02 Our performance Investec integrated annual report 2022 # IN THIS SECTION | Chief Executive's report | 17 | | --- | --- | | Our strategic objectives | 24 | | Stakeholder engagement (Section 172 statement) | 28 | | CFO report | 38 | --- 02 | Our performance Investec integrated annual report 2022 # CHIEF EXECUTIVE'S REPORT ![img-0.jpeg](img-0.jpeg) “There is no passion to be found in playing small – in settling for a life that is less than the one you are capable of living.” Nelson Mandela At Investec’s Capital Markets Day in February 2019, we laid out a comprehensive strategic plan to focus and simplify the business, and to position it for long-term growth. At the time, nobody could have foreseen the sweeping external shocks that lay ahead: a devastating pandemic whose human and economic costs are still being counted; supply-chain disruptions on a global scale; and, more recently, Russia’s invasion of Ukraine that threatens to reverse the gains achieved in geopolitics since the fall of the Berlin Wall. Localised shocks in our core geographies included the uneven path of Brexit in the UK and the impact of social instability and power shortages in South Africa. But the hallmark of a resilient and robust business is its ability to thrive under changing and adverse circumstances. We are encouraged by the progress we’ve made, as evidenced by a very credible set of financial results for the year under review. While there are certainly significant areas for improvement – as highlighted further on in this report – we have accomplished much of what we set out to do three years ago. Chief Executive 17 --- 02 Our performance Investec integrated annual report 2022 ## CHIEF EXECUTIVE'S REPORT CONTINUED ### Simplify, focus and position for growth The demerger of Investec Asset Management, successfully listed as Ninety One in March 2020, represented the first major milestone on the path to a more simplified and focused Investec. Despite the tumultuous market conditions under which the listing of Ninety One took place, it is clear that the demerger has delivered significant value to shareholders while achieving its intended purpose of enabling each business to pursue its own growth path. With the distribution of a further 15% of Ninety One to shareholders, Investec would have returned an aggregate value of approximately £1.6 billion$^{1}$ to shareholders through the demerger and distribution on successful completion. We further simplified the Group structure by exiting businesses that were subscale, non-core or fell outside our refined risk appetite, including the difficult but necessary decision to wind down our Australian operations. This has resulted in a more focused Group, with client franchises operating in markets where we have meaningful scale and relevance. In the UK, we refocused the banking business on the core domestic market and rightsized its cost base to improve operating efficiency. Unfortunately, this required significant headcount reduction in our London office. The One Investec strategy outlined three years ago embodies our obsession with client service and our continuous drive to deliver innovative and responsive solutions. It's an approach that places the client at the centre of our ecosystem, enabling us to offer them seamless access to relevant and specialised service offerings across operating divisions and geographies. The close collaboration between our Banking and Wealth & Investment businesses is a key example of the strategy in action. 44% of SA Wealth & Investment's annuity clients are also clients of the SA Private Bank. And £473 million of gross funds under management were referred to our UK Wealth & Investment business from our UK Bank in the financial year. We are proud to have been recognised by both the Financial Times of London and Euromoney for the ninth and tenth year respectively as the best private bank and wealth manager in South Africa. We regard these accolades as an endorsement of our integrated banking and wealth management offering. Our uncompromising client service standards were further bolstered by the formation of specialised client service groupings in the corporate bank – an initiative that is clearly bearing fruit. We are delighted that the FT's The Banker recognised Investec as the best-performing bank in the UK for the first time and the best-performing bank in South Africa for the second consecutive year. But we still have some way to go. There is scope for closer integration across our private client and corporate banking propositions, as well as improved collaboration between our core geographies. We expect to make further headway on these objectives in the coming year. Alongside our client ecosystem, digitalisation sits at the foundation of our strategy. Extensive investment in this aspect of the business has enabled us to differentiate our service offering with a client experience that is high-touch, supported by high-tech. By leveraging common platforms across businesses and geographies, we have managed over the past three years to optimise technology spend while improving the quality of our systems and channels. Notwithstanding our successes, progress in some areas has been slower than we would have hoped. While the transition to a cloud environment and a single client data platform is well underway, parts of the business remain constrained by legacy systems and processes. Addressing these issues is a priority as we embark on a new, transformative phase in our digital evolution, which will see a higher proportion of our technology investments directed at innovative applications – including extensive use of cloud computing and artificial intelligence (AI) – that actively support our growth ambitions. Our capability to generate strong capital flows is reflected in robust liquidity levels, affording the business a high degree of optionality in capital deployment decisions, whether supporting the accelerated growth of existing lending operations, taking advantage of new market opportunities, or, where appropriate, returning capital directly to shareholders. Our balance sheet remains well-capitalised, considerably above Board-guided target ranges. CET1 ratios are now 11.7% and 14% for the UK and South African businesses respectively, comfortably above their 10% target. Capital ratios in South Africa have benefitted from the adoption of the Advanced Internal Ratings-Based (AIRB) approach. With expected full adoption in the coming year, the pro-forma CET1 ratio at 31 March 2022 would improve to c.16%. The resulting level of surplus capital should be further bolstered in the near- to medium-term as we continue to realise the value in our South African investment portfolio. We have thus far fallen short of ambitions to unlock the value in these holdings and hope to make more meaningful progress in the year ahead. ![globe icon]() For more information on our strategic objectives, refer to pages 24 to 25. ### People and culture Three years ago, Investec transitioned from a founder-led business to an entrepreneurial professional management team. The success of this transition is testament to the strength of our organisational culture. Throughout the journey, the spirit of apprenticeship within our organisation came to the fore, deepening the bedrock of talent that underpins our sustainable competitive advantage. This wealth of intellectual and cultural capital is not only performance-enhancing in the near term, but also reduces the risk of disruptive leadership transitions in the future. The values and behaviours that set Investec's people apart include an unwavering focus on client relationships and a high degree of autonomy and accountability at all levels. These tenets stood us in good stead as we shifted to remote work during the pandemic. We are now navigating the challenges of a return to physical premises, conscious that the needs and expectations of both clients and staff have evolved and will continue to do so. Investec has long embraced the benefits of a flexible work environment and we welcome recent advances in remote interaction technologies. At the same time, as an organisation built on the strength of personal relationships and high levels of engagement, we believe that the physical proximity to teams and clients that comes from being together in person is essential to our cultural fabric. As we look ahead to the exciting possibilities of a post-pandemic workplace, we will continue to hone and articulate a hybrid employee value proposition that attracts the best people in the world. ### Operating environment Following a sudden and severe contraction at the height of the pandemic, the pace of the global 1. or c.R32 billion per Ninety One closing share price on 16 May 2022. 18 --- 02 Our performance Investec integrated annual report 2022 ## CHIEF EXECUTIVE'S REPORT CONTINUED economic recovery surprised on the upside. This was aided by the remarkable speed of vaccine development and stimulus measures by governments and central banks. But history has taught us that large-scale fiscal and monetary interventions are seldom without unintended consequences. The rapid rise of global inflation in the second half of the year is due in part to the same accommodative policies that helped accelerate the economic recovery. Spending and demand for goods has far outpaced production, placing global supply chains under intense strain. A recent report by the CIOs of Bridgewater Associates sums up the situation rather well: "We now have an excess of money, credit and income financing an excessive level of nominal spending in relation to output, with the mechanical result being higher prices on the given quantity of goods and services consumed."$^{2}$ Misguided hopes that market forces would quickly correct this inflationary imbalance have given way to expectations of a rapid swing towards restrictive monetary policies, borne out by recent rate hikes in the US as well as the UK and South Africa, Investec's two core geographies. In the face of higher inflation and rising interest rates, global growth forecasts have been revised lower and market sentiment has deteriorated on fears of stagflation and, more recently, global recession. The prices of most asset classes, apart from commodities, declined during the first quarter of 2022, and a continued downturn could weigh on the nominal value of Investec's funds under management in the coming year. And while a rising interest rate cycle is positive for Investec from an endowment perspective, quicker and more aggressive hikes could constrain economic activity and client appetite for borrowing. We decry the conflicts, both civil and transnational, that continue to threaten lives and livelihoods in various hotspots across the globe, including the invasion of Ukraine by Russia. Apart from the human costs, the war raises the spectre of a return to fragmented trading blocks, threatening to undo gains in global trade and supply chain efficiencies since the end of the Cold War. The war has exacerbated levels of geopolitical uncertainty and added to inflationary pressures, with the greatest impact being felt in commodity prices, notably for energy and food. While Investec has no direct exposure to Russia or Ukraine, the knock-on effects of the war pose a significant risk to financial markets and global economic growth. ### United Kingdom The UK economy staged an impressive recovery from the initial shock of the pandemic. This rebound was aided by a vaccine rollout programme that has seen 92.4% of the population aged 12 and over receiving at least one immunisation. The spread of the more transmissible Omicron variant did, however, dampen activity around the turn of the year and Q2 looks set for a contraction. Still, we expect to see positive GDP growth in 2022. A noteworthy success story of the economic recovery has been the resilience of the labour market. When furlough employment support was introduced in March 2020, some predicted a rise in unemployment once the schemes expired. However, these fears proved unfounded, as unemployment has declined to 3.7%, which is below pre-pandemic levels. An unexpected consequence of the pandemic is that more people are opting for early retirement and further study, while the end of the Brexit transition period has triggered an exodus of EU workers living in the UK. A key factor in the inflation outlook is whether these tight labour market conditions will translate into sustained wage growth. CPI inflation hit 9.0% in April, the fastest pace of annual price growth since 1982, partly on the hike in the Ofgem energy price cap. Assuming the government's mitigation measures for households are treated as not affecting consumer prices, our forecasts envisage CPI inflation peaking at 10.2% in the fourth quarter of 2022 and remaining well above the Bank of England's 2% inflation target until late 2023. The BoE has already increased the Bank rate from its low of 0.1% in five successive moves and has begun the process of quantitative tightening. We forecast two additional hikes, resulting in a Bank rate of 1.75% by year end, but with a risk that rates rise beyond this level. But with such frontloaded tightening, we see rates on hold through 2023, with the risk of a policy easing next year. ### South Africa South Africa entered the pandemic with an economy in recession and an unsustainable national debt trajectory. Successive lockdowns further impaired the economic outlook and borrowings to fund relief efforts placed additional strain on the fiscus. By the second