and Investec Bank (Mauritius) Limited (IBM), contributed over 99% of the Investec Bank Limited consolidated HQLA and stressed combined group’s average cash inflows and outflows. IBM’s cash outflows of R6 billion are stressed primarily to non-financial corporates, while inflows of R9 billion its average stressed banks. IBM bank solo is largely from is There has no LCR requirement. currently on the contribution of IBM’s no restriction Consolidated cash inflows to the group. mainly LCR is better than IBL solo’s, group due to IBM’S surplus cash inflows. Risk management Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Some foreign denominated government Some foreign included in the HQLA, securities are limitations. subject to regulatory On average, Level 2 assets made up On average, Level 2 assets made up 3% of total HQLA and the SARB’s committed liquidity facility (CLF) contributed 7% to total HQLA The HQLA comprises primarily South The HQLA comprises primarily South and central bank African sovereign Rand-denominated securities and debt eligible for instruments, all of which are SARB repo In order to manage the deposit mix in to manage the deposit mix in In order to tenor and client type, we relation establish targets for deposits to be raised by market, channel, product, tenor band and client type designed the weighted outflows falling to restrict into the 30-day window. The structure and nature of deposits of deposits and nature The structure is the key inside the 30-day window weighted driver of the LCR. This by the type outflow is determined into the of customer liabilities falling In turn30‑day contractual bucket. determine these deposit characteristics the targeted level of HQLA required to be held as a counterbalance to the outflows modelled stressed • • The composition of HQLA: • • The main drivers of the LCR results and and LCR results The main drivers of the of inputs the evolution of the contribution calculation over time: to the LCR’s • Investec Bank Limited bank solo: Investec Bank Limited LIQUIDITY COVERAGE LIQUIDITY COVERAGE RATIO (LCR) coverage The objective of the Liquidity the short- ratio (LCR) is to promote profile of the liquidity risk term resilience they have of banks by ensuring that to high quality liquid assets sufficient lasting scenario survive a significant stress 30 calendar days. of with the provisions In accordance African Banks section 6(6) of the South Act 1990 (Act No. 94 of 1990), banks are LCR to comply with the relevant directed as set out in requirements, disclosure 11/2014. 6/2014 and Directive Directive with is in accordance This disclosure Pillar III of the Basel III liquidity accord. calculated The values in the table are as the simple average of calendar daily values over the period 1 January 2016 for Investec Bank to 31 March 2016 Limited bank solo. All 60 business day used. Investec Bank observations were values use Limited consolidated group daily values for Investec Bank Limited bank entities solo, while those for other group and February use the average of January, 2016 month-end values. March is 70% The minimum LCR requirement by 10% 2016 and will increase throughout each year to 100% on 1 January 2019. This applies to both Investec Bank Limited bank solo and Investec Bank Limited consolidated group. – – 393 480 840 value value 130.1 5 409 value value 5 840 6 669 4 074 1 149 4 377 9 600 Total Total 5 083 5 083 Total Total 48 682 62 095 60 066 48 817 86 000 86 840 62 095 108 748 adjusted adjusted weighted weighted – – – 393 840 5 409 value value 9 788 1 149 Total Total 67 398 52 201 42 606 18 502 62 257 50 827 50 827 118 838 119 065 119 905 Consolidated Group Consolidated Group Investec Bank Limited Investec Bank Limited unweighted unweighted – –

393 480 814 value value 117.3 5 089 value value 5 840 6 701 3 908 1 149 4 377 9 434 Total Total 4 747 4 747 Total Total 53 594 62 049 49 671 38 742 80 697 80 697 81 511 62 049 103 266 adjusted adjusted weighted weighted – – – 393 814 Bank Solo Bank Solo 5 089 value value 9 788 1 149 Total Total 56 595 41 718 40 909 18 502 60 560 47 471 47 471 119 369 108 119 108 933 Investec Bank Limited unweighted unweighted

Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) (Undrawn committed) credit and liquidity facilities (Undrawn committed) credit Outflows related to loss of funding on debt products Outflows related Outflows related to derivatives exposures and other and other to derivatives exposures Outflows related collateral requirements Unsecured debt Unsecured Non-operational deposits (all counterparties) Operational deposits (all counterparties) and deposits deposits Operational deposits (all counterparties) and in institutional networks of cooperative banks Less stable deposits Stable deposits Liquidity coverage ratio (%) Total net cash outflows Total Total high-quality liquid assets Total Total cash inflows Total Other cash inflows Inflows from fully performing exposures Inflows from Total cash outflows cash Total Cash inflows repos) lending (e.g. reverse Secured Other contingent funding obligations Other contractual funding obligations Additional requirements, of which: Additional requirements, Secured wholesale funding Secured Unsecured wholesale funding, of which: Unsecured Cash outflows small business customers, of from Retail deposits and deposits which: High-quality liquid assets high-quality liquid assets Total At 31 March 2016 At 31 March R’million THREE 70

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 71 THREE Ensures that Ensures risk events and are exposures identified and appropriately escalated and managed Reporting and escalation framework in place REPORTING (continued) (continued) Measure Measure exposures arising from key risks which considered are in determining internal operational risk capital requirements Extreme, Extreme, yet plausible scenarios are evaluated for financial and non-financial impacts SCENARIOS AND CAPITAL CALCULATION Risk management Assists in predictive capability and assessing the of the risk profile business Metrics are Metrics are used to monitor risk exposures identified against thresholds KEY RISK INDICATORS

Events are Events are used to raise management and awareness as input to risk assessment and scenario analysis Access to an external data relating provider to operational risk events that occur in the global financial services industry Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group EXTERNAL RISK EVENTS A causal analysis is performed and enables business to in identify trends risk events and control address weaknesses Incidents from resulting failed systems, processes, people or external events INTERNAL RISK EVENTS

Identifies ineffective and controls improves decision-making an through understanding of the operational risk profile Qualitative assessments that identify key operational risks and controls RISK AND CONTROL ASSESSMENT

PURPOSE DESCRIPTION OPERATIONAL RISK MANAGEMENT FRAMEWORK RISK MANAGEMENT OPERATIONAL capital purposes. The framework (TSA) to operational risk for regulatory approach The bank continues to operate under the standardised and enhanced on a continual supported by the risk culture of the group, is embedded at all levels which includes policies and procedures developments. and in line with regulatory basis as the discipline matures management system which facilitates the identification, assessment and supported by an operational risk are Practices and processes mitigation of operational risk. Practices consist of the following: Operational risk is defined as any instance where there is potential or actual impact to the group resulting from failed internal processes, failed internal processes, resulting from impact to the group is potential or actual there as any instance where Operational risk is defined reputational or external detriment, financial as well as non-financial such as customer events. The impacts can be people, systems or from consequences. regulatory appropriately aims to The group asset management group. risk in the operations of a specialist bank and Operational risk is an inherent integrated which are sound operational risk management practices risk within acceptable levels by adopting identify and manage operational framework which is fit for purpose. into an overall risk management Operational risk Operational RISK DEFINITION OPERATIONAL

and mitigate operational risk and maintain appropriate operational risk and control environment. BUSINESS UNIT MANAGEMENT • Identify, own • Establish review business review unit practices and data operational risk management framework including policies and procedures Report to board and board committees on operational risk events and current and emerging exposures. INDEPENDENT OPERATIONAL RISK MANAGEMENT • Challenge and • Maintain • RELIANCE ASSURANCE review of review framework and its effectiveness as part considered of the operational risk management process. INTERNAL ASSURANCE • Independent • Audit findings assessment of operational risk environment by the SARB and other regulators. EXTERNAL ASSURANCE AND SUPERVISION • External • Onsite reviews Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) the risk appetite and tolerance of the bank operational review risk exposures of the Approval operational risk management framework. • Monitor and • • Determination of BOARD AND BOARD COMMITTEES THREE 72 The Operational Risk Tolerance policy defines the amount of operational risk exposure, or potential adverse impact from a risk event, that or potential adverse impact from policy defines the amount of operational risk exposure, The Operational Risk Tolerance and provides The objective of the policy is to encourage action and mitigation of risk exposures the bank is willing to accept or retain. for risk events reporting thresholds the policy defines capturing and Additionally, appropriately. management with the guidance to respond to key risk indicators appropriately. and guidance to respond RISK APPETITE AND TOLERANCE RISK APPETITE AND TOLERANCE The structure adopted to manage operational risk is supported and enforced by a level of defence model and includes principles relating to principles relating by a level of defence model and includes operational risk is supported and enforced adopted to manage The structure combined assurance. GOVERNANCE of the operational risk management framework. to operational risk forms an integral part relating The governance structure

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 73 THREE (continued) (continued) Group Compliance and Group Legal assist in the Legal assist in the Compliance and Group Group and compliance risk management of regulatory to legal and Identification and adherence requirements regulatory Review practices and policies as regulatory change requirements of Ongoing identification and remediation vulnerabilities identified in IT systems, applications and processes to support IT resilience Establishing appropriate and 24/7 business our global digital offerings services capabilities to Maintaining and testing IT recovery from against disruptions that may result safeguard or IT service outages systems failures Risk management Active involvement of cybersecurity teams during teams during Active involvement of cybersecurity ensuring applications are systems development, design by secure of security incident Maintenance and testing ensuring that these are processes response breach global in nature and consistent, coordinated into the latest cyberattack Ongoing research the group to ensure controls methods and revising is adequately protected Identification and classification of most valuable and confidential information assets Implementation and monitoring of information and processes security policies, standards, the risks designed to mitigate technical controls chain by the information supply introduced and Align practices with the rapidly changing legal information to safeguard requirements regulatory Causal analyses is used to identify weaknesses in of risk events following the occurrence controls used to Risk and performance indicators are across of controls monitor the effectiveness business units business units to ensure across Thematic reviews applications of controls consistent and efficient a priority management of change remains Effective Proactive strategy for the effective prevention, prevention, strategy for the effective Proactive of all financial detection and investigation measures risk crime types which includes business and client assessments policies Development of financial crime prevention and practices which comply with regulations, industry guidance and best practices Regular delivery of management information focused on key risk indicators Review external and industry events by engaging with external partners and stakeholders and enhanced monitoring, analysis Increased to of internal controls causes and review of root enhance defences against external attacks PRIORITY FOR 2016/17 • • • • • • • • • • • • • • • • • • • • • Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Alignment of regulatory and compliance approach and compliance approach Alignment of regulatory landscapes (particularly new regulatory to reflect structures) change of regulatory Managing business impact and implemented of significant volumes challenges as a result changes and of statutory and regulatory developments focused Ensuring existing monitoring remains of conduct and regulatory as areas appropriately risk develop of technical infrastructure Enhancing resilience or service interruptions to IT failures and process risks in Identifying, monitoring and reducing of the digital channel, following the introduction online presence mobile applications and increased Proactive risk identification and assessment risk identification and assessment Proactive to and projects to new products relating controls implement adequate and effective including improvements Continuous process automation of workflow of incompatible duties and Segregation authorisation controls appropriate Understanding what critical information assets are are Understanding what critical information assets exposed to which they are and the threats security controls and robust Ensuring appropriate in place are stakeholders of with relevant Raising awareness and their to information security policies relating information in protecting responsibility Maintaining a robust cybersecurity strategy cybersecurity strategy Maintaining a robust detection, prevention focusing on prediction, and response information with relevant Sharing of threat industry bodies and peers, law enforcement Identify and assess financial crime risks holistically in clients, sectors and markets to Consistent implementation of standards to all financial detect, deter and respond prevent, crime incidents and for the specific risk roles training Targeted to raise campaigns to all employees regular and associated of financial crime risk awareness policies and to encourage escalation Operate an integrity line which allows employees including regulatory to make disclosures fraud and allegations of bribery, breaches, corruption, and non-compliance with policies • • • • • • • • • • • • • • • • • MITIGATION APPROACH MITIGATION TECHNOLOGY Risk associated with the reliance on technology to support and client business processes to the services. This relates ownership and usage of IT the business systems across Risk associated with identification, implementation and monitoring of compliance with regulations REGULATORY AND REGULATORY COMPLIANCE PROCESS FAILURE Risk associated with inadequate internal including processes, failures and control human errors within the business. This includes origination, execution process and operations INFORMATION SECURITY INFORMATION Risk associated with the integrity and confidentiality, availability of information assets. This includes its unauthorised access, use, disclosure, modification or destruction CYBERSECURITY Risk associated with fraud, corruption, theft, embezzlement, collusion, extortion, coercion, conflict of abuse of power, abuse of privileged interest, information, money laundering and other criminal conduct and/ clients, or misconduct by staff, suppliers and other stakeholders FINANCIAL CRIME DEFINITION OF RISK Risk associated with cyberattacks, including disruption of client-facing systems, data theft, cyber and espionage terrorism LOOKING FORWARD considerations Key operational risk Relationship contracts Legislation/governance We have various policies and practices to have various policies and practices We strong risk, including mitigate reputational and proactively regularly values that are also subscribe to sound We reinforced. corporate governance practices, which and that activities, processes require considered based on carefully decisions are of the impact of aware are principles. We breakdown in a practices that may result in the organisation. of trust and confidence policies and practices are The group’s transparent through reinforced regularly communication, accurate reporting, and values culture continuous group assessment, internal audit and regulatory and risk management compliance review, risk practices. Strategic and reputational is mitigated as much as possible through and governance/ these detailed processes business from escalation procedures regular, and from units to the board, clear communication with shareholders, customers and all stakeholders. In addition, policy is to avoid any transaction, Investec’s service or association which may bring with it the risk of a potentially unacceptable level Transaction of damage to our reputation. such as governance structures approval engagement and new product credit, been tasked committees have therefore to all new in relation with this responsibility and business undertaken. A disclosure public communications policy has also by the board. been approved Legal risk management from Legal risk is the risk of loss resulting any of our rights not being fully enforceable our obligations not being properly or from performed. This includes our rights and intoobligations under contracts entered with counterparties. Such risk is especially the counterparty defaultsapplicable where documentation may not giveand the relevant anticipatedrise to the rights and remedies into. when the transaction was entered manage, monitor Our objective is to identify, the group. and mitigate legal risks throughout seek to actively mitigate these risks by We identifying them, setting minimum standards for their management and allocating clear for such management to responsibility legal risk managers, as well as ensuring monitoring. proactive compliance through The scope of our activities is continuously and includes the following areas: reviewed • • Assess how the group might recover might recover Assess how the group of these actions to as a result avoid resolution. Include potential recovery actions actions Include potential recovery and available to the board to the management to respond situation, including immediate, intermediate and strategic actions Analyse how the group could be could be Analyse how the group under by the stresses affected various scenarios Identify early warning indicators and trigger levels Identify roles and responsibilities Identify roles Analyse the potential for severe stress stress severe Analyse the potential for in the group Integrate with existing contingency contingency Integrate with existing planning Financial Stability Board member countries Financial Stability Board and to have recovery required are plans in place for all systemically resolution significant financial institutions. The SARB and has to has adopted this requirement African domestically South date required significant banking institutions to develop plans. Guidance issued by the recovery and the SARB Financial Stability Board has been incorporated into Investec’s recovery plan. The SARB has continued to focus on recovery plans for the local finalising the banks and together with the South African considering legislation to are Treasury framework. A discussion adopt a resolution document for public comment has been issued during the period under review. be subject to this legislation once We will it is adopted. • • • • • • The recovery plans for Investec Limited: plans for Investec The recovery • Reputational and Reputational and strategic risk Reputational risk is damage to our name or brand. Reputational risk reputation, is often associated with strategic decisions and also arises as a made by the board of other risks manifesting and not result being mitigated. to maintain an excellent aspires The group risk strong for entrepreneurship, reputation management discipline, a client-centric and an ability to be flexible and approach the recognises innovative. The group serious consequences of any adverse whatever publicity or damage to reputation, the underlying cause.

Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) ‑purpose. THREE 74 annual basis. The purpose of the recovery plans plans The purpose of the recovery and to document how the board are extreme from management will recover to avoid liquidity and capital financial stress in Investec plc and Investec difficulties and reviewed Limited. The plans are on an by the board approved Recovery and resolution Recovery and resolution planning The group continues to enhance its The group global business continuity management capability which incorporates an appropriate built into the bank’s level of resilience operations to lessen the impact of severe operational disruptions. In the event of a major interruption, incident management teams will respond to manage the disruption. accordingly a Continuity will be achieved through response, which flexible and adaptable impacted business includes relocating site and the to the designated recovery on highly available technological reliance all ensure solutions. Dedicated resources in place with are governance processes business and technology teams responsible meets process for ensuring the recovery to support client key business requirements and industry expectations. business conducts regular The group and testing of recovery continuity exercises that its recovery strategies to ensure and appropriate capability remains fit‑for Business continuity Business continuity management active participants in risk are We mitigation discussions amongst industry with we stay abreast bodies to ensure industry views, concerns and associated to minimise the risk collaborative efforts of interruptions. INSURANCE insurance maintains adequate The group risks. The insurance to cover key insurable managed are and requirements process insurance risk manager. by the group Group Regular interaction between and Group Operational Risk Management ensures Insurance Risk Management is an exchange of information that there of to enhance the mitigation in order operational risk.

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 75 THREE (continued) (continued) MANAGEMENT OF LEVERAGE Investec BankAt present calculatesLimited its leverage ratio based on and reports The leverage the latest SARB regulations. intended ratio is a non-risk-based measure excessive build up of leverage to prevent and mitigate the risks associated with deleveraging during periods of market of the leverage The reporting uncertainty. ratio in South Africa has been mandatory since 1 January 2013 as part of an exercise to monitor South African banks’ readiness to comply with the minimum standard 1 January 2018. Following of 4% from the SARB, Investec applies guidance from the rules as outlined in the most recent BCBS publication. each regulated entity, with the support of entity, each regulated capital management functions, the group’s prudently that capital remains ensures at all times. above minimum requirements TARGETS CAPITAL years, capital adequacy Over recent raised as for banks have been standards the stability part of attempts to increase sector. of the global banking and resilience has always held Investec Bank Limited requirements capital in excess of regulatory well continues to remain and the group targeting we are capitalised. Accordingly, a minimum common equity tier 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%. continuously assessed These targets are for appropriateness. The DLC capital committee is responsible for ensuring that the impact of any change is analysed, understood, regulatory allow the To and planned for. prepared committee to carry out this function the management and capital regulatory group’s teams closely monitor regulatory to the present developments and regularly committee on the latest developments As part of any assessment and proposals. with analysis the committee is provided capital adequacy setting out the group’s position, taking into account the most up- of the rule changes. to-date interpretation sessions with the board In addition, regular kept that members are held to ensure are up to date with the most salient changes and its the impact on the group to ensure and understood. subsidiaries is monitored Risk management

Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Current regulatory framework regulatory Current Investec Bank Limited is supervised for capital purposes by the SARB on a consolidated basis. Since 1 January 2013, Investec Bank Limited has been calculating capital at a group and requirements resources level using the Basel III framework, as implemented in South Africa by the SARB, Act and all with the Bank’s in accordance regulations. related Investec Bank Limited uses the to calculate its approach standardised risk and and counterparty credit credit operational risk capital requirements. for equity risk is Capital requirements calculated using the internal ratings-based by applying the simple (IRB) approach risk-weight method. The market risk capital using an internal is measured requirement by risk management model, approved the SARB. subsidiaries of Investec Bank Various subject to additional regulation Limited are covering various activities or implemented in other jurisdictions. by local regulators For capital management purposes, it is the rules applied to the consolidated prevailing that are Investec Bank Limited group Nevertheless, most closely. monitored consideration, capital is a relevant where entity management within each regulated local pays close attention to prevailing rules as determined by their regulatory Management of regulators. respective REGULATORY CAPITAL CAPITAL REGULATORY – INVESTEC BANK LIMITED The South African financial sector regulatory sector The South African financial for the review landscape has been under is structure last few years. A new regulatory legislation is also developing, and existing the conduct of being amended. Although regulated currently financial institutions is legislation, and by under various pieces of under this will change various regulators, The resultant structure. the new regulatory impact is strategic and operational the next expected to last for at least five years. Capital management and allocation Conduct risk Conduct risk Litigation Corporate events Incident or crisis management Ongoing quality control. of areas review Identification and ongoing legal risk is found to be present where for the Allocation of responsibility for development of procedures management and mitigation of these risks segregation Installation of appropriate of duties, so that legal documentation and executed with the is reviewed level of independence from appropriate or the persons involved in proposing the transaction promoting Ongoing examination of the inter- between legal risk and relationship of risk management, so as other areas no ‘gaps’ in the are that there to ensure risk management process for Establishing minimum standards each risk. mitigating and controlling and extent of work This is the nature to be undertaken by our internal and external legal resources to monitor Establishing procedures compliance, taking into account the minimum standards required Establishing legal risk forums (bringing together the various legal risk we keep abreast managers) to ensure of developments and changes in the and extent of our activities, and nature against to benchmark our processes best practice. • • • The legal risk policy is implemented through: • • • • • • • for this policy rests Overall responsibility delegates The board with the board. for implementation of the responsibility policy to the global head of legal risk. for The global head assigns responsibility these risks to the managers of controlling departments and focused units appropriate the group. throughout A legal risk forum is constituted in each significant legal entity within the group. Each forum meets at least half-yearly and business needs where frequently more by the global head dictate, and is chaired of legal risk or an appointed deputy. • Group strategy Pricing and performance measurement Credit and counterparty risk Credit Market risk Equity and investment risk in the banking book Balance sheet liquidity and non-trading rate risk interest Operational, conduct and reputational risk within operational Legal risk (considered risk for capital purposes). capital testing Capital Internal Scenario Internal capital requirements are quantified are Internal capital requirements by analysis of the potential impact of key consistent with our risk risks to a degree are appetite. Internal capital requirements risk supported by the board-approved described above. assessment process to ensure that each risk is managed to an to ensure acceptable level. Detailed performance metrics of these risks are and control to each ERRF and BRCC meeting reported the results appropriate, including, where of scenario testing. Key risk types that are fall within the following: considered • • • • • • Each of these risk categories may consist of a number of specific risks, each of analysed in detail and managed which are GRCC and BRCC. by ERRF, RISK MODELLING AND (INTERNAL QUANTIFICATION CAPITAL) and planning management and DLC capital Managed by Management Group Capital Capital Group quantification Risk modelling with oversight by committee/BRCC Maintain sufficient capital to satisfy the Maintain sufficient all risks across risk appetite board’s faced by the group to depositors against protection Provide in the risks inherent losses arising from business capital surplus to sufficient Provide is able to retain that the group ensure its going concern basis under relatively operating conditions. severe RISK ASSESSMENT AND REPORTING the business continuously to review We maintain a close understanding of our analysed universe of risks, which are the risk management governance through of BRCC. framework under stewardship and debated by reviewed Key risks are senior management on a continuous basis. Assessment of the materiality of risks is stated risk linked to the board’s directly risk management appetite and approved policies covering all key risks. by Group monitored Key identified risks are Risk Management and by Internal Audit The internal capital framework is based review risk identification, on the group’s and is used to and assessment processes to capital a risk-based approach provide allocation, performance and structuring of our balance sheet. The objectives of the to quantify internal capital framework are to: the minimum capital required • • • Risk assessment departments business unit and Group Risk and Group with oversight by Managed by each ERRF/BRCC/GRCC Risk usual’ risk Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group identification management Risk reporting

and ‘business as Risk management (continued) Ongoing risk management risk Ongoing THREE THE (SIMPLIFIED) INTEGRATION OF RISK AND CAPITAL MANAGEMENT AND CAPITAL OF RISK INTEGRATION THE (SIMPLIFIED) 76 Risk management framework Risk management Both the Investec Limited and Investec plc to capital operate an approach groups management that utilises both regulatory to that jurisdiction, capital, as appropriate and internal capital, which is an internal risk-based assessment of capital Capital management primarily requirements. to management of the interaction relates of both, with the emphasis on regulatory capital for managing portfolio level capital and on internal capital for sufficiency appropriate are ensuring that returns given the level of risk taken at an individual transaction or business unit level. The determination of target capital is strategy and risk driven by our risk profile, appetite, taking into account 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 and optimisation of risk profile the group’s returns. shareholder Our internal capital framework is designed to manage and achieve this balance. CAPITAL MANAGEMENT CAPITAL Philosophy and approach LEVERAGE RATIO TARGET LEVERAGE RATIO targeting a leverage Investec is currently ratio above 6%, but will continue to this target for appropriateness reassess in report pending the outcome of the EBA’s July 2016.

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 77 THREE (continued) (continued) Common equity tier 1 capital equity and comprises shareholders’ interests eligible non-controlling related to deductions after giving effect for disallowed items (for example, goodwill and intangible assets) and other adjustments Additional tier 1 capital includes qualifying capital instrument, that are capable of being fully and permanently written down or converted into common equity tier 1 capital at the point of non-viability of the firm and other additional tier 1 instruments, which no longer qualify as additional subject to tier 1 capital and are and related grandfathering provisions interests eligible non-controlling Tier 2 capital comprises qualifying eligible debt and related subordinated and other tier 2 interests non-controlling instruments, which no longer qualify subject to as tier 2 capital and are grandfathering provisions. REGULATORY CAPITAL AND CAPITAL REGULATORY REQUIREMENTS main Regulatory capital is divided into three categories, namely common equity tier 1, tier 1 and tier 2 capital as follows: • • • are sufficient after taking recognition of after taking sufficient are a given risk generated for the inherent us to allows transaction. This approach discipline at the embed risk and capital expectations of level of deal initiation. Using the basis for pricing as risk-based returns that risk and deal acceptance ensures in ensuring a key role management retains managed that the portfolio is appropriately for that risk. on internalIn addition to pricing, returns and relative monitored capital are performance is assessed on this basis. Assessment of performance in this way is a fundamental consideration used in setting strategy and risk appetite as well performance. as rewarding have been embedded These processes the business with the process across that risk and capital designed to ensure management form the basis for key and at a decisions, at both a group transactional level. Responsibility for oversight for each of these processes ultimately falls to the BRCC. Risk management Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Changes to capital demand caused strategic by implementation of agreed or objectives, including the creation acquisition of new businesses, or as of the manifestation of one a result of the risks to which we are or more potentially susceptible of current The impact on profitability strategies and future changes to the capital Required structure The impact of implementing a proposed dividend strategy The impact of alternate market or operating conditions on any of the above. PRICING AND PERFORMANCE MEASUREMENT The use of internal capital as an allocation tool means that all transactions are in the context of their considered on risk-adjusted contribution to return that expected returns capital. This ensures under duress. The conditions themselves The conditions under duress. by the DLC capital committee agreed are and consultation with after research internal Such plans are experts. relevant formulate balance used by management to management sheet strategy and agree influence the actions, trigger points and determination of our risk appetite. allows senior The output of capital planning decisions to ensure management to make sufficient continues to hold that the group and internal capital to meet its regulatory capital targets. On certain occasions, scenarios, especially under stressed management may plan to undertake a number of actions. Assessment of the merits of undertaking various relative using an internal actions is then considered portfolios across returns view of relative themselves based on internal which are assessments of risk and capital. designed to allow Our capital plans are to review: senior management and the board • • • • • At a minimum level, each capital plan assesses the impact on our capital adequacy over expected case, upturn and downturn scenarios. On the basis of this analysis, the DLC of the results capital committee and the BRCC are with the potential variability in presented responsible, capital adequacy and are for in consultation with the board, response. consideration of the appropriate Liquidity rate risk Banking book interest Underlying counterparty risk Underlying counterparty Concentration risk Securitisation risk – – – – – Strategic and reputational risks Strategic and reputational Operational risk, which is considered term and covers a as an umbrella range of independent risks including, but not limited to fraud, litigation, and outsourcing business continuity, out of policy trading. The specific risks assessed dynamically are covered of the constant review through underlying business environment. Market risk Equity and investment risk held in the banking book Balance sheet risk, including: – – Credit and counterparty risk, including: Credit – – – • • • • • A group capital plan is prepared and capital plan is prepared A group maintained to facilitate discussion of the impact of business strategy and market This plan is conditions on capital adequacy. designed to assess capital adequacy under a range of economic and internal conditions years), with over the medium-term (three risk the impact on earnings, asset growth, The plan appetite and liquidity considered. (via the BRCC) with an the board provides input into strategy and the setting of risk appetite by considering business risks and potential vulnerabilities, capital usage and given constraints funding requirements these exist. where Capital planning is performed regularly, capital being the key driver with regulatory of decision-making. The goal of capital insight into potential planning is to provide of vulnerability of capital adequacy sources by way of market, economic or internal the capital plans events. As such, we stress based on conditions most likely to place us CAPITAL PLANNING AND CAPITAL STRESS/SCENARIO TESTING Quantification of all risks is based on Quantification of all risks analysis of internal data, management and externalexpertise and judgement, benchmarking. within the included The following risks are internal framework and quantified for capital capital allocation purposes: • 169 (299) (190) (190) (461) 2015 1 140 1 140 1 073 1 534 (1 534) 11.0% 11.4% 15.4% 39 707 10 319 10 449 27 365 28 899 28 315 29 388 257 931 229 920 (235) (695) (614) (695) 2016 1 839 1 839 1 534 (1 534) 10.6% 11.0% 14.6% 43 121 10 726 10 732 30 331 31 865 31 475 32 395 295 752 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) Summary is provided on the main features of all capital instruments information on the terms and conditions of pages 75 to 77.  Collective impairment allowances Tier 2 instruments Phase out of non-qualifying tier 2 instruments Shareholders’ equity per balance sheet Shareholders’ capital and share premium share Perpetual preference reserve Cash flow hedging Additional tier 1 instruments Phase out of non-qualifying additional tier 1 instruments Shareholders’ equity Shareholders’ Goodwill and intangible assets net of deferred tax Goodwill and intangible assets net of deferred Tier 1 capital At 31 March R’million Risk-weighted assets Capital ratios Common equity tier 1 ratio Tier 1 ratio capital adequacy ratio Total Total regulatory capital regulatory Total Regulatory adjustments to the accounting basis Regulatory adjustments to the accounting basis Deductions deductions Additional tier 1 capital before Tier 2 capital Common equity tier 1 capital 1 capital tier Total THREE 78 CAPITAL MANAGEMENT AND ALLOCATION MANAGEMENT AND CAPITAL adequacy and capital Capital structure CAPITAL DISCLOSURES CAPITAL in the table below. capital under a Basel III basis is provided regulatory The composition of our

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 79 96 32 88 10 324 878 549 872 277 705 847 576 324 113 113 2015 2015 5 488 8 717 2 770 7 045 8 472 5 762 3 240 1 134 1 132 1 923 3 242 4 297 3 450 1 492 19 230 32 420 42 967 34 495 14 921 19 073 11 505 25 794 257 931 190 717 115 047 THREE 4 46 66 636 483 813 806 404 305 569 185 475 212 193 2016 2016 4 660 2 937 4 578 7 838 7 766 3 893 5 486 1 783 2 039 1 857 2 943 4 876 4 005 3 700 1 847 28 361 47 001 38 603 35 666 17 798 23 603 13 278 30 684 295 752 227 504 127 985 (continued) (continued) Risk management (CONTINUED) Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Corporates estate property on real Secured Short-term claims on institutions and corporates Retail Listed equities Institutions classes Other exposure Securitisation exposures Unlisted equities rate Interest Foreign exchange Foreign Commodities Equities Corporates estate property on real Secured Short-term claims on institutions and corporates Short-term claims on institutions Retail Institutions classes Other exposure Securitisation exposures Listed equities Unlisted equities Interest rate Interest Foreign exchange Foreign Commodities Equities Risk-weighted assets classes exposure standardised risk – prescribed Credit Market risk Equity risk risk Counterparty credit valuation adjustment risk Credit At 31 March R’million Operational risk – standardised approach Operational risk – standardised At 31 March R’million Credit risk – prescribed standardised exposure classes exposure standardised risk – prescribed Credit Capital requirements Equity risk Counterparty credit risk Counterparty credit Credit valuation adjustment risk Credit Market risk Operational risk – standardised approach Operational risk – standardised Risk-weighted assets CAPITAL MANAGEMENT AND ALLOCATION MANAGEMENT AND CAPITAL Capital requirements # # # – (2) (88) (99) 305 618 (250) (135) (154) 2015 2015 8.5% 8.3% 8.0% 1 227 3 128 1 073 11.0% 10.9% 11.4% 15.4% 39 707 28 315 10 670 10 319 24 487 29 388 # # # 60 270 699 920 (153) (120) (389) (505) 2016 2016 7.5% 7.3% 7.1% 1 073 1 360 3 475 (1 283) 10.6% 10.6% 11.0% 14.6% 43 121 31 475 10 319 10 726 28 315 32 395 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Risk management (continued) Based on revised BIS rules. on Basel III capital requirements as fully phased in by 2022. understanding of current and draft regulations ‘Fully loaded’ is based Based on the group’s The leverage ratios are calculated on an end-quarter basis. Redeemed capital Collective impairment allowances Opening additional tier 1 capital adjustments and transitional arrangements including regulatory Other, New tier 2 capital issues adjustments and transitional arrangements including regulatory Other, capital Closing total regulatory Dividends after taxation Profit income Movement in other comprehensive tax liability) of related Goodwill and intangible assets (deduction net adjustments and transitional arrangements including regulatory Other, Closing common equity tier 1 capital Closing additional tier 1 capital Opening tier 2 capital Closing tier 2 capital Leverage ratio* – ‘fully loaded’^^ Leverage ratio* – current Opening common equity tier 1 capital Opening common equity Closing tier 1 capital As at 31 March Common equity tier 1 (as reported) Common equity tier 1 (fully loaded)^^ Tier 1 (as reported) capital adequacy ratio (as reported) Total Leverage ratio* – permanent capital At 31 March R’million

THREE 80 ^^ * Total regulatory capital flow statement capital regulatory Total MOVEMENT IN TOTAL REGULATORY CAPITAL REGULATORY MOVEMENT IN TOTAL tier 1 and tier 2 capital during the year. the movement in common equity tier 1, additional The table below analyses # A SUMMARY OF CAPITAL ADEQUACY AND LEVERAGE RATIOS OF CAPITAL A SUMMARY

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 81 – – – – – – – – – 667 (190) (190) 2015 2015 8.3% 7 339 8 081 5 108 6 672 (1 989) (2 756) 80 821 24 960 29 388 24 960 13 189 (55 861) 352 731 352 731 307 433 307 243 332 706 R’million R’million THREE – – – – – – – – – 389 (693) (693) 2016 2016 7.3% 9 673 3 197 4 366 (2 973) 39 302 90 589 38 519 32 395 38 519 12 870 34 936 (52 070) 440 871 440 871 350 873 350 180 405 629 R’million R’million (continued) (continued) Risk management Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Adjustments for conversion to credit equivalent amounts Adjustments for conversion to credit sheet items (sum line 17 and 18) Off-balance Tier 1 capital (sum of lines 3, 11, 16 and 19) exposures Total Basel III leverage ratio Total securities financing transaction exposures (sum line 12 to 15) (sum securities financing transaction exposures Total notional amount at gross sheet exposure Off-balance Leverage ratio framework but including collateral) and SFTs, On-balance sheet items (excluding derivatives Other adjustments Leverage ratio exposure At 31 March III TierAsset amounts deducted in determining Basel 1 capital (sum of lines 1 and 2) (excluding derivatives and SFTs) sheet exposures on-balance Total transactions (i.e. net of eligible cash variation Replacement cost associated with all derivatives margin) of netting), after adjusting for sales accounting SFT assets (with no recognition Gross transactions Agent transaction exposures At 31 March Fiduciary assets recognised on the balance sheet pursuant to the operative accounting on the balance sheet pursuant to the operative Fiduciary assets recognised measure exposure the leverage ratio framework but excluded from Derivative financial instruments lending) similar secured repos and Securities financing transactions (i.e. sheet amounts of off-balance equivalent sheet items (i.e. conversion to credit Off-balance exposures) transactions Add-on amounts for PFE associated with all derivatives the balance sheet assets deducted from where for derivatives collateral provided Gross-up pursuant to the operative accounting framework in derivatives transactions assets for cash variation margin provided Deductions of receivables trade exposures Exempted CCP leg of client-cleared derivatives notional amount of written credit Adjusted effective derivatives and add-on deductions for written credit notional offsets Adjusted effective (sum of lines 4 to 10) derivative exposures Total SFT assets of gross Netted amounts of cash payables and cash receivables for SFT assets Risk (CCR) exposures Counterparty Credit Adjustments for: consolidated for are entities that financial, insurance or commercial Investments in banking, consolidation outside the scope of regulatory accounting purposes but Total consolidated assets as per published financial statements consolidated assets as per Total 18 19 20 21 22 16 17 1 7 8 Line # 2 3 4 12 15 Line # 3 4 5 6 5 6 7 8 9 10 11 13 14 2 1 LEVERAGE RATIO COMMON DISCLOSURE TEMPLATE LEVERAGE RATIO SUMMARY COMPARISON OF ACCOUNTING ASSETS VERSUS LEVERAGE RATIO LEVERAGE RATIO OF ACCOUNTING ASSETS VERSUS COMPARISON SUMMARY EXPOSURE MEASURE 3 F3 A-3 bbb- baa2 Baa2 BBB- BBB- za.A-1 za.AA- A1.(za) AA-(za) A1+(za) P-1 (za) AA-(zaf) Prime-2 F1+(zaf) Limited – a subsidiary of Investec Bank Investec Limited Limited 5 F3 Investec bbb- BBB- Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Credit ratings Credit Long-term rating Short-term rating Foreign currency Foreign Foreign currency Foreign Foreign currency Foreign National National National Foreign currency Foreign Foreign currency Foreign currency Foreign National National National Rating agency Local currency GLOBAL CREDIT RATINGS S&P Long-term ratings Short-term ratings MOODY’S Long-term ratings FITCH Long-term ratings Short-term ratings Viability rating assessment Baseline credit Short-term ratings Support rating THREE 82 Credit ratings As a point of view. a credit separately from treated Limited are Investec plc and Investec companies structure, In terms of our dual listed Bank plc and Investec namely Investec within the group, assigned ratings to the significant banking entities the rating agencies have result, Limited. Our companies, namely Investec plc and Investec agencies have assigned ratings to the holding Bank Limited. Certain rating as follows: ratings are

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 83 THREE

Internal Audit Internal Significant control weaknesses are are weaknesses Significant control in terms of an escalation reported, forums, the local assurance protocol, to and procedures remediation where and monitored considered are progress The audit in detail by management. on significant a report committee receives by management issues and actions taken An update controls. to enhance related issues raised on the status of previously by Internal Audit to each audit is provided concerns in relation are committee. If there issues, these will be escalated to overdue forum to to the executive risk review expedite resolution. its reviews Internal Audit proactively for adequacy and practices and resources to meet an increasingly appropriateness demanding corporate governance and including the environment, regulatory of King III in South Africa. requirements The audit teams comprise well-qualified, that the function to ensure experienced staff has the competence to match Investec’s specific Where diverse requirements. specialist skills or additional resources from obtained these are required, are parties. Internal Audit resources third by the respective subject to review are audit committees. Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group The head of internal audit reports at each The head of internal audit reports and has a direct audit committee meeting the audit line to the chairman of reporting chief appropriate committee as well as the of internal The head executive officers. of executive audit operates independently access to management but has regular and to business their chief executive officer of internalunit executives. The head audit internal for coordinating is responsible skills departmental to ensure audit efforts For leveraged to maximise efficiency. are administrative purposes the head of internal to the global head of audit also reports corporate governance and compliance. The function complies with the International Practice for the Professional Standards of Internal Auditing, and is subject to an independent Quality Assurance Review intervals. The most (QAR) at appropriate independent QAR benchmarked the recent function against the July 2013 publication Institute for Internal by the Chartered Internal Audit Auditors entitled ‘Effective in the Financial Services Sector’. The to the audit communicated were results 2014 and to the committees in March A QAR follow-up regulators. respective issued was completed and results review to the audit committees in January 2015 as regulators. well as to the respective Internal Audit conducts a formal Annually, business risk assessment of the entire risk-based which a comprehensive from audit plan is derived. The assessment validated by are and programme executive management and approved audit committee. Very by the responsible are high-risk businesses and processes audited at least every 12 months, with intervals at regular covered other areas is an There based on their risk profile. ongoing focus on identifying fraud risk as well as auditing technology risks given dependence on IT systems. Investec’s Internal Audit also liaises with the external to auditors and other assurance providers in terms of integrated enhance efficiencies assurance. The annual plan is reviewed and relevant it remains to ensure regularly given changes in the operating responsive, The audit committee approves environment. any changes to the plan. Internal Audit activity activity Internal Audit by an is governed charter internal audit which is approved audit by the group is committees and reviewed annually. The charter defines the purpose, authority and responsibilities of the function to determine their own risk appetite to determine their own and to client identification in relation institutions are verification. All accountable Intelligence by the Financial further affected intended move to a new Centre’s for reporting, automated solution (GoAML) live in April 2016. which is scheduled to go its to strengthen Investec continually aims to meet its in order environment control obligations. regulatory REPORTING TAX South Africa and Mauritius have in place intergovernmental agreements with the USA and each have enacted local locally. to implement FATCA law/regulation This allows South Africa and Mauritius to as participating countries. This be treated means that financial institutions in these information annually on countries report US clients (or non-compliant clients) to the South African Revenue Services and the These local Mauritian authority respectively. authorities in turn exchange information with with the USA which reciprocates similar information (on South African and who respectively Mauritian tax residents hold financial accounts in the US). With South Africa being an ‘early adopter’ Common Reporting of the OECD’s (CRS), (the global version of Standard became requirements these FATCA), 2016. in South Africa on 1 March effective South Africa has also opted for the ‘wider which means all South African approach’ required financial institutions are reporting information on all to collect tax-related of the clients, rather than only in respect opted 55 countries which have currently the information into CRS. As for FATCA, SARS then to SARS annually. is reported exchanges this information with relevant information for reciprocal countries in return on South Africans with financial accounts in those countries. Mauritius has indicated that it will opt into 2017. CRS from FINANCIAL CRIME Financial crime continues to be a regulatory focus with amendments to governing for later this year. legislation proposed This legislation will change the Anti-money laundering and Combatting of financing of framework (AML CFT) regulatory Terrorism a rules-based to a risk-based from allowing accountable institutions approach, Retail Distribution Review and proposed and proposed Retail Distribution Review Fit and Proper amendments to FAIS A and Compliance reporting. requirements conduct committee Customer and market for Investec (CMCC) has been established Risk Limited, as part of the Conduct to ensure framework, with the objective a client- that Investec Limited maintains culture. focused and fair outcomes-based CEO. group by the The CMCC is chaired implemented being Conduct risk forums are legal entities to ensure affected across and addressed that identified gaps are for implementation of business readiness The work requirements. new regulatory a ongoing and will remain is in this regard focus area. The South African Reserve Bank conducted of Foreign an industry-wide review Operations in 2015. The Exchange Trading on market focused predominantly review governance and conduct and related Exchange of Foreign in respect controls 2012. Communications during Traders’ no material findings. Investec were There Corporate and Institutional Banking (ICIB) implemented a Financial Markets Code of monitoring of Conduct and comprehensive traders’ communications. Amendments to the National Credit the obligations of Act have increased of affordability in respect providers credit assessments, and has extended the Regulator powers of the National Credit and rule- of enforcement in respect making powers. A commencement date for the Protection of Personal Information Act has not for been announced. The Chief Director Legislative Development at the Department of Justice and Constitutional Development will be no further confirmed that there developments until the Information Regulator has been established. Work and continues internally on data protection information management. Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Compliance THREE 84 The draft Financial Sector Regulation Bill Peaks) was tabled in Parliament in the (Twin in the quarter of 2015, and is currently third The Bill is expected Parliamentary process. the latter part of towards to be promulgated business areas in affected 2016, and will result by the Prudential Authority being regulated and the Financial Sector Conduct Authority. The Financial Advisory and Intermediary continues to be Services Act (FAIS) with added emphasis on enforced, This includes the Customers Fairly. Treating CONDUCT RISK AND CONDUCT RISK AND CONSUMER PROTECTION CHANGES TO REGULATORY CHANGES TO REGULATORY LANDSCAPE IN SOUTH AFRICA regulatory The South African financial sector for the landscape has been under review is structure last few years. A new regulatory developing, and existing legislation is also being amended. Although the conduct of regulated financial institutions is currently under various pieces of legislation, and by this will change under various regulators, structure. the new regulatory Year in review Year The pace of regulatory change in the in the change The pace of regulatory little signs of financial sector has shown the industry abating, and the pressure various regulatory has faced to implement to be resource initiatives, has continued scale and intensive. In addition, the redress fines and of regulatory frequency balance continues to impact firm’s orders and intensive sheets with the regulators’ expected to supervision intrusive approach future. to continue for the foreseeable to focus have continued Global regulators in stability and resilience on promoting emphasis financial markets, with increasing plans and and resolution on recovery to the banking sector structural reforms as well as customer and market conduct reforms. related focused on complying Investec remains with the highest levels of compliance to and integrity in each standards professional is a major of our jurisdictions. Our culture component of our compliance framework policies, and is supported by robust who and talented professionals processes of our customers that the interests ensure of at the forefront remain and shareholders everything we do.