quarter of 2020, business confidence was testing historic lows. In early 2021, economic activity rebounded strongly following the partial lifting of COVID-related restrictions, while elevated commodity prices benefitted both terms of trade and tax receipts. Fitch and Moody's both changed their outlook from negative to stable, signalling heightened confidence in the country's economic prospects. While this still leaves South Africa's rating below investment grade, it is an endorsement of National Treasury's use of windfall revenues from the commodity boom to ease the country's debt burden. However, 2021 was a testing year, marred by social instability, an ongoing health crisis and continuing structural constraints to economic growth. The rollout of the vaccine programme was slower than anticipated, and just as business confidence began to recover in July it was dented by a spate of coordinated looting and vandalism in KwaZulu Natal and parts of Gauteng, which regrettably claimed 354 lives and over R16 billion in damages to property and stock. The ease with which the desperation of marginalised communities was exploited to incite violence on this scale was a stark reminder of the untenable inequality of South African society. The poor preparedness of intelligence and security services was concerning, and there is thus far little momentum to prosecute the instigators. We commend the ongoing work of the judiciary, whose fierce independence is a critical bulwark against the forces that would seek to plunge the country into a state of lawlessness. While the scourge of corruption remains a blot on South Africa's political and social landscape, we welcome the findings of the Zondo Commission and hope that the National Prosecuting Authority will act swiftly in bringing to book those who have been implicated in state capture. On the economic front, the government was able to push through several necessary and long-delayed structural reforms. The invitation to the private sector to participate in rail logistics, the loosening of restrictions on embedded power generation and the auction of prime spectrum, which should result in more ubiquitous and affordable broadband internet access, are all promising developments. But far more needs to be done. Electricity supply remains a binding constraint on economic growth. Some 2. Bridgewater Associates, An Update from Our CIOs: What Was Coming Is Now Upon Us, April 2022. 19 --- 02 Our performance Investec integrated annual report 2022 ## CHIEF EXECUTIVE'S REPORT progress has been made on initiatives to bolster the power grid while reducing South Africa's reliance on coal-powered electricity generation. The successful adjudication of bid window 5 of the Renewable Independent Power Producer Programme (REIPP) and the publication of the Electricity Regulation Amendment Bill go some way towards enabling a more competitive and cleaner energy market. We are also heartened by the pledge made at COP26 by the UK and EU partners to mobilise \$8.5 billion in support of efforts to decarbonise South Africa's electricity sector. These developments notwithstanding, power shortages and load shedding will continue to cap economic growth in the near- to medium-term. Eskom, the state electricity utility, is sadly not the only state-owned utility impeding South Africa's economic growth. Following a decade of corruption and neglect, the country's transport networks, once the envy of the continent, are now in a state of decay. The lack of efficient transport options raises the cost of doing business and jeopardises the export revenues so critical for the country's balance of payments. It also places yet another burden on the poorest in society who are forced to rely on less reliable and more expensive forms of commuter transport. A further localised operating risk is a finding by the Financial Action Task Force (FATF) that the South African financial sector needs to improve its processes to prevent money laundering and terrorist financing. The country has until August 2022 to present progress. A key requirement is that the National Prosecuting Authority (NPA) must bolster its ability to enforce anti-money laundering laws and to successfully prosecute perpetrators. The reputation for good governance that South Africa's banks have worked hard to earn is thus dependent on the authorities' capacity to uphold the law. Should the NPA fail to meet the FATF deadline, South Africa will be 'grey-listed' and the ability of its banks to raise funds on global markets will be restricted, to the detriment of our country's financial system. The need to overcome these hurdles to inclusive growth could not be more urgent. According to a recent World Bank report$^{3}$, South Africa is the most unequal society in the world. Unemployment climbed to an historic high of 35.3% in the fourth quarter of 2021. We forecast positive GDP growth in 2022 and subsequent years as growth-enhancing reforms gather pace. Our base case for interest rates is an additional hike this year – as the SARB seeks to avoid inflation expectations becoming embedded significantly higher than the midpoint of the 3%-6% target band – followed by further interest rate hikes in 2023. Until the economy can escape its modest growth trajectory, the high risk of social instability will continue to hamper efforts to build a cohesive and equitable constitutional democracy. We are of the view that the only way to achieve faster and more inclusive economic growth is through private sector participation in national infrastructure projects. We thus strongly support efforts like Project Vulindlela, a joint initiative by the President and Treasury to eradicate the red tape and policy flaws holding up efforts to address the country's massive infrastructure backlog. Investec stands ready to do its part. Together with our clients, we look forward to participating in bankable infrastructure projects that harness private sector capital and skills to unlock South Africa's economic growth potential. ### Financial performance The Group's performance for the 2022 financial year is testament to the strength of our client franchises, disciplined strategic execution, and the commitment of our people to support our clients. We achieved adjusted earnings per share of 55.1p (FY2021: 28.9p) which is at the top end of previous guidance and ahead of comparable pre-COVID levels. Our return on equity was 11.4% (FY2021: 6.6%) and return on tangible equity was 12.3% (FY2021: 7.2%). In the context of an operating environment that was mostly supportive of growth, Investec delivered a creditable performance across all client franchises in both core geographies. Across our Wealth businesses, funds under management (FUM) increased 9.2% to £63.4 billion (31 March 2021: £58.0 billion) underpinned by net inflows of £1.9 billion and improved market levels. Market volatility in the last quarter negatively impacted FUM at year end. Our banks saw net core loans grow 13.2% to £29.9 billion (31 March 2021: £26.4 billion), driven largely by residential mortgage and corporate lending growth in both geographies. Pre-provision adjusted operating profit increased 50.1% to £716.2 million, 7.9% ahead of a comparable March 2019 (pre- COVID) period; this growth was primarily revenue driven. Revenue grew 21.3% as our franchises effectively supported our clients and benefitted from a post-pandemic economic recovery. Operating costs increased 6.0%, largely driven by higher variable remuneration, with fixed cost growth of 1.1% over the period. Our focus on costs and robust revenue growth resulted in an improved cost to income ratio of 63.3% (FY2021: 70.9%). The credit loss ratio improved to 8bps (FY2021: 35bps). Expected credit loss impairment charges were 71.0% lower, due to limited default experience in both geographies, and good recoveries in South Africa. The Group has maintained a level of post-model overlays given the uncertain economic outlook. The Group generated strong value for its stakeholders – as demonstrated by the net asset value per share increasing 11.4% to 510.0p (FY2021: 458.0p). This is further evidenced by the distribution of a further 15% of Ninety One to shareholders, coupled with a Board proposed final dividend of 14.0p per share, resulting in a full year dividend of 25.0p per share (FY2021: 13.0p). Refer to the CFO report on page 38 for more on financial performance. ### Growth initiatives showing traction As we heighten our strategic focus on growth, I'm encouraged to report that new and existing growth initiatives are gathering pace across all client franchises and geographies. The UK Bank continues to build scale and relevance in its market, reflected in strong loan book growth, increased client activity and new client acquisition. International partnerships in continental Europe and the USA are bolstering cross-border M&A advisory services revenues. We are also making inroads into the underserved UK private companies segment. We're proud to report that we achieved breakeven in our UK high net worth (HNW) banking business this year, ahead of our target date of March 2022. Client acquisition is also ahead of schedule and continues to accelerate. In addition, we're pursuing tighter integration between our UK bank and wealth offerings as well as closer collaboration with our franchises outside the UK. The bank in South Africa benefitted from increased client activity. We expect further growth in the corporate and institutional lending book in 2023, as we look to grow market share in the large 3. The World Bank, Inequality in Southern Africa: An Assessment of the Southern African Customs Union, March 2022. 20 --- 02 Our performance Investec integrated annual report 2022 ## CHIEF EXECUTIVE'S REPORT CONTINUED and mid-tier corporate sectors. Investec for Your Business, a new mid-market offering, is seeing steadily growing penetration in a segment where we can competitive client proposition. We're also growing our nascent life insurance business and look forward to broadening the target market for this well-differentiated offering in the coming year. The Private Bank increased its core client base and lending turnover significantly, and we anticipate that this momentum will carry into the new year. Furthermore, we are growing capital light revenues through the 'My Investments' platform, which provides investment services to private clients not serviced by Wealth & Investment. Our Wealth & Investment businesses are revising their asset allocation strategies to provide clients with enhanced access to global market opportunities and a wider range of differentiated asset classes. A key aspect of this approach involves closer integration of our UK, South African and Swiss wealth management operations. Efforts to increase higher-margin discretionary FUM inflows are gaining traction and will continue to drive higher operating profits. ### Sustainability Investec is deeply invested in creating enduring worth for all our stakeholders. Acting in the interests of the communities in which we operate and the planet we all inhabit is integral to our long-term success. To this end, we have looked to the United Nations Sustainable Development Goals (SDGs) and identified where we are best positioned to contribute by virtue of our operating model and core geographies. While we have much work to do, I'm encouraged by the progress we've made this year in both of our key impact SDGs: climate action and reducing inequalities. As a multi-national financial services company with a strong brand and substantial influence in our markets, we have a fundamental obligation to address the urgent issue of climate change. Our potential impact is greatest where we partner with our clients to help decarbonise their operations. We joined the Net-Zero Banking Alliance at the end of 2021, committing to specific and measurable targets that challenge us to direct financial flows towards positive outcomes for our planet and society. Our Wealth & Investment business signed up to Climate Action 100+, an investor-led initiative to ensure the world's largest corporate greenhouse gas emitters take necessary action on climate change. We have embarked on a focused project to understand our Scope 3 financed emissions and establish a baseline, strategies and targets to reach net-zero. We are particularly encouraged to report that coal as a percentage of core loans and advances reduced last year to 0.1%, from 0.17% in March 2021. In line with the consensus view of the COP26 conference, we remain conscious that the transition to a zero-carbon economy needs to be a just one, giving due regard to socio-economic constraints, particularly in emerging markets like South Africa, which relies on coal to supply most of its energy needs. With this in mind, we will continue to work with and assist our clients in their path to net-zero, ever conscious of the profound impact that this transition will have on local economies and communities. Our aspiration for a more equitable and sustainable world should be embodied first and foremost in our internal culture and values, and we believe that learning is a powerful tool for redress wherever potential has been deprived of opportunity. Last year our learning and development spending increased from 1.3% to 1.6% of staff costs and we expect this to grow further in the year ahead. We have also made progress in diversifying our workforce to be more representative of broader society. At the time of writing, 49.7% of Investec employees are women, up from 48.8% last year, while women and people of colour make up 40% of the Group Board. In the UK, we signed up to the Race at Work Charter, pledging to further improve equality of opportunity in the workplace, while our UK wealth business joined the #100 Black Interns initiative, which works to transform the prospects of black people in the United Kingdom through paid work experience and training opportunities. In South Africa, we continued our support of the YES Initiative, providing young South Africans with valuable paid work experience, as well as the Startup School, which offers mentorship and opportunities to entrepreneurs (refer to case study on page 36). We have also added an online component to our flagship Promaths initiative – a partnership between Investec and Kutiwanong Maths, Science and Technology Centre. We call on government to emulate and amplify the impact of such programmes, partnering with the private sector to transform South Africa's education system. Further information can be found in the Group's 2022 sustainability report – available on our website at the end of June 2022. ### In conclusion I wish to thank my colleagues for the passion and discipline they have shown over a difficult year to enable us to deliver this strong set of results. I am also grateful to our clients, whose continued trust in us is the prerequisite to our future success. The Group has successfully navigated the uncertain macro backdrop that has persisted since the onset of the pandemic and has made significant progress against the strategic goals outlined at the 2019 Capital Markets Day. However, we are mindful of the uncertain external environment and expect a slowdown in economic growth following the strong recovery of the past 18 months. Nevertheless, we remain confident that our distinctive offering – Out of the Ordinary client relationships underpinned by innovative, world-class technology platforms – will continue to deliver sustainable shareholder returns. I am encouraged by the momentum across our client franchises. Earnings are now above pre-pandemic levels and should continue to build as we enter the coming year with a clear set of strategic growth initiatives. The business has proven its ability to generate capital. As a result, we now have options as to how group resources may be deployed in the best interests of shareholders. This capital optionality supports the accelerated growth of existing lending operations, ensures that we are nimble enough to take advantage of new market opportunities, and, where appropriate, allows us to return capital directly to shareholders. We are firmly committed to our medium-term targets, and are well positioned to pursue growth opportunities in our chosen markets (refer to the CFO report on page 38 for FY2023 guidance). Since its founding in 1974, Investec has been a forward-looking, optimistic organisation. This drive to contribute to a better future for all our stakeholders enables us to be an agent for change. Now, as ever, we are invested in transformational growth, creating enduring worth wherever we operate. On behalf of the Board of Investec plc and Investec Limited **Fani Titi** Chief Executive 21 --- 02 | Our performance Investec Integrated Annual Report 2022 “Business practices and outputs that are aligned with the SDGs provide a net positive outcome for the planet and its people while aiming to deliver positive investment returns. The Investec GSE Fund proves that it’s possible to do good at the same time as doing well.” **Barry Shamley** Investec Wealth & Investment fund manager 2. --- D2 | Our performance Investec Integrated Annual Report 2022 # CASE STUDY # Living up to our purpose Launched publicly in August 2021, our new Global Sustainable Equity Fund is demonstrating that sustainability and profitable investment can be good and natural partners. By investing in companies that contribute on a net positive basis towards the United Nations' 17 Sustainable Development Goals (SDGs), our new Global Sustainable Equity (GSE) Fund is helping us deliver on our purpose of creating enduring worth – living in, not off, society. The Fund aims to provide attractive investment returns over the long term. Over the course of 2021 the Fund raised new investment of over $30 million and provided a return of 15.2% in US Dollars. The impact of the Fund is defined in terms of how companies are contributing to global challenges through the lens of the SDGs as an impact framework. This is calculated using Institutional Shareholder Services' (ISS) SDG impact methodology, with the scores of individual companies assessed by ISS considering positive and negative contributions of revenue, operations and controversies towards the SDGs. The Fund's overall score is +4.4, against the benchmark MSCI World of 0.5, with 100% of the underlying companies providing a net positive impact in terms of their contribution to the SDGs. Investec has a 20-year history of robust, sustainable internal practices which recognise that our planet and communities are key stakeholders and have shone an increasingly bright light on issues such as inequality, climate change, food security and access to healthcare. The pandemic accelerated the need for action as the interdependency of societal and planetary wellbeing and economic prosperity was made clear. With this as our foundation, we were able to take the next step in our sustainability journey through a commitment to integrating ESG considerations into the core of our fundamental investment process as well as providing sustainability focused investment solutions to our clients – starting with the launch of the GSE Fund. The Fund has been awarded the coveted '5 globes' Sustainability rating by Morningstar which indicates that the fund is positioned in the top 10% of its peer group in terms of its management of ESG risk. "The link between sustainability and performance is closer than many think," says Investec Wealth & Investment fund manager Barry Shamley. 23 --- 02 | Our performance Investec integrated annual report 2022 # OUR STRATEGIC OBJECTIVES # Driving sustainable long-term growth ![img-1.jpeg](img-1.jpeg) “ Our strategic framework has remained largely unchanged as we make progress toward our short, medium and long-term goals. We continue to strengthen our position as a domestically relevant, internationally connected banking and wealth management group.” Fani Titi ## Our long-term strategic focus: We are committed to delivering exceptional service to our clients, creating long-term value for our shareholders and contributing meaningfully to our people, communities and the planet All relevant Investec resources and services are on offer in every single client transaction We aim to sustain our distinctive, Out of the Ordinary culture, entrepreneurial spirit and freedom to operate, with the discipline and obligation to do things properly for the whole of Investec. ## Our strategic direction Our long-term commitment is to One Investec; a client-focused strategy where, irrespective of specialisation or geography, we commit to offering our clients the full breadth and scale of our products and services. We are focused on delivering profitable, impactful and sustainable solutions to our clients. To deliver on One Investec, we will focus on collaboration between the Specialist Banking and Wealth & Investment businesses, and across geographies, and continue to invest in and support these franchises. This will position Investec for sustainable long-term growth. 24 --- 02 | Our performance Investec integrated annual report 2022 # OUR STRATEGIC OBJECTIVES CONTINUED # Growth initiatives Clear set of opportunities to deliver disciplined revenue growth # Progress for FY2022 - Ahead of our breakeven target for UK Private Banking - Pivoting from platform-build to driving scale and client acquisition in Investec Life, Business transactional banking and My Investments - SA Wealth & Investment launched the Investec Global Sustainable Equity Fund, raising R0.7 billion of funds under management (FUM) - UK Wealth & Investment formed a new Investment & Research Office to improve the consistency and quality of the investment offering, and is broadening exposure to global market opportunities. # Looking ahead With an optimised platform and capital flexibility, we are driving a robust growth agenda, focusing on client centricity and continued investment into new capabilities to drive competitive strength. # Cost management Enhanced management of the cost base through operational leverage # Progress for FY2022 - The Group's cost to income ratio improved to 63.3% (31 March 2021: 70.9%) - Fixed operating expenditure was well contained, increasing by 1.1%, reflecting ongoing cost discipline - Increased variable remuneration was in line with improved business performance - Technology investment grew 4.0%. # Looking ahead Our disciplined approach to investment spend supports our digital transformation strategy and other growth initiatives. We expect the cost to income ratio to be within the Group target of <63% in FY2023. UNDERPINNED BY # Capital discipline A more disciplined approach to capital allocation and focus on capital optimisation # Progress for FY2022 - Strong capital generation from underlying businesses - Investec Limited continued migration from the Foundation Internal Ratings Based (FIRB) approach to the AIRB approach - Effective 30 May 2022, the Group successfully distributed a 15% holding in Ninety One, returning a cumulative value of c.£1.6 billion (c.R32 billion) to shareholders through the demerger and distribution. # Looking ahead - In South Africa, we will continue to operate with a surplus capital position - On full adoption of AIRB, Investec Limited's CET1 ratio at 31 March 2022 would, on a pro-forma basis, increase by 200bps to c.16%, expanding capital optionality - We are committed to optimisation of capital through right sizing the Group Investments portfolio. AND DELIVERED THROUGH # Digitalisation # Connectivity Continued investments drive a digitally connected ecosystem to leverage efficiencies and deliver enhanced value to clients and staff # Progress for FY2022 Digitalisation of our DNA: - For our clients, an integrated experience with frictionless access to products and services - Developed and executing technology roadmaps that will take us closer to a composable and more agile architecture, decommissioning legacy systems and operationalising our journey to the cloud - Continued investment in our cyber capability, enhancing security by design and implementing best-in-class tools to protect our clients. # Looking ahead We are implementing a fully digital, streamlined and simplified client onboarding process. We are also providing clients with a personalised digital experience, leveraging data across the organisation to generate deeper insights, and help determine the next best conversation to have with each client. # Progress for FY2022 Our coordinated approach, with the client at the centre, supports meaningful and long-lasting client partnerships. - Structural integration of the UK Bank, organising business activities around target client groupings - Enhanced connectivity with UK Wealth & Investment: UK Bank referred and created £473 million of incremental FUM to the UK Wealth & Investment business - Continued to cement our competitive advantage through One Place™, deepening the strategic partnership between the South African Private Banking and Wealth & Investment businesses. # Looking ahead We are accelerating the build-out of our ecosystems, further integrating client value propositions across specialisations. We are focused on a number of initiatives to leverage and optimise our operating platforms. 