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CULTURE AND VALUES CULTURE and values have always been Our culture at the heart of how we operate, and we with which these believe the strength the embedded and lived throughout are organisation distinguishes Investec from to ensure our culture others. Safeguarding good conduct, ethical practice will promote the delivery of our long-term success and a key focus of the board. will remain GOVERNANCE FRAMEWORK has adopted a risk and The group which allows for governance structure the operation of the various committees level. This avoids the and forums at group necessity of having to duplicate various subsidiary committees and forums at group sub-committees however, are, levels. There that specifically oversee the governance of Investec Bank processes and control operations. Limited’s governance A diagram of the group’s on the various framework as well as reports committees can be found in the board of Investec’s corporate governance report 2016 integrated annual report. annual general meeting and subsequently annual general meeting effect with the board stepped down from 6 August 2015. from the Priorities for new year 2016 from terms, our priorities for In broad a corporate governance perspective, are as follows: BOARD EFFECTIVENESS of the effectiveness An independent review was undertaken during 2015. of the board was satisfied terms, the board In broad The board that it was operating effectively. areas an action plan to address has agreed and will monitor identified for improvement, against this plan. progress MANAGEMENT SUCCESSION The changes described above have helped to position the company to meet Having the challenges of the future. implemented these changes, ensuring the and is operating is embedded restructure of focus. will be a key area effectively Corporate governance Corporate Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group to maintain differentiated businesses to maintain differentiated integrated and coordinated that are under the Investec brand, while the best solution focused on providing for the client; of businesses to facilitate the growth management responsibility with direct and accountability; and leaders are talented future to ensure in place for the long-term success of the group. The past year in focus The past year MANAGEMENT SUCCESSION AND EXECUTIVE DIRECTORS a key remained Succession planning has Investec of focus during the year. area announced in November 2015 that, in its across pursuit of sustained growth certain businesses, Investec restructured with the aim of operating responsibilities objectives: achieving the following broad • • • Changes included the appointment of as Ciaran Whelan and David van der Walt joint global heads of the Specialist Bank, Wainwright, Richard appointment of and the of Investec Bank chief executive officer Limited in South Africa. Investec has always talent from maintained a policy of growing within, and the majority of the group’s leaders have an extensive history with the valued for their institutional and are group knowledge and expertise. The changes implemented have positioned Investec with an enhanced for sustained growth remains operational focus. Stephen Koseff and Bernard chief executive officer group managing director. Kantor group While non-executive appointments are based on merit and overall suitability for the affairs the nominations and directors’ role, mindful of committee (NOMDAC) remains the value of diversity as it considers any for the board. recommendations of Investec Bank Limited, on The board of the NOMDAC and the recommendation appointed approval, following regulatory as the chief executive Wainwright Richard on 1 February 2016. Karl Socikwa officer at the August 2015 did not seek re-election and philosophies and we conduct our and philosophies and we and behaviour business and measure so as to ensure practices against them characteristics that we demonstrate the of good governance. Sound corporate governance depends and than processes upon much more it fundamentally depends procedures, within upon the people and the culture an organisation. At Investec, sound corporate governance is embedded in our functions and processes, values, culture, Our values require organisational structure. and employees behave that directors displaying consistent and with integrity, in order moral strength uncompromising and maintain trust. The board to promote the top in the manner in sets the tone from which it conducts itself and oversees the and the framework for corporate structures and governance. Each business area is responsible every employee of the group with our values for acting in accordance OUR CULTURE, VALUES AND VALUES OUR CULTURE, PHILOSOPHY Chairman’s introduction Chairman’s annual the 2016 I am pleased to present which sets corporate governance report to approach out Investec Bank Limited’s corporate governance. Limited, together Investec plc and Investec managed as a are with their subsidiaries, of the as a result single economic enterprise structure. dual listed companies (DLC) is a major subsidiary Investec Bank Limited of Investec Limited and due to the DLC compliance with operational structure, many of the specific corporate governance DLC level. is at the group requirements encourage all stakeholders to read We that the corporate governance report 2016 follows in conjunction with Investec’s a which provides integrated annual report from including reports detailed review more committee chairmen the various board an explanation of how which provide those committees discharge their duties and Investec of both the group in respect Bank Limited. looking at the summary of our Before corporate governance philosophy and which follows, practices, in the report I would like to comment on some key developments during the last year and to look at some of the priorities identified I however, Firstly, for the next year. some important would like to provide values and our culture, context regarding and will continue philosophies, which are to everything we do. to be at the core Further information on the bank’s the bank’s Further information on is liquidity and capital position to 70 of provided on pages 59 this report.  The board is of the opinion, based on its is of the opinion, based The board key processes knowledge of the bank, enquiries, that in operation and specific to support adequate resources are there the bank as a going concern for the future. foreseeable Furthermore, the board is of the opinion is of the opinion the board Furthermore, risk management that the bank’s the systems of internal processes and effective. are control for responsible are In addition, the directors the preparation, monitoring and reviewing annual of the bank’s integrity and reliability financial statements, accounting policies and the information contained in the integrated annual report. the In undertaking this responsibility, by an ongoing supported are directors for identifying, evaluating and process managing the significant risks Investec the financial and other faces in preparing information contained in this integrated was in place for This process annual report. and up to the date the year under review of the integrated annual report of approval and financial statements. The process is implemented by management and for effectiveness independently monitored by the audit, risk and other sub-committees of the board. Management and succession planning Global business unit heads, geographic management and the heads of central appointed service functions are and group by executive management and endorsed based on the skills and by the board, experience deemed necessary to perform function. In general, managers the required do not have fixed-term employment no employment are contracts and there contracts with managers for a term of more years. than three reporting Our management structure, are lines and the division of responsibilities a geographic, divisional and built around functional network. Each strategic business unit has a management committee and is for implementing operational responsible decisions, managing risk and aligning strategy divisional objectives with the group and vision. For a complete list of all principles and a reference to demonstrate how Investec has applied these principles, please refer to our website.  Budgeting and forecasts Profitability Capital Liquidity. Financial reporting and going concern to confirm required are The directors satisfied that the bank has that they are to continue in business adequate resources The assumptions future. for the foreseeable underlying the going concern statement discussed at the time of the approval are and results by the board of the financial these include: • • • • KING III is of the opinion that, based on The board this the practices disclosed throughout in operation during the which were report, Investec has applied the year under review, King III principles. Board statement management and employees The board, in full support of Investec Bank Limited are committed to complying of and are requirements with applicable regulatory of our listed and King III. As a result non-cumulative, non- non-redeemable, we are shares, participating preference also committed to complying with the JSE Limited (JSE) Listings Requirements. that assured therefore Stakeholders are being managed ethically and in we are compliance with the latest legislation, and best practice. regulations Fani Titi Chairman 9 June 2016 The governance framework and structures The governance framework and structures that the company in place ensure that are of highest standards is able to maintain the corporate governance. Some key aspects and below, described of the framework are of detail in the governance report in greater report. 2016 integrated annual Investec’s Conclusion Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group (continued) Corporate governance Corporate Audit committee: of In terms of the King Code Governance Principles for South Africa (King III) and the Companies Act, No 71 of 2008, as amended (the Companies Act), the chairman of the audit committee should report on its statutory to shareholders duties. The Investec Limited audit committee performs the necessary on behalf of Investec functions required Bank Limited. Social and ethics committee: In terms of the Companies Act, the chairman of the social and to ethics committee should report on the matters within its shareholders mandate. The DLC social and ethics committee performs the necessary on behalf of Investec functions required Bank Limited. The DLC NOMDAC acts as the (including NOMDAC for the group Investec Bank Limited). committee acts The DLC remuneration committee for the as the remuneration (including Investec Bank Limited) group the remuneration from and the report committee, explaining the group’s as well as policies and processes, can be found on disclosures required pages 42 to 103. THREE 86 BOARD COMMITTEES of committees The DLC (combined) board plc act as the Investec Limited and Investec Limited committees of Investec Bank board of by the chairmen as well. The reports be found in the these committees can of Investec’s corporate governance report report. 2016 integrated annual • • • • Issues specific to Investec Bank Limited are at each meeting of the various considered committees and the Investec Bank Limited on the proceedings a report receives board of the committees at each of their meetings. of Investec Bank Limited The board corporate the group’s takes comfort from as well as the fact governance processes of Investec Bank Limited that the board includes common membership with the of Investec Limited and Investec plc. boards In addition, certain members, who are of Investec only appointed to the board the company at Bank Limited, represent risk and NOMDAC and the DLC board capital committee (BRCC) of the group.

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 87 THREE (continued) (continued) MEMBERSHIP the At the end of the year under review, comprised six executive directors board and six non-executive directors. concluded the board As set out below, are that all of the non-executive directors independent in terms of King III. we appointed During the year under review as an executive Wainwright Richard and the chief executive officer. director subject to election at the are All directors first annual general meeting following their and in accordance appointment. Thereafter of the non-executive with King III, a third and by rotation should retire directors Zarina Bibi Mahomed Bassa, accordingly, Khumo Lesego Shuenyane and Fani Titi will at the 2016 themselves for re-election offer annual general meeting. is taken. Group Finance and Investor Finance and Investor is taken. Group and comment review Relations coordinate, regulatory and on the monthly financial and annual and facilitate the interim reports, the including reporting process, financial independent external audit process. Board of directors operates within the group’s The board governance and is accountable framework of affairs for the performance and meets Investec Bank Limited. The board and following its objectives by reviewing the corporate strategy as determined of Investec Limited and by the boards has defined the Investec plc. The board limits of delegated authority within Investec with the boards Bank Limited. Together of Investec Limited and Investec plc, and committees, it board the group’s through for assessing and managing is responsible risk policies and philosophies, ensuring overseeing internal controls, appropriate acquisitions and major capital expenditure, the establishment of disposals, approving the introduction businesses and approving and services. In fulfilling of new products together the board its responsibilities, with management implements the plans and strategies. For further detail of the functions of the of Investec Bank Limited, as included board of Investec with the functions of the boards Limited and Investec plc, performed directly to committees, refer board or through 2016 integrated annual report. Investec’s Corporate governance Corporate Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Internal financial controls are based on are Internal financial controls established policies and procedures. for Management is responsible implementing internal financial controls, suitably ensuring that personnel are segregation qualified, that appropriate is exists between duties, and that there These areas suitable independent review. the through by the board monitored are independently audit committees and are assessed by Internal Audit and Compliance. in place to monitor internal are Processes identify and report effectiveness, control that and ensure material breakdowns, action corrective timely and appropriate Internal financial controls Conflict of interests to Certain statutory duties with respect in force are conflicts of interest directors’ under the Companies Act. In accordance with the Companies Act and the Memorandum of Incorporation (MOI) of may Investec Bank Limited, the board authorise any matter that otherwise may their duty to breaching involve the directors has The board avoid conflicts of interest. as set out in the MOI adopted a procedure, to for directors that includes a requirement detailing any submit, in writing, disclosures actual or potential conflict for consideration approval. appropriate, and, if considered within the group through a combination a combination through within the group and of risk identification, evaluation decision appropriate monitoring processes, assurance and oversight forums, and functions such as group and control Risk Management, Internal Audit and processes Compliance. These ongoing the year under in place throughout were of the and up to the date of approval review accounts. and integrated annual report any control Internal reports Audit to senior management, recommendations risk management and the audit group processes, committee. Appropriate by the audit and including review compliance implementation forums, ensure action is taken on that timely corrective matters raised by Internal Significant Audit. by ERRF, considered regularly risks are GRCC and by the BRCC. Material incidents of and losses and significant breaches to the reported are systems and controls BRCC and the audit committee. Reports the audit committee, BRCC and risk from at each reviewed functions are and control . board meeting More information on risk management can be found on pages 22 to 82.  to maintain differentiated businesses that to maintain differentiated under integrated and coordinated are focused onthe Investec brand, while the best solution for the client; providing of businesses to facilitate the growth management responsibility with direct and accountability; and leaders are talented future to ensure in place for the long-term success of the group. Internal control and reviewed are Risks and controls and for relevance regularly monitored The GRCC, BRCC and effectiveness. in audit committees assist the board Sound risk management this regard. by the group promoted practices are risk management function, which is independent of operational management. for its responsibility recognises The board framework and the overall risk and control its effectiveness. for reviewing is designed to mitigate, Internal control not eliminate, significant risks faced. that such a system It is recognised but not absolute, reasonable, provides omission, assurance against material error, misstatement or loss. This is achieved Risk management for the total is responsible The board of risk management and the process A number of systems of internal control. committees and forums assist in this group Senior management is responsible regard. for identifying risks and implementing and mitigation processes appropriate within their businesses. controls risk management The independent group boards functions, accountable to group for establishing, reviewing responsible are of risk and monitoring the process Risk Management management. Group to the BRCC, GRCC regularly reports and ERRF. Management succession a key remained Succession planning has Investec of focus during the year. area 2015 that, in announced in November its across pursuit of sustained growth certain businesses, Investec restructured the aim of with operating responsibilities objectives: broad achieving the following • • • 1 6 6 6 6 5 6 6 6 6 2 6 5 attended of the Number of meetings six held during the year Relationships and associations Relationships and 1 March on Prior to joining the board was a partner of 2013. David Friedland ErnstKPMG. KPMG along with & Young, The joint auditors of Investec Limited. are his concluded that, notwithstanding board David association with KPMG, previous given independence of judgement retains designated Limited’s he was never Investec and was not partner auditor or relationship account. involved with its Investec Yes Yes Yes Yes Yes Yes Independent 1 February 2016 30 June 1990 30 June 1990 1 July 1997 30 June 1990 1 July 1997 3 July 2002 1 July 1997 1 November 2014 2013 1 March 8 August 2014 1 July 1997 Date of appointment KXT Socikwa did not offer himself for re-election at the annual general meeting held on 2015. 6 August 2015, and was therefore only eligible to attend meetings held prior to 6 August RJ Wainwright was appointed to the board with effect from 1 February was appointed to the board with effect from 1 therefore only 2016, and was RJ Wainwright eligible to attend meetings held after 1 February 2016. NON-EXECUTIVE DIRECTORS F Titi (chairman) EXECUTIVE DIRECTORS (chief executive officer) RJ Wainwright* chief executive officer) (group S Koseff managing director) B Kantor (group (deputy chairman) DM Lawrence risk and finance director) GR Burger (group B Tapnack SE Abrahams ZBM Bassa D Friedland KXT Socikwa** KL Shuenyane PRS Thomas ** * The board of Investec Bank Limited met six times during the financial year. The chairman is the financial year. of Investec Bank Limited met six times during The board consultation with the chief executive for setting the agenda for each meeting, in responsible information packs on matters to be Comprehensive and the company secretary. officer in advance. to directors provided are by the board considered meetings during the financial year ended attendance at board Details of directors’ 2016: 31 March Attendance at credit meetings Attendance at credit committees invitation, certain credit attend, by David Friedland and Peter Thomas regularly to be desirable considers their attendance at these committees The board of the group. day-to-day issues facing the business.in terms of developing an understanding of the of character and judgement. independence concluded that David and Peter retain The board BOARD MEETINGS Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Corporate governance Corporate (continued) NON-EXECUTIVE DIRECTORS F Titi (chairman) S Koseff (group chief executive officer) (group S Koseff managing director) B Kantor (group (deputy chairman) DM Lawrence director) risk and finance GR Burger (group B Tapnack EXECUTIVE DIRECTORS (chief executive officer) RJ Wainwright SE Abrahams ZBM Bassa D Friedland KL Shuenyane PRS Thomas THREE 88 Karl Socikwa did not offer himself for re-election at the August 2015 annual general meeting at the August himself for re-election Karl Socikwa did not offer the board. down from of Investec Bank Limited and subsequently stepped Tenure of process follows a thorough The board assessing independence on an annual whose tenure basis for each director exceeds nine years. of does not believe that tenure The board non-executive directors any of the current with their independence of interferes judgement and ability to act in Investec’s has the board Accordingly, best interests. concluded that Fani Titi, Peter Thomas and Sam Abrahams, despite having been of Investec Bank Limited for directors both financial retain nine years or more, independence and independence of character and judgement. Notwithstanding the guidelines set out in is of the view that these King III, the board independent are non-executive directors the interests of management and promote of stakeholders. The balance of executive is such that and non-executive directors to is a clear division of responsibility there such that no a balance of power, ensure can dominate board one individual or group powers of or have unfettered processes believes that decision-making. The board and evaluates its it functions effectively performance annually. INDEPENDENCE is compliant 2016, the board At 31 March with Chapter 2, Principle 2.18 of King III in that the majority of non-executive A summary of independent. are directors uses to determine the the factors the board is independence of nonexecutive directors detailed below. The names of the directors at the date of this report, the year of their appointment and their the year of their appointment and date of this report, at the The names of the directors in the table below. set out independence status, are

RISK MANAGEMENT AND CORPORATE GOVERNANCE RISK MANAGEMENT AND CORPORATE GOVERNANCE 89 THREE (continued) (continued) Remuneration dealings Directors’ Internal audit Compliance Regulation and supervision and code of conduct Values Sustainability IT governance. Further disclosures 2016 integrated annual Refer to Investec’s information regarding: for more report • • • • • • • • CHAIRMAN AND CHIEF CHAIRMAN AND CHIEF EXECUTIVE OFFICER of the chairman and chief The roles distinct and separate. are executive officer and is board The chairman leads the board for ensuring that the responsible accurate, timely and clear receives directors that the information to ensure The effectively. can perform their duties does not consider the chairman’s board with external to interfere commitments to his performance and responsibilities is satisfied that the Investec. The board time available chairman makes sufficient to serve Investec effectively. The deputy chairman is David Lawrence. Company secretary of Niki van Wyk is the company secretary Investec Bank Limited. Niki is professionally qualified and has experience, gained over a number of years. The company secretary’s members evaluated by board services are evaluation process. during the annual board for is responsible The company secretary and its the flow of information to the board committees and for ensuring compliance have All directors procedures. with board access to the advice and services of the whose appointment company secretary, matter. a board are and removal and is satisfied has considered The board is competent, that the company secretary qualifications and has the relevant length experience and maintains an arm’s In evaluating with the board. relationship has considered these qualities, the board and duties pursuant to role the prescribed codified in the Companies the requirements Act and the listings and governance as applicable. requirements confirms that for In addition, the board 2016 the period 1 April 2015 to 31 March on the Niki did not serve as a director of Investec Bank Limited, nor did she board deliberations and only take part in board advised on matters of governance, form or procedure. Corporate governance Corporate Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group INDEPENDENT ADVICE the chairman or deputy chairman Through individual or the company secretary, entitled to seek professional are directors independent advice on matters related of their duties and to the exercise at the expense of Investec. responsibilities No such advice was sought during the 2016 financial year. ONGOING TRAINING AND DEVELOPMENT provided are On appointment, directors with an induction pack and participate to tailored in an induction programme their needs. This includes meeting with the business unit and central services they become familiar with heads to ensure business operations, senior management, and internal our business environment and systems policies, processes controls, for managing risk. ongoing training and Directors’ agenda development is a standing board item, including updates on various training and development initiatives. formal regular members receive Board and governance on regulatory presentations matters as well as on the business and support functions. Regular interactive arranged between directors workshops are and the heads of risk management, control functions and business units. liaises with The company secretary seminars and relevant to source directors could attend which directors conferences funded by Investec. and which are and directors’ Following the board’s any performance evaluation process, communicated to the training needs are these who ensures company secretary addressed. needs are were there During the period under review workshops arranged a number of director meetings and some topics outside of board during the past year included the covered plan, budgets and anti-money recovery laundering. on obtaining independent advice and, on obtaining independent details of the board appropriate, where non-executive committees of which the have an insurance We is a member. director against liabilities directors policy that insures out their duties. they may incur in carrying NOMDAC, of the On the recommendation appointed will be non-executive directors nine years (three for an expected term of of the date terms) from times three-year to the board. their first appointment Appropriate and rigorous performance and rigorous Appropriate objectives Ratio of executive to non-executive directors Contribution to setting of strategic objectives. International business and operational experience Understanding of the economics of the sectors in which we operate Knowledge of the regulatory in which we operate environments Financial, accounting, legal and banking experience and knowledge. TERMS OF APPOINTMENT On appointment, non-executive directors with a letter of appointment. provided are The letter sets out, among other things, and expected duties, responsibilities time commitments, details of our policy The 2016 board effectiveness was effectiveness The 2016 board conducted by an external independent of the Rob Goffee Professor facilitator, London Business School. Professor has no connection with the group. Goffee each completed a questionnaire Directors in order Goffee and met with Professor challenges, current to identify future insight to how the and provide strengths collated functions. Findings were board at the January 2016 board and presented concluded meeting. While the review was operating effectively that the board of in the areas with particular strengths corporate governance, the functioning of the audit committee, risk management, areas were leadership and teamwork, there Key felt it could improve. the board where the effectiveness themes to emerge from included: review • • • BOARD AND DIRECTORS’ PERFORMANCE EVALUATION • • • of the The skills and experience profile regularly and its committees are board an by the NOMDAC to ensure reviewed composition and relevant appropriate a governance, succession and from perspective. effectiveness The board considers that the skills, considers that the skills, The board and attributes of knowledge, experience appropriate as a whole are the directors activities. and our for their responsibilities to the bring a range of skills The directors including: board • SKILLS, KNOWLEDGE, SKILLS, KNOWLEDGE, ATTRIBUTES EXPERIENCE AND OF DIRECTORS report Remuneration Four (53) (45) (77) (65) (69) (71) (66) (52) (59) (64) (63) Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Directorate (54) THREE 90 Non-executive chairman BSc (Hons), MA, MBA BEcon, CA(England & Wales) Deputy chairman BA (Econ) (Hons), MCom FCA, CA(SA) BCom, CA(SA) RICHARD J WAINWRIGHT RICHARD J WAINWRIGHT PETER RS THOMAS BRADLEY TAPNACK BRADLEY TAPNACK KHUMO L SHUENYANE KHUMO L SHUENYANE STEPHEN KOSEFF BERNARD KANTOR DAVID FRIEDLAND DAVID GLYNN R BURGER GLYNN ZARINA BM BASSA SAMUEL E ABRAHAMS DAVID M LAWRENCE M LAWRENCE DAVID FANI TITI FANI Investec Bank Limited Investec Bank (details as at 30 June 2016) Limited A subsidiary of Investec BCom, CA(SA) CA(SA) BCom, CA(SA), H Dip BDP, MBA BCom, CA(SA), H Dip BDP, BAcc, DipAcc, CA(SA) BAcc, CA(SA), H Dip BDP, MBL BAcc, CA(SA), H Dip BDP, CTA Chief executive officer CA(SA) BCom, CTA, Note: Karl-Bart XT Socikwa resigned as director Note: Karl-Bart XT Socikwa resigned as director effective 6 August 2015

RISK MANAGEMENT AND CORPORATE GOVERNANCE Four Remuneration report Be in line with the business strategy, Be in line with the business strategy, objectives, values and long-term of the bank interests sound Be consistent with and promote risk management, and not and effective encourage risk taking that exceeds the level of tolerated risk of the bank that payment of variable Ensure does not limit the bank’s remuneration its ability to maintain or strengthen capital base (base fixed remuneration gross Target salary and benefits including pension) at median market levels to contain fixed costs that variable remuneration Ensure is largely economic value added and underpinned by (EVA)-based risk appetite and our predetermined capital allocation Facilitate alignment with shareholders deferral of a portion of short- through and long- term incentives into shares awards term incentive share total compensation (base salary, Target benefits and incentives) to the relevant competitive market at upper quartile levels for superior performance. within which they work, remain crucial remain within which they work, and long- in determining our success programmes Our reward term progress. designed clear and transparent, are and to align directors’ and administered of all with those employees’ interests short-, the bank’s stakeholders and ensure success. medium- and long-term that financial we recognise In summary, the return institutions have to distribute suppliers their enterprises between the from the societies of capital and labour and in which they do business, the latter taxation and corporate social through activities. Our remuneration responsibility philosophy seeks to maintain an balance between the interests appropriate of these stakeholders, and is closely and values which aligned to our culture include risk consciousness, meritocracy, material employee ownership and an unselfish contribution to colleagues, clients and society. Remuneration principles and Remuneration policies, procedures to as the practices, collectively referred designed, in policy’, are ‘remuneration normal market conditions, to: • • • • • • • An annual gross remuneration package remuneration An annual gross an (base salary and benefits) providing industry competitive package A variable short-term incentive related to performance (annual bonus) awards) A long-term incentive (share long-term equity participation. providing Remuneration Remuneration philosophy unchanged which remains Our philosophy, prior years, is to employ the highest from characterised individuals who are calibre intellect and innovation and by integrity, and subscribe to our culture, who adhere strive to values and philosophies. We by providing entrepreneurship inspire that stimulates a working environment performance so that extraordinary and employees may executive directors be positive contributors to our clients, their communities and the bank. employees generally for their reward We contribution through: • • • of the above as consider the aggregate We package designed the overall remuneration incentivise and drive to attract, retain, the behaviour of our employees over the short, medium and longer term in a risk are Overall, rewards conscious manner. values as important as our core considered responsibility, of work content (greater variety of work and high level of challenge) feel (entrepreneurial and work affiliation in to the company and unique culture) and motivation the attraction, retention of employees. merit entrepreneurial, have a strong We characterised and values-based culture, by passion, energy and stamina. The ability to live and perpetuate our culture and values in the pursuit of excellence industry and within an in a regulated risk management environment effective paramount in determining is considered overall reward levels. The type of people the organisation and environment attracts, and the culture The remuneration committee of the bank’s the bank’s committee of The remuneration non- Investec Limited, comprises parent, for and is responsible executive directors packages reward determining the overall on The policy of executive directors. packages for non-executive remuneration and determined by is agreed directors the board.

Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Remuneration report Remuneration FOUR 92 We have a strong have a strong We entrepreneurial, merit- and values‑based culture, by characterised passion, energy and stamina

REMUNERATION REPORT REMUNERATION REPORT 93 FOUR (continued) (continued) The most relevant competitive The most relevant levels points for remuneration reference based on the scope of responsibility are made and individual contributions we that The committee recognises operate an international business local and and compete with both international competitors in each of our markets benchmark, industry Appropriate and comparable organisations’ practices are remuneration reviewed regularly the JSE For employees generally, the most Financial 15 has offered benchmark appropriate to avoid disproportionate In order of the bank areas packages across and between executives, adjustments to may be made at any extremes internal consistency. broad ensure Adjustments may also be made to the competitive positioning of remuneration components for individuals, in cases a higher level of investment is where or to build or grow needed in order sustain either a business unit or our capability in a geography. • • • • • The following section outlines our detail for policy in more remuneration each element of total compensation as it applies to employees. Our remuneration B Kantor and arrangements for S Koseff, GR Burger can be found in Investec’s 2016 integrated annual report. Gross remuneration: base salary and benefits reviewed annually Salaries and benefits are relative skills and experience the and reflect the individual. of, and contribution made by, policy to seek to set base It is the bank’s salaries and benefits (together known as at median market remuneration) gross with peer like-for-like levels when compared companies. group division The Human Resources guidelines to business units provides salary levels for all on recommended employees within the organisation to These guidelines facilitate the review. include a strategic message on how to set salary levels that will aid Investec in meeting true to its objectives while remaining corporate values, and incorporate guidance levels to take account of the on increasing change in the cost of living over the year Remuneration report Remuneration Alignment and adherence to our Alignment and adherence and values culture The level of cooperation and collaboration fostered Development of self and others risk Attitude displayed towards risk consciousness and effective management to internal controls Adherence procedures Compliance with the bank’s and requirements regulatory policies and procedures, relevant customers fairly including treating and develop The ability to grow markets and client relationships Multi-year contribution to performance and brand building Long-term sustained performance the risk and Specific input from compliance functions Attitude and contribution to sustainability principles and initiatives. Achievement of individual targets and objectives and Scope of responsibility individual contributions. Market context the risk and Specific input from compliance functions. Risk-adjusted EVA model Risk-adjusted EVA Affordability. Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group – – – – – – – – – – – – – – – – – Non-financial measures of Non-financial measures performance: – – – – – – – – – – – Financial measures of performance: Financial measures – – Non-financial measures of of Non-financial measures performance: – – Financial measures of performance: Financial measures – – Remuneration levels are targeted to Remuneration levels are competitive, on the be commercially following basis: • Factors considered to determine total Factors considered compensation for each individual include: • • Factors considered for overall levels of for overall Factors considered Investec at the level of the remuneration include: group • Qualitative and quantitative considerations form an integral part of the determination and total of overall levels of remuneration compensation for each individual. DETERMINATION OF DETERMINATION LEVELS REMUNERATION All remuneration payable (salary, benefits payable (salary, All remuneration and incentives) is assessed at an Investec business unit and individual level. group, This framework seeks to balance both of financial and non-financial measures that the appropriate performance to ensure prior to making considered factors are mix of and that the appropriate awards, made. are awards cash and share-based of to remuneration Our policy with respect unchanged during employees has remained the 2016 financial year. Remuneration policy Given our stance on maintaining a low Given our stance on maintaining our remuneration, of fixed cost component an entrepreneurial commitment to inspiring on and our risk-adjusted return culture, we do not apply to EVA, capital approach rewards. an upper limit on variable remuneration of The fixed cost component so designed to be sufficient is, however, become dependent that employees do not as we are on their variable compensation not consider not contractually (and do to make variable ourselves morally) bound Investec has the awards. remuneration ability to pay no annual bonuses and make should no long-term incentive awards the performance of the bank or individual this. employees require through do not pay remuneration We vehicles that facilitate avoidance of applicable laws and regulations. employees must undertake Furthermore, not to use any personal hedging strategies or liability-related or remuneration contracts of insurance to undermine the embedded in their risk alignment effects arrangements. Compliance remuneration maintains arrangements designed to ensure that employees comply with this policy. No individual is involved in the determination of his/her own remuneration and and specific internal controls rewards conflicts in place to prevent are processes between Investec and its clients of interest occurring and posing a risk to the from bank on prudential grounds. Realised gross revenue (net margin revenue Realised gross and other income) – The profitability of each operating The profitability business unit is determined as if a stand-alone business. they are is determined based revenue Gross on the activity of the business, with length pricing applicable to arm’s are Profits intersegment activity. determined as follows: – are embedded in key processes at both at both embedded in key processes are level, which form a bank and transaction performance- the basis of the bank’s thus model, variable remuneration related stakeholders. of all balancing the interests both the risk and compliance Further, in the also embedded functions are subject to and are operating business units by the internal audit and compliance review risk and compliance monitoring teams. The exception- on an functions also provide, to the relating only basis, information behaviour of individuals and business been evidence of non- has if there areas compliance or behaviour which gives rise the riskiness of to concerns regarding business undertaken. MODEL: ALLOCATION EVA OF PERFORMANCE-RELATED BONUS POOL Our business strategy and associated risk capital appetite, together with effective bonus annual utilisation, underpin the EVA allocation model. in the annual bonus Business units share pool to the extent that they have generated on their allocated risk- return a realised adjusted capital base in excess of their Many of the on equity. target return risks that the firm may potential future ensuring that the avoided through face are based on actual realised bonus pools are risk-adjusted profits. The bonus pools for non-operating business units (central services and head generated by a levy functions) are office payable by each operating business on This bonus pool may, its operating profit. in some years, be supplemented by a allocation as determined discretionary and by the chief executive officer by the and agreed managing director, committee. remuneration model has been consistently Our EVA applied for a period of about 17 years and encompasses the following elements: • and the extent of such risks which the bankand the extent of such as the mitigationshould undertake, as well management andof risks and overall capital of the Senior members allocation process. who provide risk management teams, bank’s packs andinformation for the meeting and contribute to the committee’s present meetings. discussions, attend these is a sub- The DLC capital committee and provides committee of the BRCC identification, detailed input into the bank’s of its quantification and measurement taking into account capital requirements, of the banking the capital requirements It determines the amount of regulators. internal capital that the bank should hold and its minimum liquidity requirements, taking into account all the associated risks or unidentified for any future plus a buffer of internal capital forms risks. This measure part of the basis for determining the variable pools of the various operating remuneration business units (as discussed above). forum (ERRF), The executive risk review comprising members of the executive and the heads of the various risk Its responsibilities functions, meets weekly. limits and mandates, include approving to and that adhered ensuring these are to mitigate risk recommendations agreed implemented. are and risk forums central credit The bank’s independent transaction approval provide of the business unit on a deal-by-deal basis, and the riskiness of business evaluated and undertaken is therefore at initiation of the business approved deal forum, investment committee through and ratified at and ERRF and is reviewed basis. These central ERRF on a regular a level of risk management forums provide by ensuring that risk appetite and various to and that an being adhered limits are rate and, by implication, interest appropriate is built into every approved risk premium of transactions transaction. The approval by these independent central forums thus that every transaction undertaken ensures in a contribution to by the bank results been subject to already profit that has some risk adjustment. model as described in detail below Our EVA profits is principally applied to realised targets above risk against predetermined In terms of and capital weighted returns. capital is allocated based structure, the EVA the higher the risk, the on risk and therefore higher the capital allocation and the higher This model return rate required. the hurdle that risk and capital management ensures Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Remuneration report Remuneration (continued) In our ordinary course of business we face a number of risks that could affect our business operations, as highlighted on page 16.