25 --- 02 | Our performance Investec Integrated Annual Report 2022 # CASE STUDY # Innovation through strategic partnerships We're continuing to invest in digitalising our DNA – with the extension of a long-standing partnership providing a real boost to our transactional banking proposition. We've long understood that world-class digital client experiences and efficient operating platforms aren't just nice-to-haves. They're absolutely essential to our competitiveness and to our clients' ability to seize opportunities. With the pandemic accelerating the drive towards digitalisation across all sectors, the last 12 months saw a number of milestones in our journey – including through our well-established partnership with Monese, the leading pan-European financial technology company. We have a long-standing relationship with Monese, having invested in them through Outward VC fund and smaller investment vehicles in recent years. We also advise Monese on their ongoing funding and strategic options. However, we're now building even stronger ties, by adopting Monese's new Banking-as-a-Service (BaaS) platform which will accelerate our private client transactional banking proposition and underpin our launch of a new business current account for private companies. Cost-effective and scalable, the new platform will enable us to develop a world-leading digital banking experience while driving operational efficiencies. Over time, we expect BaaS to help us consolidate our retail savings products. ![img-2.jpeg](img-2.jpeg) 26 --- 02 | Our performance Investec Integrated Annual Report 2022 ![img-3.jpeg](img-3.jpeg) “ This strategic partnership will enable us to leverage Monese’s scale, expertise and digital capabilities to deliver Investec’s digital current account in the UK,” explains our Group Head of Digital and Technology Lyndon Subroyen, who joined the Monese Board during the year. Lyndon Subroyen Group Head of Digital and Technology 27 --- 02 | Our performance Investec integrated annual report 2022 # STAKEHOLDER ENGAGEMENT (SECTION 172 STATEMENT) # Listening to and engaging with our stakeholders The Board appreciates the importance of meeting the diverse needs and expectations of all the Group's stakeholders and building lasting relationships with them. Effective communication and stakeholder engagement are integral in building stakeholder value. The Board is committed to providing meaningful, transparent, timely and accurate financial and non-financial information to primary stakeholders, enabling them to make meaningful assessments and informed investment decisions about the Group. In order to achieve these outcomes, the Board addresses material matters of significant interest and concern, highlighting key risks to which the Group is exposed and responses to mitigate these risks. The Group's DLC structure requires compliance with the disclosure obligations contained in the applicable listing rules of the UK Listing Authority (UKLA), the Johannesburg Stock Exchange (JSE) and other exchanges on which the Group's shares are listed, and with any public disclosure obligations as required by the UK Prudential Regulation Authority, the South African Prudential Authority and other regulatory bodies. From time to time, the Group may be required to adhere to public disclosure obligations in other countries where it has operations. The Investor Relations division has the overall responsibility for ensuring appropriate communication with stakeholders and, together with the Group Finance, Group Marketing, and Company Secretarial divisions, ensures that we meet our public disclosure obligations. A Board-approved policy statement is in place to ensure compliance with all relevant public disclosure obligations and to uphold the Board's communication and disclosure philosophy. ## Section 172(1) statement This section of the Strategic Report describes how the directors have had regard to the matters set out in section 172(1), and forms the directors' statement required under the Companies Act 2006. This statement also provides details of how the directors have engaged with and had regard to the interests of our key stakeholders. Strong partnerships and understanding are essential to the creation of enduring worth. To be the best we can be, and to understand stakeholders' needs, we work hard to establish the most effective ways of engaging with them. Engagement is important to us because it means we can understand stakeholder views and are able to respond in a meaningful and impactful way. We gather feedback through continuous dialogue with our stakeholders throughout the year to gain an intimate understanding of their needs. It's only through this varied dialogue that we can improve as a business, consider our strategy and deliver on our purpose. As detailed on the pages that follow, the Board's oversight of engagement with our stakeholders informs their principal decisions during the year. 28 --- 02 | Our performance Investec integrated annual report 2022 # STAKEHOLDER ENGAGEMENT (SECTION 172 STATEMENT) CONTINUED # Clients At Investec, we are all about partnership, striving to build deep and long-lasting relationships with our clients. ![img-4.jpeg](img-4.jpeg) # What matters to them - A dependable banking, wealth creation and wealth management partner - Innovative and creative solutions - Financial support - Enhanced cyber security - Competitive pricing - Assurance as to the security of their funds. # How we engage - Client engagement is managed on a day-to-day basis by senior management and client relationship managers. The Board receives regular updates from senior management on key client issues - Client engagement methods have evolved as a result of the COVID-19 pandemic, with face-to-face meetings becoming less frequent and a greater reliance on digital platforms and services - Comprehensive, user-friendly website and mobile app - Regular telephone and email communications - Industry relevant events and client marketing events, both of which have moved to online platforms while most people continue to work from home for at least some of their working week. # FY2022 highlights - Continued success in HNW client acquisition, growing our client base by 7% and 18% in South Africa and the UK, respectively - We have further developed our 'One Investec' approach, which brings all of Investec that is relevant to every client. It is a coordinated approach with the client at the centre. This has enabled us to leverage the whole of our capability to provide solutions most relevant to clients' needs - Recognised by the Financial Times of London as the best Private Bank and Wealth Manager in South Africa for the ninth consecutive year. # Our people* Our people are at the heart of our business. We aim to be an organisation that values all of its people for their contributions and celebrates them for who they are. ![img-5.jpeg](img-5.jpeg) # What matters to them - Learning, development and career progression - Belonging, Inclusion and Diversity (BID). Our approach continues building an inclusive working environment, improving representation with respect to gender and ethnicity, particularly at a senior level and enhancing opportunities for progression - Wellbeing, especially during various COVID-19 lockdowns and extended periods of working from home - Fair remuneration - Sustainable working practices - Flexible working conditions and expectations around the future of work. # How we engage - Regular staff updates and discussions hosted by the Chief Executive, executive directors and senior management, conducted via digital channels and where possible in person to keep colleagues up to date with strategic priorities and performance - Regular Chief Executive staff communication including email updates, staff intranet and other digital channels - Induction training for new joiners including a welcome from the Chief Executive and senior management - Tailored internal investor relations presentations on Group results, strategy updates and market feedback - Dedicated, comprehensive intranet including a platform full of resources to support the health and wellbeing of our people called LearnSpace. # FY2022 highlights - Launched a new app-based healthcare benefit in the UK, providing support to employees through some of life's most difficult personal challenges including menopause, fertility, and early parenthood - Launch of Allies programme to equip colleagues with the skills to recognise and address micro-aggressions and challenge exclusion - Supported staff and their families during the civil unrest in South Africa, both by flying in necessities and offering accommodation and psychological support - Reduced gender pay gap for the fourth consecutive year in the UK and South Africa. * includes permanent employees, temporary employees and contractors. 29 --- 02 | Our performance Investec integrated annual report 2022 # STAKEHOLDER ENGAGEMENT (SECTION 172 STATEMENT) CONTINUED # Investors Our shareholders (largely institutional) are primarily based in South Africa and the UK given our Group DLC structure. We also engage with debt investors who hold instruments issued by our subsidiary entities. ![img-6.jpeg](img-6.jpeg) # What matters to them - Progress against strategic objectives - Financial performance - Business sustainability and response to climate change - Management expectations and guidance on future business performance - Balance sheet resilience - Executive remuneration. # How we engage - Regular meetings with executive directors, senior management and investor relations - Annual meetings for largest shareholders with the Chair of the Board, Chair of the Remuneration Committee, investor relations, and Group company secretarial - Annual general meeting hosted by the Chair of the Board with Board members in attendance - Two investor presentations and two pre-close investor calls presented by the Chief Executive and CFO - Stock exchange announcements - Comprehensive investor relations website - Investor roadshows and presentations - Regular telephone and email communications - Annual and interim reports. # FY2022 highlights - The Chief Executive, along with executive management, presented a Group strategy update in May 2021 updating investors on progress made since the 2019 Capital Markets Day (CMD). The update included a deep dive into the strategic developments of Investec plc - Organised four debt roadshows in UK/Europe and one in South Africa, which raised over £1.3bn and R2.9bn, respectively. 127 meetings with existing and prospective investors # Communities Our values of making an unselfish contribution to society, valuing diversity and nurturing an entrepreneurial spirit drive our commitment to support the communities in which we exist. Our focus is on education, entrepreneurship and the environment. ![img-7.jpeg](img-7.jpeg) # What matters to them - Financial and non-financial support - Time volunteered by our staff - Education and learnership opportunities - Skills training and job creation - Protecting the environment. # How we engage - Regular in-person meetings, telephone/conference calls and emails with our community partners - Comprehensive community website and social media platforms to encourage participation - Staff volunteering - Community partners and NGOs invited to collaborate at conferences and events. # FY2022 highlights - We spent £8.9 million on our community initiatives in our jurisdictions around the world - Good progress in scaling our educational focus by providing an online offering with 4 018 Investec-funded learners participating in Promaths Online (2021: 1 212 learners) - Increased support for the Promaths Bursary Fund with 75 students awarded bursaries (2021: 25 students) - In the UK, Arrival Education swiftly adapted to ensure that young people and volunteers could participate in the programme remotely. We have supported 1 995 Arrival Education learners in the UK over the past 14 years. £8.9mn spent on community initiatives (2021: £9.8mn) Further information can be found in the Group's 2022 sustainability report which will be available on our website at the end of June 2022. 30 --- 02 | Our performance Investec integrated annual report 2022 # STAKEHOLDER ENGAGEMENT (SECTION 172 STATEMENT) CONTINUED # Government and regulators As a dual-listed Group, we are regulated by the South African Prudential Authority, the South African Financial Conduct Authority, the UK Prudential Regulation Authority and the UK Financial Conduct Authority, as well as other regulatory bodies. We maintain continuous engagement with governments and regulators in our key markets to ensure our business adapts to evolving regulatory environments. ![img-8.jpeg](img-8.jpeg) # What matters to them - Compliance with existing and evolving regulatory, legal and governance requirements - Assurance that we have robust prudential standards and supervision in place - Fair treatment of our clients and employees - Financial and operational resilience in the face of changing market conditions - Risk framework and appetite management - Capital and liquidity stress testing - Group tax strategy. # How we engage - Our Chair, Chief Executive, executive directors and the Board hold regular meetings with the South African Prudential Authority including the annual trilateral meeting with the Audit Committee, and with the UK Prudential Regulation Authority - Active participation in a number of policy forums - Engagement with industry consultative bodies. # FY2022 highlights - Approval of the distribution of 15% of the Group's shareholding in Ninety One to Investec shareholders - Permission for David Friedland, who has served on the Board for a period of greater than nine years, to remain as chair of the DLC BRCC until the 2022 AGM - Approval of the appointment of Philip Hourquebie as Chair of the Group, Henrietta Baldock as Chair of IW&I UK and, Nicky Newton-King, Jasandra Nyker and Brian Stevenson as non-executive directors of the Group. # ESG analysts and climate-focused industry bodies We are committed to supporting the transition to a clean and energy efficient economy and regularly engage with climate-focused industry bodies and analysts to discuss our evolving sustainability strategy. ![img-9.jpeg](img-9.jpeg) # What matters to them - Our climate change position statement and climate change framework - Managing and mitigating climate change impact within our operations (direct impact) - Indirect climate change impact through our loan book and investment portfolio - Addressing ESG risks within our business - Our commitment to net-zero carbon emissions - Reporting in line with industry standards. # How we engage - Annual sustainability report - Comprehensive sustainability website - Comprehensive ESG disclosures, including a standalone TCFD report - Sustainability factsheets - Our Chief Executive is a member of the UN Global Investors for sustainable development alliance - Regular and active participation in a number of ESG and climate forums relating to the TCFDs, e.g. PCAF - Regular knowledge sharing on ESG industry standards. # FY2022 highlights - Tabled a voluntary climate resolution at our AGM that received 99% support - Implemented a new executive directors' remuneration framework that links remuneration to various ESG ratings. # Carbon neutral Zero direct emissions, carbon neutrality in Scope 1 and 2 mainly through renewable electricity consumption with remaining unavoidable emissions of 17% offset through purchasing verified and high-quality carbon credits. 31 --- 02 | Our performance Investec integrated annual report 2022 # STAKEHOLDER ENGAGEMENT (SECTION 172 STATEMENT) CONTINUED # Suppliers We collaborate with suppliers and sub-contractors securely and who we expect to be resilient and to operate and behave in an environmentally and socially responsible manner. ![img-10.jpeg](img-10.jpeg) # What matters to them - Compliance with applicable environmental, labour and anti-corruption laws and regulations - Prompt payment practices - Fair and transparent tender and negotiation practices - Clear guidance on policies and procedures, such as due diligence and onboarding. # How we engage - The procurement function is responsible for engaging suppliers, and other business functions will be involved as required. For example, the Group sustainability team may conduct a sustainability and ESG review once a supplier is engaged - Centralised negotiation process - Procurement questionnaires requesting information on suppliers' environmental, social and ethical policies - Due diligence on cyber security and business continuity. # FY2022 highlights - We updated our critical supplier contracts in line with EBA regulatory guidelines - Strengthened our Business Continuity and third party operational resilience through supplier assessment and engagement - We improved our due diligence processes around financial crime, data security and financial screening. We have implemented a supplier screening system. Currently all of our IT suppliers are screened against ethical supply chain practices. We are expanding the screening to all suppliers in the next year. 32 --- 02 Our performance Investec integrated annual report 2022 ## STAKEHOLDER ENGAGEMENT (SECTION 172 STATEMENT) ### Principal decisions Here we outline how Board engagement with stakeholders has informed principal decisions during the year. #### Supporting our people through the COVID-19 pandemic Given the continued, far-reaching impact of the COVID-19 pandemic, the Board focused on the wellbeing of our people, and being front-footed with our clients and other stakeholders. The organisation continues to engage with and make sense of the future state of work embracing a hybrid approach. This proposed approach combines the experience of being together which enables relationships and interactions that underwrite the 'Out of the Ordinary' experience our clients expect, with recognising the value that working from home has brought, increasing flexibility in ways previously unrealised. The Future State of Work project is looking into providing the right leadership capabilities to support and develop colleagues in the new model. With the relaxing of the COVID-19 restrictions globally towards the end of 2021, the Board supported a return-to-work policy for three days a week from January 2022. The Board is committed to ensuring a safe environment for all employees, consultants and contractors working at Investec. From 1 February 2022, employees and all others working in the organisation's offices were required to be fully vaccinated or take up any reasonable accommodation in the form of antigen or PCR testing. However, no employee will be forced or coerced into consenting to a COVID-19 vaccination. Burnout and mental health risks remain of concern and the need to support our people is a key focus for the Board. We regularly monitor data from all our people engagement processes to identify timely interventions that are locally relevant and globally aligned. In the UK, we have continued to provide a range of interventions to support our colleagues' needs with rapid access to our in-house psychologists (Amplify-YP), facilitated conversations around 'hot current topics' and targeted sessions around burnout and anxiety. In South Africa, the Employee Wellbeing Programme is easily accessible to all employees and has offered several interventions highlighting mental health issues over the course of the year. #### Strategy in execution Investors have a keen interest in the strategic progress made by the Group since the 2019 Capital Markets Day (CMD). Over the past three years the Group's strategic priority has been to simplify and focus the business to deliver improved shareholder returns. The current year financial performance is above the levels reported in 2019, pre the COVID-19 pandemic, and the business is now well positioned to aggressively pursue identified growth opportunities in chosen niches. The Board has overseen the communication of strategic progress made, to shareholders and staff, in the form of an Investec plc business update presentation held in May 2021, staff presentations and in one-on-one dialogue with investors. In the financial year under review, the Board resolved to distribute a 15% holding in Ninety One to shareholders, whilst retaining a 10% shareholding. This decision is consistent with the Group's strategic priorities to simplify the business and optimise capital, and incorporated input received from shareholders. A General Meeting was held on 28 April 2022, whereby shareholders were able to cast their vote to approve the distribution of Ninety One shares and associated distribution mechanism. The resolutions were passed with a 99.9% majority. The 15% holding was successfully distributed on 30 May 2022. The Board has continued its regular engagement with shareholders and endeavours to incorporate shareholder feedback in its oversight of strategic execution. In the financial year under review, the Board oversaw the migration to the Advanced Internal Ratings Based (AIRB) approach in the measurement of capital in South Africa, and is pleased to announce that the Group is in the early stages of developing a plan to move to AIRB in the UK. In addition, the Board acknowledges shareholders' aspiration for the Group to reduce the South African investment portfolio; this remains a key priority of the Board. The Board has also focused on increasing connectivity across businesses and geographies and by advancing One Investec. The appointment of Brian Stevenson (Investec Bank plc (IBP) Chair) to the Group Board, and of Henrietta Baldock (Group Non-Executive Director) to the Wealth & Investment UK Board as Chair has enhanced the Board's oversight of connectivity across the Group. The Board considered the perspective of employees throughout, ensuring that the evolution of the Group's strategy has been communicated internally, that it is well understood and embedded at all levels of the Group's operations. #### Executive remuneration policy We undertook consultation with our key shareholders in 2020, focusing on our one-year proposed remuneration policy, which was approved at the 2020 AGM. The key change in this policy was a reduction in remuneration of approximately 25%. Subsequently we engaged in an extensive consultation exercise in February 2021 with our key shareholders and the Investment Association to obtain input into the design of our proposed 2022 remuneration policy. We received predominantly positive and constructive feedback. We incorporated changes as a result of this feedback, with these changes aiming to align reward more closely with business performance and adherence to our strategy. The key changes were to the financial and non-financial performance measures in both the Short-Term Incentive (STI) and Long-Term Incentive (LTI), and the addition of a risk modifier. In addition, a framework has also been created to link executive director remuneration to ESG key performance indicators (KPIs). We engaged in a further extensive consultation exercise with our key shareholders and the Investment Association in July 2021. During this exercise we discussed the final proposed remuneration policy to be presented to shareholders for approval at the AGM in August 2021. We demonstrated how we had responded to the feedback we had gathered from our key stakeholders in the prior consultation exercise. In respect of the 33 --- 02 Our performance Investec integrated annual report 2022 # STAKEHOLDER ENGAGEMENT (SECTION 172 STATEMENT) # CONTINUED proposed three-year policy, the overall feedback was positive. Some shareholders believed that prospective disclosure of the performance targets under the proposed policy would enable them to better assess the overall soundness of the policy. The Board reflected on the feedback from these shareholders and resolved to disclose the STI performance targets for the financial year ending 31 March 2022 and the indicative three-year LTI targets under the proposed policy, which was done prior to the AGM. The Board was pleased to receive a materially higher vote in favour of the remuneration policy than had been the case in prior years, at 86%. The Board anticipates and hopes that this will translate into higher votes in favour of the annual report on remuneration in future years. The Chair of the Remuneration Committee and the Chair of the Board look forward to engaging with our key shareholders again in July 2022, ahead of the AGMs in August 2022. # Tabling a climate risk-related resolution at the 2021 AGM The Board regularly engages with a range of stakeholders (including shareholders, ESG analysts and rating agencies) on a number of climate-related and sustainability topics that are relevant for the business. As the first bank in South Africa to release a separate report aligned with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) in 2020, we have shown that sustainability is central to our strategic direction. The Board also acknowledges that climate change represents a material financial risk, and continues to oversee the evaluation of our exposure to understand and mitigate potential risks. In addition, the Board recognises the opportunities that climate change presents within our various business activities. All Board members have a strong awareness around climate-related and sustainability matters that was supplemented by presentations from internal and external parties during various Board meetings. The aim is to introduce targeted training to the Board over the next year. The Board takes ultimate accountability for climate-related and sustainability matters, supported by the Social and Ethics Committee (DLC SEC). This structure has been in place for many years and was strengthened to include senior executive responsibility for identifying and managing climate-related risks. In addition, the Chief Executive is supported by the Group ESG Executive Committee to coordinate climate-related and sustainability (including ESG) efforts across geographies and businesses from both a strategy and policy perspective. The Group ESG Executive Committee, mandated by the Group's executive directors, reports relevant climate-related and sustainability (including ESG) matters to DLC SEC and the Group Executive Risk Committee. Our ambition towards net-zero has been strengthened by joining the Net-Zero Banking Alliance (NZBA) at the end of 2021, highlighting the urgency for faster, immediate and more ambitious climate action. Through the stewardship of the global sustainability team, we engaged with a number of stakeholders regarding our net-zero ambitions that led to tabling a second voluntary climate resolution at the August 2021 AGM, and at the time the most significant climate change shareholder resolution for a JSE-listed company as noted by JustShare. This resolution asked shareholders to "authorise and direct the Group and its directors to commit to disclose: - A baseline of the Group's scope 3 financed emissions; - Our strategy to reduce scope 3 emissions; and - Our short-, medium- and long-term targets to reach net-zero emissions and align with the Paris goals, based on a geographic approach that is guided by (but not limited to) the net-zero trajectories of our two core jurisdictions, being South Africa and the UK". Shareholders voted overwhelmingly in favour of the resolution, which passed with a 99.9% vote, further highlighting the importance investors are placing on climate-related matters. Following this resolution, the Board engaged with shareholders during roadshows to discuss and clarify any climate-related concerns. In addition, Investor Relations received ad hoc requests to provide further clarification on the resolution. The Group sustainability team also engaged with stakeholders, for example JustShare, to understand their views and expectations on climate disclosures and incorporate feedback from our 2021 TCFD report. Questions largely focused on our approach to calculating our net-zero emissions, our short-, medium- and long-term targets, as well as the climate-related skills of our Board - acknowledging that two of the Directors have strong climate-related experience and skills. During these engagements a definite sense of the increased importance of climate action was noted. The Board's decision to table a second climate risk-related resolution at the 2021 AGM demonstrates our commitment to addressing climate issues, and aligns with our purpose of living in, not off, society. Our delivery of this resolution is disclosed in the Group's 2022 climate-related financial disclosures report. Further information on our ESG initiatives and progress can be found in the Group's 2022 sustainability report which will be available on our website at the end of June 2022. # Belonging, Inclusion and Diversity initiatives The Board's commitment to Belonging, Inclusion and