FOUR 94 Risk Management is independent from the Risk Management is independent from business units and monitors, manages and it is risk to ensure on the bank’s reports within the stated risk appetite as mandated the board through of directors by the board risk and capital committee (BRCC). The risk exposure bank monitors and controls operational market, liquidity, credit, through and legal risk divisions/forums/committees. Risk consciousness and management is embedded in the organisational culture the initiation of transactional activity from to the monitoring of adherence through to mandates and limits and throughout everything we do. The BRCC (comprising both executive and sets the overall risk non-executive directors) appetite for the bank and determines the categories of risk, the specific types of risks RISK-WEIGHTED RETURNS FORM BASIS FOR VARIABLE LEVELS REMUNERATION All employees are eligible to be considered eligible to be considered All employees are annual bonus, subject for a discretionary inter alia to the factors set out above in the section dealing with the determination of levels. remuneration Variable short-term Variable incentive: annual bonus to ensure that salary levels always allow that salary levels always to ensure standard a reasonable employees to afford on a reliance of living and do not encourage variable remuneration. either often engaged by Advisers are or the division the Human Resources general benchmark business units to obtain specific information or to benchmark remuneration that gross positions to ensure market-driven and competitive levels are do not inhibit so that levels of remuneration we need to the people our ability to recruit develop our business. targeted at competitive levels Benefits are flexible and through delivered and are packages. Benefits include pension tailored schemes; life, disability and personal accident insurance; medical cover; and other benefits, as dictated by competitive local market practices. Only salaries, not pensionable. annual bonuses, are

REMUNERATION REPORT REMUNERATION REPORT 95 FOUR (continued) (continued) ‑end audit process A fixed predetermined percentage of percentage A fixed predetermined hurdle in excess of the EVA any return pool accrues to the business units’ EVA pool A portion of the total EVA the bonus is allocated towards pool for central service and head office employees reviewed These bonus pools are by the appropriate regularly management and non-executive are that awards committees to ensure to do only paid when it is appropriate so, considering firm-wide performance against non-financial risk (both current and compliance-based and future) that to ensure objectives and in order the payment of such discretionary bonuses does not inhibit the bank’s ability to maintain/raise its capital levels. All users of capital operate within a strict philosophical framework a balancing of risk that requires and that is designed to and reward encourage behaviour in the interests of all stakeholders as opposed to just employees calculated centrally pools are The EVA finance function by the Investec bank’s and subject to audit as part of the year for superior performance, in line with our for superior performance, policy. remuneration overarching an operating where In circumstances have an EVA business unit does not a loss or when pool (e.g. when it incurs executive officer it is a start-up), the chief may consider and managing director for a allocation to allow a discretionary who were staff modest bonus for those to the longer term expected to contribute the bank, of that business unit or interests in the short profits despite the lack of EVA functions, support staff term, e.g. control and key business staff. It should be noted the salaries and bonuses for employees proposed for risk, internal audit and responsible not based on a formulaic compliance are independent of any and are approach generated by the or profits revenues of level The work. they where units business assessed for these employees are rewards against the overall financial performance of the bank; objectives based on their function; and compliance with the various to above. referred non-financial aspects Key elements of the bonus allocation set out below: are process • • • • Remuneration report Remuneration Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Internal is allocated to each capital business unit via a comprehensive within that analysis of the risks inherent of the business and an assessment costs of those risks are rates or targeted returns Hurdle unit determined for each business average cost based on the weighted for trading of capital (plus a buffer account businesses to take into in the additional risks not identified to applied capital allocation process) internal capital by business unit differ returns Targeted the competitive economics reflecting expectation for the and shareholder of the business, and are specific area of risk to the degree set with reference and the competitive benchmarks for line each product In essence, varying levels of return for each business unit required are the state of market maturity, reflecting country of operation, risk, capital invested (capital intensive businesses) or expected expense base (fee- based businesses) over time will in profitability Growth bonus pool, in an increasing result as long as it is not achieved at the expense of capital efficiency must be reflective returns Target risk assumed in the of the inherent in absolute business. Thus, an increase result automatically not does profitability in the annual bonus pool. in an increase allows us to embed risk This approach and capital discipline in our business subject to These targets are processes. annual review and risk forums credit The bank’s transaction approval provide 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 rates and thus hurdle and required that each transaction generates ensure that is commensurate with its a return associated risk profile. • • • • • • • if business process, In terms of our EVA and individual performance goals are exceeded, the variable element of the package is likely to total remuneration be substantially higher than the relevant that overall target benchmark. This ensures levels have the potential to remuneration be positioned at the upper quartile level Less: Funding costs Less: Impairments for bad debts Add back: Debt coupon or dividends paid out share preference applicable) of the business (where operating costs Less: Direct (personnel, systems, etc) Less: Allocated costs and residual charges (certain independent on a provided functions are group centralised basis, with an allocation model applied to charge out costs to business units. Costs incurred based on the full allocated are operational costs for the particular inclusive of central service area, cost the variable remuneration of the central service. Allocation methodologies generally use cost drivers as the basis of allocation) earned on retained Less: Profits earnings and statutory held capital paid by centre Add: Notional profit on internal allocated capital Equals: Net profits. A detailed explanation of our capital management and allocation process is provided on pages 75 to 81.

– – – – – – – – Capital allocated is a function of and internal capital both regulatory the risk assumed requirements, within the business and our overall business strategy The bank has always held capital in excess of minimum regulatory and this principle is requirements, perpetuated in our internal capital This process allocation process. that risk and capital discipline ensures is embedded at the level of deal initiation and incorporates independent (outside of the business unit) approval of transactions by the various risk and committees credit Internal capital comprises the regulatory Internal capital comprises the regulatory taking into account capital requirement a number of specified risks plus a which caters, inter alia, capital buffer risks not for any unspecified or future specifically identified in the capital The bank then planning process. that it actually holds capital in ensures excess of this level of internal capital – – – – – – – – • • • For further information on the For further information share share option and long-term and incentive plans in operation are eligible in which the directors Investec’s to participate, refer to report. 2016 integrated annual  Governance COMPLIANCE AND GOVERNANCE STATEMENT complies with the report The remuneration Code III King African South the of provisions of Corporate Practice and Conduct, the South African Companies Act 2008, the and the JSE Limited Listings Requirements South African Notice on the Governance and Risk Management Framework for 2014. Insurers, SCOPE OF OUR REMUNERATION POLICY The bank aims to apply remuneration and policies to executive directors largely consistent employees that are that certain the bank, but recognises across governed by local parts of the bank are onerous that may contain more regulations In those in certain respects. requirements applied are cases, the higher requirements where to that part of the bank. Additionally, policy any aspect of our remuneration the contravenes local laws or regulations, shall prevail. local laws or regulations Retention is addressed through the the through Retention is addressed granted, of awards long-term nature ‘lock-in’ for an element of which provides period the vesting employees throughout contribution to and allows for multi-year building. performance and brand Non-executive directors’ remuneration fees for receive Non-executive directors being a member of the Investec Bank also payable and fees are Limited board for any additional time committed to the bank including attendance at certain non-executive meetings. Furthermore, may not participate in our share directors option plans or our long-term share incentive and pension plans. ‘New starter’ awards are made based are ‘New starter’ awards basis on a de facto non-discretionary using an allocation table linked to salary levels also de are ‘General allocation’ awards of the awards facto non-discretionary same quantum as new starter awards made to employees who have and are in a award not had any other share period three-year at the made are up’ awards ‘Top of line management primarily discretion multi-year performance and to ensure long-term value generation. We have a number of share option and option and have a number of share We that are incentive plans long-term share of employees designed to align the interests long-term and with those of shareholders to build and organisational interests, the long ownership over material share These share awards. share term through also used in are option and incentive plans as a mechanism circumstances appropriate the skills of key talent. for retaining made in the form of forfeitable are Awards other than for countries awards share is the taxation of such awards where made in are penal. In these cases awards or market the form of conditional awards strike options. eligible In principle all employees are are for long-term incentives. Awards committee by the remuneration considered and made only in the 42-day period of our interim or following the release with results in accordance final financial the Investment Association principles of 2014 edition (formerly ABI remuneration: principles). These awards remuneration elements, namely: comprise three • • • long-term incentive awards All proposed by business unit recommended are by the staff management, approved executive committee and then share committee before the remuneration being awarded. subject to one third are Forfeitable shares fourth and vesting at the end of the third, which we believe is appropriate fifth year, The awards for our business requirements. forfeited on termination, but ‘good are is applied in exceptional leaver’ discretion circumstances. Long-term incentive: Long-term incentive: share awards Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Remuneration report Remuneration (continued) Once the annual audit is complete, Once the annual audit line managers in each business bonus unit will make discretionary for each team recommendations member taking into consideration criteria qualitative and quantitative (as mentioned above) then are Bonus recommendations geographic subject to an extensive involving human resources, review local local management and committees remuneration these recommendations Thereafter, by to a global review are subject the executive management before and review committee’s remuneration process. approval FOUR 96 All annual bonus awards exceeding a All annual bonus awards subject level are hurdle predetermined of that to 60% deferral in respect level. portion that exceeds the hurdle in the amount is awarded The deferred vesting awards form of: forfeitable share equal tranches at the end of in three 12 months, 24 months and 36 months; equal tranches in three or cash released at the end of 12 months, 24 months being are shares and 36 months. Where to employees as part of the awarded deferral of performance bonus awards, to as short-term EVA referred these are made in terms are These awards shares. of our existing long-term incentive plans amount of the below). The entire (refer is payable annual bonus that is not deferred in cash. upfront DEFERRAL OF ANNUAL BONUS AWARDS • • remuneration The Investec group’s reviews and committee specifically the individual remuneration approves packages of the executive directors and persons discharging managerial The committee also reviews responsibilities. the salaries and performance bonuses to a number of other senior and awarded the bank. In higher paid employees across reviews addition, the committee specifically the salaries and performance and approves to each employee bonuses awarded within the internal audit, compliance and risk functions, both in the business units and in the central functions, ensuring that competitive and are such packages are determined independently of the other In making these decisions business areas. on a combination of the committee relies external advice and supporting information internally by the bank. prepared •

REMUNERATION REPORT REMUNERATION REPORT 97 – R Total 2015 114 583 114 583 183 333 483 500 FOUR 6 557 828 5 712 741 1 446 578 4 342 500 8 661 397 4 650 000 2 145 991 2 912 829 1 260 000 12 121 199 42 045 665 33 384 268 remuneration – – – – – – – – – – R 2015* bonus Annual 4 064 000 4 064 000 2 880 000 2 700 000 (continued) (continued) 10 021 199 23 729 199 23 729 199 –

R 2015 other 114 583 114 583 183 333 483 500 Salaries, fees and directors’ 1 446 578 8 661 397 2 493 828 2 145 991 1 648 741 1 462 500 2 100 000 1 950 000 9 655 069 2 912 829 1 260 000 18 316 466 remuneration – R Total 2016 Remuneration report Remuneration 290 000 290 000 212 083 expense 3 717 778 8 230 979 2 255 509 7 216 975 2 033 420 4 440 000 5 080 000 3 861 194 1 979 076 10 921 282 14 903 213 54 510 227 43 588 945 remuneration – – – – – – – – – R 2016* bonus Annual 3 200 000 5 238 431 5 238 431 2 880 000 3 000 000 12 653 213 32 210 075 32 210 075 – R 2016 other Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group 517 778 290 000 290 000 212 083 Salaries, fees and directors’ 2 992 548 2 255 509 1 978 544 2 033 420 1 560 000 2 250 000 2 080 000 3 861 194 1 979 076 22 300 152 10 921 282 11 378 870 remuneration remuneration # ^^ ^ ^^ (Investec group chief executive officer) (Investec group # S Koseff stepped down as CEO of Investec Bank Limited and RJ Wainwright was appointed as CEO of Investec Bank Limited on 1 February 2016. S Koseff stepped down as CEO of Investec Bank Limited and RJ Wainwright KXT Socikwa did not offer himself for re-election at the annual general meeting held on 6 August 2015. As discussed on page 96, a portion of the bonus is received in cash and a portion is deferred with reference to the value of a predetermined number of As discussed on page 96, a portion of the bonus is Investec Limited shares over a three-year period. Sir DJ Prosser resigned from the board on 8 August 2014. KL Shuenyane was appointed to the board on 8 August 2014 and ZBM Bassa was appointed to the board on 1 November 2014. KL Shuenyane was appointed to the board on 8 August 2014 and ZBM Bassa was appointed to the board

** ^^ # ^ * Audited information Audited information REMUNERATION DIRECTORS’ ANNUAL Executive directors (chief executive officer) RJ Wainwright KL Shuenyane D Friedland KXT Socikwa** S Koseff B Kantor (Investec group managing director) B Kantor (Investec group Sir DJ Prosser PRS Thomas DM Lawrence (deputy chairman) DM Lawrence Total in Rands in Total GR Burger (group risk and finance director) GR Burger (group Total in Rands in Total B Tapnack B Tapnack Total in Rands in Total Non-executive directors F Titi (chairman) SE Abrahams ZBM Bassa – – – – – – 1 2016 0.2% 0.4% 1.0% 0.0% 0.0% 0.0% 0.1% 1.7% 0.0% 1.7% % of 31 March 31 March shares shares Limited in issue Investec

– – – – – – – – – 250 250 2016 3 40 000 458 298 100 590 327 076 327 076 31 March 31 March 4 960 863 4 961 113 2 800 500 1 234 399

– – – – – – – – – 250 250 2015 Beneficial and 1 April Investec Limited 40 000 458 298 200 590 627 076 627 076 6 460 863 6 461 113 non-beneficial interest 3 600 500 1 534 399 –

– – – – – – 1 2016 0.1% 0.1% 0.9% 0.0% 0.0% 0.5% 1.6% 0.0% 1.6% % of 31 March shares shares in issue Investec plc –

– – – – – – – – 2016 75 595 19 900 19 900 2 832 657 749 410 31 March 31 March 5 274 035 3 316 390 3 316 390 10 267 987 10 248 087 – –

– – – – – – – 2015 Investec plc Beneficial and 1 April 75 595 19 900 19 900 488 918 749 410 non-beneficial interest 4 773 200 8 936 067 8 955 967 2 848 944 2 848 944 # Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Remuneration report Remuneration (continued) (Investec group chief (Investec group # S Koseff stepped down as CEO of Investec Bank Limited and RJ Wainwright was appointed as CEO of Investec Bank Limited on 1 February 2016. S Koseff stepped down as CEO of Investec Bank Limited and RJ Wainwright KXT Socikwa did not offer himself for re-election at the annual general meeting held on 6 August 2015. The issued share capital of Investec plc and Investec Limited at 31 March 2016 was 617.4 million and 291.4 million shares, respectively. The issued share capital of Investec plc and Investec Limited at 31 March 2016 was 617.4 million and 291.4 of £4.03 to a high of £6.47 during the The market price of an Investec plc share at 31 March 2016 was £5.13 (2015: £5.61), ranging from a low financial year. from a low of R93.91 to a high of R121.90 The market price of an Investec Limited share as at 31 March 2016 was R109.91 (2015: R100.51), ranging during the financial year. KL Shuenyane was appointed to the board on 8 August 2014 and ZBM Bassa was appointed to the board on 1 November 2014. KL Shuenyane was appointed to the board on 8 August 2014 and ZBM Bassa was appointed to the board FOUR

98 Executive directors executive officer) B Kantor (Investec group managing director) (deputy chairman) DM Lawrence risk and GR Burger (group finance director) B Tapnack number Total Non-executive directors F Titi (chairman) SE Abrahams ZBM Bassa^^ D Friedland KL Shuenyane^^ KXT Socikwa* number Total number Total PRS Thomas * # ^^ 1 2 3 The table above reflects holdings of shares by current directors. The table above reflects holdings of shares by current RJ Wainwright (chief executive officer) RJ Wainwright S Koseff DIRECTORS’ SHAREHOLDINGS IN INVESTEC PLC AND INVESTEC LIMITED SHARES AT 31 MARCH 2016 31 INVESTEC LIMITED SHARES AT IN INVESTEC PLC AND DIRECTORS’ SHAREHOLDINGS

REMUNERATION REPORT REMUNERATION REPORT

99

–

2016 9 058 18 119

101 198 FOUR 31 March 31 March

– – 75% is exercisable on 75% is exercisable 1 June 2019 and 25% on 1 June 2020 23 December 2015 and 25% on 23 December 2016 on 75% is exercisable 13 June 2017 and 25% on 13 June 2018 11 December 2016 and 25% on 11 December 2017 4 June 2017 and 25% on 4 June 2018 27 May 2018 and 25% on 27 May 2019 75% is exercisable on 75% is exercisable 75% is exercisable on 75% is exercisable on 75% is exercisable on 75% is exercisable Period exercisable Investec plc 2015 9 058 1 April 18 119 – – – – – 101 198 (continued) (continued) gains Gross Gross date of exercise made on R2 723 883 R8 240 250 –

2016 3 000 5 400 8 620 – – – – – 31 March 31 March Market date of price at R108.95 R109.87 exercise –

– at Remuneration report Remuneration 2015 3 000 5 400 8 620 2016 1 April 50 000 Investec Limited 25 000 150 000 150 000 175 000 125 000 Balance 31 March – – – – – – – –

during lapsed 2016 Options the year granted/ 4 000 4 000 2 000 31 March 31 March – – – – – during (25 000) (75 000) the year –

Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Exercised 2015 4 000 4 000 2 000 1 April 2015 Investec Bank Limited 1 April 25 000 50 000 Limited 100 000 150 000 150 000 175 000 125 000 Investec shares at shares Number of Nil Nil Nil Nil Nil Nil Nil price Exercise 1 July 2010 23 December 2011 11 December 2012 Date of grant 13 June 2013 4 June 2013 27 May 2014 1 June 2015 The market price of an Investec plc preference share at 31 March 2016 was R104.00 (2015: R90.21). The market price of an Investec plc preference share at 31 March 2016 was R73.20 (2015: R73.50). The market price of an Investec Limited preference share share at 31 March 2016 was R79.00 (2015: R83.45). The market price of an Investec Bank Limited preference DM Lawrence B Tapnack RJ Wainwright Name S Koseff S Koseff DM Lawrence B Tapnack RJ Wainwright These options are not subject to any performance conditions. These options are price of R108.95 per share. on 7 July 2015, at a share his options and sold 25 000 Investec Limited shares exercised DM Lawrence price of R109.87 per share. on 23 December 2015, at a share his options and sold 75 000 Investec Limited shares exercised B Tapnack DIRECTORS’ INTEREST IN LONG-TERM INCENTIVE PLANS AT 31 MARCH 2016 INCENTIVE PLANS AT DIRECTORS’ INTEREST IN LONG-TERM Investec Limited shares Investec Limited shares Limited shares. in options over Investec do not have any interest The directors Investec plc shares plc shares. in options over Investec do not have any interest The directors DIRECTORS’ INTEREST IN OPTIONS AT 31 MARCH 2016 AT DIRECTORS’ INTEREST IN OPTIONS • • • DIRECTORS’ INTEREST IN PREFERENCE SHARES AT 31 MARCH 2016 IN PREFERENCE SHARES AT DIRECTORS’ INTEREST Executive directors 2018 2019 2018 2019 2018 2019 period 2017 to 2017 to 2018 to 2018 to 2018 to 2017 to 16 March 16 March 16 March 16 March 16 March 16 March 16 March 16 March 16 March 16 March 16 March 16 March Retention 16 September 16 September 16 September 16 September 16 September 16 September criteria criteria criteria 75% is 75% is 75% is Period 25% on 25% on 25% on being met being met being met 2017; and 2017; and 2017; and exercisable 2018, subject 16 September 16 September 2018, subject 16 September 16 September 2018, subject exercisable on exercisable 16 September exercisable on exercisable 16 September exercisable on exercisable to performance to performance to performance Total Total shares 804 617 804 617 804 617 Shares Shares 204 617 204 617 204 617 being met conditions awarded for awarded performance Yes* Yes* Yes* met (Y/N) conditions Performance 2016 2016 period 31 March 31 March Performance 1 April 2013 to 1 April 2013 to 31 March 2016 31 March 1 April 2013 to Nil Nil Nil price Exercise 2013 shares Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group 600 000 600 000 600 000 Remuneration report Remuneration (continued) Number of awarded on awarded Investec plc 16 September The performance criteria in respect of these awards are detailed in Investec’s 2016 integrated annual report. The performance criteria in respect of these awards are detailed in Investec’s results are provided in The performance period for these awards made in 2013 has now been tested and the integrated annual report. In terms of this assessment a total number of 804 617 shares have been Investec’s 2016 These awards are only exercisable in 2017 and 2018 as shown above. awarded to S Koseff, B Kantor and GR Burger. *    FOUR Name S Koseff B Kantor GR Burger 100 The Executive Incentive Plan and the awards made on 16 September 2013 were approved at the July 2013 annual general meeting in terms at the July 2013 approved made on 16 September 2013 were The Executive Incentive Plan and the awards B Kantor and GR Burger. to S Koseff, awarded of which 600 000 nil cost options each were DIRECTORS’ INTERESTS IN THE INVESTEC PLC EXECUTIVE INCENTIVE PLAN 2013 AT 31 MARCH 2016 31 INCENTIVE PLAN 2013 AT IN THE INVESTEC PLC EXECUTIVE DIRECTORS’ INTERESTS 2013 ending 31 March of the financial year made in respect Awards

REMUNERATION REPORT REMUNERATION REPORT 101 period A further A further A further A further A further A further FOUR six-month six-month six-month Retention vesting date vesting date vesting date retention after retention retention after retention retention after retention Period (continued) (continued) exercisable criteria being met criteria being met criteria being met on 2 June 2020; and on 2 June 2020; and on 2 June 2020; and One third is exercisable is exercisable One third One third is exercisable is exercisable One third One third is exercisable is exercisable One third subject to performance subject to performance subject to performance one third on 2 June 2021, one third one third on 2 June 2021, one third one third on 2 June 2021, one third on 2 June 2019; one third on 2 June 2019; one third on 2 June 2019; one third 2019 2019 2019 period Remuneration report Remuneration to 31 March to 31 March to 31 March to 31 March to 31 March to 31 March 1 April 2016 1 April 2016 1 April 2016 1 April 2016 1 April 2016 1 April 2016 Performance at 2016 277 801 314 225 314 225 Balance 31 March awards 277 801 314 225 314 225 the year Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Conditional made during – – – shares at shares Number of Investec plc 1 April 2015 Nil Nil Nil price Exercise Date 2016 2016 2016 2 June 2 June 2 June 2 June 2 June of grant The performance criteria in respect of these awards are detailed in Investec’s 2016 integrated annual report. None 2016 integrated annual report. None awards are detailed in Investec’s The performance criteria in respect of these value at grant for these awards amounts to £1 480 000 for S Koseff of these awards have as yet vested. The face based on an actual share price for Investec plc of £4.71 on 2 June 2016 and B Kantor and £1 308 000 for GR Burger 100% of fixed remuneration at face value. (date of grant). The awards are subject to   GR Burger B Kantor S Koseff Name On 2 June 2016, 314 225 nil cost options were awarded to S Koseff and B Kantor and 277 801 to GR Burger. These awards form part of form part of These awards B Kantor and 277 801 to GR Burger. and Koseff to S awarded On 2 June 2016, 314 225 nil cost options were 2016. of the financial year ending 31 March meeting, in respect at the 2015 annual general as approved their variable remuneration Awards made in respect of the financial year ending 31 March 2016 ending 31 March of the financial year made in respect Awards 29.7 84.0 Total 850.4 234.5 245.7 256.5 – 1.0 staff^ 63.9 74.2 304.0 164.9 risk control risk control Financial and – 70.2 42.9 85.7 49.1 Risk 247.9 takers^ 29.7 40.1 85.8 42.5 298.5 100.4 Senior management^ Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Remuneration report Remuneration (continued) The bank’s qualitative remuneration disclosures are provided on pages 92 to 96 and further information is provided in on pages 92 to 96 and further information remuneration disclosures are provided qualitative The bank’s annual report. 2016 integrated Investec’s

all members of our South African general management forum, excluding executive directors. Senior management: all members of our South African general management to be responsible for a division/function (e.g. lending, balance sheet management, Risk takers: includes anyone (not categorised above) who is deemed advisory the bank. and transactional banking activities) which could be incurring risk on behalf of Financial and risk control staff: includes everyone responsible for risk and finance in central group finance and central group risk as well as employees functions within the operating business units. 258. number of employees receiving variable remuneration was Total price. These awards were made during the period but have not yet represents the number of shares awarded multiplied by the applicable share Value years. 25% at the end of five the end of four years and the final vested. These awards are subject to 75% vesting at Deferred shares – long-term incentive awards** shares Deferred Deferred cash Deferred Deferred shares Deferred FOUR Total aggregate remuneration and deferred incentives and deferred remuneration aggregate Total – – – Variable remuneration* Variable – Cash Fixed remuneration R’million 102 The information contained in the tables below sets out the bank’s quantitative disclosures for the year ended 31 March 2016. for the year ended 31 March quantitative disclosures in the tables below sets out the bank’s The information contained   * ** ^  Aggregate remuneration by remuneration type by remuneration remuneration Aggregate The bank is required to make certain quantitative and qualitative remuneration disclosures on an annual basis in terms of the South African on an annual basis in terms of the South African disclosures quantitative and qualitative remuneration to make certain The bank is required requirements. disclosure Basel Pillar III Reserve Bank’s Additional remuneration disclosures (unaudited) Additional remuneration DISCLOSURES PILLAR III REMUNERATION

REMUNERATION REPORT REMUNERATION REPORT – – – – – – – 103 – 48.9 (20.9) (22.4) (29.9) (73.2) 962.1 913.2 (73.2) Total Total Total Total 348.2 (316.8) 1 061.6 1 103.4 FOUR – – – – – – – – – (0.3) (0.6) (0.7) (1.6) (1.6) (8.0) 64.9 staff^ staff^ staff^ staff^ 224.9 169.6 193.7 193.7 (continued) (continued) risk control risk control risk control risk control risk control risk control risk control Financial and Financial and Financial and Financial and – – – – – – – – – (7.2) (6.8) Risk (11.0) (25.0) Risk Risk Risk (25.0) 353.0 113.1 368.3 (103.4) 284.7 284.7 takers^ takers^ takers^ takers^ – – – – – – – – 48.9 Remuneration report Remuneration 434.8 (13.4) (15.0) (18.2) (46.6) (46.6) 483.7 170.2 565.5 (205.4) 483.7 Senior Senior Senior Senior management^ management^ management^ management^ Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Senior management: all members of our South African general management forum, excluding executive directors. balance sheet management, Risk takers: includes anyone (not categorised above) who is deemed to be responsible for a division/function (e.g. lending, advisory activities) which could be incurring risk on behalf of the bank. and transactional banking Financial and risk control staff: includes everyone finance and central group risk as well as employees responsible for risk and finance in central group functions within the operating business units. For awards made in 2013 financial year For awards For awards made in 2014 financial year For awards For awards made in 2015 financial year For awards Number of beneficiaries Deferred unvested remuneration outstanding at the end of the year unvested remuneration Deferred Guaranteed bonuses Made during the year (R’million) Deferred remuneration vested in year remuneration Deferred Number of beneficiaries Deferred remuneration reduced in year through performance adjustments performance in year through reduced remuneration Deferred – Severance payments Made during the year (R’million) Deferred remuneration awarded in year awarded remuneration Deferred – Other – Number of beneficiaries Deferred unvested remuneration adjustment – employees that are no – employees that are adjustment unvested remuneration Deferred bank and reclassifications longer employed by the – Cash Deferred remuneration vested in year remuneration Deferred – Sign-on payments Made during the year (R’million) Deferred unvested remuneration outstanding at the beginning of the year outstanding unvested remuneration Deferred outstanding at the end of the year unvested remuneration Deferred – Equity R’million R’million R’million R’million ^    Other remuneration disclosures Other remuneration Additional disclosure on deferred remuneration on deferred Additional disclosure Five Annual nancial statements ANNUAL FINANCIAL STATEMENTS 105 FIVE Richard Wainwright Richard Chief executive officer Directors’ responsibility statement responsibility Directors’ Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group The Investec Bank Limited group and The Investec Bank Limited group company annual financial statements, as identified in the first paragraph, were on of directors by the board approved 9 June 2016 and signed on its behalf by: Fani Titi Chairman 9 June 2016 Approval of Investec group Bank Limited’s and company annual financial statements In addition, the board considers that considers In addition, the board and annual this integrated annual report as a whole, financial statements, taken and understandable balanced is fair, the information necessary and provides performance, to assess the company’s business model and strategy. for reporting responsible The auditors are group Limited’s on whether Investec Bank statements are and company financial with the in accordance fairly presented framework. reporting applicable financial The directors are responsible for the responsible are The directors of and fair presentation preparation annual financial statements the group statements of and the annual financial comprising the Investec Bank Limited, 2016, and balance sheets at 31 March and statements the income statements in income, changes of comprehensive for the year then equity and cash flows the annual financial ended, and the notes to policies, and statements, accounting with in accordance report, the directors’ International Financial Reporting Standards, SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Council, and in the manner Standards by the Companies Act, No 71 of required 2008, as amended. for such also responsible are The directors determine as the directors internal control is necessary to enable the preparation from free of financial statements that are material misstatement, whether due to and for maintaining adequate fraud or error, and an effective accounting records system of risk management as well as of the supplementary the preparation schedules included in these annual financial statements. have made an assessment The directors of the ability of the company and its subsidiaries to continue as going concerns to believe that the and have no reason businesses will not be a going concern in the year ahead. Niki van Wyk Investec Bank Limited Company secretary, 9 June 2016 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 certify that, to the (the Act), I hereby In terms of section 88(2)(e) of the South African Companies Act, No 71 of 2008, as amended year Commission, for the financial Property my knowledge and belief, Investec Bank Limited has lodged with the Companies and Intellectual and up to date. true, correct are in terms of the Act and that all such returns required as are 2016, all such returns ended 31 March Details of principal subsidiary companies are reflected on page 174 and the associate companies on page 169.  The board of directors of Investec Bank of directors The board Limited may authorise Investec Bank or indirect direct Limited to provide financial assistance by way of loan, of security or guarantee, the provision course otherwise, not in the ordinary of business of the non-executive The remuneration for a period of was approved directors the date of passing the 24 months from special resolution. The interest of the company in the The interest after taxation of its profits aggregate subsidiary companies is R795.0 million (2015: R488.0 million) and its share losses is R8.0 million in aggregate (2015: R3.0 million). Special resolutions At the annual general meeting of members held on 6 August 2015, the following passed in terms were special resolutions of which: • • Auditors Inc. have KPMG Inc. and Ernst & Young their willingness to continue expressed to resolution as joint auditors. A in office KPMG Inc. and Ernst & Young reappoint at be proposed Inc. as joint auditors will taking place on the annual general meeting 4 August 2016. Holding company holding company is The bank’s Investec Limited. Major shareholders Investec Limited owns 100% of the issued shares. ordinary Subsidiary and associated companies Directors’ remuneration is disclosed on pages 92 to 103. Details of the directors are Details of the directors to 90. reflected on pages 87 in Directors’ shareholdings Investec plc Investec Limited and  Limited’s and in Investec Bank preference shares are set out on pages 98 and 99.   Social and ethics committee As allowed under the Companies Act, No 71 of 2008, as amended, the social and ethics committee of Investec Limited performs the necessary functions required on behalf of Investec Bank Limited. Further of the and responsibilities details on the role set out in social and ethics committee are 2016 integrated annual report. Investec’s Company secretary and registered office is Niki van Wyk. The company secretary c/o Company is office The registered Investec Limited, 100 Grayston Secretarial, Drive, Sandown, Sandton 2196. Audit committee As allowed under the Companies Act, No 71 of 2008, as amended, and the Banks Act No 96 of 1990, as amended, the audit committee of Investec Limited performs the necessary functions required on behalf of Investec Bank Limited. An audit committee comprising non-executive with senior meets regularly directors management, the external auditors, Operational Risk, the Internal Audit, Compliance and the Finance division, to and scope of the audit consider the nature of the group’s and the effectiveness reviews systems. Further details risk and control of the audit and responsibilities on the role 2016 set out in Investec’s committee are integrated annual report. Directors’ shareholdings in shares holds any ordinary No director Investec Bank Limited. Directors’ remuneration Directors Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Directors’ report Directors’ A review of the operations for the year can be found on pages 12 to 20.

FIVE 106 The preparation of the group and company of the group The preparation annual financial statements was supervised risk and finance director, by the group Glynn Burger. Preference dividend number 25 for Preference the six months ended 30 September 2015, amounting to 390.39534 cents to members was declared per share, registered shares holding preference on 4 December 2015 and was paid on 14 December 2015. dividend number 26 for the six Preference 2016 amounting months ended 31 March was to 412.48350 cents per share, to members holding preference declared on 10 June 2016 and will registered shares be paid on 20 June 2016. Preference dividends NON-REDEEMABLE NON- NON-CUMULATIVE PREFERENCE PARTICIPATING SHARES No ordinary dividends were declared or declared dividends were No ordinary paid during the year. Ordinary dividends Details of the share capital are set capital are Details of the share out in notes 39 and 40 to the annual financial statements. Authorised and issued share capital Financial results results and company financial The group set out are of Investec Bank Limited statements and in the annual financial accompanying notes for the year ended 2016. 31 March Nature of business is a specialist bank Investec Bank Limited a diverse range of financial providing client base and services to a niche products in South Africa and Mauritius.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 107 FIVE (continued) (continued) Directors’ report Directors’

Richard Wainwright Richard Chief executive officer Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Chairman 9 June 2016 Fani Titi Subsequent events no material facts or are There which occurred circumstances between the balance sheet date and that would require the date of this report in the annual adjustment or disclosure financial statements. Going concern have made an assessment The directors of the ability of the company and its subsidiaries to continue as going concerns to believe that the and have no reason businesses will not be a going concern in the year ahead. Environment is committed Investec Bank Limited to pursuing sound environmental its business, policies in all aspects of and promote and seeks to encourage practice among its good environmental employees and within the communities in which it operates. in Investec’s Further information is provided 2016 integrated annual report. empowerment financing. We also recognise also We empowerment financing. the need for our own internal transformation representivity bringing about greater and are black creating within our workplace by within the organisation. entrepreneurs These policies are set out on pages 117 to 125.  In South Africa, transformation and black high economic empowerment remain on the corporate agenda. Our approach is to utilise our own entrepreneurial of new expertise to foster the creation platforms, and black entrepreneurial of continue to be one of the prime sources Empowerment and transformation Invested Bank Limited made political donations totalling R1.5 million in 2016 (2015: R1.0 million). Political donations and expenditure The group’s policy is to recruit and promote and promote is to recruit policy The group’s without on the basis of aptitude and ability, discrimination of any kind. Applications for employment by disabled people are bearing in mind the always considered, qualifications and abilities of the applicants. In the event of employees becoming is made to ensure disabled, every effort their continued employment. The group’s policy is to adopt an open management encouraging informal style, thereby consultation at all levels about aspects of and motivating staff operations, the group’s performance by involvement in the group’s schemes. means of employee share in Investec’s Further information is provided 2016 integrated annual report. Employees Accounting policies are set having regard to to regard set having Accounting policies are in accordance practice and are commercial with International Financial Reporting SAICA Financial Reporting Standards, Accounting Guides as issued by the Financial Practices Committee and as well as Council, Reporting Standards of the Companies Act, the requirements No 71 of 2008, as amended. Accounting policies Accounting policies and disclosure Report on Other Report on Other Legal and Regulatory Requirements published in In terms of the IRBA Rule Government Number 39475 dated Gazette that Ernst & report 4 December 2015, we Inc. and KPMG Inc. have been the Young Limited for 22 auditors of Investec Bank and 47 years respectively. Inc. Ernst & Young Auditor Registered Per Ernest van Rooyen Accountant (SA) Chartered Auditor Registered Director 102 Rivonia Road Sandton Private Bag X14 Sandton 2146 Johannesburg 9 June 2016 KPMG Inc. Auditor Registered Per Peter MacDonald Accountant (SA) Chartered Auditor Registered Director KPMG Crescent Road 85 Empire Parktown 2193 Johannesburg 9 June 2016 Other reports required by the Companies Act and As part of our audit of the group company financial statements for the year the 2016, we have read ended 31 March Declaration by the company secretary for the purpose report and the directors’ material are of identifying whether there and inconsistencies between these reports the audited consolidated and separate the reports are financial statements. These preparers. of the respective responsibility we have these reports Based on reading not identified material inconsistencies and the audited between these reports consolidated and separate financial we have not audited statements. However, do not and accordingly these reports thereon. an opinion express Opinion and company In our opinion, these group in all fairly, financial statements present the consolidated and material respects, separate financial position of Investec 2016, and Bank Limited at 31 March its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended with International Financial in accordance and the requirements Reporting Standards of the Companies Act of South Africa. the risks of material misstatement of the the risks of material misstatement and company financial statements, group In making error. whether due to fraud or the auditors’ those risk assessments, the to relevant consider internal control of and fair presentation preparation entity’s design to in order the financial statements appropriate that are audit procedures but not for the in the circumstances, an opinion on purpose of expressing internal of the entity’s the effectiveness An audit also includes evaluating control. of accounting policies the appropriateness of accounting used and the reasonableness estimates made by management, as well of the as evaluating the overall presentation and company financial statements. group believe that the audit evidence we have We to and appropriate obtained is sufficient a basis for our audit opinion. provide Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Independent auditors’ report auditors’ Independent FIVE 108 Auditors’ responsibility an opinion is to express Our responsibility and company financial on these group statements based on our audit. We with conducted our audit in accordance on Auditing. International Standards that we comply require Those standards and plan and with ethical requirements perform the audit to obtain reasonable and assurance about whether the group from free company financial statements are material misstatement. to An audit involves performing procedures obtain audit evidence about the amounts and company in the group and disclosures financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of The company’s directors are responsible responsible are directors The company’s and fair presentation for the preparation and company financial of these group with International statements in accordance and the Financial Reporting Standards of the Companies Act of requirements South Africa, and for such internal control determine is necessary to as the directors and of the group enable the preparation free company financial statements that are material misstatement, whether due to from fraud or error. Directors’ responsibility for the financial statements REPORT FINANCIAL ON THE STATEMENTS and company have audited the group We Investec Bank financial statements of the balance sheets Limited, which comprise 2016, at 31 March of Investec Bank Limited statements and the income statements, of income, statements of comprehensive changes in equity and cash flow statements for the year then ended, the accounting policies and the notes to the financial statements, as set out on pages 109 to within 194 and the specified disclosures the Risk management and corporate and Remuneration governance report marked as audited. that are report To the shareholders of the shareholders To Limited Investec Bank

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS – – – 109 317 269 (159) (468) (447) 2015 4 632 1 521 1 531 8 111 7 643 3 090 3 090 2 643 (4 553) 18 750 (14 118) FIVE

– – 1 Company 302 345 (165) (496) (766) 2016 5 635 2 284 1 647 9 553 4 467 4 467 3 701 (5 086) 22 613 10 049 (16 978) – – 1 290 260 (207) (455) (545) 2015 5 521 1 420 1 661 8 946 8 491 3 673 3 673 3 128 (4 818) 19 587 (14 066) Income statements Income (9) Group 11 (39) 293 298 (207) (517) (831) 2016 6 712 1 356 1 945 9 871 4 334 4 295 3 475 (5 537) 23 515 10 388 (16 803) 3 1 2 1