Diversity (BID) at Investec continues to be a key strategic objective, with a particular focus on increasing gender and minority ethnic representation. Stakeholders such as our employees, shareholders, ESG analysts, and clients remain interested in our progress. During this year the Board has continued to work towards our commitments to address inequalities. Key areas of our strategy have included increasing diversity representation in senior roles and decision-making forums, improving leader capability and awareness in creating an inclusive work environment, and ensuring our policies and principles entrench a level playing field. Following extensive engagement with employees, the Board has endorsed a number of initiatives this year in support of our strategy: - Listening circles with Black, Asian and Minority Ethnic employees took place in the UK, the output of which has been shared with our Executive and is helping to inform the actions we need to take as an organisation - The implementation of mandatory training for all employees in the UK on bullying, harassment and discrimination - The creation of BID Forums to bring leaders and representatives of the workforce together to discuss and co-create solutions and strategies in relation to BID, increase awareness and thereby help to create an environment where colleagues can be 34 --- 02 | Our performance Investec integrated annual report 2022 # STAKEHOLDER ENGAGEMENT (SECTION 172 STATEMENT) CONTINUED themselves and a sense of belonging permeates - Provision of safe spaces for colleagues to participate in informal facilitated dialogue to reflect and share the impact of the murder of Sarah Everard in the UK as well as the alarming surge in anti-Semitism incidents and violence in the UK and many other countries - A number of global conversations took place with 200 colleagues from South Africa, the UK, Channel Islands and Mauritius in December, January and February to discuss the evolvement and creation of two new Investec values: evolving belonging, inclusion and diversity, and recognising the environment - Conversations with our Executive teams to discuss how we can empower leaders to be more proactive and confident, inclusive leaders and to enhance leader capability in Belonging, Inclusion and Diversity. This year we have also made notable progress in relation to the appointment of women into senior positions and into principal decision making committees. The Board recognises that maintaining a strong focus on Belonging, Inclusion and Diversity, and having clear targets and measures to track progress, is critical. BID is integral to Investec's purpose to 'create enduring worth – living in, not off society'. The Board firmly believes that improving representation and fostering inclusion and belonging will better enable us to meet our clients' needs. Further information on our gender, diversity and transformation initiatives and progress can be found on pages 96 to 97 as well as in the Group's 2022 sustainability report which will be available on our website at the end of June 2022. # Value added statement Highlighting value created by the Group and its distribution to stakeholders | £'000 | 31 March 2022 | % | 31 March 2021 | % | | --- | --- | --- | --- | --- | | **Net income generated – total Group** | | | | | | Interest income | 1 951 209 | | 1 922 299 | | | Other income | 1 004 915 | | 863 427 | | | Interest expense | (1 005 939) | | (1 144 193) | | | Other operating expenditure and impairments on loans | (214 529) | | (251 133) | | | Financial impact of Group restructures (pre-tax) | (1 203) | | 7 386 | | | | **1 734 453** | **100%** | **1 397 786** | **100%** | | **Distributed as follows:** | | | | | | **Employees:** Salaries, wages and other benefits | 621 337 | 35.8% | 616 476 | 44.1% | | **Communities:** Spend on community initiatives* | 8 875 | 0.5% | 9 852 | 0.7% | | **Government:** Corporation, deferred payroll and other taxes | 551 106 | 31.8% | 450 414 | 32.2% | | **Shareholders:** | 217 351 | 12.5% | 88 120 | 6.3% | | Dividends to ordinary shareholders | 178 418 | | 53 346 | | | Dividends to perpetual preference and Other Additional Tier 1 security holders | 38 933 | | 34 774 | | | **Retention for future expansion and growth:** | 335 784 | 19.4% | 232 924 | 16.7% | | Depreciation | 16 691 | | 18 755 | | | Retained income | 319 093 | | 214 169 | | | **Total** | **1 734 453** | **100%** | **1 397 786** | **100%** | * Community spend higher in FY2021 due to COVID-19 relief. 35 --- 02 | Our performance Investec Integrated Annual Report 2022 # CASE STUDY # Supporting entrepreneurship, creating opportunities We're enabling young people to become entrepreneurs, helping them to build successful businesses for themselves – while creating job opportunities for others in their local communities. "The extended presence of COVID-19 and associated restrictions has led to high job losses which in the main represent economic exclusion of people, impacting negatively on the livelihoods and survival of many individuals and families," says Setlogane Manchidi, our Head of Corporate Social Investment. "The support of entrepreneurship presents a platform for many of those who have lost their jobs to re-enter the economy by looking for opportunities that may initially just keep them above the poverty line but if all goes well, could do much more than just survival for them and others who they may employ." When people are economically engaged in society, the benefits don't just impact the individuals concerned, they extend across families, friends and entire communities – bringing income, a sense of personal worth, dignity and direction. Recognising that the growth of entrepreneurship can be a key driver of job creation, we're proud to continue our support of the Startup School, an innovative social project which aims to increase the number of successful entrepreneurs in South Africa. Each course combines interactive learning activities, practical tools, individualised feedback and coaching support to help entrepreneurs start and grow sustainable businesses. The flagship entrepreneurship course offers additional benefits, including one-to-one mentorship sessions and the chance to win business funding. During 2021, we commissioned an independent review to assess the impact and success of the programme, and to gain insights into how we can improve on the offering. The review was overwhelmingly positive, with findings including: The **majority of participants** experienced an authentic and organic journey of self-discovery, discipline and personal development. **88%** 88% of alumni reported deriving ROI/value from their participation. **22%** 22% grew their businesses, despite the impact of COVID-19. **78** 78 new full-time jobs were created. ![Startup School logo]() **Startup** SCHOOL 36 --- 02 | Our performance Investec Integrated Annual Report 2022 “The extended presence of COVID-19 and associated restrictions has led to high job losses which in the main represent economic exclusion of people, impacting negatively on the livelihoods and survival of many individuals and families.” **Setlogane Manchidi** Head of Corporate Social Investment **Pictured:** Sikhangezile Bwanali, previous winner of business funding. ![img-11.jpeg](img-11.jpeg) --- 02 | Our performance Investec integrated annual report 2022 # CFO REPORT ![img-12.jpeg](img-12.jpeg) ## The year in review The Group continues to successfully navigate the social, economic and geopolitical challenges that have characterised the past two years, and has made significant progress against the strategic goals outlined at the 2019 Capital Markets Day. Our focused approach delivered a strong rebound in adjusted operating profit increasing by 82% to £687 million. Revenue performance was strong as underlying franchises effectively supported our clients, with costs well contained, resulting in a pre-provision operating profit increase of 50% to £716 million. The Group's capital optionality increased over the year benefitting from continued capital generation and further implementation of the AIRB approach in South Africa. Group Finance Director 38 --- 02 Our performance Investec integrated annual report 2022 # CFO REPORT CONTINUED # Strong financial performance... Adjusted earnings per share grew by 90.7% to 55.1 pence (2021: 28.9 pence), surpassing pre-pandemic comparable earnings. Basic earnings per share grew over 100% to 52.0 pence (2021: 25.2 pence). ![img-13.jpeg](img-13.jpeg) Pre-provision adjusted operating profit increased by 50.1%, supported by continued client acquisition, increased client activity, growth in FUM and higher average advances. - Revenue momentum experienced in the first half of the financial year continued into the second half. - Net interest income benefitted from lower funding costs and higher average interest earning assets. - Increased client activity, higher lending turnover and supportive market conditions underpinned the growth in non-interest revenue over the year. - Fixed operating expenditure was well contained in line with the Group's focus on cost efficiencies, while variable remuneration grew in line with business performance. - Impairments were significantly lower given limited default experience and the minimal impact from updated forward-looking macro-economic scenarios. The prior year results reflected the effects of severe economic contraction and rate cuts associated with COVID-19 which negatively affected client activity, net interest margins, valuations and impairments. Additionally, risk management and risk reduction costs associated with the UK structured products book were elevated in FY2021. # ...supported by solid underlying fundamentals - Net core loans and customer deposits increased by 13.2% to £29.9 billion and by 16.5% to £40.1 billion, respectively. - Funds under management increased 9.2% to £63.8 billion as a result of favourable market movements and net organic inflows in both geographies. # £'billion ![img-14.jpeg](img-14.jpeg) # Well capitalised, lowly leveraged, strong liquidity - The Group has maintained strong capital and liquidity positions to support growth, all ahead of internal and Board-approved minimum targets and regulatory requirements. - The common equity tier (CET) 1 and leverage ratio were 14.0% and 7.4% respectively for Investec Limited, and 11.7% and 9.2% respectively for Investec plc. - Cash and near cash was £17.2 billion at 31 March 2022, representing 42.8% of customer deposits. - The Group comfortably exceeds Basel liquidity requirements for the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). - Investec Bank Limited (consolidated Group) ended the year with the three-month average of its LCR at 138.9% and a NSFR of 112.6%. Investec plc reported a LCR of 457% and a NSFR of 145% at 31 March 2022. # Creating long-term shareholder value - NAV per share growth of 11.4% to 510.0 pence underscores the ability of our client franchises to generate capital to support growth and sustainable dividends. - The Board proposed a final dividend of 14.0 pence, resulting in a total dividend of 25.0 pence, translating to a 45.4% payout ratio, within the Group's target pay-out ratio range of 30% to 50%. - Significant cumulative capital has been returned to shareholders totalling c.£1.6 billion (c.R32 billion) since March 2020, including the successful distribution of 15% of Ninety One on 30 May 2022. # NAV per share (pence per share) ![img-15.jpeg](img-15.jpeg) - We have made positive progress towards the achievement of medium-term targets, reporting an ROE of 11.4% for the year - We expect to be within our 12% to 16% target range by FY2024, underpinned by a combination of improved operational performance and capital optimisation. # ROE (%) ![img-16.jpeg](img-16.jpeg) 39 --- 02 | Our performance Investec integrated annual report 2022 # CFO REPORTCONTINUED # Unpacking financial results # Summarised income statement | £'000 | Year to 31 March 2022 | Year to 31 March 2021 | % change | | --- | --- | --- | --- | | **Net interest income** | **945 270** | **778 106** | **21%** | | **Non-interest revenue** | **1 045 085** | **862 955** | **21%** | | Net fee and commissioning income | 818 216 | 748 878 | 9% | | Investment income | 27 974 | 32 002 | (13%) | | Share of post-tax operating profit of associates | 79 556 | 42 459 | 87% | | Client flow trading income | 128 277 | 35 566 | >100% | | BSM & Other trading income | (21 128) | (18 903) | (12%) | | Other operating income | 12 190 | 22 953 | (47%) | | **Total operating income before ECL impairment charges** | **1 990 355** | **1 641 061** | **21%** | | ECL impairment charges | (28 828) | (99 438) | (71%) | | **Total operating income** | **1 961 527** | **1 541 623** | **27%** | | Operating costs | (1 233 948) | (1 164 513) | 6% | | **Operating profit before goodwill, acquired intangibles and strategic actions** | **727 579** | **377 110** | **93%** | | Profit attributable to other non-controlling interests | (40 170) | 472 | >100% | | **Adjusted operating profit** | **687 409** | **377 582** | **82%** | | ROE | 11.4% | 6.6% | | | ROTE | 12.3% | 7.2% | | # Net interest income (NII) Strong NII growth was driven by higher average interest earning assets including average loan book growth, lower funding costs as liabilities repriced post rate cuts, and excess liquidity deployed into higher-yielding loans. Partially offset by higher repayments in certain areas of the South African corporate lending portfolio, lower average yield earned on cash, near cash, bank debt and