4 5 7 7 2 24 31 Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group customer flow balance sheet management and other trading activities balance sheet management and other trading For the year to 31 March R’million Net interest income Net interest Investment income Interest expense Interest Fee and commission income Fee and commission expense income arising from Trading – Interest income Interest – Total operating income before impairment losses on loans income before operating Total and advances Impairment losses on loans and advances Other operating (loss)/income Operating income Operating costs intangibles acquired before Operating profit Profit before taxation before Profit Amortisation of acquired intangibles Amortisation of acquired Profit after taxation Profit Taxation on acquired intangibles on acquired Taxation Taxation on operating profit before acquired intangibles acquired before on operating profit Taxation – –

328 114 (612) 2015 2 643 2 359 2 245 2 359 – – Company (13) 120 (645) (683) 2016 3 701 2 360 2 240 2 360 –

322 602 114 (619) 2015 3 128 3 433 3 319 3 433 Group (13) 120 (699) (717) 2016 3 475 1 040 3 086 2 966 3 086 7 7 7

Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Statements of comprehensive income of comprehensive Statements FIVE

For the year to 31 March R’million Other comprehensive income: Other comprehensive to the income statement Items that may be reclassified cash flow hedges taken directly Fair value movements on income to other comprehensive assets taken available-for-sale Fair value movements on income to other comprehensive directly assets recycled of available-for-sale Gain on realisation the income statement through operations adjustments on translating foreign currency Foreign Profit after taxation Profit Total comprehensive income comprehensive Total shareholders income attributable to ordinary comprehensive Total Total comprehensive income attributable to perpetual comprehensive Total shareholders preference Total comprehensive income comprehensive Total 110

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS – – – – – 111 80 36 32 994 187 476 137 177 732 (909) 2015 6 148 2 825 6 430 9 926 9 581 1 289 1 623 4 522 3 492 1 369 9 841 30 284 10 540 31 358 15 981 13 390 14 969 15 225 29 652 12 401 10 449 14 885 23 849 159 028 314 532 211 914 280 234 290 683 314 532 FIVE – – – – – – – 1 Company 32 198 373 133 992 950 2016 7 654 1 734 5 086 6 323 5 632 9 982 5 923 1 405 6 670 4 037 (2 250) 21 385 38 912 41 325 12 317 11 354 15 616 15 325 37 108 13 424 10 732 14 885 13 422 26 089 194 578 379 518 263 778 342 697 353 429 379 518 – – 80 60 88 32 76 192 472 190 618 732 764 2015 6 261 1 262 4 535 3 268 1 289 9 972 1 623 5 517 1 089 3 741 1 186 33 422 10 540 10 095 31 378 17 332 12 749 15 178 16 556 29 792 12 401 10 449 14 885 13 218 28 899 172 993 332 706 221 377 293 358 303 807 332 706 Balance sheets Balance – – 1 Group 32 236 171 367 116 524 992 115 809 671 122 566 2016 7 801 3 656 7 967 5 145 5 460 9 858 6 360 1 405 7 665 5 042 26 779 38 912 41 325 13 968 12 761 15 843 16 916 37 242 13 424 10 732 14 885 16 382 31 865 207 272 405 629 279 736 363 032 373 764 405 629 16 15 29 30 24 27 28 31 34 17 18 19 20 21 22 24 25 25 26 33 23 17 21 35 25 36 37 38 39 41 27 32 Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group At 31 March R’million Loans and advances to banks Loans and advances to placements and non-bank cash Non-sovereign Assets banks Cash and balances at central Property and equipment Property Investment properties Goodwill Other loans and advances taxation assets Deferred Other assets Intangible assets Investment in subsidiaries assets classified as held for sale Non-current Reverse repurchase agreements and cash collateral and cash collateral agreements Reverse repurchase on securities borrowed debt securities Sovereign Bank debt securities Other debt securities Derivative financial instruments trading activities Securities arising from Loans and advances to customers securitised Own originated loans and advances to customers Other securitised assets in associated undertakings Interest companies Loans to group Investment portfolio Liabilities Deposits by banks Repurchase agreements and cash collateral on securities lent agreements Repurchase Customer accounts (deposits) Derivative financial instruments Other trading liabilities Liabilities arising on securitisation of own originated loans and advances Debt securities in issue taxation liabilities Current Other liabilities liabilities Subordinated Equity capital share Ordinary premium Share Other reserves Deferred taxation liabilities Deferred Retained income Total equity Total Total liabilities and equity Total – – (13) (21) (717) (120) (699) 322 602 (619) (114) Total 3 086 3 475 1 040 3 128 3 433 equity 31 865 25 601 28 899 – – – – – – – (21) (95) (120) (191) (114) 3 475 3 475 3 128 3 128 16 382 10 320 13 218 income Retained – – – – – – – – – – – – 602 602 602 1 040 1 040 2 244 1 204 reserve Foreign currency – – – – – – – – – – – – (699) (699) (619) (521) (619) (1 839) hedge (1 140) reserve Cash flow – – – – – – – – – – – – – – 95 risk 191 673 387 482 Other reserves reserve general Regulatory – – – – – – – – – – – (13) (717) 322 322 218 (730) (512) (104) reserve for-sale Available – – – – – – – – – – – – – – – – Share 14 885 14 885 14 885 premium – – – – – – – – – – – – – – – – 32 32 32 share capital Ordinary Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Statements of changes in equity of changes Statements FIVE At 31 March 2016 At 31 March Total comprehensive income comprehensive Total shareholders Dividends paid to perpetual preference general risk reserve to regulatory Transfer Fair value movements on available-for-sale assets taken directly to other comprehensive income to other comprehensive assets taken directly Fair value movements on available-for-sale the income statement through recycled assets of available-for-sale Gain on realisation operations adjustments on translating foreign currency Foreign Movement in reserves 1 April 2015 – 31 March 2016 1 April 2015 – 31 March Movement in reserves after taxation Profit income to other comprehensive directly Fair value movements on cash flow hedges taken Dividends paid to perpetual preference shareholders shareholders Dividends paid to perpetual preference general risk reserve to regulatory Transfer 2015 At 31 March Foreign currency adjustments on translating foreign operations adjustments on translating foreign currency Foreign income comprehensive Total shareholders Dividends paid to ordinary Fair value movements on cash flow hedges taken directly to other comprehensive income to other comprehensive directly Fair value movements on cash flow hedges taken income to other comprehensive assets taken directly Fair value movements on available-for-sale Group Group At 1 April 2014 2015 2014 – 31 March 1 April Movement in reserves after taxation Profit R’million 112

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 113 FIVE (continued) (continued) – – (13) (21) (699) (717) (120) 602 322 (114) (619) Total 3 475 3 086 1 040 3 128 3 433 equity 31 865 25 601 28 899 – – – – – – – (21) (95) (191) (120) (114) 3 475 3 475 3 128 3 128 16 382 13 218 10 320 income Retained Statements of changes in equity of changes Statements – – – – – – – – – – – – 602 602 602 2 244 1 040 1 040 1 204 reserve Foreign currency Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group – – – – – – – – – – – – (699) (699) (619) (619) (521) (1 839) hedge (1 140) reserve Cash flow – – – – – – – – – – – – – – 95 risk 191 673 482 387 Other reserves reserve general Regulatory – – – – – – – – – – – (13) (717) (730) (512) 218 322 322 (104) reserve for-sale Available – – – – – – – – – – – – – – – – Share 14 885 14 885 14 885 premium – – – – – – – – – – – – – – – – 32 32 32 share capital Ordinary R’million Group At 1 April 2014 2015 2014 – 31 March 1 April Movement in reserves after taxation Profit income to other comprehensive directly Fair value movements on cash flow hedges taken income to other comprehensive assets taken directly Fair value movements on available-for-sale operations adjustments on translating foreign currency Foreign income comprehensive Total shareholders Dividends paid to ordinary shareholders Dividends paid to perpetual preference general risk reserve to regulatory Transfer 2015 At 31 March 2016 1 April 2015 – 31 March Movement in reserves after taxation Profit income to other comprehensive directly Fair value movements on cash flow hedges taken income to other comprehensive assets taken directly Fair value movements on available-for-sale the income statement through recycled assets of available-for-sale Gain on realisation operations adjustments on translating foreign currency Foreign income comprehensive Total shareholders Dividends paid to perpetual preference general risk reserve to regulatory Transfer 2016 At 31 March (13) (21) (683) (120) (645) 328 (612) (114) Total 3 701 2 360 2 643 2 359 equity 21 625 26 089 23 849 – – – – – (21) (120) (114) 7 333 3 701 3 701 2 643 2 643 9 841 13 422 income Retained – – – – – – – – – – – – 3 3 3 reserve Foreign currency – – – – – – – – (645) (521) (645) (612) (612) (1 778) hedge (1 133) reserve Cash flow Other reserves – – – – – – – (13) (683) (107) 328 328 221 (696) (475) reserve for-sale Available- – – – – – – – – – – – – Share 14 885 14 885 14 885 premium – – – – – – – – – – – – 32 32 32 share capital Ordinary Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Statements of changes in equity of changes Statements (continued) FIVE Total comprehensive income comprehensive Total shareholders Dividends paid to perpetual preference 2016 At 31 March Fair value movements on available-for-sale assets taken directly to other comprehensive income to other comprehensive assets taken directly Fair value movements on available-for-sale the income statement through recycled assets of available-for-sale Gain on realisation Movement in reserves 1 April 2015 – 31 March 2016 1 April 2015 – 31 March Movement in reserves after taxation Profit income to other comprehensive directly Fair value movements on cash flow hedges taken Dividends paid to ordinary shareholders shareholders Dividends paid to ordinary shareholders Dividends paid to perpetual preference 2015 At 31 March Fair value movements on cash flow hedges taken directly to other comprehensive income comprehensive to other cash flow hedges taken directly Fair value movements on income to other comprehensive assets taken directly Fair value movements on available-for-sale income comprehensive Total Movement in reserves 1 April 2014 – 31 March 2015 2014 – 31 March 1 April Movement in reserves after taxation Profit R’million Company At 1 April 2014 114

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 115 FIVE (continued) (continued) (13) (21) (645) (120) (683) 328 (114) (612) Total 3 701 2 360 2 643 2 359 equity 26 089 21 625 23 849 Statements of changes in equity of changes Statements – – – – – (21) (120) (114) 3 701 7 333 3 701 2 643 2 643 9 841 13 422 income Retained Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group – – – – – – – – – – – – 3 3 3 reserve Foreign currency – – – – – – – – (645) (645) (521) (612) (612) (1 778) hedge (1 133) reserve Cash flow Other reserves – – – – – – – (13) (683) (475) (696) 328 221 (107) 328 reserve for-sale Available- – – – – – – – – – – – – Share 14 885 14 885 14 885 premium – – – – – – – – – – – – 32 32 32 share capital Ordinary R’million Company At 1 April 2014 2015 2014 – 31 March 1 April Movement in reserves after taxation Profit income comprehensive to other cash flow hedges taken directly Fair value movements on income to other comprehensive assets taken directly Fair value movements on available-for-sale income comprehensive Total shareholders Dividends paid to ordinary shareholders Dividends paid to perpetual preference 2015 At 31 March 2016 1 April 2015 – 31 March Movement in reserves after taxation Profit income to other comprehensive directly Fair value movements on cash flow hedges taken income to other comprehensive assets taken directly Fair value movements on available-for-sale the income statement through recycled assets of available-for-sale Gain on realisation income comprehensive Total shareholders Dividends paid to perpetual preference 2016 At 31 March – – 23 (21) (445) (210) (114) (250) 2015 (385) 5 485 3 692 3 249 6 148 3 845 (1 664) (1 851) 26 230 17 284 20 533 10 540 20 533 (23 992) – – Company 17 (43) 798 688 533 (127) (120) (112) 2016 5 224 1 360 7 654 3 430 9 982 (1 657) (1 283) 62 918 20 533 21 066 21 066 (66 597) – – 26 (21) 439 (546) (224) (114) (250) 2015 (198) (385) 4 266 3 467 3 323 6 261 6 982 24 864 20 460 23 783 10 540 23 783 (25 117) – Group 17 (43) 773 (149) (367) (120) (499) 2016 5 133 2 469 1 360 2 700 7 801 8 824 9 858 (1 943) (1 283) 67 302 23 783 26 483 26 483 (68 023)

43 43 43 Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Cash flow statements Cash flow FIVE For the year to 31 March R’million Taxation paid Taxation Cash flows from operating activities operating Cash flows from items taxation adjusted for non-cash before Profit Increase in operating assets Increase in operating liabilities Increase from operating activities Net cash inflow/(outflow) Cash flows from investing activities Cash flows from equipment Cash flow on acquisition of property, and intangible assets Cash flow on disposal of property, equipment Cash flow on disposal of property, and intangible assets Net (increase)/decrease in investment in subsidiaries Net (increase)/decrease Net cash (outflow)/inflow from investing activities Net cash (outflow)/inflow Cash flows from financing activities Cash flows from shareholders Dividends paid to ordinary Dividends paid to perpetual preference shareholders Dividends paid to perpetual preference Proceeds from subordinated debt raised subordinated from Proceeds Repayment of subordinated debt Repayment of subordinated Net cash outflow from financing activities Net cash outflow from Effects of exchange rates on cash and cash equivalents Effects Net increase in cash and cash equivalents Net increase Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the beginning of Cash and cash equivalents at the end of the year Cash and cash equivalents at the end of the Cash and cash equivalents is defined as including: Cash and cash equivalents is defined as including: Cash and balances at central banks On demand loans and advances to banks Non-sovereign and non-bank cash placements Non-sovereign Cash and cash equivalents at the end of the year 116 Cash and cash equivalents have a maturity profile of less than three months.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 117 FIVE Business combinations Business combinations and goodwill accounted for are Business combinations The cost using the acquisition method. as the of an acquisition is measured of the consideration transferred, aggregate at the acquisition date fair value measured and the amount of any prior non-controlling For each business in the acquiree. interest the non- measures combination, the group either in the acquiree interest controlling share at fair value or at the proportionate identifiable net assets. of the acquiree’s expensed are Acquisition costs incurred immediately in the income statement. a business, it acquires When the group assesses the financial assets and liabilities classification and assumed for appropriate with the the designation in accordance contractual terms, economic circumstances and pertinent conditions at the 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 held equity interest previously the group’s to fair value is remeasured in the acquiree the at each acquisition date through income statement. Any contingent consideration to be will be recognised by the group transferred at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration, which is will be deemed to be an asset or liability, with IAS 39 in in accordance recognised the income statement. If the contingent it will consideration is classified as equity, until it is finally settled not be remeasured within equity. at cost, Goodwill is initially measured of the being the excess of the aggregate and the amount consideration transferred over interest for non-controlling recognised and the net identifiable assets acquired liabilities assumed. If this consideration for non-controlling and amount recognised is less than the fair values of interest the the identifiable net assets acquired, discount on acquisition is recognised in the income statement as a gain in directly the year of acquisition. for which discrete financial information financial information for which discrete is available. been have No additional disclosures as the segmental results regarding provided the bank has one segment. Accounting policies Accounting Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Segmental reporting An operating segment is a component that engages in business of the group which it may earn revenues activities from and incur expenses, including revenues to transactions and expenses that relate other components, with any of the group’s reviewed are whose operating results by chief operating decision-makers regularly and which include members of the board Investec and an entity. A change in the Investec and an entity. without of a subsidiary, ownership interest for as an is accounted a loss of control, also holds group equity transaction. The in private equity investments for example, rise to significant, investments which give voting rights. Assessing but not majority, whether Investec these voting rights and judgement these entities requires controls the date at which subsidiaries that affects consolidated or deconsolidated. are undertakings, Entities, other than subsidiary significant exercises in which the group influence over operating and financial in as interests treated policies, are in associated undertakings. Interests accounted associated undertakings are the date for using the equity method from that significant influence commences until the date that significant influence interests where ceases. In circumstances in associated undertakings or joint venture has no holdings arise in which the group strategic intention, these investments are capital’ holdings and classified as ‘venture designated as held at fair value through are or loss. profit For equity accounted associates, the financial statements include the attributable of and reserves of the results share associated undertakings. The group’s in associated undertakings are interests included in the consolidated balance sheet at cost plus the post-acquisition changes of the net assets of share in the group’s the associate. balance sheet reflects The group the associated undertakings net of accumulated impairment losses. Investments in subsidiaries (including loan carried at advances to subsidiaries) are their cost less any accumulated impairment losses in the company financial statements. balances, transactions All intergroup gains or losses within the and unrealised eliminated in full regarding group, are subsidiaries and to the extent of the an associate. interest in All subsidiaries or structured entities are entities are All subsidiaries or structured an controls consolidated when the group an investee controls investee. The group if it is exposed to, or has rights to variable its involvement with the returns from those investee and has the ability to affect its power over the investee. returns through results of subsidiaries are The financial included in the consolidated annual financial the date on from statements of the group is obtained until the date the which control can no longer demonstrate control. group of performs a reassessment The group is a change in the whenever there control between substance of the relationship Basis of consolidation Presentation of information under IFRS 7 Financial Disclosure and IAS 1 Instruments: Disclosures of Financial Statements: Presentation to the nature relating Capital disclosures and extent of risks have been included in sections marked as audited in the risk on pages 22 to 81. management report under required Certain disclosures have been IAS 24 Related Party Disclosures included in the section marked as audited in Investec's report in the remuneration 2016 integrated annual report. Basis of presentation and company financial The group in accordance prepared statements are with the International Financial Reporting SAICA Financial Reporting Standards, Accounting Guides as issued by the Financial Practices Committee and as well as Council, Reporting Standards of the Companies Act. the requirements and company financial The group a on prepared statements have been historical cost basis, except for investment investments, available-for-sale properties, derivative financial instruments and financial assets and financial liabilities held at fair or loss or subject profit value through to hedge accounting, that have been at fair value. measured and company in to group refers ‘Group’ the accounting policies that follow unless specifically stated otherwise. consistent Accounting policies applied are Standards with those of the prior year. during the year did which became effective not have an impact on the group.

Non-monetary items that are measured measured are Non-monetary items that using translated at historical cost are at the date of the exchange rates ruling the transaction. each balance Assets and liabilities for translated at are sheet presented of the the closing rate at the date balance sheet Income and expense items are translated at exchange rates ruling at the date of the transaction are exchange differences All resulting in other comprehensive recognised translation currency income (foreign in the which is reclassified reserve), income statement on disposal of the operation foreign translated at the Cash flow items are exchange rates ruling at the date of the transactions. • and financial On consolidation, the results translated are operations position of foreign group of the currency into the presentation as follows: • • • • Revenue recognition income, Revenue consists of interest fee and commission income, investment income, trading income arising from trading income arising customer flow, sheet management from balance and other trading activities and other operating income. when it can be Revenue is recognised that and it is probable measured reliably the economic benefits will flow to the entity. of services to provision Revenue related services when the related is recognised at performed. Revenue is measured are the fair value of the consideration received or receivable. in the income is recognised Interest income statement using the effective rate method. Fees charged on interest included in the lending transactions are yield calculation to the extent effective that they form an integral part of the rate yield, but excludes interest effective those fees earned for a separately are identifiable significant act, which upon completion of the act. recognised Fees and commissions charged in lieu as income as recognised are of interest rate on the interest part of the effective underlying loan. rate method is based interest The effective on the estimated life of the underlying Monetary items (other than monetary items that form part of the net operation) are investment in a foreign translated using closing rates, with in the gains or losses recognised income statement arising on Exchange differences monetary items that form part of the operation net investment in a foreign determined using closing rates and are as a separate component recognised translation currency of equity (foreign upon consolidation and is reserve) to the income statement reclassified upon disposal of the net investment Foreign currency transactions and foreign operations is of the group currency The presentation South African Rand, being the functional of the company and the currency currency in which its subsidiaries mainly operates, except Mauritius which is in US Dollars. subsidiaries, operations are Foreign in associated undertakings or interests the activities of branches of the group, based in a functional currency which are The entity. other than that of the reporting entities is of group functional currency determined based on the primary economic in which the entity operates. environment translated transactions are currency Foreign of the entity into the functional currency in which the transactions arise, based on rates of exchange ruling at the date of the transactions. At each balance sheet translated items are currency date foreign as follows: • • share-based payment expense is payment expense share-based in the income accounted for as an expense with the presented statement. This cost is in note 6. payment expense share-based on based are Fair value measurements taking into account option pricing models, rate, volatility of the interest the risk-free expected underlying equity instrument, prices. share dividends and current the terms of an equity-settled Where modified, the minimum expense are award costs is the expense in staff recognised as if the terms had not been modified. for An additional expense is recognised the total any modification which increases payment fair value of the share-based arrangement, or is otherwise beneficial to at the date the employee as measured of modification. Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Accounting policies Accounting (continued) FIVE 118 The group engages in equity-settled share- The group of services based payments in respect employees. from received in The fair value of the services received of equity-settled share-based respect to payments is determined by reference options or share the fair value of the shares on the date of grant to the employee. The payment, together cost of the share-based is in equity, increase with a corresponding in the income statement over recognised the period the service conditions of the met, with the amount changing grant are to the number of awards according expected to vest. The cumulative expense for equity-settled transactions recognised date until the vesting at each reporting the extent to which the date reflects and the group’s vesting period has expired best estimate of the number of equity instruments that will ultimately vest. by a in equity is offset The increase payment made to the holding company of of Investec Bank Limited for the provision In addition, all the equity-settled shares. account for any share- entities of the group costs allocated to equity in based recharge the period during which it is levied in their separate annual financial statements. Any excess over and above the recognised Share-based payments to employees After initial recognition, goodwill is goodwill After initial recognition, at cost less any accumulated measured goodwill tests The group losses. impairment for in a business combination acquired of whether irrespective impairment annually, exists and in an indication of impairment with IAS 36. accordance testing, For the purpose of impairment in a business goodwill acquired date, the acquisition combination is, from cash group’s allocated to each of the to expected generating units that are the combination. benefit from goodwill forms part of a cash Where generating 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 based on the is measured circumstances values of the operation disposed relative of and the portion of the cash-generating units retained.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 119 FIVE (continued) (continued) it eliminates or significantly reduces it eliminates or significantly reduces or an inconsistent measurement inconsistency that would recognition measuring assets otherwise arise from the gains and or liabilities or recognising bases; or losses on them on different of financial assets, financial a group liabilities or both is managed and its performance is evaluated on a fair value with a documented basis in accordance risk management or investment strategy is and information about the group internally on that basis to theprovided key management personnel; group’s and a contract contains one or more embedded derivatives (which significantly modifies the cash flows by the contract that would be required from and is not clearly prohibited the host contract) and separation from has designated the entire the group hybrid contract as a financial instrument or loss. profit at fair value through HELD-TO-MATURITY HELD-TO-MATURITY FINANCIAL ASSETS non- Held-to-maturity financial assets are derivative financial instruments with fixed or determinable payments and maturity has the intention and dates which the group Subsequent to ability to hold to maturity. held-to-maturity assets initial recognition, at amortised cost using measured are rate method, less interest the effective impairment losses. Amortised cost is calculated by taking on into account any discount or premium an integral acquisition and fees that are rate. The interest part of the effective income amortisation is included in interest in the income statement. The losses arising fair value on the balance sheet with changesfair value on the balance in the recognised in fair value subsequently instruments areincome statement. Financial held with they are classified as trading when disposal, held withthe intention of short-term or profits, intention of generating short-term not designated as derivatives which are are instruments hedges. Financial part of effective value throughdesignated as held at fair designated as such on initial or loss are profit in remain of the instrument and recognition this classification until derecognition. Financial assets and liabilities are designated as held at fair value through or loss only if: profit • • • Accounting policies Accounting Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group FINANCIAL ASSETS AND VALUE FAIR LIABILITIES HELD AT THROUGH PROFIT OR LOSS Financial instruments held at fair value or loss include all instruments profit through and those classified as held-for-trading instruments designated as held at fair value or loss. profit through Financial instruments classified as held-for trading or designated as held at fair value atrecorded initially or loss are profit through Financial instruments are initially recognised initially recognised Financial instruments are at their fair value. For financial assets or financial liabilities not held at fair or loss, transaction profit value through attributable to the directly costs that are acquisition or issue of the financial assets included in the or financial liabilities are All other transaction initial measurement. in the income recorded costs are statement immediately. and sales Regular way purchase of financial transactions in respect delivery of a financial assets that require instrument within the timeframe established by market convention are at settlement date. recorded Financial instruments A market is regarded as active if transactions A market is regarded place withfor the asset or liability take provide and volume to frequency sufficient on-going basis. pricing information on an is no quoted price in an active If there uses valuation market, then the group the use of relevant techniques that maximise the use ofobservable inputs and minimise chosen valuationunobservable inputs. The all of the factors thattechnique incorporates take into accountmarket participants would in pricing a transaction. at fair If an asset or a liability measured value has a bid price and an ask price, assets and long measures then the group positions at a bid price and liabilities and short positions at an ask price. classifies disclosed fair values The group that reflects to a hierarchy according the significance of observable market inputs. A transfer is made between the levels when the inputs have hierarchy has been a change in changed or there deemed are the valuation method. Transfers to occur at the end of each semi-annual reporting period. Fair value measurement Fair value is the price that would be to sell an asset or paid to transfer received transaction between a liability in an orderly market participants at the measurement in its absence, date in the principal or, the most advantageous market to which has access at that date. the group its The fair value of a liability reflects non‑performance risk. the measures When available, the group fair value of an instrument using the quoted price in an active market for that instrument. instrument and where this estimate is not this estimate instrument and where life. available, the contractual readily includes fees Fee and commission income services as advisory providing earned from and includes well as portfolio management investment properties. income from rental management Investment advisory and to which accrued over the period fees are fees are Performance the income relates. receivable. when they become recognised are if there is recognised No revenue recovery regarding significant uncertainties of the consideration due. Investment income includes income, securities held for other than margin from yield, the purpose of generating interest dividends and capital appreciation. Customer flow trading income includes trading activities arising from income from making and facilitating client activities. balance sheet income arising from Trading management and other trading activities trading income and consists of proprietary balance other gains or losses arising from sheet management. is shown net of the funding profit Trading costs of the underlying positions and on trading profits includes the unrealised marked to market portfolios, which are in lieu Equity investments received daily. included in of corporate finance fees are investment portfolio and valued accordingly. when Dividend income is recognised payment right to receive the group’s is established. Included in other operating income income, gains on is incidental rental (other than properties realisation of which is included investment properties in investment income), operating lease in interests income and income from associated undertakings. DAY 1 PROFIT OR LOSS DAY from When the transaction price differs 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 immediately in the value is recognised income statement. fair value is determined In cases where using data which is not observable, the between the transaction price difference and model value is only recognised in the income statement when the inputs become observable, when the or over the life instrument is rerecognised of the transaction. OF FINANCIAL IMPAIRMENTS AMORTISED ASSETS HELD AT COST Financial assets carried at amortised cost is objective evidence if there impaired are cash would not receive that the group to the original contractual flows according assessed for terms. Financial assets are 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 homogeneous on a portfolio of similar, assets. Over and above individual collective If, in a subsequent period, the fair value of If, in a subsequent period, as available- a debt instrument classified can be increase and the increases for-sale to an event occurring objectively related was recognised after the impairment loss the impairment in the income statement, impairment limited to the loss is reversed, in the recognised value previously income statement. FINANCIAL LIABILITIES classified as non- Financial liabilities are or designated as trading, held-for-trading or loss. profit held at fair value through at recorded Non-trading liabilities are amortised cost applying the effective rate method. interest liabilities or liabilities Held-for-trading designated as held at fair value through at fair value. measured or loss are profit All changes in fair value of financial liabilities in the income statement. recognised are AVAILABLE-FOR-SALE AVAILABLE-FOR-SALE FINANCIAL ASSETS financial assets are Available-for-sale designated as such or do those which are not qualify to be classified as designated or loss, held- profit at fair value through or loans and receivables. to-maturity, They include strategically held equity in not interests instruments that are or associated undertakings, joint ventures certain Further, subsidiaries of the group. held at fair value debt instruments that are due to being quoted on an active market, neither actively traded nor held- which are classified as to-maturity instruments, are financial assets. available-for-sale Financial assets classified as available- at fair value, with measured are for-sale gains or losses recognised unrealised income in other comprehensive directly When reserve. in the available-for-sale the asset is disposed of, the cumulative in other recognised gain or loss previously to the income is reclassified comprehensive earned whileincome statement. Interest financial assets is holding available-for-sale in the income statement as interest reported rate. interest income using the effective Dividends earned while holding available-for- recognised in the sale financial assets are income statement when the right to payment has been established. instrument is If an available-for-sale the respective determined to be impaired, losses previously cumulative unrealised income in other comprehensive recognised included in the income statement in the are period in which the impairment is identified. equity Impairments on available-for-sale once not reversed instruments are in the income statement. recognised Statements when the group has exposure has exposure Statements when the group its from to or rights to variable returns and has the involvement with the investee its through those returns ability to affect power over the investee. originated are Loans and advances that entities, and to structured transferred are securities entities issue debt the structured to external to fund the purchase investors When the group of the securitised assets. the group entity, consolidates the structured on a the assets and liabilities recognises does not basis. When the group gross entity the impact is consolidate the structured derecognised that the securitised assets are in and only any position still held by the group entity is reflected. the structured Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Accounting policies Accounting (continued) Those that the group intends to trade intends Those that the group classified as held-for- in, which are the group trading and those that profit designates as at fair value through or loss designates as Those that the group available-for-sale Those for which the holder may not substantially all of its initial recover investment, other than because of deterioration, which is accounted credit instruments. for as available-for-sale FIVE 120 The group makes use of securitisation The group of finance, as a means vehicles as a source of risk transfer and to leverage returns of equity tranches the retention through in low default rate portfolios. The group focuses on the securitisation predominately mortgages. and commercial of residential credit also trades in structured The group investments. consolidated entities are The structured under IFRS 10 Consolidated Financial SECURITISATION/CREDIT SECURITISATION/CREDIT INVESTMENT AND TRADING ACTIVITIES EXPOSURES • • loans and Subsequent to initial recognition, at amortised measured are receivables rate interest cost, using the effective method, less impairment losses. The the rate rate represents interest effective cash projected that exactly discounts future flows over the expected life of the financial instrument, to the net carrying amount of the financial instrument. Included in the rate, is interest calculation of the effective on acquisition and any discount or premium an integral part of the effective fees that are rate. interest impairment of such Losses arising from in the income recognised investments are statement line ‘impairment losses on loans and advances’. financial assets is on impaired Interest used using the rate of interest recognised cash flows for the to discount the future purpose of measuring the impairment loss. LOANS AND RECEIVABLES non-derivative are Loans and receivables or determinable financial assets with fixed in an active not quoted payments that are following: market and exclude the • from impairment of such investments are are impairment of such investments from in the income statement. recognised

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 121 FIVE (continued) (continued) At inception of the hedge, the group 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 a formal of the hedge relationship, assessment is undertaken to ensure the hedging instrument is expected the in offsetting to be highly effective 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 in a expected to offset designated are range of 80% to 125% For cash flow hedges, a forecasted transaction that is the subject of the and hedge must be highly probable to variations an exposure must present in cash flows that could ultimately affect the income statement of the hedge can be The effectiveness i.e. the fair value or measured, reliably cash flows of the hedged item that are attributable to the hedged risk and the fair value of the hedging instrument can measured be reliably is assessed The hedge effectiveness on an ongoing basis and determined actually to have been highly effective the financial reporting throughout periods for which the hedge was designated. remeasured price. The counterparty risk price. The counterparty risk remeasured into derivative transactions is taken from fair value of the account when reporting adjustment to derivative positions. The value as the credit the fair value is known adjustment (CVA). HEDGE ACCOUNTING or cash applies either fair value The group of net investments in flow hedge or hedge the operations accounting when foreign transactions meet the specified hedge qualify for hedge accounting criteria. To ensures the group accounting treatment, met: that all of the following conditions are • • • • For qualifying fair value hedges, the change in fair value of the hedging instrument in the income statement. is recognised Changes in fair value of the hedged item that is attributable to the hedged risk are in the income statement. also recognised Accounting policies Accounting Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group DERIVATIVE INSTRUMENTS DERIVATIVE All derivative instruments of the group on the balance sheet at recorded are fair value. Positive and negative fair as assets and reported values are liabilities, respectively. into either entered Derivative positions are for trading purposes or as part of the asset and liability management group’s to interest activities to manage exposures risks. Both currency rate and foreign or losses profits and unrealised realised in the recognised arising on derivatives are income statement as part of trading income in which cash (other than circumstances flow hedging is applied as detailed below). into as Derivative instruments entered economic hedges which do not qualify for hedge accounting and derivatives that into for trading purposes are entered are in the same way as instruments that treated held-for-trading. are into largely entered derivatives are Credit derivatives for trading purposes. Credit at their fair values, initially recognised are being the transaction price of the derivative. carried Subsequently the derivatives are at fair value, with movements in fair value or loss, based on the profit through The group may reclassify, in rare in rare may reclassify, The group non-derivative financial circumstances, category assets out of the held-for-trading loans and into the available-for-sale, or held-to-maturity and receivables in certain categories. It may also reclassify, financial instruments out circumstances, category and of the available-for-sale category. into the loans and receivables at fair recorded Reclassifications are which value at the date of reclassification, becomes the new amortised cost. RECLASSIFICATION OF RECLASSIFICATION FINANCIAL INSTRUMENTS financial assets but has transferred control control transferred financial assets but has of the assets. when it A financial liability is derecognised the obligation is is extinguished, i.e. when When or expired. discharged, cancelled replaced or is an existing financial liability terms, different modified with substantially is or modification such a replacement of the original as a derecognition treated a new of liability and the recognition in the respective difference liability. The in the carrying amounts is recognised income statement. A financial asset, or a portion thereof, is A financial asset, or a portion thereof, rights to when the group’s derecognised or when the group cash flows have expired its rights to cash flows has transferred to the financial assets and either relating substantially all has transferred (a) the group associated with the the risks and rewards has neither financial assets, or (b) the group substantially all nor retained transferred associated with the the risks and rewards DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES impairments raised at specific portfolio impairments raised at specific a collective recognises levels, the group a central level impairment allowance at macro-economic that takes into account to the data related factors, mainly driven by markets and which indicate credit prevailing identified losses but not specifically incurred in the loan portfolios (i.e. exposures across Assets specifically all business segments). the excluded from are identified as impaired collective assessment. to an allowance credited Impairments are 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 rate of the asset. Loans interest effective together with the associated allowance is no realistic when there written off are and all recovery of future prospect or transferred collateral has been realised to the group. An allowance for impairment is only is objective evidence when there reversed to the quality has improved that the credit assurance of is reasonable extent that there in timely collection of principal and interest terms of the original contractual agreement. The impairment is calculated as the between the carrying value of difference the asset and the expected cash flows on (including net expected proceeds of collateral) discounted at realisation rate. Impairments of the original effective financial assets held at amortised cost are in the income statement. recognised cater for any shortfall between regulatory To (in the respective requirements provision jurisdictions) and impairments based on the principles above, a transfer is made from distributable to non-distributable reserves, general risk reserve. being the regulatory risk The non-distributable regulatory that minimum regulatory ensures reserve maintained. are requirements provisioning Financial guarantee contracts issued by Financial guarantee contracts issued by those contracts that require are the group the a payment to be made to reimburse holder for a loss it incurs because the specified debtor fails to make a payment with the terms when due, in accordance of a debt instrument. Financial guarantees at fair value, initially recognised are adjusted for the transaction costs that attributable to the issuance of are directly the guarantee. the Subsequent to initial recognition, liability under each guarantee is measured at the higher of the amount recognised, less cumulative amortisation and the best to settle required estimate of expenditure result any financial obligation arising as a of the guarantee. Subsequent to initial all changes in the balance measurement, in the recognised sheet carrying value are income statement. LEASES CREDIT, INSTALMENT AGREEMENTS AND RENTAL 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 agreements and cash collateral on and cash collateral agreements securities borrowed’. between the sale and The difference as interest prices is treated repurchase over the life of expense and is accrued interest using the effective the agreement rate method. that are transactions Securities borrowing included on not are not cash collateralised lending and the balance sheet. Securities cash transactions which are borrowing accounted for in the same collateralised are manner as securities sold or purchased commitments. subject to repurchase agency-based The cash collateral from disclosed scrip lending transactions are with master on a net basis, in accordance and the group’s netting agreements intention to settle net. FINANCIAL GUARANTEES The economic characteristics and The economic characteristics derivative risks of the embedded to the closely related are not and risks economic characteristics of the host contract with the A separate instrument same terms as the embedded definition derivative would meet the of a derivative. SALE AND REPURCHASE AGREEMENTS (INCLUDING SECURITIES BORROWING AND LENDING) Securities sold subject to a commitment them, at a fixed price or a to repurchase remain return, selling price plus a lender’s are received on balance sheet. Proceeds as a liability on the balance sheet recorded and cash agreements under ‘repurchase collateral on securities lent’. Securities under a commitment purchased that are date the securities at a future to resell on the balance sheet. not recognised are The consideration paid is recognised repurchase as an asset under ‘reverse Financial assets and liabilities are offset offset Financial assets and liabilities are is both an intention to settle on a when there net basis (or simultaneously) and a currently exists. legal right to offset enforceable ISSUED DEBT AND EQUITY FINANCIAL INSTRUMENTS Financial instruments issued by the group classified as liabilities if they contain a are contractual obligation to deliver cash or another financial asset. Financial instruments issued by the group they confer classified as equity where are in the interest on the holder a residual has no obligation and the group group, to deliver either cash or another financial The components of asset to the holder. compound issued financial instruments accounted for separately with the are liability component separated first and any being allocated to the residual amount equity component. net initially measured Equity instruments are attributable issue costs. of directly OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES is separated from the host contract and the host contract is separated from derivative if accounted for as a standalone and only if: • • Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Accounting policies Accounting (continued) FIVE 122 EMBEDDED DERIVATIVES the extent that a derivative may be To embedded in a hybrid contract and the hybrid contract is not carried at fair value in the with changes in fair value recorded income statement, the embedded derivative For qualifying cash flow hedges in respect hedges in For qualifying cash flow and liabilities, of non-financial assets of the hedging the change in fair value portion to the effective instrument, relating in other directly is initially recognised flow income in the cash comprehensive the and is included in hedge reserve recognised initial cost of any asset/liability to the or in all other cases released the hedged firm income statement when transaction commitment or forecasted transaction If the forecast net profit. affects or firm commitment is no longer expected in other the balance included to occur, income is reclassified comprehensive to the income statement immediately in trading income from and recognised balance sheet management and other trading activities. respect For qualifying cash flow hedges in of financial assets and liabilities, the change in fair value of the hedging instrument, hedge are an effective which represents in other comprehensive initially recognised to the income income and is reclassified statement in the same period during which financial asset or liability affects the relevant the income statement. Any ineffective portion of the hedge is immediately in the income statement. recognised Qualifying hedges of a net investment in operation including a hedge of a a foreign monetary item that is accounted for as part accounted for in a of the net investment are way similar to cash flow hedges. Changes in the fair value of the hedging instrument portion of the hedge to the effective relating in other comprehensive is recognised income while any gains or losses relating in recognised portion are to the ineffective the income statement. On disposal of the operation, the cumulative value of foreign in other any such gain or loss recorded to the income is reclassified comprehensive income statement. Hedge accounting is discontinued when it is determined that the instrument ceases as a hedge; when the to be highly effective or is sold, terminated or derivative expires when the hedge item matures exercised; when a forecasted or is sold or repaid; transaction is no longer deemed highly or when the designation as a probable, hedge is revoked.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 123 FIVE (continued) (continued) The initial recognition of goodwill The initial recognition of an asset or The initial recognition liability in a transaction which is not a business combination and at the time on the of the transaction has no effect income statement of temporary differences In respect associated with the investments in in associated subsidiaries and interests the timing of the undertakings, where of the temporary differences reversal and it is probable can be controlled will not that the temporary differences future. in the foreseeable reverse Employee benefits operates various defined The group contribution schemes. All employer charged to the income contributions are with in accordance statement as incurred, the rules of the scheme, and included costs. under staff has no liabilities for other The group benefits. post‑retirement Taxation and deferred Taxation taxation for taxation payable is provided Current based on the amount expected to be at rates that payable on taxable profits enacted or substantively enacted and are period. applicable to the relevant on temporary taxation is provided Deferred between the carrying amount of differences an asset or liability in the balance sheet and such temporary its tax base, except where arise from: differences • • • taxation assets or liabilities are Deferred using the tax rates that have measured been enacted or substantively enacted at taxation the balance sheet date. Deferred to the extent that recognised assets are will taxable profit that future it is probable be available against which the deferred taxation asset can be utilised. Items in other comprehensive directly recognised and current net of related income are taxation. deferred period in which they are identified. Reversal identified. period in which they are in recognised of impairment losses are which the reversal income in the period in that the carrying is identified, to the extent not exceed the value of the asset does been calculated amount that would have without impairment. Accounting policies Accounting Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group At each balance sheet date, the group At each balance sheet date, the group the carrying value of non-financial reviews for assets, other than investment property 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 amount of an asset is less recoverable than its carrying value, the carrying value to its recoverable of the asset is reduced amount value. as an recognised Impairment losses are expense in the income statement in the Impairment of non‑financial assets Intangible assets at cost less recorded Intangible assets are accumulated amortisation and impairments. Intangible assets with finite lives, are amortised over the useful economic to eight years) on three life (currently a straight-line basis. The depreciable to each intangible asset is amount related between the determined as the difference value of the asset. cost and the residual Trading properties Trading carried at the lower are properties Trading value. of cost and net realisable Investment properties or held for capital appreciation Properties classified as investment yield are rental properties. initially measured are Investment properties at cost plus transaction costs and subsequently carried at fair value, with fair in the value gains or losses recognised income statement in ‘investment income’. is Fair value of investment property calculated by taking into account the associated stream expected rental and is supported by with the property, market evidence. The useful lives, depreciation methods The useful lives, depreciation assessed annually. values are and residual service costs Routine maintenance and expensed as incurred. of assets are only capitalised is Subsequent expenditure economic that future if it is probable the item will flow to benefits associated with the group. Computer and related equipment Computer and related 20% – 33% 20% – 25% Motor Vehicles and fittings 10% – 20% Furniture and improvements* Leasehold property 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. * Leasehold improvements depreciation rates Property and equipment at recorded and equipment are Property and cost less accumulated depreciation impairments. Cost is the cash equivalent paid or the fair value of the consideration given to acquire an asset and includes other expenditures attributable to the directly that are acquisition of the asset. on the depreciable is provided Depreciation amount of each component on a straight- line basis over the expected useful life of the to amount related asset. The depreciable each asset is determined as the difference value between the cost and the residual value is the of the asset. The residual estimated amount, net of disposal costs, obtain from would currently that the group the disposal of an asset in similar age and condition as expected at the end of its and comparative useful life. The current rates for each class of annual depreciation and equipment is as follows: property • • • • incidental to ownership of an asset. incidental to ownership lease other than a An operating lease is a finance lease. classified as a finance lease, Where these contracts, amounts outstanding on net of unearned finance charges, are the where included in loans and advances in liabilities is the lessor and included group is the lessee. Finance the group where and instalment charges on finance leases or debited credited transactions are credit to in proportion to the income statement the capital balances outstanding at the rate implicit in the agreement. classified as operating leases, Where charged/ are payable/receivable rentals in the income statement on a credited straight-line basis over the lease term. accrued to (if any) are Contingent rentals the income statement when incurred. loans and advances to banks and to banks and to loans and advances to reverse customers and non-trading that are agreements repurchase receivables classified as loans and at under IAS 39 will be measured amortised cost under IFRS 9, with investments the exception of current for which embedded derivatives separately unless a recognised are separate derivative instrument can be loan would be the entire recognised, at fair value; recognised financial assets designated at fair value or loss (FVTPL) under profit through at FVTPL IAS 39 will be measured under IFRS 9; certain debt securities held within may be portfolio credit the group’s available for sale to from reclassified debt amortised cost. The remaining securities classified as available for at fair value sale will be measured income other comprehensive through (FVOCI) under IFRS 9 and debt securities classified as held to maturity at amortised cost; will be measured and equity instruments securities classified as available for sale or FVTPL will be at FVTPL under IFRS 9. measured work streams. The committee provides provides The committee work streams. to the of the project updates on the status committees. board appropriate assessment of classification Current and measurement expects that generally: The group • • • • continues to assess the impact The group of these changes, but expects that the basis of the and measurement recognition financial assets will be majority of the group’s largely unchanged on application of IFRS 9. assessment of impairments Current would also shift its As noted, the group the current impairment methodology from loss basis to expected loss. We incurred of developing models in the process are losses for to determine expected credit risk that are subject to credit exposures profit not carried at fair value through or loss. key definitions also reviewing are We such as significant deterioration in credit quality and default against our current asset quality classifications. This process includes participation in industry/regulatory will discussions and workshops. We into incorporate IFRS 9 requirements risk classification and credit our group policy. provisioning s ’ losses on assets held at fair value are fair value are losses on assets held at in the income statement recognised tounless the entity has elected gains or losses on non-trading recognise through equity investments directly income. Withcomprehensive reference at fair value,to financial liabilities held that changes proposes the standard to credit to fair value attributable in other directly recognised risk are recycling income without comprehensive and the income statement; through impairment methodology: the key an to a shift from change is related loss to an expected loss incurred initial At impairment methodology. an allowance (or provision recognition, in the case of commitments and for expected guarantees) is required from losses (ECL) resulting credit possible within default events that are the next 12 months (12-month ECL). In the event of a significant increase risk since initial recognition, in credit the recognition IFRS 9 requires losses. of lifetime expected credit will involve Impairment measurement complexity and significant increased such as the judgements on areas of default, estimation of probabilities loss given default, unbiased future economic scenarios, estimation of expected lives, estimation of at default and assessing exposures in credit whether a significant increase risk has occurred. • IFRS 9 also includes guidance on hedge accounting. The general hedge accounting aim to simplify hedge requirements link with a stronger accounting, creating risk management strategy and permitting hedge accounting to be applied to a variety of hedging instruments greater does not address and risks. The standard hedge accounting strategies, macro in a separate being considered which are the risk of any conflict remove To project. hedge accounting between existing macro practice and the new general hedge IFRS 9 includes accounting requirements, an accounting policy choice to remain with IAS 39 Hedge Accounting. The group intends to continue applying IAS 39 hedge accounting requirement until this until this hedge accounting requirement section of IFRS 9 has been finalised. has established an IFRS 9 The group steering committee comprising of and key executive representation Risk, Finance, Analytics management from The committee is accountable for and IT. IFRS 9 implementation and is supported for different responsible by working groups Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Accounting policies Accounting (continued) classification and measurement of classification and measurement financial assets and financial liabilities: that all financial requires the standard assets be classified as either held at fair value or amortised cost. The amortised cost classification is only permitted it is held within a business model where held the underlying cash flows are where to collect contractual cash flows in order and that the cash flows arise solely from The payment of principal and interest. that gains or further provides standard FIVE 124 IFRS 9 Financial Instruments was issued IFRS 9 Financial Instruments was issued certain in July 2014 and will replace key elements of IAS 39. The mandatory date for IFRS 9 is for annual effective periods beginning on or after 1 January 2018 with early adoption permitted. IFRS 9 has not yet been endorsed by the Union. The two key elements European accounting that would impact the group’s policies include: • IFRS 9 FINANCIAL INSTRUMENTS The following significant standards and The following significant standards which have been issued but interpretations, applicable to the are not yet effective, are and interpretations These standards group. have not been applied in these annual intends financial statements. The group the from to comply with these standards dates. effective Standards and interpretations issued, but not yet effective Provisions are recognised when the recognised are Provisions obligation (legal or has a present group of a past event, constructive) as a result resources that an outflow of it is probable embodying economic benefits will be to settle the obligation and a required estimate can be made of the reliable amount of the obligation. The expense is presented to a provision relating in the income statement net of any Contingent assets and reimbursement. on not recognised contingent liabilities are balance sheet. Provisions, contingent Provisions, contingent contingent liabilities and assets Borrowing costs directly costs that are Borrowing developments attributable to property period of time to which take a substantial capitalised. develop are

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 125 FIVE (continued) (continued) the current status of tax audits the current and enquiries; status of discussions the current relevant and negotiations with the tax authorities; claims; of any previous the results any changes to the relevant and tax environments; has the group appropriate Where utilised expert external advice as well as experience of similar in making any situations elsewhere such provisions. – – – – – Determination of interest income Determination of interest expense using the and interest rate method involved interest effective judgement in determining the timing cash flows and extent of future to meet the objectives of In order IFRS 12, management performs an assessment of the value of total assets as well as any qualitative considerations to determine that may exist in order entity for materiality to the reporting purposes. disclosure – – – – – • • Accounting policies Accounting Details of unlisted investments Details of unlisted investments 23 with can be found in note in further risk analysis contained the risk management section on pages 51 to 53. Refer to pages 42 to 50 of the risk Refer to pages 42 to 50 of the risk management section for further analysis on impairments.   Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group The group’s income tax charge income The group’s are and balance sheet provision This arises judgemental in nature. certain transactions for which from can only the ultimate tax treatment with be determined by final resolution local tax authorities. The the relevant tax in its current has recognised group certain amounts in respect provision of of taxation that involve a degree estimation and uncertainty where cannot finally be the tax treatment has determined until a resolution tax by the relevant been reached The carrying amount of this authority. is often dependent on the provision of discussions timetable and progress and negotiations with the relevant tax authorities, arbitration processes in the relevant and legal proceedings tax jurisdictions in which the group operates. Issues can take many years and assumptions on the likely to resolve have to be outcome would therefore made by the group In making any estimates, judgement would be management’s based on various factors, including any such transactions and events for tax purposes is whose treatment uncertain. In making any estimates, judgement has been management’s based on various factors, including: The determination of impairments carried at against assets that are amortised cost and impairments financial to available-for-sale relating assets involves the assessment of cash flows which is judgemental future in nature Valuation of unlisted investments of unlisted Valuation and direct primarily in the private equity embedded investments portfolios and inputs are derivatives. Key valuation observable based on the most relevant where market inputs, adjusted specifically necessary for factors that and apply to the individual investments market volatility recognising • • • • In preparation of the annual financial In preparation makes estimations statements, the group the and applies judgement that could affect amount of assets and liabilities reported in Key areas within the next financial year. which judgement is applied include: Key management assumptions IFRS 16 LEASES In January 2016, the IASB issued IFRS 16 for annual is effective Leases. The standard periods beginning on or after 1 January 2019. Earlier adoption is permitted for entities that apply IFRS 15 at or before the date of initial application of IFRS 16. in lessees accounting IFRS 16 results for most leases within the scope of the in a manner similar to the way standard currently in which finance leases are accounted for under IAS 17 Leases. a ‘right of use’ Lessees will recognise financial liability asset and a corresponding on the balance sheet. The asset will be amortised over the period of the lease at and the financial liability measured amortised cost. Lessor accounting remains substantially the same as in IAS 17. The assessing the impact of is currently group this standard. and interpretations All other standards not are issued but not yet effective expected to have an impact on the group. IFRS 15 REVENUE FROM IFRS 15 REVENUE CUSTOMERS CONTRACTS WITH issued IFRS 15 In May 2014, the IASB Customers. Contracts with Revenue from for annual periods is effective The standard January 2018 beginning on or after 1 IFRS 15 with early application permitted. a principles-based approach provides and introduces recognition, for revenue for revenue the concept of recognising The satisfied. obligations as they are should be applied retrospectively, standard with certain practical expedients available. and measurement current The group’s aligned to the principles are recognition not anticipate an impact do We standard. principles currently to the measurement applied. The impact of the disclosure is currently of the standard requirements being assessed. 365 (569) (210) (776) 4 632 4 709 8 592 3 982 1 102 12 574 18 750 (12 563) (14 118) income Interest Interest expense – 2015 2015 value value 8 487 sheet sheet 49 399 10 449 52 776 13 866 211 914 271 762 104 237 159 028 106 252 285 618 Balance Balance 564 Company Company (402) (789) 5 705 4 532 1 538 5 635 (1 268) 14 806 10 274 22 613 (14 519) (16 978) income Interest Interest expense – 2016 2016 value value 6 323 sheet sheet 59 103 10 732 60 077 11 727 263 778 333 613 131 575 194 578 134 501 344 203 Balance Balance (35) 411 317 (642) (776) 5 521 4 768 9 071 5 020 14 091 19 587 (12 613) (14 066) income Interest Interest Interest Interest expense 2015 2015 value value 1 089 3 886 sheet sheet 51 865 10 449 61 146 13 221 221 377 284 780 109 028 177 528 116 382 303 663 Balance Balance Group Group (98) 610 258 (789) 5 787 5 742 6 712 (1 351) 16 860 11 118 23 515 (14 565) (16 803) income Interest Interest expense 2016 2016 809 value value 5 575 sheet sheet 73 088 61 823 10 732 13 128 142 151 279 736 353 100 138 643 215 239 372 585 Balance Balance 4 5 1 2 3 Notes Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes Private client Corporate, institutional and other clients Deposits by banks and securities other debt-related Customer accounts (deposits) Other interest-bearing liabilities Subordinated liabilities Subordinated Total interest-bearing Total liabilities income Net interest Net interest income Cash, near cash and bank Cash, near cash and bank debt debt and sovereign securities

Core loans and advances Core Other debt securities and other loans and advances Other interest-earning Other interest-earning assets interest-earning Total assets

For the year to 31 March R’million Comprises (as per the balance sheet) cash and balances at central banks; loans and advances to banks; non-sovereign and non-bank cash placements; Comprises (as per the balance sheet) cash and balances at central banks; loans and advances to banks; securities; bank debt securities. reverse repurchase agreements and collateral on securities borrowed; sovereign debt to customers securitised. Comprises (as per the balance sheet) loans and advances to customers; own originated loans and advances Comprises (as per the balance sheet) other securitised assets; loans to group companies. and cash collateral on securities lent. Comprises (as per the balance sheet) deposits by banks; debt securities in issue; repurchase agreements Comprises (as per the balance sheet) liabilities arising on securitisation of own originated loans and advances. FIVE 126 For the year to 31 March For the year to 31 March R’million 1. 2. 3. 4. 5. Notes: 1.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 127 385 986 535 740 622 (317) (159) 511 392 771 (254) Total 2015 1 356 4 011 1 521 1 362 (2 723) 1 420 FIVE – – 1 (1) 6 (1) 19 Company 19 39 34 574 805 677 (165) 2016 asset Other 1 647 1 482 1 073 (continued) (continued) categories – – – – – – – – 60 (60) 585 772 682 (207) 2015 1 661 1 454 1 076 properties Investment – – – – – (8) 63 Group 63 60 68 986 752 640 (207) Debt 2016 other) 1 945 1 738 1 305 bank and securities (sovereign, 511 394 669 385 (253) (316) 1 274 3 869 (2 664) 1 321 equities)* unlisted portfolio Notes to the financial statements to the financial Notes (listed and Investment Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group

^ Including embedded derivatives (warrants and profit shares). line item. In a year of realisation, any prior period mark-to-market gains/(losses) recognised are reversed in the unrealised Annuity fees (net of fees payable) Deal fees Funding and other net related costs Funding and other net related Dividend income Unrealised 2015 Realised Funding and other net related costs Funding and other net related Dividend income Unrealised Investment income Private client transactional fees Private client transactional Fee and commission income Fee and commission expense income Net fee and commission The following table analyses investment income generated by the asset portfolio shown on the balance sheet: Group 2016 Realised Corporate and institutional transactional and advisory services Corporate and institutional * ^ Net fee and commission income Net fee and commission  For the year to 31 March R’million 3. For the year to 31 March R’million 2. – – – – (317) 789 462 534 (254) Total 2015 2 284 1 344 3 946 (2 689) 1 531 1 – – 1 1 (1) (1) 6 (1) (3) Company 959 960 280 278 2016 asset Other categories – – – – – – – – – – 1 1 60 (60) 2015 properties Investment – – – – – – 1 1 (9) 18 Group 18 67 67 (11) Debt 2016 other) bank and securities (sovereign, 384 (316) 511 456 470 (253) 1 307 3 869 (2 630) 1 184 equities)* unlisted portfolio (listed and Investment (continued)

^ Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Including embedded derivatives (warrants and profit shares). Including embedded derivatives (warrants and profit Dividend income from investment in subsidiaries. gains/(losses) recognised are reversed in the unrealised line item. In a year of realisation, any prior period mark-to-market Funding cost and other net related costs Funding cost and other net related Dividend income** Unrealised 2015 Realised Funding cost and other net related costs Funding cost and other net related Dividend income** Unrealised Investment income Other operating (loss)/income Rental income from properties Rental income from Gains on realisation of fixed assets Gains on realisation associates Operating loss from The following table analyses investment The following table analyses asset portfolio income generated by the sheet: shown on the balance Company 2016 Realised * ** ^ FIVE 128 For the year to 31 March R’million For the year to 31 March R’million 3. 4.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS – – 7 7 3 2 129 78 33 13 18 25 493 132 344 125 292 292 134 314 2015 3 366 2 630 4 553 FIVE . – – 6 1 7 2 Company 39 26 17 19 628 150 103 353 153 341 336 144 316 103 2016 2 839 5 086 3 759 to 92 (continued) (continued) – 7 9 8 2 80 34 41 15 15 26 510 141 376 161 329 304 138 314 2015 2 745 4 818 3 510 – 3 2 Group 40 18 64 20 38 21 26 107 652 154 394 202 406 348 154 325 2016 3 080 5 537 4 033 Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Business expenses mainly comprise insurance costs, consulting and professional fees, travel expenses and subscriptions. Business expenses mainly comprise insurance costs, consulting and professional fees, travel expenses Details of the directors’ emoluments, pensions and their interests are disclosed in the remuneration report on pages Details of the directors’ emoluments, pensions and their interests are disclosed in the remuneration report Salaries and wages (including directors’ remuneration)* directors’ Salaries and wages (including and other costs Training payments expense Share-based Social security costs fund contributions Pensions and provident subsidiaries pursuant to legislation Audit of the company’s Audit of the company’s subsidiaries pursuant to legislation Audit of the company’s Other services Other services Operating costs – – – – – expenses (excluding depreciation) Premises Equipment expenses (excluding depreciation) Business expenses** Marketing expenses amortisation and impairment of property, Depreciation, equipment and intangibles to the paid by the group The following amounts were of the audit of the financial statements auditors in respect to the group: and for other services provided fees: Ernst & Young audit Fees payable to the companies’ auditors for the of the companies’ accounts Fees payable to the companies’ auditors and its associates for other services: – Total in Minimum operating lease payments recognised operating costs Fees payable to the companies’ auditors and its associates Fees payable to the companies’ auditors and for other services: – – KPMG fees: audit Fees payable to the companies’ auditors for the of the companies’ accounts – Staff costs Staff ** * For the year to 31 March R’million 5. Rnil Rnil 493 589 2015 2015 84 188 R69.51 244 527 (899 002) 8 477 151 2.23 years (8 314 349) 30 854 481 30 362 808 4.5 – 5.0 years 25.24% – 30% 6.78% – 7.18% 4.45% – 4.62% R90.00 – R100.57 Company 628 494 2016 10 065 Company Rnil Rnil 133 778 30% 2016 5 817 487 (7 676 562) (1 053 214) R84.91 30 362 808 27 584 297 2.03 years 4.0 – 5.0 years 7.49% – 7.66% 4.02% – 4.19% 510 609 2015 R109.98 – R120.88 84 188 245 965 (905 252) 8 755 401 (8 658 071) Rnil 32 113 711 31 551 754 Rnil 2015 R69.58 Group 2.22 years 652 522 2016 4.5 – 5.0 years 25.24% – 30% 10 065 6.78% – 7.18% 4.45% – 4.62% 277 528 R90.00 – R100.57 6 139 400 (7 985 662) (1 081 340) 31 551 754 28 901 680 Group Rnil Rnil 30% 2016 R84.98 2.03 years 4.0 – 5.0 years 7.49% – 7.66% 4.02% – 4.19% R109.98 – R120.88 ^ Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Further information on the group share options and Further information on the group share options long-term incentive plans are provided in the remuneration report and on our website. The weighted average share price and weighted average exercise during the year were R108.32 (2015: R96.85) and RnilThe weighted average share price and weighted (2015: Rnil) respectively. Risk-free rate Risk-free Expected dividend yields Option life Expected volatility Exercise price Exercise Share price at date of grants Share Share-based payments Share-based Details of options outstanding during the year Outstanding at the beginning of the year The group operates share option and long-term share incentive long-term share option and operates share The group on an equity- majority of which are plans for employees the schemes is to share of the staff settled basis. The purpose an create an esprit de corps within the organisation, promote performance and provide of the Investec group's awareness performance by individual and group an incentive to maximise the group. of rewards in the risks and to share allowing all staff Equity-settled share-based payment expense charged Equity-settled share-based to the income statement Lapsed during the year Relocation of employees during the year Fair value of options at grant date Outstanding at the end of the year Granted during the year Vested and exercisable at the end of the year and exercisable Vested Exercised during the year Exercised

Expected volatility was determined based on the implied volatility levels quoted by the equity derivatives’ trading desk. The expectedExpected volatility was determined based on the implied volatility levels quoted by the equity expectation. of forward price movement over the last six months, but also includes an element share volatility is based on the respective attrition on final vesting. data with an adjustment to actual determined based on historical group The expected attrition rates used were – – – – – The fair values of options granted were The fair values of options granted were calculated using a Black-Scholes option pricing model. For options granted during the inputs into the model were the year, as follows: – Weighted average fair value of options and Weighted date long-term grants at measurement Weighted average remaining contractual life average remaining Weighted The exercise price range and weighted average The exercise contractual life for the options remaining as follows: outstanding were Long-term incentive grants with no strike price price Exercise ^ For the year to 31 March For information on the share options granted to directors, refer to the remuneration report on pages 98 to 101. For information on the share options granted to directors, refer to the remuneration  FIVE 130

6. For the year to 31 March R’million

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS

– – – 131 447 447 447 447 597 447 (150) 2015 1.9% (3.5%) 3 090 15.1% 14.5% 28.0% FIVE

– – – Company 35 766 731 766 766 766 766 2016 6.8% 4 467 (7.8%) 11.9% 17.1% 28.0% (continued) (continued)

– 25 545 545 520 661 545 545 (141) 2015 4.1% 1.6% (2.8%) 3 673 10.3% 14.8% 28.0%

30 (25) (11) Group 790 815 820 831 820 820 2016 7.0% 2.9% 7.1% 4 295 (8.1%) 19.1% 28.0% Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Includes the effect of cumulative tax losses and other permanent differences relating to foreign subsidiaries. Includes the effect of cumulative tax losses and other Current taxation Current Deferred taxation Deferred Taxation Foreign taxation – Mauritius Foreign Income statement tax charge Income statement tax on income Taxation South Africa Effective rate of taxation Effective – Total taxation charge as per income statement taxation Total The standard rate of South African normal taxation The standard by: has been affected Dividend income – Total taxation charge for the year comprises: taxation Total acquitted intangibles before on operating profit Taxation Foreign earnings* Foreign Taxation on acquired intangibles on acquired Taxation Profits of capital nature Profits Tax rate reconciliation: Tax as per income statement taxation before Profit Other non-taxable/non-deductible differences Total taxation charge as per income statement taxation Total * 7. For the year to 31 March R’million

– – – – – – 31 (74) (58) 328 386 (612) (569) (114) 2015 2015 2 529 2 529 2 643

– 5 Company Company 94 71 (13) (13) (18) 439 107 (645) (120) (754) (683) 2016 2016 3 675 3 581 3 701 (1 084)

– – – – – – 31 (74) (58) (619) 380 322 (576) (114) 2015 2015 3 014 3 014 3 128

– 5 Group Group 71 94 (13) (18) (13) 439 107 (788) (699) (120) (717) 2016 2016 3 449 3 355 3 475 (1 138) (continued) Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) These amounts are net of taxation of R19.3 million (2015: Rnil) for both group and company. Deferred tax Deferred Current tax Current Deferred tax Deferred effect Taxation Headline earnings Taxation Taxation – Other comprehensive income taxation effects income Other comprehensive cash flow hedges taken Fair value movements on income to other comprehensive directly – Pre-taxation – Gain on available-for-sale assets recycled to the income statement assets recycled Gain on available-for-sale shareholders Headline earnings attributable to ordinary Headline adjustments, net of taxation* assets classified as held-for-sale down of non-current Write Preference dividends paid Preference shareholders Earnings attributable to ordinary Profit after taxation Profit Fair value movements on available-for-sale assets Fair value movements on available-for-sale income to other comprehensive taken directly assets recycled of available-for-sale Gain on realisation the income statement through – Pre-taxation – – Pre-taxation –

* FIVE 132 For the year to 31 March R’million For the year to 31 March R’million 8. 7.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 133 55 59 114 FIVE R’million 2015 Cents 360.15 380.29 740.44 per share (continued) (continued) 59 61 120 Company R’million 2016 Cents 384.35 390.40 774.75 per share 55 59 114 R’million 2015 Cents 360.15 380.29 740.44 per share Notes to the financial statements to the financial Notes Group 59 61 120 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group R’million 2016 Cents 384.35 390.40 774.75 per share Dividends Perpetual preference Perpetual preference dividend Final dividend in prior year Interim dividend for year current Total dividend dividend Total attributable to perpetual preference shareholders in current recognised financial year The directors have declared a final dividend in respect of the financial year ended 31 March 2016 of 412.48350 centsended 31 March respect of the financial year a final dividend in have declared The directors share. (2015: 384.34536 cents) per perpetual preference For the year to 31 March 9.

1 (9) 293 298 290 260 (207) (517) (455) (207) Total 1 420 6 712 1 945 1 356 8 946 8 491 9 871 5 521 1 661 10 388 – – – – – – – – – – – – – (51) 637 637 637 1 107 1 107 1 158 Other fee income – – – – 2 1 1 – – – (9) (2) 30 30 30 39 (45) 138 125 125 instruments Non-financial – – – – – – – – – (6) 25 36 (52) (64) cost (14 580) (12 676) (12 704) (12 704) (14 613) (14 613) liabilities Financial at amortised – – – – – – 3 – – – 71 (36) 116 757 757 641 1 644 1 189 2 871 2 871 for-sale Available- – – – – 45 20 88 11 (76) 458 (120) (517) (455) 1 112 15 914 15 459 18 022 19 122 18 605 15 476 Loans and receivables – – – – – – – – – – – – – (17) 814 814 613 613 613 831 maturity Held-to- – – 2 7 8 2 – – – (14) 781 786 237 108 (212) 1 140 1 140 1 246 1 811 1 811 Designated at inception – – – – – – – – – 28 (46) 468 225 461 286 493 493 288 profit or loss profit 1 217 1 217 Trading At fair value through At fair value through Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Analysis of income and impairments by category and impairments by Analysis of income of financial instrument 2015 income Net interest Group 2016 income Net interest – balance sheet management and other trading activities – balance sheet management and other trading Other operating income loans and advances impairment losses on operating income before Total Impairment losses on loans and advances Operating income Fee and commission income Fee and commission expense Investment income income arising from Trading – customer flow – balance sheet management and other trading activities – balance sheet management and other trading Other operating loss impairment losses on loans and advances income before operating Total Impairment losses on loans and advances Operating income Fee and commission income Fee and commission expense Investment income income arising from Trading – customer flow FIVE 134 10. For the year to 31 March R’million

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 135 FIVE 1 (9) 290 293 260 298 (207) (455) (517) (207) Total 1 945 1 661 5 521 1 420 8 946 8 491 9 871 6 712 1 356 10 388 (continued) (continued) – – – – – – – – – – – – – (51) 637 637 637 1 158 1 107 1 107 Other fee income – – – – 1 1 2 – – – (9) (2) 30 30 30 39 (45) 138 125 125 instruments Non-financial – – – – – – – – – (6) 25 36 (64) (52) cost Notes to the financial statements to the financial Notes (12 676) (14 580) (12 704) (12 704) (14 613) (14 613) liabilities Financial at amortised Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group – – – – – – 3 – – – 71 (36) 641 116 757 757 1 644 1 189 2 871 2 871 for-sale Available- – – – – 11 88 45 20 (76) 458 (455) (120) (517) 1 112 15 476 15 914 15 459 18 022 19 122 18 605 Loans and receivables – – – – – – – – – – – – – (17) 814 814 831 613 613 613 maturity Held-to- – – 8 2 2 7 – – – (14) 781 237 786 108 (212) 1 811 1 811 1 140 1 140 1 246 Designated at inception – – – – – – – – – 28 (46) 493 493 468 288 461 225 286 profit or loss profit 1 217 1 217 Trading At fair value through At fair value through Analysis of income and impairments by category and impairments by Analysis of income of financial instrument Total operating income before impairment losses on loans and advances income before operating Total Impairment losses on loans and advances Operating income 2015 income Net interest Fee and commission income Fee and commission expense Investment income income arising from Trading – customer flow activities – balance sheet management and other trading Other operating income loans and advances impairment losses on operating income before Total Impairment losses on loans and advances Operating income Group 2016 income Net interest Fee and commission income Fee and commission expense Investment income income arising from Trading – customer flow activities – balance sheet management and other trading Other operating loss 10. For the year to 31 March R’million 1 302 345 317 269 (165) (496) (468) (159) Total 5 635 1 647 2 284 9 553 7 643 4 632 1 521 1 531 8 111 10 049 – – – – – – – – – – – – (50) 636 636 636 1 096 1 146 1 096 Other fee income – – – – – 3 1 1 – – – (45) 280 138 983 279 280 1 080 1 080 instruments Non-financial – – – – 1 – – – – (5) (1) (52) (64) cost (14 368) (12 473) (12 538) (14 424) (14 424) (12 538) liabilities Financial at amortised – – – – – 3 – – – 71 (36) 718 605 113 718 1 609 1 189 2 836 2 836 for-sale Available- – – – 20 99 40 15 (79) (31) 858 367 (496) (468) 14 318 16 785 17 683 17 187 14 395 14 786 Loans and receivables – – – – – – – – – – – – (17) 756 529 529 529 773 756 maturity Held-to- – – – 8 2 8 – – 92 (14) 775 280 783 (212) 1 116 1 673 1 673 1 165 1 165 Designated at inception – – – – – 9 – – – (54) 557 317 466 294 543 543 294 profit or loss profit 1 340 1 340 Trading At fair value through At fair value through (continued) Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) balance sheet management and other trading activities balance sheet management and other trading customer flow balance sheet management and other trading activities balance sheet management and other trading customer flow Analysis of income and impairments by category and impairments by Analysis of income of financial instrument 2015 income Net interest – loans and advances impairment losses on operating income before Total Impairment losses on loans and advances Operating income Fee and commission income Fee and commission expense Investment income income arising from Trading – – Other operating income impairment losses on loans and advances income before operating Total Impairment losses on loans and advances Operating income Fee and commission income Fee and commission expense Investment income income arising from Trading – Company 2016 income Net interest FIVE 136 10. For the year to 31 March R’million

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 137 FIVE 1 317 269 302 345 (468) (496) (165) (159) Total 4 632 1 531 8 111 7 643 1 647 2 284 9 553 1 521 5 635 10 049 (continued) (continued) – – – – – – – – – – – – (50) 636 636 636 1 096 1 096 1 146 Other fee income – – – – – 1 1 3 – – – (45) 279 280 280 138 983 1 080 1 080 instruments Non-financial – – – – 1 – – – – (5) (1) (52) (64) cost Notes to the financial statements to the financial Notes (12 473) (14 368) (12 538) (12 538) (14 424) (14 424) liabilities Financial at amortised Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group – – – – – 3 – – – 71 (36) 605 718 718 113 1 609 1 189 2 836 2 836 for-sale Available- – – – 15 20 99 40 (79) (31) 367 858 (468) (496) 14 395 14 786 14 318 16 785 17 683 17 187 Loans and receivables – – – – – – – – – – – – (17) 756 756 773 529 529 529 maturity Held-to- – – – 8 2 8 – – 92 (14) 775 280 783 (212) 1 673 1 673 1 165 1 116 1 165 Designated at inception – – – – – 9 – – – (54) 543 557 317 466 294 543 294 profit or loss profit 1 340 1 340 Trading At fair value through At fair value through (continued) customer flow activities balance sheet management and other trading customer flow activities balance sheet management and other trading Analysis of income and impairments by category and impairments by Analysis of income of financial instrument Impairment losses on loans and advances Operating income 2015 income Net interest Fee and commission income Fee and commission expense Investment income income arising from Trading – – loans and advances impairment losses on operating income before Total Impairment losses on loans and advances Operating income Fee and commission income Fee and commission expense Investment income income arising from Trading – – Other operating income impairment losses on loans and advances income before operating Total Company 2016 income Net interest 10. For the year to 31 March R’million 1 671 122 992 116 236 171 524 809 367 115 Total 7 801 9 858 7 967 5 145 3 656 5 460 1 405 7 665 5 042 6 360 15 843 37 242 13 424 16 916 10 732 26 779 38 912 41 325 13 968 12 761 405 629 279 736 363 032 373 764 207 272 – – – – – – – – – – – – – – – – – – – – – – – 1 671 122 116 832 236 171 524 5 145 7 025 3 129 3 922 3 922 or scoped instruments out of IAS 39 Non-financial – – – – – – – – – – – – – 809 367 115 cost Total 7 801 9 855 7 967 2 500 5 561 2 585 1 233 3 718 7 864 2 229 37 242 10 732 14 407 26 779 14 757 284 544 267 677 323 953 334 685 195 031 instruments at amortised – – – – – – – – – – – – – – – – – – – – – – – – – – – 809 cost 2 585 1 233 37 242 10 732 14 407 267 677 323 953 334 685 liabilities Financial at amortised – – – – – – – – – – – – – – – – – – – – – – – 855 367 115 7 801 9 855 7 967 2 500 5 561 1 592 26 779 14 757 273 080 195 031 Loans and receivables – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 3 718 6 272 1 374 11 364 maturity Held-to- – – – – – – – – – – – – – – – – 3 680 992 324 (101) Total 1 405 2 509 5 080 6 104 6 360 13 424 12 059 35 157 35 157 24 155 37 607 10 532 15 843 12 241 114 060 at fair value instruments – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 8 687 4 990 2 564 26 475 10 234 for-sale Available- – – – – – – – – – – – – – – – – – – – – – – – – – – 298 1 114 3 796 5 080 17 139 17 139 46 369 12 059 28 920 12 241 Designated at inception – – – – – – – – – – – – – – – – – – – – – – – 3 680 992 324 (101) profit or loss profit 1 405 2 509 18 018 18 018 41 216 13 424 24 155 15 843 Trading At fair value through At fair value through Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Derivative financial instruments have been classified as held-for-trading and include derivatives held as hedges. Derivative financial instruments have been classified as held-for-trading Analysis of financial assets and liabilities assets and liabilities Analysis of financial basis by measurement Liabilities arising on securitisation of own originated loans and advances taxation liabilities Current taxation liabilities Deferred Other liabilities liabilities Subordinated Derivative financial instruments* Other trading liabilities and cash collateral on securities lent agreements Repurchase Customer accounts (deposits) Debt securities in issue Investment properties Goodwill Intangible assets companies Loans to group Liabilities Deposits by banks Own originated loans and advances to customers securitised Own originated loans and advances to customers Other loans and advances Other securitised assets in associated undertakings Interests taxation assets Deferred Other assets and equipment Property Bank debt securities Other debt securities Derivative financial instruments* trading activities Securities arising from Investment portfolio Loans and advances to customers Loans and advances to banks and non-bank cash placements Non-sovereign and cash collateral on securities borrowed agreements Reverse repurchase debt securities Sovereign Group 2016 Assets Cash and balances at central banks * FIVE 138

11. At 31 March R’million

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 139 FIVE 1 992 367 115 116 236 171 524 671 122 809 Total 5 042 6 360 7 967 5 145 5 460 1 405 7 665 3 656 7 801 9 858 37 242 16 916 10 732 41 325 13 968 12 761 15 843 13 424 26 779 38 912 207 272 279 736 405 629 363 032 373 764 – – – – – – – – – – – – – – – – – – – – – – – 1 (continued) (continued) 116 236 171 524 671 122 832 3 129 5 145 7 025 3 922 3 922 or scoped instruments out of IAS 39 Non-financial – – – – – – – – – – – – – 367 115 809 cost Total 2 585 1 233 3 718 7 864 2 229 7 967 2 500 5 561 7 801 9 855 37 242 14 407 10 732 26 779 14 757 195 031 284 544 267 677 323 953 334 685 instruments at amortised – – – – – – – – – – – – – – – – – – – – – – – – – – – 809 cost 2 585 1 233 37 242 14 407 10 732 267 677 323 953 334 685 liabilities Financial at amortised – – – – – – – – – – – – – – – – – – – – – – – Notes to the financial statements to the financial Notes 367 115 855 1 592 7 967 2 500 5 561 7 801 9 855 26 779 14 757 273 080 195 031 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Loans and receivables – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 6 272 1 374 3 718 11 364 maturity Held-to- – – – – – – – – – – – – – – – – 3 680 992 324 (101) Total 1 405 2 509 5 080 6 104 6 360 35 157 35 157 13 424 12 059 10 532 15 843 12 241 24 155 37 607 114 060 at fair value instruments – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 4 990 2 564 8 687 26 475 10 234 for-sale Available- – – – – – – – – – – – – – – – – – – – – – – – – – – 298 3 796 5 080 1 114 17 139 17 139 46 369 12 241 12 059 28 920 Designated at inception – – – – – – – – – – – – – – – – – – – – – – – 3 680 992 324 (101) profit or loss profit 1 405 2 509 18 018 18 018 41 216 13 424 24 155 15 843 Trading At fair value through At fair value through Derivative financial instruments have been classified as held-for-trading and include derivatives held as hedges. Derivative financial instruments have been classified as held-for-trading Analysis of financial assets and liabilities assets and liabilities Analysis of financial basis by measurement Other liabilities liabilities Subordinated Securities arising from trading activities Securities arising from Investment portfolio Loans and advances to customers securitised Own originated loans and advances to customers Other loans and advances Other securitised assets in associated undertakings Interests taxation assets Deferred Other assets and equipment Property Investment properties Goodwill Intangible assets companies Loans to group Liabilities Deposits by banks Derivative financial instruments* Other trading liabilities and cash collateral on securities lent agreements Repurchase Customer accounts (deposits) Debt securities in issue Liabilities arising on securitisation of own originated loans and advances taxation liabilities Current taxation liabilities Deferred Group 2016 Assets Cash and balances at central banks Loans and advances to banks and non-bank cash placements Non-sovereign and cash collateral on securities borrowed agreements Reverse repurchase debt securities Sovereign Bank debt securities Other debt securities Derivative financial instruments* *