sovereign debt, and loss of income following Australian loan book exit. # Non-interest revenue (NIR) The 21% increase in NIR is largely driven by the following: Fee and commission income was positively impacted by improved activity levels and higher average FUM. Trading income reflects significantly reduced risk management and risk reduction costs of hedging UK structured products. Higher associate income from improved performance in the Group Investments portfolio. # Expected credit loss impairment charges Total ECL impairment charges decreased by 71% resulting in a credit loss ratio of 0.08% (2021: 0.35%; 1H2022: 0.07%). Asset quality remains strong, with exposures to a carefully defined target market and well covered by collateral. The decrease in ECL was driven by limited default experience, good recoveries, and reversals of certain Stage 3 ECLs raised in the prior year as exposures cured. Given the uncertain economic outlook, the Group has maintained a level of post-model management overlays to account for risks assessed as inadequately reflected in the models. There was a net release of management overlays during the year of £2.9 million. # Operating costs Fixed operating expenditure was well contained, increasing by 1.1%. The increase in total expenses was primarily driven by higher variable remuneration given improved business performance, partly offset by the non-repeat of one-off costs associated with restructures (including related redundancies) and the closure of operations in Australia in the prior year. The cost to income ratio improved to 63.3% from 70.9% in the prior year. Group Costs decreased by 8.1% to £30.8 million (2021: £33.5 million). # Revenue growth ahead of cost growth – resulting in positive jaws ![img-17.jpeg](img-17.jpeg) 40 --- 02 | Our performance Investec integrated annual report 2022 # CFO REPORT ## Strong financial position | £'million | Year to 31 March 2022 | Year to 31 March 2021 | % change | | --- | --- | --- | --- | | Loans and advances to customers | 29 934 | 26 438 | 13% | | Customer deposits | 40 118 | 34 449 | 16% | | --- | --- | --- | --- | | Funds under management (FUM) | 63 800 | 58 436 | 9% | | --- | --- | --- | --- | **Core loans** increased by 13.2%, driven largely by residential mortgage and corporate lending growth in both geographies. In South Africa, net core loans grew by 3.9% to R298.4 billion (31 March 2021: R287.3 billion). Advances to private clients increased 4.2% driven by resi-mortgages, offset by flat year-on-year growth in commercial real estate. Corporate lending increased 3.3%, offset by elevated repayments and subdued credit demand given continued low business confidence. In the UK, net core loans grew by 17.0% (18.5% excluding Australia) to £14.4 billion (31 March 2021: £12.3 billion) driven by residential mortgages (up 35.5%) and strong demand for corporate credit (up 10.2% (12.0% excluding Australia)) across several portfolios. **Customer deposits** increased 16.5%, ahead of core loan growth as the corporates remain defensively positioned, specifically in South Africa. The UK grew into excess liquidity accumulated in recent years, as loans grew ahead of deposit growth. The balance sheet remains conservative from a liquidity perspective in line with our philosophy. **FUM** increased 9.2% supported by net inflows of £1.9 billion and favourable market movements in both geographies. South Africa Wealth & Investment net inflows were supported by the sustained flows into the offshore investment range, with offshore-based FUM currently representing over 60% of total discretionary FUM. The UK Wealth and Investment net inflows were supported by inflows of £473 million originating from our Private Banking referrals in line with the Group's strategic objective of One Investec. ## Capital and liquidity ratios ### Investec limited | CET1 | 14.0% | 12.2% | | --- | --- | --- | | Leverage ratio | 7.4% | 7.6% | | --- | --- | --- | ### Investec plc | CET1 | 11.7% | 11.2% | | --- | --- | --- | | Leverage ratio | 9.2% | 7.9% | | --- | --- | --- | ## Capital adequacy and leverage ratios Capital and leverage ratios remain sound, ahead of Board-approved minimum targets and regulatory requirements. The CET1 and leverage ratio were 14.0% and 7.4% for Investec Limited (increased AIRB scope) and 11.7% and 9.2% for Investec plc (Standardised approach) respectively. The Group targets a minimum CET1 ratio above 10%, a tier 1 ratio above 11% and a total capital adequacy ratio range of 14% to 17% on a consolidated basis for each of Investec plc and Investec Limited, respectively. Investec Limited made progress in the application to adopt AIRB for the measurement of capital on certain portfolios currently on the Foundation Internal Ratings Based (FIRB) approach. On full adoption of AIRB, the pro-forma CET1 ratio would on a pro-forma basis increase by 200bps at 31 March 2022. Investec plc is in the early stages of a process to migrate from the Standardised approach to the Internal Ratings Based (IRB) approach. 41 --- 02 | Our performance Investec integrated annual report 2022 # CFO REPORT CONTINUED # Looking forward The Group is well-capitalised and lowly leveraged, adequately provisioned and has robust liquidity levels. We are firmly committed to our medium-term targets, and are well positioned to pursue growth opportunities in our chosen markets. The expected slowdown in global growth given the high levels of inflation and increased geopolitical tensions present a downside risk to current economic forecasts. # FY2023 guidance: Based on financial performance for FY2022, current business momentum and a macro-economic outlook with elevated forecast risk in the short term, the Group expects: - A positive revenue outlook, underpinned by higher average interest rates supporting margins, higher average lending books and increased activity levels given expected GDP growth - The cost to income ratio to be within the Group target of <63% notwithstanding inflationary pressures and continued investment in technology - Normalisation of expected credit loss impairment charges and consequent credit loss ratio increase towards the Group's revised through-the-cycle (TTC) range of 25-35bps, with South Africa's TTC range calibrated between 20bps and 30bps, and the UK between 30bps and 40bps - The distribution of Ninety One to result in a 65bps reduction in Investec Limited's CET1 ratio and to have an immaterial impact on Investec plc. The attributable contribution to adjusted earnings per share was c.3.4p for FY2022 - South Africa to continue to operate with a surplus capital position given excess capital generation and the anticipated CET1 uplift on full implementation of AIRB - Improvement in ROE towards the 12-16% Group target range, which we expect to achieve by FY2024. This will be aided by capital management initiatives. # Appreciation I would like to extend my personal thanks to my colleagues on the Board and the Group executive team for your support and counsel during the year. Thank you to all our 8 300 colleagues across the Group for their hard work and dedication. Thank you to all our shareholders, as well as the broader investment community for your interest and investment in the Investec Group. I look forward to further engagements. Nishlan Samujh Group Finance Director 42 --- 03 Divisional review Investec integrated annual report 2022 # Divisional review ![img-18.jpeg](img-18.jpeg) --- 03 Divisional review Investec integrated annual report 2022 # IN THIS SECTION | UK and Other | 46 | | --- | --- | | Wealth & Investment | 48 | | Specialist Banking | 51 | | Group Investments | 58 | | Southern Africa | 59 | | Wealth & Investment | 61 | | Specialist Banking | 63 | | Group Investments | 70 | --- 03 Divisional review Investec integrated annual report 2022 # INTRODUCTION We partner with private, institutional and corporate clients, offering international banking, investment and wealth management services in two principal markets, South Africa and the UK, as well as certain other countries. ![img-19.jpeg](img-19.jpeg) --- 03 | Divisional review Investec integrated annual report 2022 # UK AND OTHER We provide our clients with a diversified, combined and integrated banking and wealth management offering in the UK with extensive depth and breadth of products and services. We've built our business by working in partnership with our clients, taking the time to understand their unique needs and aspirations. This approach allows us to deliver Out of the Ordinary service to private, institutional and corporate clients alike. # Highlights Funds under management £44.4bn (2021: £41.7bn) Adjusted operating profit £299.9mn (2021: £126.0mn) Net core loans £14.4bn (2021: £12.3bn) Cost to income 70.5% (2021: 79.5%) Customer deposits £18.3bn (2021: £16.1bn) ROE post tax 11.2% (2021: 4.0%) # What we do # Private client offering # Wealth & Investment Investment and savings Pensions and retirement Financial planning # Private Banking Lending Private Capital Transactional banking Savings Foreign exchange # Corporate client offering # Corporate and Investment Banking Lending Advice Hedging Cash – deposits and savings Equity placement # Target market # Private client offering - Individuals with > £250k minimum investable amount - Charities - Trusts - High net worth active wealth creators (with >£300k annual income and > £3mn NAV) # Corporate client offering - Corporates - Private equity - Institutions - Intermediaries - Government 46 --- 03 | Divisional review Investec integrated annual report 2022 ## UK AND OTHER CONTINUED Operating income ![img-20.jpeg](img-20.jpeg) Operating costs ![img-21.jpeg](img-21.jpeg) Expected credit loss impairment charges ![img-22.jpeg](img-22.jpeg) Adjusted operating profit and ROE ![img-23.jpeg](img-23.jpeg) Net core loans ![img-24.jpeg](img-24.jpeg) Total customer deposits ![img-25.jpeg](img-25.jpeg) Note: Figures on this page for comparative years relate to continuing operations. 47 --- 03 | Divisional review UK & OTHER Investec integrated annual report 2022 # WEALTH & INVESTMENT ![img-26.jpeg](img-26.jpeg) # Business Head Ciaran Whelan # Awards Won 'Best UK Wealth Planning Team' and 'Best Diversity and Inclusion in Wealth Management' at the 2022 Wealth Briefing European Awards Retained Defacto Gold rating for DFM Services With over £44 billion of FUM, we are one of the UK's largest wealth and investment managers. We work with individual clients to allow them to grow, enjoy and protect their wealth, and with charities and clients of professional advisers to help deliver optimal returns on their investments and to bring financial peace of mind. # Performance highlights - A strong financial performance has resulted in operating profit of £87.7 million (17.9% above the prior year) and an operating margin for the UK domestic business of 27.0% (2021: 25.2%) - Market recovery, continued net inflows and positive investment performance resulted in record FUM of £46.1 billion at 31 December 2021 - The final quarter of the financial year was impacted by global market volatility caused by the war between Russia and Ukraine, resulting in a closing FUM of £44.4 billion at 31 March 2022. # Funds under management and net flows £'billion ![img-27.jpeg](img-27.jpeg) # Reasons for the variance in FUM since 31 March 2021 - Favourable market movements (MSCI PIMFA Balanced Index up 10.7%), somewhat offset by investment performance in the final quarter - Net inflows of £1.2 billion resulting in net organic growth in funds under management of 2.9%. # Funds under management | £'million | 31 March 2022 | 31 March 2021 | % change | | --- | --- | --- | --- | | **UK domestic (including Channel Islands)** | **42 894** | **40 474** | **6.0%** | | Discretionary | 36 728 | 34 812 | 5.5% | | Non-discretionary* | 6 166 | 5 662 | 8.9% | | **Switzerland** | **1 525** | **1 210** | **26.0%** | | Discretionary | 487 | 395 | 23.3% | | Non-discretionary | 1 038 | 815 | 27.4% | | **Total** | **44 419** | **41 684** | **6.6%** | * Non-discretionary includes advisory-managed FUM of £1 627 million (2021: £1 829 million). Managed funds therefore represent 89% of the UK domestic total FUM at 31 March 2022 (2021: 91%). # Net inflows over the year | £'million | 31 March 2022 | 31 March 2021 | | --- | --- | --- | | Discretionary | 808 | 959 | | Non-discretionary | 410 | 150 | | **Total** | **1 218** | **1 109** | 48 --- 03 | Divisional review UK & OTHER Investec integrated annual report 2022 # WEALTH & INVESTMENT CONTINUED # Income statement analysis and key income drivers | £'000 | 31 March 2022 | 31 March 2021 | Variance | % change | | --- | --- | --- | --- | --- | | Net interest income | 2 268 | 2 296 | (28) | (1.2%) | | Net fee and commission income | 344 029 | 316 040 | 27 989 | 8.9% | | Investment (loss)/income | (2) | 272 | (274) | (>100.0%) | | Trading income arising from: | | | | | | – customer flow | 1 194 | 920 | 274 | 29.8% | | – balance sheet management and other trading activities | (307) | (9) | (298) | (>100.0%) | | **Total operating income before expected credit loss impairment charges** | **347 182** | **319 519** | **27 663** | **8.7%** | | Of which: UK domestic | 338 322 | 311 576 | 26 746 | 8.6% | | Of which: Switzerland* | 8 860 | 7 943 | 917 | 11.5% | | Expected credit loss impairment charges | (5) | (4) | (1) | 25.0% | | **Operating income** | **347 177** | **319 515** | **27 662** | **8.7%** | | Operating costs | (259 496) | (245 175) | (14 321) | 5.8% | | Of which: UK domestic | (247 729) | (233 100) | (14 629) | 6.3% | | Of which: Switzerland* | (11 