11. At 31 March R’million 76 60 88 80 192 190 732 472 618 Total 1 089 1 186 3 741 6 261 1 289 9 972 4 535 1 262 3 268 1 623 5 517 29 792 12 401 10 449 33 422 10 540 10 095 31 378 17 332 12 749 15 178 16 556 332 706 221 377 293 358 172 993 303 807 – – – – – – – – – – – – – – – – – – – – – – – 76 60 88 80 192 190 732 385 1 727 1 186 2 216 3 478 3 478 or scoped instruments out of IAS 39 Non-financial – – – – – – – – – – – – – – 835 472 618 875 cost Total 1 089 6 261 3 554 9 715 5 926 4 535 3 268 2 151 29 792 10 449 15 408 33 422 10 537 240 142 204 768 254 043 160 959 264 492 instruments at amortised – – – – – – – – – – – – – – – – – – – – – – – – – – – 835 cost 1 089 2 151 29 792 10 449 15 408 204 768 254 043 264 492 liabilities Financial at amortised – – – – – – – – – – – – – – – – – – – – – – – – 472 618 875 6 261 1 289 4 458 4 535 3 268 33 422 10 537 226 694 160 959 Loans and receivables – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 3 554 8 426 1 468 13 448 maturity Held-to- – – – – – – – – – – – – – – – – – 3 2 690 Total 7 617 6 823 9 972 1 623 1 148 3 366 1 289 90 837 27 824 12 401 16 609 35 837 10 095 15 178 12 034 35 837 at fair value instruments – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 4 487 3 132 6 787 2 161 16 567 for-sale Available- – – – – – – – – – – – – – – – – – – – – – – – – – – 36 4 485 7 811 3 366 19 975 47 703 12 034 16 609 23 337 19 975 Designated at inception – – – – – – – – – – – – – – – – – – – – – – – – 2 3 690 profit or loss profit 1 289 1 623 1 148 15 862 26 567 12 401 10 095 15 178 15 862 Trading At fair value through At fair value through (continued) Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Derivative financial instruments have been classified as held-for-trading and include derivatives held as hedges. Derivative financial instruments have been classified as held-for-trading Analysis of financial assets and liabilities assets and liabilities Analysis of financial basis by measurement Group 2015 Assets Cash and balances at central banks Liabilities arising on securitisation of own originated loans and advances taxation liabilities Current taxation liabilities Deferred Other liabilities liabilities Subordinated Derivative financial instruments* Other trading liabilities and cash collateral on securities lent agreements Repurchase Customer accounts (deposits) Debt securities in issue Investment properties Intangible assets companies Loans to group assets classified as held for sale Non-current Liabilities Deposits by banks Own originated loans and advances to customers securitised Own originated loans and advances to customers Other loans and advances Other securitised assets in associated undertakings Interests taxation assets Deferred Other assets and equipment Property Bank debt securities Other debt securities Derivative financial instruments* trading activities Securities arising from Investment portfolio Loans and advances to customers Loans and advances to banks and non-bank cash placements Non-sovereign and cash collateral on securities borrowed agreements Reverse repurchase debt securities Sovereign * FIVE 140

11. At 31 March R’million

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 141 FIVE 60 88 80 76 192 190 732 472 618 Total 1 289 9 972 4 535 3 268 1 623 5 517 1 089 1 186 1 262 3 741 6 261 29 792 16 556 10 449 10 095 31 378 17 332 12 749 15 178 12 401 33 422 10 540 172 993 221 377 332 706 293 358 303 807 – – – – – – – – – – – – – – – – – – – – – – – (continued) (continued) 60 88 80 76 192 190 732 385 1 186 1 727 2 216 3 478 3 478 or scoped instruments out of IAS 39 Non-financial – – – – – – – – – – – – – – 472 618 875 835 cost Total 2 151 1 089 3 554 9 715 5 926 4 535 3 268 6 261 29 792 15 408 10 449 33 422 10 537 160 959 240 142 204 768 254 043 264 492 instruments at amortised – – – – – – – – – – – – – – – – – – – – – – – – – – – 835 cost 2 151 1 089 29 792 15 408 10 449 204 768 254 043 264 492 liabilities Financial at amortised – – – – – – – – – – – – – – – – – – – – – – – – Notes to the financial statements to the financial Notes 472 618 875 1 289 4 458 4 535 3 268 6 261 33 422 10 537 226 694 160 959 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Loans and receivables – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 8 426 1 468 3 554 13 448 maturity Held-to- – – – – – – – – – – – – – – – – – 2 3 690 Total 1 623 1 148 3 366 7 617 6 823 9 972 1 289 90 837 12 401 16 609 35 837 10 095 27 824 15 178 12 034 35 837 at fair value instruments – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 3 132 6 787 2 161 4 487 16 567 for-sale Available- – – – – – – – – – – – – – – – – – – – – – – – – – – 36 7 811 3 366 4 485 19 975 47 703 12 034 16 609 23 337 19 975 Designated at inception – – – – – – – – – – – – – – – – – – – – – – – – 2 3 690 profit or loss profit 1 289 1 623 1 148 15 862 26 567 12 401 10 095 15 178 15 862 Trading At fair value through At fair value through (continued) Derivative financial instruments have been classified as held-for-trading and include derivatives held as hedges. Derivative financial instruments have been classified as held-for-trading Analysis of financial assets and liabilities assets and liabilities Analysis of financial basis by measurement Group 2015 Assets Cash and balances at central banks Other liabilities liabilities Subordinated Securities arising from trading activities Securities arising from Investment portfolio Loans and advances to customers securitised Own originated loans and advances to customers Other loans and advances Other securitised assets in associated undertakings Interests taxation assets Deferred Other assets and equipment Property Investment properties Intangible assets companies Loans to group assets classified as held for sale Non-current Liabilities Deposits by banks Derivative financial instruments* Other trading liabilities and cash collateral on securities lent agreements Repurchase Customer accounts (deposits) Debt securities in issue Liabilities arising on securitisation of own originated loans and advances taxation liabilities Current taxation liabilities Deferred Loans and advances to banks and non-bank cash placements Non-sovereign and cash collateral on securities borrowed agreements Reverse repurchase debt securities Sovereign Bank debt securities Other debt securities Derivative financial instruments* *

11. At 31 March R’million 1 992 373 198 133 950 Total 5 923 5 086 7 654 9 982 6 670 1 734 4 037 6 323 5 632 1 405 41 325 12 317 11 354 21 385 15 616 38 912 37 108 13 424 15 325 10 732 194 578 263 778 379 518 342 697 353 429 – – – – – – – – – – – – – – – – – – – – 1 423 198 133 950 5 086 7 494 2 497 3 447 1 653 3 447 or scoped instruments out of IAS 39 Non-financial – – – – – – – – – – 373 987 860 cost Total 3 718 6 213 1 914 7 654 9 979 1 590 6 323 3 979 21 385 14 757 37 108 12 816 10 732 182 337 251 719 304 093 259 619 314 825 instruments at amortised – – – – – – – – – – – – – – – – – – – – – – – 860 cost 1 590 37 108 12 816 10 732 251 719 304 093 314 825 liabilities Financial at amortised – – – – – – – – – – – – – – – – – – – 730 373 987 1 592 7 654 9 979 6 323 3 979 21 385 14 757 182 337 250 096 Loans and receivables – – – – – – – – – – – – – – – – – – – – – – – – – – – 3 718 4 621 1 184 9 523 maturity Held-to- – – – – – – – – – – – – 3 992 324 680 Total 6 104 5 923 9 440 5 080 1 405 2 509 37 607 12 241 24 155 15 616 12 059 13 424 35 157 35 157 112 405 at fair value instruments – – – – – – – – – – – – – – – – – – – – – – – – – – 8 687 4 990 2 520 9 142 25 339 for-sale Available- – – – – – – – – – – – – – – – – – – – – – 298 1 114 3 403 5 080 17 139 17 139 28 920 12 241 12 059 45 976 Designated at inception – – – – – – – – – – – – – – – – – – – 3 992 324 680 profit or loss profit 1 405 2 509 Trading 18 018 18 018 24 155 15 616 13 424 41 090 At fair value through At fair value through (continued) Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Derivative financial instruments have been classified as held-for-trading and include derivatives held as hedges. Derivative financial instruments have been classified as held-for-trading Analysis of financial assets and liabilities assets and liabilities Analysis of financial basis by measurement Company 2016 Assets Cash and balances at central banks Other loans and advances in associated undertakings Interests Sovereign debt securities Sovereign Bank debt securities Other debt securities Derivative financial instruments* trading activities Securities arising from Investment portfolio Loans and advances to customers Loans and advances to banks and non-bank cash placements Non-sovereign and cash collateral on securities borrowed agreements Reverse repurchase Other assets Other trading liabilities and cash collateral on securities lent agreements Repurchase Customer accounts (deposits) Debt securities in issue taxation liabilities Current Other liabilities Loans to group companies Loans to group Investment in subsidiaries Liabilities Deposits by banks Derivative financial instruments* Property and equipment Property Investment properties Intangible assets Subordinated liabilities Subordinated

* FIVE 142 11.

At 31 March R’million

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 143 FIVE 1 950 992 373 198 133 Total 5 632 7 654 9 982 5 923 5 086 1 734 6 323 1 405 6 670 4 037 37 108 15 325 10 732 41 325 12 317 11 354 15 616 13 424 21 385 38 912 263 778 342 697 353 429 194 578 379 518 – – – – – – – – – – – – – – – – – – – – 1 (continued) (continued) 950 423 198 133 1 653 3 447 3 447 5 086 7 494 2 497 or scoped instruments out of IAS 39 Non-financial – – – – – – – – – – 373 987 860 cost Total 6 323 3 979 1 590 7 654 9 979 3 718 6 213 1 914 37 108 12 816 10 732 21 385 14 757 251 719 304 093 314 825 182 337 259 619 instruments at amortised – – – – – – – – – – – – – – – – – – – – – – – 860 cost 1 590 37 108 12 816 10 732 251 719 304 093 314 825 liabilities Financial at amortised – – – – – – – – – – – – – – – – – – – Notes to the financial statements to the financial Notes 373 987 730 6 323 3 979 7 654 9 979 1 592 21 385 14 757 182 337 250 096 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Loans and receivables – – – – – – – – – – – – – – – – – – – – – – – – – – – 9 523 3 718 4 621 1 184 maturity Held-to- – – – – – – – – – – – – 3 680 992 324 Total 1 405 2 509 5 080 6 104 9 440 5 923 12 059 35 157 35 157 13 424 24 155 37 607 15 616 12 241 112 405 at fair value instruments – – – – – – – – – – – – – – – – – – – – – – – – – – 8 687 4 990 9 142 2 520 25 339 for-sale Available- – – – – – – – – – – – – – – – – – – – – – 298 3 403 5 080 1 114 17 139 17 139 12 241 45 976 12 059 28 920 Designated at inception – – – – – – – – – – – – – – – – – – – 3 992 324 680 profit or loss profit 1 405 2 509 Trading 18 018 18 018 41 090 13 424 24 155 15 616 At fair value through At fair value through (continued) Derivative financial instruments have been classified as held-for-trading and include derivatives held as hedges. Derivative financial instruments have been classified as held-for-trading Analysis of financial assets and liabilities assets and liabilities Analysis of financial basis by measurement Company 2016 Assets Cash and balances at central banks Securities arising from trading activities Securities arising from Investment portfolio Loans and advances to customers Other loans and advances in associated undertakings Interests Other assets and equipment Property Investment properties Intangible assets companies Loans to group Investment in subsidiaries Liabilities Deposits by banks Derivative financial instruments* Other trading liabilities and cash collateral on securities lent agreements Repurchase Customer accounts (deposits) Debt securities in issue taxation liabilities Current Other liabilities liabilities Subordinated Loans and advances to banks and non-bank cash placements Non-sovereign and cash collateral on securities borrowed agreements Reverse repurchase debt securities Sovereign Bank debt securities Other debt securities Derivative financial instruments* *

11. At 31 March R’million 80 36 187 177 476 137 994 732 Total 4 522 9 581 6 430 1 369 6 148 9 926 1 289 2 825 1 623 3 492 31 358 15 981 13 390 29 652 12 401 30 284 10 540 14 969 15 225 10 449 211 914 159 028 314 532 280 234 290 683 – – – – – – – – – – – – – – – – – – – – – 80 36 187 177 212 732 6 430 1 369 7 818 2 120 3 525 3 525 or scoped instruments out of IAS 39 Non-financial – – – – – – – – – – – – – 476 137 780 681 cost Total 1 156 3 554 8 364 7 258 6 148 2 825 29 652 14 076 30 284 10 537 10 449 195 305 146 994 217 357 240 870 251 319 instruments at amortised – – – – – – – – – – – – – – – – – – – – – – – – – 681 cost 1 156 29 652 14 076 10 449 195 305 240 870 251 319 liabilities Financial at amortised – – – – – – – – – – – – – – – – – – – – – – 476 137 780 1 289 5 968 6 148 2 825 30 284 10 537 146 994 205 438 Loans and receivables – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 3 554 7 075 1 290 11 919 maturity Held-to- – – – – – – – – – – – – – – 3 2 691 Total 3 366 7 617 9 581 6 132 1 623 1 149 9 926 1 289 16 609 27 804 12 034 12 401 14 969 89 357 35 839 35 839 at fair value instruments – – – – – – – – – – – – – – – – – – – – – – – – – – – – 4 467 3 132 2 161 6 132 15 892 for-sale Available- – – – – – – – – – – – – – – – – – – – – – – – – 3 366 4 485 7 420 19 975 19 975 16 609 23 337 12 034 47 276 Designated at inception – – – – – – – – – – – – – – – – – – – – – 3 2 691 profit or loss profit 1 623 1 149 9 926 1 289 Trading 15 864 15 864 12 401 14 969 26 189 At fair value through At fair value through (continued) Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Derivative financial instruments have been classified as held-for-trading and include derivatives held as hedges. Derivative financial instruments have been classified as held-for-trading Analysis of financial assets and liabilities assets and liabilities Analysis of financial basis by measurement Company 2015 Assets Cash and balances at central banks Derivative financial instruments* Other trading liabilities and cash collateral on securities lent agreements Repurchase Customer accounts (deposits) Debt securities in issue taxation liabilities Current Loans to group companies Loans to group Investment in subsidiaries Liabilities Deposits by banks Other loans and advances Other securitised assets Other assets and equipment Property Investment properties Intangible assets Sovereign debt securities Sovereign Bank debt securities Other debt securities Derivative financial instruments* trading activities Securities arising from Investment portfolio Loans and advances to customers Loans and advances to banks and non-bank cash placements Non-sovereign and cash collateral on securities borrowed agreements Reverse repurchase Deferred taxation liabilities Deferred Non-current assets classified as held for sale Non-current Other liabilities

Subordinated liabilities Subordinated * FIVE 144 11.

At 31 March R’million

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 145 FIVE 36 80 476 137 994 187 177 732 Total 1 369 3 492 6 148 9 926 1 289 9 581 2 825 6 430 1 623 4 522 12 401 29 652 15 225 31 358 15 981 13 390 14 969 30 284 10 540 10 449 211 914 314 532 280 234 290 683 159 028 – – – – – – – – – – – – – – – – – – – – – 36 80 (continued) (continued) 212 187 177 732 1 369 7 818 2 120 3 525 3 525 6 430 or scoped instruments out of IAS 39 Non-financial – – – – – – – – – – – – – 681 476 137 780 cost Total 2 825 1 156 6 148 3 554 8 364 7 258 29 652 14 076 10 449 30 284 10 537 195 305 240 870 251 319 217 357 146 994 instruments at amortised – – – – – – – – – – – – – – – – – – – – – – – – – 681 cost 1 156 29 652 14 076 10 449 195 305 240 870 251 319 liabilities Financial at amortised – – – – – – – – – – – – – – – – – – – – – – Notes to the financial statements to the financial Notes 476 137 780 2 825 6 148 1 289 5 968 30 284 10 537 205 438 146 994 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Loans and receivables – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 3 554 7 075 1 290 11 919 maturity Held-to- – – – – – – – – – – – – – – 2 3 691 Total 1 623 1 149 3 366 1 289 9 926 7 617 6 132 9 581 12 401 16 609 35 839 35 839 89 357 27 804 14 969 12 034 at fair value instruments – – – – – – – – – – – – – – – – – – – – – – – – – – – – 4 467 3 132 6 132 2 161 15 892 for-sale Available- – – – – – – – – – – – – – – – – – – – – – – – – 7 420 3 366 4 485 19 975 19 975 12 034 47 276 16 609 23 337 Designated at inception – – – – – – – – – – – – – – – – – – – – – 2 3 691 profit or loss profit 1 289 1 623 1 149 9 926 Trading 15 864 15 864 26 189 12 401 14 969 At fair value through At fair value through (continued) Derivative financial instruments have been classified as held-for-trading and include derivatives held as hedges. Derivative financial instruments have been classified as held-for-trading Analysis of financial assets and liabilities assets and liabilities Analysis of financial basis by measurement Company 2015 Assets Cash and balances at central banks Subordinated liabilities Subordinated Securities arising from trading activities Securities arising from Investment portfolio Loans and advances to customers Other loans and advances Other securitised assets Other assets and equipment Property Investment properties Intangible assets companies Loans to group Investment in subsidiaries assets classified as held for sale Non-current Liabilities Deposits by banks Derivative financial instruments* Other trading liabilities and cash collateral on securities lent agreements Repurchase Customer accounts (deposits) Debt securities in issue taxation liabilities Current taxation liabilities Deferred Other liabilities Loans and advances to banks and non-bank cash placements Non-sovereign and cash collateral on securities borrowed agreements Reverse repurchase debt securities Sovereign Bank debt securities Other debt securities Derivative financial instruments* *

11. At 31 March R’million – – – – – – – – – – – – – – – – 10 2 570 2 580 2 580 Level 3 – – – – 3 503 680 829 (101) 1 675 2 509 5 080 12 241 54 309 24 155 15 833 13 424 12 059 34 581 19 728 Level 2 Fair value category – – – – – – – – – – 324 992 576 576 3 287 4 429 57 171 37 607 10 532 56 595 Level 1 3 324 992 680 (101) Total 6 360 6 104 1 405 2 509 5 080 12 241 24 155 37 607 10 532 15 843 13 424 12 059 35 157 78 903 114 060 at fair value instruments

Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group quoted (unadjusted) prices in active markets for identical assets or liabilities. quoted (unadjusted) prices directly either the asset or liability, observable for prices included within level 1 that are inputs other than quoted prices). derived from (i.e. (i.e. as prices) or indirectly Notes to the financial statements to the financial Notes (continued) Fair value disclosures on investment properties are included in the investment properties note 30 on page 171. the investment properties note 30 on page on investment properties are included in Fair value disclosures

Fair value hierarchy Level 1 –  Level 2 –  (unobservable inputs). not based on observable market data liability that are Level 3 – inputs for the asset or The table below analyses recurring fair value measurements for financial assets and financial liabilities. These fair value for financial assets fair value measurements recurring The table below analyses the valuation technique used. based on the inputs to the fair value hierarchy levels in categorised into different are measurements identified as follows: levels are The different Investment portfolio Loans and advances to customers Other assets companies Loans to group Securities arising from trading activities Securities arising from Reverse repurchase agreements and cash collateral agreements Reverse repurchase on securities borrowed debt securities Sovereign Bank debt securities Other debt securities Derivative financial instruments Liabilities Derivative financial instruments Other trading liabilities and cash collateral on securities lent agreements Repurchase Customer accounts (deposits) Debt securities in issue Other liabilities Net financial assets at fair value Group 2016 Assets and non-bank cash placements Non-sovereign For the year to 31 March R’million FIVE 12. 146

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS ------147 – – – – – – – 36 (245) 6 509 6 509 6 718 Level 3 FIVE – – – 3 20 797 690 614 7 562 1 148 3 366 4 384 35 011 10 095 12 034 42 573 12 401 16 609 15 423 Level 2 (continued) (continued) Fair value category - - - - - – – – – 2 826 826 3 233 6 787 2 640 1 289 40 929 27 804 41 755 Level 1 3 2 690 1 623 1 148 3 366 7 617 6 823 9 972 1 289 55 000 35 837 10 095 27 824 12 034 90 837 12 401 16 609 15 178 Financial at fair value instruments Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group (continued)

Fair value hierarchy Group 2015 Assets placements and non-bank cash Non-sovereign Liabilities Derivative financial instruments Other trading liabilities and cash collateral on securities lent agreements Repurchase Customer accounts (deposits) Debt securities in issue Other liabilities Net financial assets at fair value Reverse repurchase agreements and cash collateral agreements Reverse repurchase on securities borrowed debt securities Sovereign Bank debt securities Other debt securities Investment portfolio Loans and advances to customers Other assets Derivative financial instruments trading activities Securities arising from For the year to 31 March R’million 12. – – – – – – – – – – – – – – – 10 2 427 2 437 2 437 Level 3 – – – – 3 209 829 680 1 675 2 509 5 080 24 155 15 606 12 241 53 889 13 424 12 059 34 581 19 308 Level 2 Fair value category – – – – – – – – – 992 324 576 576 4 429 9 440 3 287 37 607 56 079 55 503 Level 1 3 992 324 680 Total Total 6 104 9 440 5 923 1 405 2 509 5 080 24 155 37 607 15 616 12 241 13 424 12 059 35 157 77 248 112 405 at fair value instruments (continued) Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Fair value hierarchy Securities arising from trading activities Securities arising from Company 2016 Assets cash placements and non-bank Non-sovereign Reverse repurchase agreements and cash collateral agreements Reverse repurchase on securities borrowed debt securities Sovereign Bank debt securities Other debt securities Derivative financial instruments Investment portfolio Loans and advances to customers Other assets Liabilities Derivative financial instruments Other trading liabilities and cash collateral on securities lent agreements Repurchase Customer accounts (deposits) Debt securities in issue Other liabilities Net financial assets at fair value FIVE 148 For the year to 31 March R’million 12.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS – – – – – – – – – – – – – – – 149 (245) 6 576 6 331 6 331 Level 3 FIVE – – – – 3 366 797 691 4 384 9 926 6 914 1 149 3 366 12 034 41 927 15 214 12 401 16 609 35 013 Level 2 (continued) (continued) Fair value category – – – – – – – – – 2 826 826 2 639 1 289 3 233 6 132 41 099 27 804 40 273 Level 1 2 3 691 Total Total 9 581 1 289 9 926 7 617 6 132 1 623 1 149 3 366 12 034 89 357 27 804 14 969 12 401 16 609 35 839 53 518 at fair value instruments Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group (continued) Fair value hierarchy Loans and advances to customers Investment portfolio Other assets Securities arising from trading activities Securities arising from Company 2015 Assets cash placements and non-bank Non-sovereign Reverse repurchase agreements and cash collateral agreements Reverse repurchase on securities borrowed debt securities Sovereign Bank debt securities Other debt securities Derivative financial instruments Liabilities Derivative financial instruments Other trading liabilities and cash collateral on securities lent agreements Repurchase Customer accounts (deposits) Debt securities in issue Other liabilities Net financial assets at fair value For the year to 31 March R’million 12. 70 71 15 35 (32) 735 483 103 332 (397) 700 535 (520) (110) (161) 5 869 2 437 (5 291) 6 331 Company 70 98 31 15 (32) 761 483 103 332 677 (397) 693 (532) (110) (161) 5 928 (5 379) 2 580 6 509 Group (continued) Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) The following table is a reconciliation of the opening balances to the closing balances for level 3 financial instruments. All instruments balances for level 3 financial instruments. of the opening balances to the closing reconciliation The following table is a and loss. profit at fair value through are There were no transfers between level 1 and level 2 in the current and prior year. and level 2 in the current no transfers between level 1 were There Total gains recognised in the income statement recognised gains Total Purchases Sales Issues Settlements into level 3 Transfers out of level 3 Transfers exchange adjustments Foreign 2016 Balance as at 31 March For the year to 31 March For the year to 31 March R’million Balance as at 1 April 2014 in the income statement recognised gains Total Purchases Sales Issues Settlements into level 3 Transfers out of level 3 Transfers exchange adjustments Foreign 2015 Balance as at 31 March inputs to the of the level 2 as a result into level 3 from 2016, R103.3 million has been transferred For the year ended 31 March level 3 to level 2 as a from to instruments transferred valuation methods becoming unobservable in the market. R331.9 million related of inputs to the valuation methods becoming observable. result LEVEL 3 INSTRUMENTS TRANSFERS BETWEEN LEVEL 1 AND LEVEL 2 TRANSFERS BETWEEN Fair value hierarchy Fair value hierarchy FIVE 150

12.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS – – 151 97 97 (18) (18) 347 354 426 433 (2 711) (2 711) (2 711) (2 711) FIVE Unrealised Unrealised – – – – 22 22 267 267 267 267 3 424 3 450 3 472 3 446 Realised Realised (continued) (continued) 22 22 97 97 (18) (18) 713 739 761 735 614 621 693 700 Total Total Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group (continued) The following table quantifies the gains or (losses) included in the income statement recognised on level 3 financial instruments: recognised on level 3 statement the gains or (losses) included in the income The following table quantifies For the year to 31 March For the year to 31 March R’million For the year to 31 March For the year to 31 March R’million Fair value hierarchy Fair value hierarchy Company 2016 for the year in the income statement recognised gains/(losses) Total Investment income Group 2016 in the income statement for the year gains/(losses) included Total Investment income Trading income arising from customer flow income arising from Trading Trading income arising from customer flow income arising from Trading 2015 included in the income statement for the year gains/(losses) Total Investment income 2015 included in the income statement for the year gains/(losses) Total Investment income Trading income arising from customer flow income arising from Trading customer flow income arising from Trading Trading loss arising from balance sheet management and other trading activities loss arising from Trading balance sheet management and other trading activities loss arising from Trading 12. Main inputs curve Yield curve Yield Volatilities curve Yield curve Yield curve Yield Volatilities Liquidity adjustment curve Yield curve Yield curve Yield Volatilities curve Yield curve Yield curve Yield curve Yield curve Yield Discounted cash flow model Discounted cash flow model Discounted cash flow Black-Scholes Discounted cash flow model Discounted cash flow model Discounted cash flow model Black-Scholes Adjusted quoted price Discounted cash flow model Discounted cash flow model Discounted cash flow model Black-Scholes Discounted cash flow model Discounted cash flow model Discounted cash flow model Discounted cash flow model Discounted cash flow model Valuation basis/techniques Valuation (continued) Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Assets placements and non-bank cash Non-sovereign and cash collateral on agreements Reverse repurchase securities borrowed debt securities Sovereign Bank debt securities Derivative financial instruments Investment portfolio Loans and advances to customers companies Loans to group Liabilities Derivative financial instruments Other trading liabilities and cash collateral on securities lent agreements Repurchase Customer accounts (deposits) Debt securities in issue Other liabilities MEASUREMENT OF FINANCIAL ASSETS AND LIABILITIES AT LEVEL 2 AT FINANCIAL ASSETS AND LIABILITIES MEASUREMENT OF measuring financial year in used at the end of the reporting information about the valuation techniques The table below sets out as level 2 in the fair value hierarchy: instruments categorised Fair value hierarchy hierarchy Fair value FIVE 152 12.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS

(1) 153 (1) (8) (4) (4) (79) (73) (12) (25) (248) (327) (328) (218) (893) (118)

(1 233) (1 111) changes R’million changes FIVE R’million Unfavourable Unfavourable 1 1 5 5 45 69 23 58 102 297 399 400 282 195 Reflected in the Reflected in the 1 357 1 839 1 639 income statement income statement changes R’million changes R’million (continued) (continued) Favourable Favourable ^ ^ * * (50bps) – 50bps * ^ (10%) – 10% (25%) – 40% Range which unobservable input has been changed Range which unobservable input has been stressed (3%) – 3% Various Various Change in PE Various Various Change in PE multiple multiple Credit spreads spreads Credit Change in PE multiple Various Volatilities Volatilities Significant unobservable input changed Significant unobservable input changed Discount rates Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group (continued) Other Price-earnings Other Price-earnings Discounted cash flows Other Price-earnings Price multiple Black-Scholes Valuation method Valuation Discounted cash flows Valuation method Valuation

10 36 (245) 2 580 6 718 6 509 2 570 Level 3 Level 3 balance balance R’million R’million sheet value sheet value The price-earnings multiple has been stressed on an investment-by-investment basis in order to obtain favourable and unfavourable valuations. The price-earnings multiple has been stressed on an investment-by-investment basis in order to obtain has been assessed by adjusting various Other – The valuation sensitivity for the private equity and embedded derivatives (profit share portfolios) appropriate to reflect the outcome on a portfolio basis for inputs such as expected cash flows, discount rates and earnings multiples. It is deemed through the adjustment of a single input. the purposes of this analysis as the sensitivity of the investments cannot be determined Investment portfolio Total At 31 March 2016 At 31 March Group Assets Derivative financial instruments Investment portfolio Total * ^ SENSITIVITY OF FAIR VALUES TO REASONABLY POSSIBLE ALTERNATIVE ASSUMPTIONS BY ASSUMPTIONS POSSIBLE ALTERNATIVE TO REASONABLY VALUES SENSITIVITY OF FAIR LEVEL 3 INSTRUMENT TYPE are techniques that incorporate assumptions that using valuation measured instruments in level 3 are The fair value of financial shows the sensitivity of these fair values to reasonable observable market data. The following table from not evidenced by prices possible alternative level: assumptions, determined at a transactional Derivative financial instruments At 31 March 2015 At 31 March Fair value hierarchy Fair value hierarchy Group Assets Other debt securities 12. (8) (1) (1) (73) (12) (25) (79) (218) (893) (240) (320) (319) (118)

(1 229) (1 111) R’million R’million changes changes Unfavourable Unfavourable 1 1 45 69 23 58 287 102 390 389 275 195 1 357 1 827 1 632 Reflected in the Reflected in the income statement income statement changes changes R’million R’million Favourable Favourable ^ ^ * * (50bps) – 50bps ^ Range which unobservable input has been stressed (25%) – 40% Range which unobservable input has been changed (10%) – 10% * Various Various Change in PE Various Various Change in PE multiple multiple Credit spreads spreads Credit Various Various Significant unobservable input changed Volatilities Volatilities Significant unobservable input changed Net asset value Change in PE multiple (continued) (continued) Other Price-earnings Other Price-earnings Discounted cash flows Other Valuation method Valuation Black-Scholes Valuation method Valuation Price multiple Price-earnings

10 (245) 6 576 6 331 2 437 2 427 Level 3 Level 3 balance balance R’million R’million sheet value sheet value Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) The price-earnings multiple has been stressed on an investment-by-investment basis in order to obtain favourable and unfavourable valuations. The price-earnings multiple has been stressed on an investment-by-investment basis in order to obtain has been assessed by adjusting various Other – The valuation sensitivity for the private equity and embedded derivatives (profit share portfolios) appropriate to reflect the outcome on a portfolio basis for inputs such as expected cash flows, discount rates and earnings multiples. It is deemed through the adjustment of a single input. the purposes of this analysis as the sensitivity of the investments cannot be determined Investment portfolio Total Total Volatilities or of the variability is a measure Volatility containing optionality. is a key input in the valuation of derivative products Volatility underlying instrument, an estimate of how much a particular for a given derivative underlying. It represents uncertainty in returns parameter or index will change in value over time. Price-earnings multiple The price-to-earnings ratio is an equity valuation multiple. It is a key driver in the valuation of unlisted investments. Credit spreads Credit risk of a counter to the credit the additional yield that a market participant would demand for taking exposure reflect spreads Credit calculation. In general a significant for an instrument forms part of the yield used in a discounted cash flow spread The credit party. in a movement in fair value that is unfavourable for the holder of a financial instrument. in isolation will result spread in a credit increase Discount rates method. The discount cash flows in the discounted cash flow valuation rates used to discount future the interest Discount rates are rate takes into account time value of money and uncertainty of cash flows. * ^ judgement: require that can the principal inputs In determining the value of level 3 financial instruments, the following are At 31 March 2015 At 31 March SENSITIVITY OF FAIR VALUES TO REASONABLY POSSIBLE ALTERNATIVE ASSUMPTIONS BY ASSUMPTIONS POSSIBLE ALTERNATIVE TO REASONABLY VALUES SENSITIVITY OF FAIR LEVEL 3 INSTRUMENT TYPE At 31 March 2016 At 31 March Investment portfolio Fair value hierarchy Fair value hierarchy Company Assets Derivative financial instruments Company Assets Derivative financial instruments FIVE 154 12.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS – – – – – – – – ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ 155 19 535 Level 3 FIVE – – ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ 2 587 1 600 2 178 36 588 14 452 Level 2 130 716 173 522 (continued) (continued) Fair value category – – ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ 69 811 3 798 7 178 2 100 11 692 Level 1 137 475 809 115 367 1 233 2 587 5 561 2 500 3 798 8 778 2 247 7 967 9 855 7 801 11 692 37 399 14 452 14 757 26 779 336 363 285 682 268 191 195 157 Fair value 809 115 367 1 233 2 585 5 561 2 500 3 718 7 864 2 229 7 967 9 855 7 801 10 732 37 242 14 407 14 757 26 779 amount 334 685 284 544 267 677 195 031 Carrying Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Financial instruments for which fair value approximates carrying value. Subordinated liabilities Subordinated Other liabilities Debt securities in issue Liabilities arising on securitisation of own originated loans and advances Liabilities Deposits by banks and cash collateral on agreements Repurchase securities lent Customer accounts (deposits) Loans to group companies Loans to group Other assets Other securitised assets Other loans and advances Bank debt securities Other debt securities Loans and advances to customers Own originated loans and advances to customers securitised Sovereign debt securities Sovereign Reverse repurchase agreements and cash agreements Reverse repurchase collateral on securities borrowed Non-sovereign and non-bank cash placements Non-sovereign ^ months) it is assumed that the are liquid or have a short-term maturity (less than three For financial assets and financial liabilities that in level 1. This assumption also applies to demand deposits their fair value and have been reflected carrying amounts approximate and variable rate financial instruments. and savings accounts without a specific maturity included in customer accounts (deposits) Loans and advances to banks Group 2016 Assets Cash and balances at central banks Fair value of financial amortised cost instruments at At 31 March At 31 March R’million 13. – – – – – – – – ^ ^ ^ ^ ^ ^ ^ ^ ^ Level 3 19 181 – – – ^ ^ ^ ^ ^ ^ ^ ^ ^ 2 166 1 289 5 414 Level 2 29 436 15 395 183 302 139 526 Fair value category – – ^ ^ ^ ^ ^ ^ ^ ^ ^ 569 606 3 648 8 704 2 365 Level 1 10 593 22 727 10 543 835 472 618 875 2 166 1 089 3 268 6 261 3 648 9 993 6 020 4 535 10 593 30 005 15 395 33 422 10 543 266 112 240 727 206 029 161 072 Fair value 835 472 618 875 2 151 1 089 3 268 6 261 3 554 9 715 5 926 4 535 10 449 29 792 15 408 33 422 10 537 amount 264 492 240 142 204 768 160 959 Carrying Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) (continued) Financial instruments for which fair value approximates carrying value. Other liabilities liabilities Subordinated Debt securities in issue Liabilities arising on securitisation of own originated loans and advances Liabilities Deposits by banks Repurchase agreements and cash collateral on agreements Repurchase securities lent Customer accounts (deposits) ^ months) it is assumed that the are liquid or have a short-term maturity (less than three For financial assets and financial liabilities that in level 1. This assumption also applies to demand deposits their fair value and have been reflected carrying amounts approximate and variable rate financial instruments. and savings accounts without a specific maturity included in customer accounts (deposits) Loans and advances to banks and non-bank cash placements Non-sovereign Other loans and advances Other securitised assets Other assets companies Loans to group Group 2015 Assets Cash and balances at central banks debt securities Sovereign Bank debt securities Other debt securities Loans and advances to customers Own originated loans and advances to customers securitised Fair value of financial Fair value of amortised instruments at cost FIVE 156 At 31 March At 31 March R’million 13.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS – – – – – – – ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ 157 1 243 Level 3 FIVE – – ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ 1 592 1 600 36 454 12 860 Level 2 114 750 178 994 (continued) (continued) Fair value category – – ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ 811 2 100 3 798 4 617 11 692 Level 1 137 475 860 987 373 1 592 3 979 6 323 3 798 6 217 1 914 9 979 7 654 11 692 37 265 12 860 14 757 21 385 316 494 259 703 252 225 182 337 Fair value 860 987 373 1 590 3 979 6 323 3 718 6 213 1 914 9 979 7 654 10 732 37 108 12 816 14 757 21 385 amount 314 825 259 619 251 719 182 337 Carrying Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group (continued) Financial instruments for which fair value approximates carrying value. Subordinated liabilities Subordinated Liabilities Deposits by banks and cash collateral on agreements Repurchase securities lent Customer accounts (deposits) Debt securities in issue Other liabilities For financial assets and financial liabilities that are liquid or have a short-term maturity (less than three months) it is assumed that the are liquid or have a short-term maturity (less than three For financial assets and financial liabilities that in level 1. This assumption also applies to demand deposits their fair value and have been reflected carrying amounts approximate and variable rate financial instruments. and savings accounts without a specific maturity included in customer accounts (deposits) ^ Investment in subsidiaries Loans to group companies Loans to group Loans and advances to customers Other assets Bank debt securities Other debt securities Other loans and advances Sovereign debt securities Sovereign Reverse repurchase agreements and cash agreements Reverse repurchase collateral on securities borrowed Non-sovereign and non-bank cash placements Non-sovereign Loans and advances to banks Company 2016 Assets Cash and balances at central banks Fair value of financial Fair value of amortised instruments at cost At 31 March At 31 March R’million 13. – – – – – – – – – ^ ^ ^ ^ ^ ^ ^ 4 237 Level 3 – – – ^ ^ ^ ^ ^ ^ ^ 1171 1 289 6 730 Level 2 29 295 14 063 173 838 140 409 Main inputs curve Yield curve Yield curve Yield curve Yield curve Yield curve Yield curve Yield Fair value category – – ^ ^ ^ ^ ^ ^ ^ 569 606 7 179 2 365 3 648 Level 1 10 593 22 727 10 543 681 137 780 476 1 171 2 825 8 468 7 336 3 648 6 148 10 593 29 864 14 063 30 284 10 543 217 656 252 937 196 565 147 011 Fair value Valuation basis/technique Valuation Discounted cash flow model Discounted cash flow model Discounted cash flow model Discounted cash flow model Discounted cash flow model Discounted cash flow model Discounted cash flow model 681 137 780 476 1 156 2 825 8 364 7 258 3 554 6 148 10 449 29 652 14 076 30 284 10 537 amount 217 357 251 319 195 305 146 994 Carrying Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) (continued) Financial instruments for which fair value approximates carrying value. Assets Bank debt securities Other debt securities Loans and advances to customers Liabilities Deposits by banks and cash collateral on securities lent agreements Repurchase Customer accounts (deposits) Debt securities in issue For financial assets and financial liabilities that are liquid or have a short-term maturity (less than three months) it is assumed that the are liquid or have a short-term maturity (less than three For financial assets and financial liabilities that in level 1. This assumption also applies to demand deposits their fair value and have been reflected carrying amounts approximate and variable rate financial instruments. and savings accounts without a specific maturity included in customer accounts (deposits) period in measuring level 2 reporting The table below sets out information about the valuation techniques used at the end of the and level 3 financial instruments not held at fair value: Subordinated liabilities Subordinated Debt securities in issue Other liabilities Liabilities Deposits by banks and cash collateral on agreements Repurchase securities lent Customer accounts (deposits) ^ Other securitised assets Other assets companies Loans to group Other debt securities Loans and advances to customers Other loans and advances Bank debt securities Loans and advances to banks and non-bank cash placements Non-sovereign debt securities Sovereign Company 2015 Assets Cash and balances at central banks Fair value of financial Fair value of amortised instruments at cost FIVE 158 At 31 March At 31 March R’million 13.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 3 159 91 (15) 106 (163) (160) 11 883 11 883 12 027 12 027 FIVE Maximum credit risk credit Cumulative exposure to exposure 7 (17) (17) (19) (56) (49) 267 267 (228) (247) Fair value adjustment (continued) (continued) Cumulative Year to date Year 112 112 (284) (284) 3 382 5 090 19 885 16 503 17 312 12 222 Fair value adjustment be repaid amount to Remaining at maturity contractual Year to date to Year value value 3 366 5 080 12 034 12 034 12 241 12 241 19 975 16 609 17 139 12 059 Carrying Carrying Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Changes in fair value due to credit risk are determined as the change in the fair value of the financial instrument that is not risk are Changes in fair value due to credit attributable to changes in other market inputs. both Rnil (2015: Rnil). risk were and cumulative changes in fair value of financial liabilities attributable to credit Year-to-date Debt securities in issue Year-to-date and cumulative fair value adjustments to loans and receivables attributable to credit risk were both Rnil (2015: Rnil). risk were attributable to credit fair value adjustments to loans and receivables and cumulative Year-to-date 2015 Customer accounts (deposits) 2015 Loans and advances to customers Debt securities in issue Group Financial liabilities 2016 Customer accounts (deposits) Designated at fair value: loans and Designated at financial liabilities receivables and Group Loans and receivables 2016 Loans and advances to customers At 31 March R’million 14. At 31 March R’million 3 91 (15) 106 (163) (160) 11 883 11 883 12 027 12 027 Maximum credit risk credit Cumulative exposure to exposure 7 (19) (56) (17) (49) (17) 267 267 (228) (247) Fair value adjustment Cumulative Year to date Year 112 112 (284) (284) 3 382 5 090 19 885 16 503 17 312 12 222 Fair value adjustment be repaid amount to Remaining at maturity contractual Year to date to Year value value 3 366 5 080 19 975 16 609 17 139 12 034 12 034 12 059 12 241 12 241 Carrying Carrying Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Changes in fair value due to credit risk are determined as the change in the fair value of the financial instrument that is not risk are Changes in fair value due to credit attributable to changes in other market inputs. both Rnil (2015: Rnil). risk were and cumulative changes in fair value of financial liabilities attributable to credit Year-to-date Debt securities in issue 2015 Customer accounts (deposits) Year-to-date and cumulative fair value adjustments to loans and receivables attributable to credit risk were both Rnil (2015: Rnil). risk were attributable to credit fair value adjustments to loans and receivables and cumulative Year-to-date Debt securities in issue 2015 Loans and advances to customers Company profit through Financial liabilities designated at fair value or loss 2016 Customer accounts (deposits) Designated at fair value: loans and Designated at financial liabilities receivables and (continued) Company Loans and receivables 2016 Loans and advances to customers At 31 March R’million FIVE 160 14. At 31 March R’million

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS – 6 161 116 647 2015 2015 2015 6 148 6 148 6 085 8 090 3 015 6 052 3 874 9 926 15 225 15 225 12 325 30 284 FIVE – Company Company Company 132 144 523 2016 2016 2016 7 654 7 654 2 581 2 766 1 018 5 468 15 325 38 912 15 325 14 221 21 385 33 444 (continued) (continued) 113 129 649 560 2015 2015 2015 6 148 6 261 6 204 8 224 5 301 6 221 3 874 16 556 16 556 12 355 33 422 10 095 Group Group Group 146 172 827 2016 2016 2016 5 468 7 655 7 801 1 531 3 132 4 769 1 839 16 916 33 444 38 912 16 916 14 509 26 779 Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group The assets transferred and not derecognised in the above and not derecognised The assets transferred fair valued at R16.1 billion are agreements repurchase pledged as security for the (2015: R16.0 billion). They are agreement. term of the underlying repurchase Assets agreements Reverse repurchase Cash collateral on securities borrowed and securities borrowing repurchase As part of the reverse securities that it is allowed has received the group agreements, R13.1 billion (2015: R7.0 billion) has been to sell or repledge. parties in connection with financing to third or repledged resold activities or to comply with commitments under short sale transactions. Liabilities agreements Repurchase The country risk of loans and advances to banks The country risk of loans and advances to banks lies in the following geographies: South Africa Europe (excluding UK) Europe Australia United States of America Asia Other Reverse repurchase agreements Reverse repurchase agreements and cash collateral on securities borrowed and repurchase agreements and cash collateral on securities lent Loans and advances to banks Cash and balances at central banks Cash and balances Other The country risk of cash and balances at central banks The country risk of cash lies in the following geographies: South Africa 17. 16. 15. At 31 March R’million At 31 March R’million At 31 March R’million – – 397 161 967 2015 2015 6 600 5 235 3 588 8 928 6 086 31 358 31 358 15 981 11 990 31 358 15 981 19 368 – – Company Company 626 626 157 2016 2016 5 440 2 486 8 588 3 729 4 234 40 699 21 212 41 325 41 325 12 317 12 317 19 487 20 20 967 397 161 2015 2015 6 600 4 288 6 086 5 886 31 358 11 990 31 378 31 378 10 279 17 332 17 332 19 368 – – Group Group 626 626 156 2016 2016 5 440 3 360 3 729 5 012 40 699 21 212 41 325 41 325 10 239 13 968 13 968 19 487 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Government securities debt securities lies sovereign The country risk of the in the following geographies: South Africa Other in The country risk of the bank debt securities lies the following geographies: South Africa United States of America Bonds Bonds Debentures Floating rate notes United Kingdom (excluding UK) Europe Other Treasury bills Treasury Bank debt securities Sovereign debt securities Sovereign debt FIVE 162 19. 18. At 31 March R’million At 31 March R’million

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS – – – 163 75 75 622 2015 6 821 6 494 1 429 13 390 11 264 13 390 FIVE – Company 84 84 298 789 950 2016 9 869 1 103 7 022 2 509 11 354 11 354 (continued) (continued) – 75 170 177 209 622 2015 7 654 4 850 1 466 12 749 10 275 12 749 Group 84 298 126 210 951 2016 1 103 7 797 1 148 2 655 11 150 12 761 12 761 Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Bonds Commercial paper Commercial Floating rate notes Liquid asset bills Other investments

The country risk of the other debt securities lies in the The country risk of the other debt securities lies following geographies: South Africa United Kingdom Europe (excluding UK) Europe Australia Other Other debt securities 20. At 31 March R’million – – –

6 ^ 87 27 92 36 388 165 159 887 255 190 190 4 484 4 768 1 142 2 511 3 653 (9 820) 12 934 13 574 12 401 fair value Negative –

7 2 5 2 ^ 65 27 89 295 206 167 175 174 174 299 (714) 6 948 7 514 3 178 3 554 4 253 4 342 4 349 15 178 2015 Positive fair value

3

500 585 4 212 2 647 1 600 5 328 1 799 1 717 1 720 5 608 10 110 10 001 30 039 15 599 45 638 53 350 120 532 144 855 332 442 311 225 648 414 principal Notional amounts – –

– – ^ 21 73 15 30 315 703 721 132 132 211 6 711 9 973 3 737 3 876 1 424 4 151 5 575 16 999 13 424 (13 369) fair value Negative – –

9 1 3 ^ 74 19 39 403 115 399 101 101 237 5 616 3 524 9 543 2 172 2 389 4 669 5 068 5 072 (1 538) 15 843 2016 Positive fair value –

4 100 130 997 1 058 9 931 1 473 7 006 4 210 1 001 8 472 35 137 52 367 44 464 31 723 76 187 88 876 171 801 259 305 238 643 249 862 Notional principal amounts Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Mainly includes profit shares received as part of lending transactions. Less than R1 million.

The risks associated with derivative instruments are monitored in the same manner as for the underlying instruments. Risks are also as for the underlying instruments. Risks are in the same manner monitored derivative instruments are The risks associated with into account possible correlations. to take range in order the product across measured sheet date and do volume of business outstanding at the balance notional principal amounts indicate the In the tables that follow, positive or value of future the present represents of a derivative financial instrument amounts at risk. The fair value not represent out by the that instrument been closed arising from had the rights and obligations would have occurred negative cash flows which at balance sheet date. market transaction in an orderly group The group enters into various contracts for derivatives both as principal for trading purposes and as customer for hedging foreign foreign purposes and as customer for hedging for derivatives both as principal for trading enters into various contracts The group rate agreements. and forward options, swaps These include financial futures, rate exposures. exchange and interest * ^ At 31 March R’million Derivative financial instruments Derivative financial Group Foreign exchange derivatives Foreign Forward foreign exchange contracts foreign Forward Currency swaps Currency OTC options bought and sold Other foreign exchange contracts Other foreign Interest rate derivatives Interest Caps and floors Swaps Forward rate agreements Forward OTC options bought and sold Other interest rate contracts Other interest Equity and stock index derivatives OTC options bought and sold Equity swaps and forwards OTC derivatives Exchange traded futures Exchange traded options Warrants

Commodity derivatives OTC options bought and sold Commodity swaps and forwards Credit derivatives Credit Embedded derivatives* Cash collateral Derivatives per balance sheet FIVE 164

21.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS – – –

6 ^ 165 87 27 92 36 388 165 159 887 255 190 190 4 484 4 768 1 142 2 511 3 653 (9 820) 12 934 13 574 12 401 FIVE fair value Negative –

7 2 5 2 ^ 65 27 89 91 295 206 167 174 174 174 (714) 6 948 7 514 3 178 3 553 4 253 4 342 4 349 14 969 2015 Positive fair value (continued) (continued)

3

330 585 4 212 2 647 1 600 5 328 1 799 1 717 1 720 5 608 10 108 10 001 30 039 15 599 45 638 53 350 120 532 144 853 332 442 311 225 648 244 principal Notional amounts – –

^ ^ – – 21 73 15 30 315 703 721 132 132 211 6 711 9 973 3 737 3 876 1 424 4 151 5 575 16 999 13 424 (13 369) fair value Negative – –

9 1 3 ^ 74 19 39 10 403 115 399 101 101 5 616 3 524 9 543 2 172 2 389 4 669 5 068 5 072 (1 538) 15 616 2016 Positive fair value (continued) –

4 Notes to the financial statements to the financial Notes 100 130 997 1 058 9 931 1 473 7 006 4 210 1 001 8 472 35 137 52 367 44 464 31 723 76 187 88 876 171 801 259 305 238 643 249 862 Notional principal amounts Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Mainly includes profit shares received as part of lending transactions. Less than R1 million.

At 31 March R’million * ^ Derivative financial instruments instruments financial Derivative Company Foreign exchange derivatives Foreign Forward foreign exchange contracts foreign Forward Currency swaps Currency OTC options bought and sold Other foreign exchange contracts Other foreign Interest rate derivatives Interest Caps and floors Swaps Forward rate agreements Forward OTC options bought and sold Other interest rate contracts Other interest Equity and stock index derivatives OTC options bought and sold Equity swaps and forwards OTC derivatives Exchange traded futures Exchange traded options Warrants

Commodity derivatives OTC options bought and sold Commodity swaps and forwards Credit derivatives Credit Embedded derivatives* Cash collateral Derivatives per balance sheet 21. 40 (52) 476 271 528 978 (943) 2015 2015 2015 1 289 2 664 6 917 9 581 159 028 159 971 – Company Company Company (79) 397 992 452 373 595 (672) 2016 2016 2016 3 307 2 616 5 923 195 250 194 578 40 (18) 472 271 490 978 2015 2015 2015 1 289 2 913 7 059 9 972 (1 139) 172 993 174 132 – Group Group Group (31) 992 397 398 367 595 (910) 2016 2016 2016 3 557 2 803 6 360 208 182 207 272 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Unlisted equities includes loan instruments that are convertible into equity. Refer to note 26 for unlisted equities now shown as interests in into equity. Unlisted equities includes loan instruments that are convertible associated undertakings. Impairments of other loans and advances Listed equities loans and advances to customers Gross Impairments of loans and advances to customers other loans and advances Gross Net other loans and advances Listed equities Bonds Floating rate notes Unlisted equities* Net loans and advances to customers Loans and advances to customers Loans and advances to customers and other loans and advances Investment portfolio Securities arising from Securities arising trading activities * For further analysis on loans and advances refer to pages 42 to 50 in the risk management section. For further analysis on loans and advances refer to pages 42 to 50 in the risk management

FIVE 166 24. 23. 22.

At 31 March R’million At 31 March R’million At 31 March R’million

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS – – – – – – – 4 4 167 – 90 52 86 52 52 52 90 905 538 995 416 412 468 (126) (612) 853 2015 1 053 FIVE – – – – 8 8 8 Company 19 19 60 52 90 69 69 (19) 592 159 751 782 532 853 140 488 419 496 (363) (740) 2016 (continued) (continued) – – – – 1 1 14 44 (27) (17) (17) (27) 17 (27) 987 170 648 172 482 499 455 (149) (605) 970 169 2015 1 157 1 076 4 1 4 (6) (6) (6) Group 65 19 20 11 15 17 65 (19) 454 691 250 941 970 832 680 169 230 519 517 (378) (744) 2016 Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Total specific impairments Total portfolio impairments Total impairments Total Portfolio impairment Balance at the beginning of the year Transfers Balance at the end of the year Specific and portfolio impairments Specific and portfolio in specific and portfolio Reconciliation of movements impairments: Loans and advances to customers Specific impairment Balance at the beginning of the year Charge to the income statement in the income statement recognised Reversals and recoveries Utilised Balance at the end of the year Balance at the end of the year Portfolio impairment Balance at the beginning of the year Transfers Exchange adjustment Balance at the end of the year Other loans and advances Specific impairment Balance at the beginning of the year (Release)/charge to the income statement Charge/(release) to the income statement Charge/(release) Loans and advances to customers Loans and advances and advances and other loans (continued) Reconciliation of income statement charge: Loans and advances to customers Securitised assets (refer to note 25) Securitised assets (refer Specific impairment charge to income statement to income statement Portfolio impairment charge/(release) Portfolio impairment charge to income statement Other loans and advances Specific impairment charge to income statement income statement charge Total 24. At 31 March R’million – – – – – – – – – – – 137 137 2015 – – – – – – – – – – – – – Company 2016 – 1 1 1 1 2 (2) 74 544 618 2015 4 537 4 535 1 089 – 1 1 1 4 5 6 (6) Group 115 115 809 2016 7 973 7 967 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Cash and cash equivalents Other debt securities The associated liabilities are recorded on balance sheet in recorded The associated liabilities are the following line items: Specific and portfolio impairments and portfolio Reconciliation of movements in group-specific impairments of assets that have been securitised: Specific impairment Balance at the beginning of the year Balance at the end of the year Portfolio impairment Balance at the beginning of the year Charge to the income statement Balance at the end of the year portfolio and specific impairments on balance sheet Total Securitised assets and liabilities Securitised assets arising on securitisation Gross own originated loans and advances own originated loans and Gross to customers securitised Impairments of own originated loans and advances Impairments of own originated to customers securitised Net own originated loans and advances to customers Net own originated loans and advances to securitised Other securitised assets are made up of the following made up of the following Other securitised assets are categories of assets: Total other securitised assets other Total Liabilities arising on securitisation of own originated loans and advances FIVE 168 25. At 31 March R’million

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS – – – – – – – – – – – – – – – – 169 (36) (74) (54) (36) (36) (36) 663 150 (625) (132) 2015 2015 FIVE – – – – – – – – – – – – – – – – – – – Company Company 71 (36) (35) 2016 2016 5 086 5 086 5 086 5 086 (continued) (continued) – – – – 1 7 – – 8 88 12 61 12 14 12 60 60 52 60 (76) (74) (11) 642 141 (625) (132) 2015 2015 – – 1 1 (6) (6) (6) (6) 6 Group Group 24 13 56 10 25 71 12 60 116 (11) (122) (104) (115) 2016 2016 5 145 5 145 5 090 5 145 Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Investec Bank Limited sold R5.8 billion of its unlisted equity portfolio to an investment vehicle, Investec Equity Partners (Pty) Ltd (IEP) on Investec Bank Limited sold R5.8 billion of its unlisted 11 January Investec Bank holds 45% of the voting rights and 2016 for R0.7 billion in cash and a 45% stake in IEP to the value of R5.1 billion. associate. As a result IEP has been accounted for as an equity accounted over the entity. representation on the board does not constitute control

Deferred taxation assets Deferred Deferred taxation liabilities Deferred Net deferred taxation (liabilities)/assets Net deferred The net deferred taxation assets arise from: The net deferred capital allowances Deferred Income and expenditure accruals Income and expenditure fair value adjustments on financial instruments Unrealised assessed losses from relief Tax Deferred taxation on acquired intangibles taxation on acquired Deferred Impairment of loans and advances to customers Finance lease accounting Other temporary differences taxation (liabilities)/assets Net deferred year taxation Reversal/(charge) to income statement – current income in other comprehensive Reversal/(charge) directly Acquisitions Prior year tax adjustments Fair value on cash flow hedges taxation (liabilities)/assets: Reconciliation of net deferred At the beginning of the year At year end Interests in associated undertakings consist of: in associated undertakings Interests Net asset value Investment in associated undertakings Investment in associated comprise unlisted investments. Associated undertakings of net assets: in our share Analysis of the movement At the beginning of the year Acquisitions* Operating loss from associates (included in other operating Operating loss from income) Exchange adjustments At the end of the year Interest in associated undertakings Interest in associated Deferred taxation At reporting date, summarised financial information of IEP is not available and the purchase price allocation is provisional. IEP is not available and the purchase date, summarised financial information of At reporting * Deferred taxation assets are recognised to the extent it is likely that profits will be available in future periods. The assessment of will be available in future to the extent it is likely that profits recognised taxation assets are Deferred recognised in not taxation assets are Deferred projections. is based on past performance and current profits the likelihood of future of capital losses as crystallisation of capital gains and the eligibility of potential losses is uncertain. respect 27. 26.

At 31 March At 31 March R’million At 31 March R’million – 1 (5) 83 59 57 25 (82) (72) 16 39 (81) 456 192 812 758 880 115 812 (539) 196 204 994 (620) 236 (644) (620) 2015 Total – 1 (3) Company 39 54 24 41 17 (73) (68) (70) 618 582 681 107 618 521 246 324 585 (414) 132 (486) 179 (486) (502) 2016 1 734 Equipment – – 9 3 6 1 (8) (1) (4) (8) 83 17 47 45 469 160 152 163 160 (105) 209 280 204 (113) (113) 2015 (118) 1 262 Furniture and vehicles – – – – 2 (1) (1) Group (3) 34 11 24 36 34 17 (20) 13 (21) 12 (21) (24) 521 176 316 846 324 2016 1 456 3 656 Leasehold improvements Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Net carrying value At the end of the year Depreciation Disposals Accumulated depreciation At the beginning of the year At the end of the year Disposals Additions 2015 Cost At the beginning of the year Net carrying value At the end of the year Depreciation Disposals Accumulated depreciation At the beginning of the year At the end of the year Disposals Additions Acquisition of subsidiary undertaking Group 2016 Cost At the beginning of the year Settlement debtors Property and equipment Trading properties Trading Prepayments and accruals Prepayments Trading initial margins Trading Investec Import Solutions debtors Investec Import Solutions Fee debtors Other

Other assets FIVE 170 29. At 31 March R’million 28. At 31 March R’million

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS – (4) 171 (3) 54 55 84 80 (79) (71) (75) 187 802 751 833 102 802 (536) (615) 198 (635) 2015 (615) Total FIVE – 1 (1) Company 36 53 95 80 (72) (67) (79) (65) 141 621 586 649 621 (408) (480) 157 (492) (480) 2016 (continued) (continued) Equipment 7 2 5 – (4) (6) (1) (4) (7) 34 80 84 30 147 141 148 147 (107) (113) (118) 2015 (113) Furniture and vehicles – – – 2 1 (1) (1) Group (3) 12 34 11 24 36 34 80 (21) (79) (22) 11 (25) (22) 2016 Leasehold improvements Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group (continued) Net carrying value At the end of the year Depreciation Accumulated depreciation At the beginning of the year At the end of the year Disposals Additions 2015 Cost At the beginning of the year Net carrying value At the end of the year Depreciation Disposals Accumulated depreciation At the beginning of the year At the end of the year Disposals Additions Company 2016 Cost year At the beginning of the At the end of the year At the beginning of the year Disposals Exchange adjustment Property and equipment Property and Investment properties Investment properties are carried at fair value and are classified as level 3. classified carried at fair value and are are Investment properties unrealised. in investment income on the income statement and are recognised Revaluations are The valuation is performed by valued by directors. are The properties twice annually. values its investment properties The group yield applicable at the time. at a market-related capitalising the annual net income of a property 30. 29. At 31 March R’million At 31 March R’million – 5 25 (25) (69) (55) 651 156 133 676 651 (474) 177 (474) 520 (543) (424) Total Total – – 2 2 1 – (1) (2) (2) 99 99 99 (97) 99 (98) (95) (97) software software Company Internally generated – 5 25 (23) (68) (53) 552 154 132 577 552 (377) 175 421 (445) (329) (377) software software Acquired Acquired 5 34 (56) (26) 190 671 165 524 412 671 (112) (481) (481) 532 (593) (430) Total Total 1 117 – – – – – – – – – – – – (39) (39) 373 412 412 ships Client relation- – Group 8 – (5) (3) (2) 15 10 18 (97) (94) (97) 112 120 112 104 (102) software software Internally generated – 5 26 (53) (24) (68) 175 559 155 133 585 559 (384) (384) 428 (452) (336) software software Acquired Acquired Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Net carrying value At the end of the year Amortisation Disposals Accumulated amortisation and impairments At the beginning of the year At the end of the year Disposals Additions 2015 Cost At the beginning of the year Net carrying value At the end of the year Amortisation Accumulated amortisation and impairments At the beginning of the year At the end of the year Additions Acquisitions of a subsidiary Acquisitions of a subsidiary undertaking 2016 Cost year At the beginning of the Intangible assets FIVE 172 At 31 March At 31 March R’million 31.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 6 173 70 43 25 121 256 377 370 367 171 412 1 437 1 993 1 050 1 616 1 787 FIVE liabilities assets and Fair value of (continued) (continued) Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Other liabilities Liabilities Net fair value of assets acquired Investec Import Solutions held in Fair value of existing 48.5% equity interest Cash consideration Loan eliminated on consolidation Import Solutions was R204.9 millionincome of Investec the operating 2016, 2015 to 31 March period 1 July the post acquisition For at the occurred taxation amounted to R68.2 million. If the acquisition of Investec Import Solutions had before and the profit would be R269.5 million and taxation of the group before in operating income and profit the increase year, beginning of the current R93.1 million respectively. 2016 goodwill has not been impaired. As at 31 March to in associated undertakings. For further information on this associate please refer an interest acquired During the year the group note 26. R’million Loans and advances to banks Other assets and equipment Property taxation liabilities Deferred Fair value of consideration Goodwill Investment portfolio taxation assets Deferred Intangible assets Assets 2016 of the Investec with the management and shareholders Bank Limited concluded transaction agreements On 1 July 2015, Investec not already 51.5% of the Blue Strata group, for the acquisition of the remaining Blue Strata group, previously Import Solutions group, in 2002. over the past 13 years since Blue Strata's founding Blue Strata have had a fruitful partnership owned by it. Investec and to clients by a compelling value proposition Investec Import Solutions offers increase, and complexities As import regulations to Investec Import Solutions services in offering exciting benefits unfolding and Investec foresees simplifying the import process, the opportunity to unlock business offers believes that the full integration of the The group existing client base. of Investec’s more its growth. will allow Investec Import Solutions to accelerate substantial benefits and shown below: goodwill arising and total consideration paid are The assets and liabilities at the date of acquisition, Acquisitions 32. – – – 13 119 773 205 (199) (190) (774) 2015 2015 2 515 1 874 2 930 1 084 2 825 5 525 R’million 7 23 180 201 (519) (403) 2016 – – 4 296 1 464 3 979 (1 270) Company Net indebtedness (523) R’million 2016 5 759 1 087 6 323 * * * * * – 905 535 112 258 2015 R’million * * * * 319 174 (682) (151) 2015 3 608 3 268 11 534 112 737 259 2016 1 653 R’million Shares at book value Shares Group % 100 319 100 100 100 100 100 100 100 (523) (101) 2016 6 828 5 460 (1 063) Holding

R15 R240 R100 R100 capital R1 000 R1 000 R1 000 Issued ordinary $56 478 463 Banking Trade and asset Trade financing Investment holding Investment holding Investment holding Investment holding Property developer Property Import logistics and trade finance Nature of Nature business Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) billion (2015: R2.8 billion) is unsecured interest-bearing, with no fixed terms of repayment. with no fixed terms of interest-bearing, billion (2015: R2.8 billion) is unsecured

Less than R1 million. Material direct subsidiaries Material direct of Investec Bank Limited Investec Bank (Mauritius) Limited^ Loans from holding company – Investec Limited holding company Loans from Loans to fellow subsidiaries investment in Investec Limited share Preference Preference share investment in fellow subsidiaries share Preference Intergroup derivative instruments Intergroup

Reichmans Holdings (Pty) Ltd Sechold Finance Services (Pty) Ltd KWJ Investments (Pty) Ltd AEL Investment Holdings (Pty) Ltd Investpref Limited Investpref Copperleaf Country Estate (Pty) Ltd Investec Import Solutions (Pty) Ltd Other

Loans to group companies Loans to group Investment in subsidiaries There were no subordinated loan amounts included in the loans to group companies. loan amounts included in the loans to group no subordinated were There ^ Mauritius. * Details of subsidiary and associated companies which are not material to the financial position of the group are not reflected above. not are not material to the financial position of the group Details of subsidiary and associated companies which are repayment. terms of with no fixed interest-bearing, unsecured companies are group Loans to/(from) FIVE 174 At 31 March

33. 34. At 31 March R’million R6.2

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 175 77 797 826 319 2015 2015 1 623 4 126 4 522 FIVE Company Company 576 829 170 2016 2016 1 405 2 167 4 333 6 670 (continued) (continued) 77 826 797 2015 2015 1 623 1 149 4 291 5 517 Group Group 576 829 170 2016 2016 1 405 2 267 5 228 7 665 Type of structured entity of structured Type mortgages Securitised residential mortgages Securitised residential mortgages Securitised residential mortgages Securitised residential mortgages Securitised residential mortgages Securitised residential mortgages party originated residential Securitised third Notes to the financial statements to the financial Notes (continued) Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group For additional detail on the assets and liabilities arising on securitisation refer to note 25. For details of the risks to For additional detail on the assets and liabilities its securitisations are included in the risk management report on pages 53 which the group is exposed through all of and 54.

Short positions – gilts Repayable in: months Less than three Deposits Three months to one year Three One to five years Debt securities in issue Other trading liabilities Name of principal structured entity Name of principal structured (Pty) Ltd Private Mortgages 1 (RF) Private Residential Mortgages (RF) Limited 2 (RF) Limited Fox Street 3 (RF) Limited Fox Street 4 (RF) Limited Fox Street 5 (RF) Limited Fox Street Integer Home Loans (Pty) Ltd Grayston Conduit 1 (RF) Limited has been wound up. Grayston Conduit 1 (RF) Limited has been wound The key assumptions for the main types of structured entities which the group consolidates are summarised below: summarised consolidates are entities which the group The key assumptions for the main types of structured The group has a senior and subordinated investment in a third party originated structured entity. The structured entity is consolidated The structured entity. party originated structured third investment in a has a senior and subordinated The group the on to fund any losses above those incurred required is not group economic benefits. The to residual exposure due to the group's investments made. The group has securitised residential mortgages in order to provide investors with exposure to residential mortgage risk and to raise mortgage risk and to raise to residential investors with exposure to provide mortgages in order has securitised residential The group is not required notes. The group holdings of subordinated consolidated due to the group's entities are funding. These structured of securitised in any impairment reflected such losses are it has retained, on the notes to fund any losses above those incurred mortgages as those assets have not been derecognised. Investec Bank Limited has no subordinated investment interest in the following structured entities which are consolidated. entities which are structured in the following investment interest has no subordinated Investec Bank Limited dominant factor in deciding control. not the in which voting or similar rights are entity is an entity Typically a structured the include assessing the purpose and design of over these structures has control whether the group The judgements to assess is acting as a principal in its activities party with power over the relevant or another involved whether the group considering entity, on behalf of others. own right or as an agent CONSOLIDATED STRUCTURED ENTITIES STRUCTURED CONSOLIDATED Investment in subsidiaries Investment in Securitised third party originated residential mortgages party originated residential Securitised third Securitised residential mortgages Securitised residential

36. 35.

34. At 31 March R’million At 31 March R’million

– – – – 50 86 543 400 175 125 325 317 997 860 106 750 342 368 500 810 200 200 788 2015 2015 2 161 9 874 2 063 1 000 1 350 3 492 10 449 10 449

– – – – Company Company 92 683 779 400 101 638 860 106 750 365 392 500 810 159 601 325 339 200 200 2016 2016 2 575 4 037 1 100 2 194 1 000 10 332 10 732 10 732

– – – – 86 50 589 400 175 997 860 106 750 342 368 500 810 125 325 317 200 200 885 2015 2015 2 267 9 874 1 350 2 063 1 000 3 741 10 449 10 449

– – – – Group Group 92 400 101 601 638 860 106 750 365 392 500 810 159 325 339 200 200 2016 2016 1 021 2 730 1 291 5 042 1 100 2 194 1 000 10 332 10 732 10 732 Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) In more than five years In more In more than two years, but not more than five years than two years, but not more In more All subordinated debt issued by Investec Bank Limited and All subordinated its subsidiaries is denominated in South African Rand. Remaining maturity: In one year or less, or on demand than two years but not more than one year, In more IV035 variable rate subordinated unsecured callable bonds unsecured IV035 variable rate subordinated IV034 fixed rate subordinated unsecured callable bonds unsecured IV034 fixed rate subordinated IV015 variable rate subordinated unsecured callable bonds unsecured IV015 variable rate subordinated callable bonds unsecured IV017 indexed rate subordinated callable bonds unsecured IV019 indexed rate subordinated callable bonds unsecured IV022 variable rate subordinated callable bonds unsecured IV023 variable rate subordinated callable bonds unsecured IV024 variable rate subordinated callable bonds unsecured IV025 variable rate subordinated callable bonds unsecured IV026 variable rate subordinated callable bonds unsecured IV030 indexed rate subordinated bonds callable unsecured IV030A indexed rate subordinated callable bonds unsecured IV031 variable rate subordinated callable bonds unsecured IV032 variable rate subordinated callable bonds unsecured IV033 variable rate subordinated IV014 10.545% subordinated unsecured callable bonds unsecured IV014 10.545% subordinated callable bonds unsecured IV016 variable rate subordinated callable bonds unsecured IV019A indexed rate subordinated IV08 13.735% subordinated unsecured callable unsecured IV08 13.735% subordinated upper tier 2 bonds callable unsecured IV09 variable rate subordinated upper tier 2 bonds callable bonds unsecured IV013 variable rate subordinated Issued by Investec Bank Limited Settlement liabilities Other creditors and accruals Other creditors liabilities Other non-interest-bearing

Subordinated liabilities Other liabilities 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 only remedy debt is the non-payment of principal or interest. to the subordinated The only event of default in relation In a winding up no debt in the event of default is to petition for the winding up of the issuing entity. the holders of the subordinated have been paid in full. debt until all other creditors of the subordinated amount will be paid in respect FIVE 38. 37.

At 31 March R’million At 31 March R’million 176

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 177 FIVE (continued) (continued) Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group (continued) IV019A INDEXED RATE SUBORDINATED UNSECURED CALLABLE BONDS SUBORDINATED IV019A INDEXED RATE due in callable bonds are unsecured subordinated R339 million (2015: R317 million) Investec Bank Limited IV019A locally registered at a rate of 2.60%. and 30 September on these inflation-linked bonds is payable semi-annually on 31 March 2028. Interest March 2028, but the company has the of the R210 South African government bond. The maturity date is 31 March The IV019A is a replica 3 April 2023. capital disqualification or from option to call the bonds upon regulatory IV019 INDEXED RATE SUBORDINATED UNSECURED CALLABLE BONDS SUBORDINATED IV019 INDEXED RATE due in callable bonds are unsecured subordinated R92 million (2015: R86 million) Investec Bank Limited IV019 locally registered at a rate of 2.60%. and 30 September on these inflation-linked bonds is payable semi-annually on 31 March 2028. Interest March 2028, but the company has the of the R210 South African government bond. The maturity date is 31 March The IV019 is a replica 3 April 2023. capital disqualification or from option to call the bonds upon regulatory IV017 INDEXED RATE SUBORDINATED UNSECURED CALLABLE BONDS SUBORDINATED IV017 INDEXED RATE due callable bonds are unsecured subordinated R2 194 million (2015: R2 063 million) Investec Bank Limited IV017 locally registered on these inflation-linked bonds is payable semi-annually on 31 January and 31 July at a rate of 2.75%. in January 2022. Interest of the R212 South African government bond. The maturity date is 31 January 2022, but the company has the The IV017 is a replica 31 January 2017. capital disqualification or from option to call the bonds upon regulatory IV016 VARIABLE RATE SUBORDINATED UNSECURED CALLABLE BONDS SUBORDINATED RATE IV016 VARIABLE due in December 2021. callable bonds are unsecured subordinated R325 million Investec Bank Limited IV016 locally registered JIBAR plus 6 June and 6 September at a rate equal to three-month 6 March, on 6 December, is payable quarterly in arrears Interest the company has the option to call the 2.75%, up to and excluding 6 December 2021. The maturity date is 6 December 2021, but 2016. 6 December disqualification or from bonds upon regulatory IV015 VARIABLE RATE SUBORDINATED UNSECURED CALLABLE BONDS SUBORDINATED RATE IV015 VARIABLE due in bonds are callable unsecured subordinated Limited IV015 locally registered R601 million (2015: R1 350 million) Investec Bank 20 June and 20 September at a rate equal to 20 March, on 20 December, is payable quarterly in arrears September 2022. Interest up to and excluding and including 20 September 2017, From JIBAR plus 2.65% basis points until 20 September 2017. three-month 2022, JIBAR plus 4.00%. The maturity date is 20 September is paid at a rate equal to three-month 20 September 2022 interest 20 September 2017. R749 million or from capital disqualification upon regulatory but the company has the option to call the bonds year. by Invested Bank Limited during the current repurchased IV015 bonds were IV014 10.545% SUBORDINATED UNSECURED CALLABLE BONDS IV014 10.545% SUBORDINATED in due callable bonds are unsecured subordinated IV014 locally registered Rnil (2015: R125 million) Investec Bank Limited of 10.545% until 22 June 2015. on 22 June and 22 December at a fixed rate is payable six-monthly in arrears June 2020. Interest on 22 June, is paid quarterly in arrears 22 June 2020, interest including 22 June 2015, up to and excluding From and JIBAR plus 5.50%. The maturity date is 22 June 2020, at a rate equal to three-month 22 December and 22 March 22 September, called on 22 June 2015. 22 June 2015. The bonds were from but the company has the option to call the bonds IV013 VARIABLE RATE SUBORDINATED UNSECURED CALLABLE BONDS SUBORDINATED RATE IV013 VARIABLE June 2020. due in callable bonds are unsecured subordinated IV013 locally registered Rnil (2015: R50 million) Investec Bank Limited JIBAR to three-month 22 June, 22 September and 22 December at a rate equal on 22 March, is payable quarterly in arrears Interest is paid at a rate 2020, interest and including 22 June 2015, up to and excluding 22 June plus 2.75% until 22 June 2015. From but the company has the option to call the bonds from JIBAR plus 5.50%. The maturity date is 22 June 2020, equal to three-month called on 22 June 2015. 22 June 2015. The bonds were IV09 VARIABLE RATE SUBORDINATED UNSECURED CALLABLE UPPER TIER 2 BONDS UNSECURED CALLABLE SUBORDINATED RATE IV09 VARIABLE without a maturity date. Interest callable bonds unsecured subordinated Limited IV09 locally registered R200 million Investec Bank JIBAR plus 3.75% equal to three-month 31 January and 30 April at a rate 31 October, 31 July, on is paid quarterly in arrears payment date falling any interest 30 April 2013 or on to call the bonds from until 30 April 2018. The company has the option JIBAR payable quarterly in arrears of 5.625% above the bonds will pay interest after 30 April 2018. If not called by 30 April 2018, until called. IV08 13.735% SUBORDINATED UNSECURED CALLABLE UPPER TIER 2 BONDS UNSECURED CALLABLE UPPER TIER IV08 13.735% SUBORDINATED date. Interest callable bonds without a maturity unsecured subordinated registered R200 million Investec Bank Limited IV08 locally has the per annum until 30 April 2018. The company on 31 October and 30 April at a rate of 13.735% is paid six-monthly in arrears 2018, falling after 30 April 2018. If not called by 30 April payment date 30 April 2013 or on any interest from option to call the bonds until called. 5.625% above JIBAR payable quarterly in arrears st of the bonds will pay intere Subordinated liabilities Subordinated 38. (continued) Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) IV033 VARIABLE RATE SUBORDINATED UNSECURED CALLABLE BONDS SUBORDINATED RATE IV033 VARIABLE due in callable bonds are unsecured subordinated R159 million (2015: Rnil) Investec Bank Limited IV033 locally registered 11 August, 11 November and 11 February at a rate equal to the three- is payable quarterly on 11 May, February 2026. Interest 2026, but the company has the month JIBAR plus 4.25% up to and excluding 11 February 2026. The maturity date is 11 February 11 February 2021. capital disqualification or from option to call the bonds upon regulatory IV032 VARIABLE RATE SUBORDINATED UNSECURED CALLABLE BONDS SUBORDINATED RATE IV032 VARIABLE due in August 2023. callable bonds are unsecured subordinated R810 million Investec Bank Limited IV032 locally registered JIBAR plus 2.95%. 14 August at a rate equal to the three-month 14 May, 14 February, payable quarterly on 14 November, Interest is capital disqualification or regulatory The maturity date is 14 August 2023, but the company has the option to call the bonds upon 14 August 2018. from IV031 VARIABLE RATE SUBORDINATED UNSECURED CALLABLE BONDS SUBORDINATED RATE IV031 VARIABLE 2025. Interest due in March callable bonds are unsecured subordinated R500 million Investec Bank Limited IV031 locally registered 2.95% JIBAR plus 11 June and 11 September at a rate equal to the three-month 11 March, is payable quarterly on 11 December, 2025, but the company has the option to call the bonds upon 2025. The maturity date is 11 March up to and excluding 11 March 2020. 11 March capital disqualification or from regulatory R365 million (2015: R342 million) Investec Bank Limited IV030 locally registered subordinated unsecured callable bonds are due bonds are callable unsecured subordinated Limited IV030 locally registered R365 million (2015: R342 million) Investec Bank and 31 July at a rate of 2.00%. on these inflation-linked bonds is payable semi-annually on 31 January in January 2025. Interest of the I2025 South African government bond. The maturity date is 31 January 2025, but the company has The IV030 is a replica 31 January 2020. capital disqualification or from the option to call the bonds upon regulatory UNSECURED CALLABLE BONDS SUBORDINATED IV030A INDEXED RATE due in callable bonds are unsecured subordinated R392 million (2015: R368 million) Investec Bank Limited IV030A locally registered on these inflation-linked bonds is payable semi-annually on 31 January and 31 July at a rate of 2.00%. The January 2025. Interest of the I2025 South African government bond. The maturity date is 31 January 2025, but the company has the IV030A is a replica 31 January 2020. capital disqualification or from option to call the bonds upon regulatory IV026 VARIABLE RATE SUBORDINATED UNSECURED CALLABLE BONDS SUBORDINATED RATE IV026 VARIABLE 2024. due in September callable bonds are unsecured subordinated registered R750 million Investec Bank Limited IV026 locally JIBAR plus 27 June and 27 September at a rate equal to the three-month 27 March, is payable quarterly on 27 December, Interest The maturity date is 27 September 2024, but the company has the option to call 2.45% up to and excluding 27 September 2024. 27 September 2019. capital disqualification or from the bonds upon regulatory BONDS UNSECURED CALLABLE SUBORDINATED IV030 INDEXED RATE IV025 VARIABLE RATE SUBORDINATED UNSECURED CALLABLE BONDS SUBORDINATED RATE IV025 VARIABLE 2024. due in September callable bonds are unsecured subordinated registered R1 000 million Investec Bank Limited IV025 locally JIBAR plus 12 June and 12 September at a rate equal to the three-month 12 March, is payable quarterly on 12 December, Interest The maturity date is 12 September 2024, but the company has the option to call 2.50% up to and excluding 12 September 2024. 12 September 2019. capital disqualification or from the bonds upon regulatory IV024 VARIABLE RATE SUBORDINATED UNSECURED CALLABLE BONDS SUBORDINATED RATE IV024 VARIABLE is Interest due in July 2022. callable bonds are unsecured subordinated registered R106 million Investec Bank Limited IV024 locally up to and JIBAR plus 2.70% 27 April, 27 July and 27 October at a rate equal to the three-month payable quarterly on 27 January, capital July 2022, but the company has the option to call the bonds upon regulatory excluding 27 July 2022. The maturity date is 27 27 July 2017. disqualification or from IV023 VARIABLE RATE SUBORDINATED UNSECURED CALLABLE BONDS UNSECURED CALLABLE SUBORDINATED RATE IV023 VARIABLE is due in July 2022. Interest bonds are callable unsecured subordinated Limited IV023 locally registered R860 million Investec Bank JIBAR plus 2.50% up to and and 11 October at a rate equal to the three-month 11 April, 11 July January, payable quarterly on 11 capital July 2022, but the company has the option to call the bonds upon regulatory excluding 11 July 2022. The maturity date is 11 11 July 2017. disqualification or from IV022 VARIABLE RATE SUBORDINATED UNSECURED CALLABLE BONDS UNSECURED CALLABLE SUBORDINATED RATE IV022 VARIABLE due in callable bonds are unsecured subordinated registered million) Investec Bank Limited IV022 locally R638 million (2015: R997 JIBAR plus to the three-month 2 April, 2 July and 2 October at a rate equal quarterly on 2 January, is payable April 2022. Interest the bonds upon 2022, but the company has the option to call 2 April 2022. The maturity date is 2 April 2.50% up to and excluding by Investec Bank Limited during repurchased were 2 April 2017. R359 million IV022 bonds or from capital disqualification regulatory year. the current Subordinated liabilities Subordinated FIVE 178 38.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS *

179 32 2015 2015 1 534 1 534 FIVE *

Company Company 32 2016 2016 1 534 1 534 (continued) (continued) *

32 2015 2015 1 534 1 534 *

Group Group 32 2016 2016 1 534 1 534 Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group (continued) Less than R1 million. Perpetual preference share capital share Perpetual preference Perpetual preference share premium share Perpetual preference 105 000 000 (2015: 105 000 000) ordinary shares of shares 105 000 000 (2015: 105 000 000) ordinary 50 cents each Issued of shares 63 019 022 (2015: 63 019 022) ordinary 50 cents each – Authorised non-cumulative, 70 000 000 (2015: 70 000 000) non-redeemable, of one cent each shares non-participating preference non-cumulative, 20 000 000 (2015: 20 000 000) non-redeemable, with a par value of one cent shares non-participating preference preference shares) programme each (non-redeemable non-participating 50 000 000 (2015: 50 000 000) redeemable, with a par value of one cent each shares preference preference shares) programme (redeemable Issued non-cumulative 15 447 630 (2015: 15 447 630) non-redeemable, of one cent each, issued at a shares non-participating preference of between R96.46 and R99.99 per share. premium Authorised – Perpetual preference shares Ordinary share capital IV035 VARIABLE RATE SUBORDINATED UNSECURED CALLABLE BONDS UNSECURED CALLABLE SUBORDINATED RATE IV035 VARIABLE due in callable bonds are unsecured subordinated Investec Bank Limited IV035 locally registered R1 100 million (2015: Rnil) JIBAR plus to the three-month 7 October and 7 January at a rate equal quarterly on 7 April, 7 July, is payable April 2027. Interest the bonds upon 2027, but the company has the option to call 7 April 2027. The maturity date is 7 April 4.65% up to and excluding 7 April 2022. capital disqualification or from regulatory IV034 FIXED RATE SUBORDINATED UNSECURED CALLABLE BONDS UNSECURED SUBORDINATED IV034 FIXED RATE due in callable bonds are unsecured subordinated Investec Bank Limited IV034 locally registered R101 million (2015: Rnil) at a rate equal to 12.47% up to and excluding semi-annually on 11 February and 11 August is payable February 2026. Interest regulatory has the option to call the bonds upon maturity date is 11 February 2026, but the company 11 February 2026. The 11 February 2021. or from capital disqualification Share premium on perpetual preference shares is included in the line item share premium on the balance sheet. Refer to note 41. premium is included in the line item share shares on perpetual preference premium Share at a rate limited to 83.33% of the South African prime dividends, if declared, will be entitled to receive shareholders Preference held. share rate on R100 being the deemed value of the issue price of the preference interest in the dividends in priority to any payment of dividends to the holder of any other class of shares receive shareholders Preference shares. capital of the company not ranking prior or pari passu with the preference If declared, dividend has been declared. by Investec Bank Limited unless the preference dividend will not be declared An ordinary payable semi-annually at least seven business days prior to the date on which Investec Bank Limited pays dividends are preference respectively. and 30 September, but shall be payable no later than 120 business days after 31 March dividends, if any, its ordinary * Subordinated liabilities Subordinated

40. 39. 38. At 31 March R’million At 31 March R’million (15) 543 561 2015 value 1 534 1 104 13 366 14 885 Present Present 2015 Company (15) 196 666 634 2016 1 300 1 534 14 885 13 366 minimum payments Total future Total Group 590 616 (15) 2015 value 1 206 1 534 13 366 14 885 Present Present 2016 Group (15) 731 717 242 2016 1 534 1 448 13 366 14 885 minimum payments Total future Total Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Finance lease receivables included in loans and advances included in loans and advances Finance lease receivables to customers due in: Lease receivables Less than one year Share premium on ordinary shares on ordinary premium Share Share premium on perpetual preference shares (refer to note 40) (refer shares on perpetual preference premium Share issue expenses written off Share One to five years Unearned finance income Finance lease disclosures Share premium At 31 March 2016 and 31 March 2015, there were no unguaranteed residual values. no unguaranteed residual were 2015, there 2016 and 31 March At 31 March FIVE At 31 March R’million 42. 41. At 31 March R’million

180

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS – – – – – – – – 181 4 (1) 27 819 192 136 745 390 498 173 134 468 (448) (476) (597) 2015 3 692 7 386 3 142 3 484 4 045 3 090 (1 182) (3 484) (3 394) 26 230 15 737 (24 958) (23 992) FIVE – – – – – Company (1) 79 (13) 545 100 137 601 131 297 103 496 144 (218) (740) (505) 2016 5 224 7 456 1 023 2 148 8 428 3 261 2 034 4 467 (3 498) (1 740) 62 918 51 864 (28 986) (10 023) (36 045) (66 597) (continued) (continued) – – – – – 4 (1) 27 80 517 192 151 744 885 515 455 138 (156) (280) (757) (781) 2015 4 266 7 385 3 142 3 466 4 182 3 673 (1 310) (3 232) (3 639) (1 388) (1 713) 24 864 15 223 (23 509) (25 117) – Group (1) 77 79 11 39 (13) 997 503 601 131 180 297 105 517 154 (280) (218) (460) (949) 2016 2 148 5 133 8 499 7 450 1 023 3 251 4 295 (2 067) (3 441) (3 432) 67 302 56 105 (28 794) (10 000) (32 395) (68 023) Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Liabilities arising on securitisation of other assets Other liabilities Repurchase agreements and cash collateral on securities lent agreements Repurchase Debt securities in issue Liabilities arising on securitisation of own originated loans and advances Gain on realisation of fixed assets Gain on realisation through recycled assets of available-for-sale Gain on realisation the income statement taxation adjusted for non-cash items before Profit in operating assets Increase Loans and advances to banks in operating liabilities Increase Deposits by banks Derivative financial instruments Other trading liabilities Customer accounts (deposits) Reverse repurchase agreements and cash collateral on agreements Reverse repurchase securities borrowed Derivative financial instruments Other securitised assets Other assets Investment properties assets held for sale Non-current Write down of non-current assets held for sale down of non-current Write debt securities Sovereign Bank debt securities Other debt securities trading activities Securities arising from Investment portfolio Other loans and advances companies Loans to group Impairment of loans and advances associates Operating loss from Loans and advances to customers securitised Own originated loans and advances to customers Depreciation, amortisation and impairment of property, amortisation and impairment of property, Depreciation, equipment and intangibles Profit before taxation adjusted for non-cash items taxation adjusted for non-cash before Profit is derived as follows: taxation before Profit items included in net income Adjustments for non-cash before taxation: assets intangible Amortisation of acquired Notes to cash flow statement Notes to cash 43. At 31 March R’million lent 423 472 472 2015 1 873 1 123 3 419 8 220 4 144 1 712 1 146 8 220 4 144 1 712 1 146 41 513 related related liability 41 513 15 694 15 694 value of Carrying and cash securities agreements agreements Repurchase Repurchase collateral on 2015 Company 369 749 357 698 357 698 2016 asset 1 880 2 998 5 055 7 466 3 083 5 055 7 466 3 083 42 855 42 855 16 659 16 659 pledged Carrying amount of – – – – lent 423 2015 6 317 7 455 1 553 6 317 7 455 1 553 1 873 1 123 3 419 15 325 15 325 43 479 related related liability 43 479 value of Carrying and cash securities agreements agreements Repurchase Repurchase collateral on 2016 – – – – Group 49 49 373 749 2016 asset 6 947 9 178 6 947 9 178 1 883 3 005 16 174 16 174 44 533 44 533 pledged Carrying amount of Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Bank debt securities Other debt securities trading activities Securities arising from and cash collateral agreements Reverse repurchase on securities borrowed Bank debt securities Other debt securities trading activities Securities arising from and cash collateral agreements Reverse repurchase on securities borrowed Company debt securities Sovereign Pledged assets Group debt securities Sovereign Commitments The assets pledged by the group are strictly for the purpose of providing collateral for the counterparty. To the extent that the To collateral for the counterparty. strictly for the purpose of providing are The assets pledged by the group repurchase reverse as classified on the balance sheet the assets, they are counterparty is permitted to sell and/or repledge and cash collateral on securities borrowed. agreements Undrawn facilities

The group has entered into forward foreign exchange contracts exchange foreign into forward has entered The group in the normal course of its banking and loan commitments on balance sheet. fair value is recorded business for which the Operating lease commitments minimum lease payments under non-cancellable Future operating leases: Less than one year One to five years Greater than five years Greater

At 31 March 2016, Investec was obligated under a number of operating leases for properties, computer equipment and office and office computer equipment of operating leases for properties, 2016, Investec was obligated under a number At 31 March extend over a number of years. The annual escalation clauses range minimum lease payments equipment for which the future payments made represents rent options. Contingent of the leases have renewal between 7.0% and 10.0% per annum. The majority for operating, tax and other escalation expenses. to landlords At 31 March At 31 March R’million FIVE

44. At 31 March R’million

182

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS

183 6 1 77 30 75 (33) (12) 614 344 531 250 (173) (554) (399) (621) 2015 2015 20 353 20 353 FIVE 2

Company 96 97 78 75 (26) (83) 614 667 129 461 (140) (621) (265) (508) 2016 2016 22 602 22 602 Group and company Group (continued) (continued)

2015 19 757 19 757

Group 2016 21 905 21 905 Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Guarantees and irrevocable letters of credit letters Guarantees and irrevocable Related party transactions Contingent liabilities LEGAL PROCEEDINGS Transactions, arrangements and agreements involving directors and others: involving directors and agreements arrangements Transactions, and connected with directors involving directors agreements arrangements and Transactions, as follows: were of the company, with officers by them, and persons and companies controlled by them: and companies controlled key management and connected persons Directors, Loans At the beginning of the year Increase in loans Increase Repayment of loans Exchange adjustment Additional guarantees granted Guarantees cancelled Exchange adjustments Guarantees and assets pledged as collateral security: Guarantees and assets At the end of the year Guarantees At the beginning of the year At the end of the year Deposits At the beginning of the year in deposits Increase in deposits Decrease At the end of the year Exchange adjustment course of business and on substantially the same terms, including interest made in the ordinary The above transactions were with other employees. applicable, where as for comparable transactions with persons of a similar standing or, rates and security, None of these loans have been impaired. than the normal risk of repayment. The transactions did not involve more Investec operates in a legal and regulatory environment that exposes it to litigation risks. As a result, Investec is involved in disputes that exposes it to litigation risks. As a result, environment Investec operates in a legal and regulatory of any of the of business. Investec does not expect the ultimate resolution course which arise in the ordinary and legal proceedings group. These claims, on the financial position of the adverse effect to which Investec is a party to have a significant proceedings estimated at this time. cannot be reasonably if any, –

The amounts shown above are intended only to provide an indication of the volume of business outstanding at the balance an indication of the volume intended only to provide are The amounts shown above sheet date. issued companies. The guarantees are parties and other group issued by Investec Bank Limited on behalf of third Guarantees are as part of the banking business.

For the year to 31 March R’million 46.

45. At 31 March R’million

– – 63 31 55 26 234 696 125 157 463 2015 2 882 1 782 4 193 – – 8 59 59 907 149 356 132 136 676 195 2016 2 677 2 326 Group and company Group (continued) Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Refer to pages 92 to 103 in the directors’ remuneration report for other transactions relating to directors. Refer to pages 92 to 103 in the directors’ remuneration report for other transactions Refer to note 33 for loans to group companies and note 34 for loans to/(from) subsidiary companies.

Transactions with Investec plc and its subsidiaries Transactions Assets banks Loans and advances to customers Loans and advances to Other debt securities Debt securities in issue Other liabilities expense Interest to the 15% acquisition of Investec portion of funding in relation Investec’s The loan arises from Asset Management by senior management of the business Derivative financial instruments Other assets Customer accounts (deposits) and cash collateral on securities lent agreements Repurchase Derivative financial instruments Income statement income Interest business and on substantially course of the ordinary from The above outstanding balances arose with third as for comparable transactions rates and security, the same terms, including interest party counterparties. between Investec plc and Investec Bank rendered In the normal course of business, services are of payment by Investec plc group in a net 2016, this resulted Limited. In the year to 31 March R331.6 million (2015: R377.7 million). parties with other related Transactions Point Two Investec Bank (Mauritius) Limited to Forty Two Loan from Liabilities banks Deposits from Related party transactions Related party FIVE

For the year to 31 March R’million 46.

184

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 185 211 Total Total 1 405 7 834 1 202 5 045 37 449 13 425 13 214 17 055 12 956 23 408 44 690 FIVE 282 970 379 341 447 439 – – – – – 218 218 802 582 2 617 1 130 5 349 1 947 years > Five 16 076 23 372 (continued) (continued) – – 92 92 327 416 year One years 4 791 5 395 to five 17 779 29 500 10 169 68 469 11 816 10 129 90 414 – 1 1 – 33 172 132 Six year 9 167 6 135 1 256 1 228 4 209 24 027 40 923 46 360 to one months – – 3 3 4 – 17 64 216 252 to six 2 331 1 815 Three 21 879 24 514 26 581 months months – 1 1 – 16 98 965 One 1 886 1 256 1 494 6 799 5 494 month 53 092 58 808 71 101 months to three Notes to the financial statements to the financial Notes – – 7 – – 87 154 156 750 one Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group 5 550 3 316 1 302 Up to month 31 022 41 438 42 344 – – – 211 736 1 405 1 553 2 203 1 210 6 217 12 899 13 110 120 833 139 840 147 267 Demand For an unaudited analysis based on discounted cash flows, please refer to page 64. based on discounted cash flows, please For an unaudited analysis

The balances in the below table will not agree directly to the balances in the consolidated balance sheet as the table incorporates balance sheet as the table incorporates to the balances in the consolidated directly table will not agree The balances in the below (except coupon payments associated with all future relating to both principal and those basis all cash flow on an undiscounted on the balance sheet. generally not recognised are loan commitments trading derivatives). Furthermore for trading liabilities and by contractual maturity because in the ‘Demand’ time bucket and not and trading derivatives have been included Trading liabilities held for short periods of time. typically trading liabilities are At 31 March R’million Liquidity analysis of financial liabilities based on undiscounted cash flows based on undiscounted of financial liabilities Liquidity analysis Group 2016 Liabilities Deposits by banks Derivative financial instruments – held for trading – held for hedging risk Other trading liabilities Repurchase agreements agreements Repurchase and cash collateral on securities lent Customer accounts (deposits) Debt securities in issue Liabilities arising on securitisation of own originated loans and advances Other liabilities Subordinated liabilities Subordinated Total on balance sheet Total liabilities Contingent liabilities Commitments Total liabilities Total 47.

57 Total Total 1 623 5 517 5 253 3 795 29 792 12 411 12 354 16 684 14 165 20 222 43 752 221 399 310 639 374 613 – – – – – 21 21 608 2 729 1 014 7 277 1 289 years > Five 11 649 14 088 27 026 – – – – 512 year One years 3 931 4 291 4 229 5 993 7 404 to five 14 499 28 596 62 051 11 438 80 893 – – – – 2 68 356 320 Six year 1 340 1 068 3 627 12 188 20 091 35 113 39 060 to one months – – – – 8 10 81 681 516 163 303 to six 1 141 Three 13 919 15 378 16 822 months months – – – – – 2 77 742 894 315 One 5 405 month 39 490 41 520 10 246 57 171 months to three – – – – – – 61 54 43 518 one 1 643 9 493 Up to month 27 923 39 638 39 735 – – – 36 710 679 1 623 1 237 5 447 3 169 12 354 12 390 88 651 105 290 113 906 Demand Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) At 31 March R’million (continued) Liquidity analysis of financial liabilities based on undiscounted cash flows based on undiscounted of financial liabilities Liquidity analysis Group 2015 Liabilities Deposits by banks Derivative financial instruments – held for trading – held for hedging risk Other trading liabilities Repurchase agreements agreements Repurchase and cash collateral on securities lent Customer accounts (deposits) Debt securities in issue Liabilities arising on securitisation of own originated loans and advances Other liabilities Subordinated liabilities Subordinated Total on balance sheet on Total liabilities Contingent liabilities Commitments Total liabilities Total FIVE 186 47.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 187 211 Total Total 1 405 6 701 4 040 37 315 13 424 13 213 15 435 12 956 22 930 43 012 FIVE 266 990 358 266 424 208 – – – – – 218 218 582 2 617 1 130 4 547 1 947 years > Five 15 812 22 306 (continued) (continued) – – 92 92 381 year One years 3 184 4 362 9 537 to five 17 779 29 154 10 169 65 121 11 723 86 381 – – 1 1 50 172 Six year 9 167 6 128 1 256 1 100 3 713 23 548 40 322 45 135 to one months – – – – 3 3 61 216 165 to six 2 331 1 672 Three 21 734 24 345 26 182 months months – – 1 1 98 965 One 1 886 1 254 1 265 6 648 5 312 month 51 889 57 358 69 318 months to three Notes to the financial statements to the financial Notes – – – – 87 137 749 one (145) Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group 5 550 3 316 1 202 Up to month 30 495 40 505 41 391 – – 211 602 1 405 1 553 1 846 1 210 6 217 12 898 13 109 107 553 126 068 133 495 Demand At 31 March R’million (continued) Liquidity analysis of financial liabilities based on undiscounted cash flows based on undiscounted of financial liabilities Liquidity analysis Company 2016 Liabilities Deposits by banks Derivative financial instruments – held for trading – held for hedging risk Other trading liabilities Repurchase agreements agreements Repurchase and cash collateral on securities lent Customer accounts (deposits) Debt securities in issue Other liabilities Subordinated liabilities Subordinated Total on balance sheet on Total liabilities Contingent liabilities Commitments Total liabilities Total 47.

57 Total Total 1 623 4 522 3 549 29 652 12 411 12 354 15 225 14 165 20 820 41 785 211 914 293 061 355 666 – – – – – 21 21 608 2 729 7 277 1 246 years > Five 10 635 13 330 25 211 – – – – 512 year One years 2 570 4 126 5 993 8 339 to five 14 499 28 175 55 875 10 762 74 976 – – – – 64 238 356 220 Six year 1 335 3 154 12 188 20 032 34 213 37 587 to one months – – – – 10 81 679 516 163 279 to six 1 141 Three 13 637 15 086 16 506 months months – – – – – 77 742 821 315 One 5 163 month 38 974 40 929 10 219 56 311 months to three – – – – – – 61 43 511 one 1 643 9 492 Up to month 27 347 39 054 39 097 – – 36 570 517 1 623 1 149 5 573 3 136 12 354 12 390 81 020 97 269 105 978 Demand Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) The group uses derivatives for the management of financial risks relating to its asset and liability portfolios, mainly associated relating to its asset and liability uses derivatives for the management of financial risks The group from rate risk is transferred risk. Most non-trading interest currency to foreign rate risks and exposures with non-trading interest as the sole and netted Central Treasury, in the Specialist Bank. Once aggregated the originating business to the Central Treasury liquidity mismatch and non-trading interface to the wholesale market for cash and derivative transactions, actively manages the of funding, liquidity, tight control to exercise is required Treasury our asset and liability portfolios. In this regard, rate risk from interest rate risk within defined parameters. concentration and non-trading interest of accounting hedges is dependant on the classification between fair value hedges and cash flow hedges The accounting treatment hedging instrument. relationship between a hedged item and the identification of a direct and in particular accounting hedges require On the manages its risk exposure. based on the manner in which the group is established in limited circumstances This relationship following page is a description of each category of accounting hedges achieved by the group. At 31 March R’million (continued) Liquidity analysis of financial liabilities based on undiscounted cash flows based on undiscounted of financial liabilities Liquidity analysis Company 2015 Liabilities Deposits by banks Derivative financial instruments – held for trading – held for hedging risk Other trading liabilities Repurchase agreements agreements Repurchase and cash collateral on securities lent Customer accounts (deposits) Debt securities in issue Other liabilities Subordinated liabilities Subordinated Total on balance sheet on Total liabilities Contingent liabilities Commitments Total liabilities Total FIVE 188

48. Hedges 47.

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 189 37 37 219 206 (958) item (351) Current FIVE Hedging fair value or (losses) year gains instrument on hedged Three months Three Three months Three 419 405 179 179 item Period cash flows are Period cash flows are expected to occur and hedged gains or affect income statement affect (continued) (continued) (losses) on Cumulative (16) (16) (253) (266) 4 997 4 356 Fair value instrument of hedging on hedging instrument Current year Current gains/(losses) (445) (459) (192) (192) (losses) gains or Cumulative on hedging instrument Bonds Bonds instrument of financial Description (817) (831) (635) (635) being hedged Fair value Notes to the financial statements to the financial Notes of hedging instrument Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Bonds Bonds Bonds Bonds instrument of financial Description being hedged

(continued) At year end the hedges were both retrospectively and prospectively effective. and prospectively both retrospectively At year end the hedges were 2015 rate swap Interest Company 2016 rate swap Interest 2015 rate swap Interest Group 2016 rate swap Interest Fair value hedges are entered into mainly to hedge the exposure of changes in fair value of fixed-rate financial instruments of changes in fair value to hedge the exposure into mainly entered Fair value hedges are rates. attributable to interest Investec Bank Limited has entered into foreign exchange contracts to hedge its balance sheet exposure to its net investment, in exchange contracts to hedge its balance sheet exposure into foreign Investec Bank Limited has entered US Dollars, in Investec Bank (Mauritius) Limited. At 31 March R’million At 31 March At 31 March R’million Company 2016 2015 CASH FLOW HEDGES At 31 March R’million and prior year. in the income statement in the current portion recognised was no ineffective There The group is exposed to variability in cash flows on future liabilities arising from changes in base interest rates. The aggregate rates. The aggregate changes in base interest liabilities arising from is exposed to variability in cash flows on future The group affected present in the to terms and conditions reference with hedged based on cash flow forecasts expected cash flows are to the income and reclassified income in other comprehensive initially recognised are contractual arrangements. Changes in fair value statement. the income statement when the cash flow affects HEDGES OF NET INVESTMENTS IN FOREIGN OPERATIONS FAIR VALUE HEDGES VALUE FAIR Group and company Group 2016 swaps Cross-currency 2015 swaps Cross-currency There are cash flow hedges during the year to mitigate interest rate and currency risk. A reconciliation of the cash flow hedge reserve reconciliation of the cash flow hedge risk. A rate and currency cash flow hedges during the year to mitigate interest are There in the income statement. recognised portion was no ineffective There can be found in the statement of changes in equity. income. included in net interest Releases to the income statement for cash flow hedges are

48. Hedges

Net 809 943 943 367 367 115 115 8 303 5 884 1 405 1 591 7 665 5 042 7 801 9 858 9 858 7 021 7 021 3 583 3 583 6 360 6 360 7 967 7 967 3 656 3 656 37 242 10 732 26 779 26 779 38 912 38 912 41 325 41 325 amount 370 262 279 736 350 106 207 272 207 272 – – – – – – – – – – – – – – – – – – (49) (7 540) (6 947) (9 178) (7 540) (7 540) (15 325) (22 865) (23 714) Financial collateral) non-cash (including Related amounts not offset instruments 809 992 992 367 367 115 115 sheet 1 405 7 665 5 042 7 801 9 858 9 858 6 360 6 360 7 967 7 967 3 656 3 656 37 242 13 424 16 916 10 732 26 779 26 779 38 912 38 912 41 325 41 325 13 968 13 968 12 761 12 761 15 843 15 843 279 736 372 971 207 272 207 272 393 976 393 976 reported on reported the balance Net amounts – – – – – – – – – – – – – – – – – – offset (1 538) (1 407) (3 804) (1 407) (15 635) (18 580) (13 369) (18 580) Amounts netting arrangements Amounts subject to enforceable Amounts subject to enforceable 809 992 992 367 367 115 115 1 405 7 665 5 042 Gross 7 801 9 858 9 858 6 360 6 360 7 967 7 967 3 656 3 656 38 780 29 059 16 916 10 732 40 148 40 148 38 912 38 912 41 325 41 325 13 968 13 968 12 761 12 761 19 647 281 143 391 551 208 679 208 679 412 556 412 556 amounts Effects of offsetting on balance sheet of offsetting Effects

Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Offsetting

2016 Group Assets Cash and balances at central banks

Loans and advances to banks cash placements Non-sovereign and non-bank and non-bank Non-sovereign Reverse repurchase agreements and cash collateral and cash collateral agreements Reverse repurchase on securities borrowed Sovereign debt securities Sovereign Bank debt securities Other debt securities Derivative financial instruments Securities arising from trading activities Securities arising from Investment portfolio Loans and advances to customers Own originated loans and advances to customers Own originated loans and advances to customers securitised Other loans and advances Other securitised assets Other assets Liabilities Deposits by banks Other trading liabilities Derivative financial instruments Repurchase agreements and cash and cash agreements Repurchase Customer accounts (deposits) collateral on securities lent Debt securities in issue Liabilities arising on securitisation of own originated Liabilities arising on securitisation of own originated loans and advances Other liabilities Subordinated liabilities liabilities Subordinated FIVE 190 49. At 31 March R’million

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 191 Net 143 472 618 6 261 8 804 9 972 4 535 1 262 6 027 1 623 1 334 5 517 1 089 3 741 33 422 10 540 10 095 23 158 13 188 11 037 29 792 10 449 amount FIVE 172 993 306 500 221 377 280 949 – – – – – – – – – – – – – – – – – (8 220) (4 144) (1 712) (6 374) (1 146) (6 374) (15 222) (21 596) (21 596) Financial collateral) non-cash (including Related amounts (continued) (continued) not offset instruments 472 618 sheet 6 261 1 289 9 972 4 535 1 262 1 623 5 517 1 089 3 741 33 422 10 540 10 095 31 378 17 332 12 749 15 178 29 792 12 401 16 556 10 449 172 993 328 096 221 377 302 545 reported on reported the balance Net amounts – – – – – – – – – – – – – – – – – – (714) (714) offset (9 820) (1 846) (9 820) (1 846) (12 380) (12 380) Amounts netting arrangements Amounts subject to enforceable 472 618 Gross 6 261 1 289 9 972 4 535 1 262 1 623 5 517 1 089 3 741 43 242 10 540 10 095 31 378 17 332 12 749 15 892 30 506 22 221 16 556 10 449 174 839 340 476 223 223 314 925 amounts Effects of offsetting on balance sheet of offsetting Effects Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group

(continued) Offsetting 2015 Group Assets Cash and balances at central banks

Loans and advances to banks

cash placements Non-sovereign and non-bank and non-bank Non-sovereign Reverse repurchase agreements and cash collateral and cash collateral agreements Reverse repurchase on securities borrowed Sovereign debt securities Sovereign Bank debt securities Other debt securities Derivative financial instruments Securities arising from trading activities Securities arising from Investment portfolio Loans and advances to customers Own originated loans and advances to customers Own originated loans and advances to customers securitised Other loans and advances Other securitised assets Other assets Liabilities Deposits by banks Derivative financial instruments Other trading liabilities Repurchase agreements and cash and cash agreements Repurchase collateral on securities lent Customer accounts (deposits) Debt securities in issue Liabilities arising on securitisation of own originated Liabilities arising on securitisation of own originated loans and advances Other liabilities Subordinated liabilities liabilities Subordinated 49. At 31 March R’million – Net 943 373 8 076 5 884 1 405 6 670 4 037 7 654 9 982 5 370 2 176 5 923 1 734 37 108 10 732 21 385 38 912 41 325 amount 338 431 263 778 329 614 194 578 – – – – – – – – – – – – – – – (49) (7 540) (7 540) (6 947) (9 178) (15 325) (22 865) (23 714) Financial collateral) non-cash (including Related amounts not offset instruments 992 373 sheet 1 405 6 670 4 037 7 654 9 982 5 923 1 734 37 108 13 424 15 325 10 732 21 385 38 912 41 325 12 317 11 354 15 616 263 778 352 479 194 578 362 145 reported on reported the balance Net amounts – – – – – – – – – – – – – – – offset (1 538) (1 407) (3 804) (1 407) (15 635) (18 580) (13 369) (18 580) Amounts netting arrangements Amounts subject to enforceable 992 373 1 405 6 670 4 037 Gross 7 654 9 982 5 923 1 734 38 646 29 059 15 325 10 732 34 754 38 912 41 325 12 317 11 354 19 420 265 185 371 059 195 985 380 725 amounts Effects of offsetting on balance sheet of offsetting Effects

(continued) Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) Offsetting 2016 Company Assets Cash and balances at central banks

Loans and advances to banks

Non-sovereign and non-bank Non-sovereign cash placements Reverse repurchase agreements and cash collateral and cash collateral agreements Reverse repurchase on securities borrowed Sovereign debt securities Sovereign Bank debt securities Other debt securities Derivative financial instruments Securities arising from trading activities Securities arising from Investment portfolio Loans and advances to customers Other loans and advances Other assets Liabilities Deposits by banks Other trading liabilities Derivative financial instruments Repurchase agreements and cash and cash agreements Repurchase Customer accounts (deposits) collateral on securities lent Debt securities in issue Other liabilities Subordinated liabilities liabilities Subordinated FIVE 192 49. At 31 March R’million

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS 193 3 Net 143 476 137 994 6 148 9 926 9 851 6 027 1 623 4 522 3 492 amount 30 284 10 540 23 138 11 837 11 678 29 652 10 449 FIVE 149 595 159 028 423 775 211 914 267 682 – – – – – – – – – – – – – – – (8 220) (4 144) (1 712) (6 374) (1 146) (6 374) (15 222) (21 596) (21 596) Financial collateral) non-cash (including Related amounts (continued) (continued) not offset instruments 476 137 994 sheet 6 148 9 926 1 289 9 851 1 623 4 522 3 492 30 284 10 540 31 358 15 981 13 390 29 652 12 401 15 225 10 449 155 969 159 028 445 371 211 914 289 278 reported on reported the balance Net amounts – – – – – – – – – – – – – – – – (714) (714) offset (9 820) (1 826) (9 820) (1 826) (12 360) (12 360) Amounts netting arrangements Amounts subject to enforceable 476 137 994 Gross 6 148 9 926 1 289 9 851 1 623 4 522 3 492 40 104 10 540 31 358 15 981 13 390 30 366 22 221 15 225 10 449 amounts 156 683 160 854 457 731 213 740 301 638 Effects of offsetting on balance sheet of offsetting Effects Notes to the financial statements to the financial Notes Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group

(continued) Offsetting 2015 Company Assets Cash and balances at central banks

Loans and advances to banks

Non-sovereign and non-bank Non-sovereign cash placements Reverse repurchase agreements and cash collateral and cash collateral agreements Reverse repurchase on securities borrowed Sovereign debt securities Sovereign Bank debt securities Other debt securities Derivative financial instruments Securities arising from trading activities Securities arising from Investment portfolio Loans and advances to customers Other loans and advances Other securitised assets Other assets Liabilities Deposits by banks Derivative financial instruments Other trading liabilities Repurchase agreements and cash and cash agreements Repurchase collateral on securities lent Customer accounts (deposits) Debt securities in issue Other liabilities Subordinated liabilities liabilities Subordinated 49. At 31 March R’million 3 323 3 323 Carrying liabilities amount of associated 2015 to be 3 323 3 323 amount that are that are Carrying of assets continued recognised 7 841 7 841 Carrying liabilities amount of associated 2016 to be 7 841 7 841 amount that are that are Carrying of assets continued recognised Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Notes to the financial statements to the financial Notes (continued) All the above derecognised assets in the company relate to Fox Street 2 (RF) Limited, Fox Street 3 (RF) Limited and All the above derecognised assets in the company 31 March 2016 and 31 March 2015. For the year ended 31 March 2016, it Fox Street 4 (RF) Limited for the year ended  additional information refer to page 53 in the risk management report. also includes Fox Street 5 (RF) Limited. For

For transfer of assets in relation to repurchase agreements see note 44. agreements to repurchase For transfer of assets in relation TRANSFER OF FINANCIAL ASSETS THAT DO NOT RESULT IN DERECOGNITION DO NOT RESULT ASSETS THAT TRANSFER OF FINANCIAL balance sheet on assets continue to be recognised has been party to securitisation transactions whereby Investec Bank Limited depending on the Securitisations may, to another entity. although they have been subject to legal transfer (either fully or partially) issued in of the debt securities and the recognition of the securitised assets in continued recognition result individual arrangement, the transaction. R’million Company achieved No derecognition Loans and advances to customers FIVE 194 50. Derecognition

ANNUAL FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS

195 FIVE (27 41) 396 6700 (27 41) 363 1667 (27 12) 427 8300 (27 12) 427 8310 (27 21) 809 0700 (27 21) 809 0730 SOUTH AFRICA, PORT ELIZABETH Park, Pommern Business Street Waterfront 6045 Humerail, Port Elizabeth, PO Box 13434 6057 Humewood, Port Elizabeth Telephone Facsimile SOUTH AFRICA, PRETORIA Streets Cnr Atterbury and Klarinet 0081 Menlo Park Pretoria PO Box 35209 Menlo Park 0102 Telephone Facsimile SOUTH AFRICA, STELLENBOSCH 401, Mill Square Office Stellenbosch 7600 12 Plein Street, PO Box 516 Stellenbosch 7599 Telephone Facsimile Contact details Contact

(27 44) 302 1800 (27 44) 382 4954 (27 33) 264 5800 (27 33) 342 1561 (27 11) 286 7000 (27 11) 286 7777 [email protected] Asset management: [email protected] Institutional Securities: [email protected] Private Bank: [email protected] Capital Markets: [email protected] Private Client Securities: [email protected] Property Group: Investec Bank Limited group and company annual financial statements 2016 Investec Bank Limited group Recruitment queries: [email protected] Client queries: – – – – – – – – – – – – SOUTH AFRICA, KNYSNA Ext TH24/TH25 Long Street Knysna 6571 Thesen Harbour Town Telephone Facsimile SOUTH AFRICA, PIETERMARITZBURG Acacia House Redlands Estate 1 George MacFarlane Lane Pietermaritzburg 3201 PO Box 594 Pietermaritzburg 3200 Telephone Facsimile 100 Grayston Drive Sandown Sandton 2196 PO Box 785700 Sandton 2146 Telephone Facsimile e-mail, South African offices • • SOUTH AFRICA, JOHANNESBURG (27 43) 709 5700 (27 43) 748 1548 (27 21) 416 1000 (27 21) 416 1001 (27 31) 575 4000 (27 865) 009 901 (264 61) 389 500 (264 61) 249 689 (230) 207 4000 (230) 207 4002 (267) 318 0112 (267) 318 0114 Facsimile SOUTH AFRICA, EAST LONDON Cube 1 Cedar Square Bonza Bay Road Beacon Bay East London 5241 Telephone 5 Richefond Circle 5 Richefond Circle Park Ridgeside Office Umhlanga Durban 4319 PO Box 25278 Gateway Durban 4321 Telephone Facsimile SOUTH AFRICA, DURBAN Facsimile 36 Hans Strijdom Avenue 36 Hans Strijdom Avenue 8001 Town Cape Foreshore 8000 PO Box 1826 Cape Town Telephone SOUTH AFRICA, CAPE TOWN NAMIBIA, WINDHOEK floor 1 Ground Office Building Heritage Square Windhoek100 Robert Mugabe Avenue Telephone Facsimile e-mail [email protected] MAURITIUS, PORT LOUIS 6th Floor Dias Pier Building Caudan Le Caudan Waterfront Port Louis Telephone Facsimile e-mail [email protected] BOTSWANA, GABORONE BOTSWANA, Plot 64511, Unit 5 Gaborone Fairgrounds Telephone Facsimile e-mail [email protected] FIVE Notes

196 Investec Bank Limited group and company annual financial statements 2016

2016 ANNUAL REPORT Investec Bank Limited group and company 16 20 annual nancial statements Investec Bank Limited group and company annual nancial statements

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