767) | (12 075) | 308 | (2.6%) | | **Adjusted operating profit/(loss)** | **87 681** | **74 340** | **13 341** | **17.9%** | | Of which: UK domestic | 90 593 | 78 476 | 12 117 | 15.4% | | Of which: Switzerland* | (2 912) | (4 136) | 1 224 | (29.6%) | | **Key income drivers** | | | | | | Operating margin | 25.3% | 23.3% | | | | Of which: UK domestic^{#} | 27.0% | 25.2% | | | | Net inflows in FUM as a % of opening FUM | 2.9% | 3.3% | | | | Average income yield earned on FUM^{^} | 0.81% | 0.85% | | | | Of which: UK domestic | 0.81% | 0.86% | | | * The results of the Switzerland business have been reported separately to demonstrate the value of the UK domestic business. Following a strategic review, our Swiss operations are being restructured to play a key role in the Group's strategic expansion of its international banking and wealth services. # The calculation of the operating margin for the UK domestic business excludes net interest expense of £755 000 (2021: £508 000) relating to net interest income earned on the firm's cash deposits and the IFRS 16 Leases interest expense on right-of-use assets. This presentation is consistent with wealth managers that are not part of a banking group and are therefore not required to report in accordance with the presentation and disclosure standards for banks. Excluding this adjustment, the operating margin for the UK domestic business would be 26.8% (2021: 25.2%). ^ The average income yield on funds under management represents the total operating income for the period as a percentage of the average of opening and closing funds under management. This calculation does not adjust for the impact of market movements and investment performance throughout the period on funds under management or the timing of acquisitions and disposals (where applicable) during the respective periods. # Other factors driving the performance in the year under review included - Net fee and commission income increased by £28.0 million (8.9%) as a result of higher market levels and positive net organic growth in FUM (in the current and prior year). Commission income returned to a more normalised level following the exceptional transaction volumes seen in the prior year, resulting in a lower average income yield - Operating costs were up 5.8% due to investment in technology, increased discretionary expenditure as COVID-19 related restrictions eased, as well as higher variable remuneration in line with business performance. # Strategy execution # Belonging, Inclusion and Diversity (BID) highlights - We launched an Inclusive Allies programme to educate colleagues about how to be an effective ally to marginalised groups - Our new app-based healthcare benefit, Peppy, which was launched in the year under review is giving colleagues access to personalised support through life events, including menopause, fertility and early parenthood - We celebrated neurodiversity using employee focus groups to shape our approach and ensuring our recruitment processes are inclusive and supportive for neurodivergent thinkers - Our commitments to the Women in Finance Charter progressed, evidenced by our over 30% representation of women in senior leadership roles, and 50% female Board representation in the UK. # Sustainability highlights - We continued to focus on investing responsibly on behalf of clients, with environmental, social and governance (ESG) considerations integrated into our investment process and active engagement with the businesses that we invest in - Our executive team and Investment & Research Office are enhancing sustainable finance knowledge through the Cambridge Institute for Sustainability Leadership programme - We are sponsoring the Blue Economy Ocean Accelerator programme, which is aimed at supporting entrepreneurial SME businesses to make a meaningful impact on the ocean. 49 --- 03 | Divisional review UK & OTHER Investec integrated annual report 2022 # WEALTH & INVESTMENT CONTINUED # Overall - In line with our One Investec objective, we seek to provide integrated solutions to clients through access to group-wide products and services on offer. Successful referrals between the Specialist banking and the Wealth & Investment businesses resulted in £473 million of FUM and £105 million of new lending - We have revised our remuneration approach to improve the alignment between performance incentives and our strategic goals, culture and values - Our client-facing teams and the Investment & Research Office have been focused on ensuring our direct clients, charities, and independent financial advisors benefitted from the positive market movements seen in the first three quarters, and were adequately supported through the market volatility in the final quarter. # Growth opportunities and outlook - Following the formation of our new Investment & Research Office, we are improving the consistency and quality of our investment offering, including updating our Strategic Asset Allocation to broaden our exposure to global market opportunities and differentiated asset classes - Our priority is organic growth in our key channels, namely direct clients, charities, and intermediaries, however, we remain alive to opportunities arising from industry consolidation - We will continue to focus on our value proposition in relation to advice capabilities and a coordinated banking and wealth management offering to HNW clients. 50 --- 06 Governance Investec integrated annual report 2022 # BOARD COMPOSITION CONTINUED # Board composition # Membership At the date of this annual report, the Board comprised four Executive directors and eleven Non-Executive Directors, including the Chair. The changes to the composition of the Board during the year, following the year-end, and forthcoming, are as detailed on page 108. The names of the directors during the year, and the dates of their appointments are set out on page 120. Further information regarding the DLC Nomadac's responsibilities in respect of succession planning can be found on page 96 of the Investec Group's 2022 risk and governance report. # Independence The Board considers the guidance set out in the UK Corporate Governance Code, the King IV™ Code, and directive 4/2018 as issued by the South African Prudential Authority, when considering the independence of members of the Board. Throughout the year ended 31 March 2022, the Board was compliant with the UK Corporate Governance Code and the King IV™ Code, in that the majority of the Board, excluding the Chair, comprised independent Non-Executive Directors. The Board considers all relevant circumstances, in ensuring that the directors demonstrate independence of character and judgement, and provide challenge to the Executive Board members in the boardroom. The Board believes that it functions effectively and that the Non-Executive Directors are independent of management and promote the interests of stakeholders. The Board is of the view that the Chair, Philip Hourquebie, was independent on appointment. Prior to becoming Chair, Philip was an independent Non-Executive Director and Chair of the DLC Remuneration Committee. The Board's deliberation on the independence of the Non-Executive Directors included the consideration of the following relationships and associations in regards to specific directors: - Stephen Koseff was a former CEO of the Group. Given the independence guidance provided in the UK Corporate Governance Code and the King IV™ Code and noting that Stephen stepped down as an Executive Director in August 2019, the Board concluded that Stephen could not be considered independent - The Board, noting that David Friedland had served on the Board for nine years in March 2022, and would accordingly not meet the definition of independence under the South African Prudential Authority's Directive 4/2018, obtained permission from the South African Prudential Authority for David to remain as Chair of DLC BRCC until the 2022 AGM. The Board concluded that David remained independent. # Tenure The Board also considers tenure when examining independence, and when discussing the composition of the Board as a whole. The Board is mindful that there needs to be a balance resulting from the benefits brought by new independent directors, versus retaining individuals with an understanding of Investec's unique culture. The Board does not believe that the tenure of any of the identified independent Non-Executive Directors standing for election or re-election at the AGM in August 2022 interferes with their independence of judgement or their ability to act in the Group's best interest. # Board diversity The Board places great emphasis on ensuring that its membership reflects diversity in its broadest sense. Consideration is given to the combination of demographics, skills, experience, race, ethnicity, religion, age, gender, educational and professional background and other relevant personal attributes. The aim is to provide the range of perspectives, insights and challenge needed to support good decision-making by the Board. New appointments are made on merit, taking into account the specific skills, experience, independence and knowledge needed to ensure a well-rounded Board and the diverse benefits each candidate can bring to the overall Board composition. Mindful of the recommendation of the Hampton-Alexander Review, the Board set a target of 33% female representation on the Board. As at 31 March 2022, we had achieved 36% female representation, whilst as at the date of this report, there is a 40% female representation. Following the AGM in August 2022, there will be a 43% female representation. The Board will be reviewing the Board Governance and Diversity Policy, and updating the diversity targets, to reflect the FCA policy statement and final rules on diversity on boards and executive committees. The gender balance of those in senior management and their direct reports, and further information on the Group's broader approach to inclusion and diversity can be found in the 2022 Group sustainability report. Cognisant of the recommendations of the Parker Review and in accordance with the requirements of the South African Financial Sector Code, the Board set two further internal objectives: - A minimum of 25% of the Board members who are ordinarily resident in South Africa should be black women - A minimum of 50% of the Board members who are ordinarily resident in South Africa should be black people. As at 31 March 2022, and following the AGM in August 2022: - There were / are six board members who are persons of colour (as defined by the Parker Review) - 22% of the Board members ordinarily resident in South Africa who are black women - 56% of the Board members ordinarily resident in South Africa who are black people. The Board will therefore aim over time to reflect these goals, with diversity a key consideration for the Board when planning for succession and deliberating on potential Board appointments. 119 --- 06 | Governance Investec integrated annual report 2022 # BOARD COMPOSITION CONTINUED # Board composition (as at 31 March 2022) | Members | Independent | Board member since | Investec plc (9 meetings in the year)^{5} | | Investec Limited (9 meetings in the year)^{5} | | | --- | --- | --- | --- | --- | --- | --- | | | | | Attended | Eligible to attend | Attended | Eligible to attend | | Philip Hourquebie (Chair)^{1} | On appointment | 14 Aug 2017 | 9 | 9 | 9 | 9 | | Fani Titi (Chief Executive) | Executive | 30 Jan 2004 | 9 | 9 | 9 | 9 | | Henrietta Baldock | Yes | 9 Aug 2019 | 9 | 9 | 9 | 9 | | Zarina Bassa | Yes | 1 Nov 2014 | 9 | 9 | 9 | 9 | | Perry Crosthwaite^{2} | On appointment | 18 Jun 2010 | 3 | 3 | 2 | 2 | | David Friedland | Yes | 1 Mar 2013 | 9 | 9 | 9 | 9 | | Charles Jacobs^{3} | Yes | 8 Aug 2014 | 1 | 1 | 1 | 1 | | Stephen Koseff | No | 17 Sep 2020 | 9 | 9 | 9 | 9 | | Lord Malloch-Brown^{4} | Yes | 8 Aug 2014 | 1 | 3 | 1 | 2 | | Nicky Newton-King | Yes | 21 May 2021 | 6 | 6 | 7 | 7 | | Jasandra Nyker | Yes | 21 May 2021 | 6 | 6 | 7 | 7 | | Nishlan Samujh | Executive | 1 Apr 2019 | 9 | 9 | 9 | 9 | | Philisiwe Sibiya | Yes | 9 Aug 2019 | 9 | 9 | 9 | 9 | | Khumo Shuenyane | Yes | 8 Aug 2014 | 9 | 9 | 9 | 9 | | Brian Stevenson | Yes | 22 Jun 2021 | 6 | 6 | 7 | 7 | | Richard Wainwright | Executive | 17 Sep 2020 | 9 | 9 | 9 | 9 | | Ciaran Whelan | Executive | 1 Apr 2020 | 9 | 9 | 9 | 9 | 1. Philip Hourquebie was appointed as Chair on 5 August 2021. 2. Perry Crosthwaite stepped down from the Board on 5 August 2021. 3. Charles Jacobs stepped down from the Board on 30 June 2021. 4. Unable to attend due to another business commitment. Where a director is unable to attend a meeting, they receive papers in advance and have the opportunity to provide comments to the Chair. Lord Malloch-Brown stepped down from the board on 5 August 2021. 5. During the year, there were six meetings of the Board, two Board strategy sessions, a separate Investec plc Board meeting and a separate Investec Limited Board meeting. # Summary of Board activities | | 20 May | 22 Jul^{1} | 22 Sep^{2} | 17 Nov | 08 Dec^{3} | 10 Feb | 16 Mar | 17 Mar^{3} | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Strategy | ● | ● | ● | ● | ● | ● | ● | ● | | Financial | ● | ● | ● | ● | ● | ● | ● | ● | | Operating context | ● | ● | | | ● | | ● | ● | | Risk and assurance | ● | ● | ● | ● | | ● | ● | | | People strategy, leadership and succession | ● | ● | ● | | | ● | ● | ● | | Remuneration | ● | ● | | | | ● | | | | Corporate governance and reporting | ● | | ● | ● | | ● | | | | Shareholders and key stakeholders | ● | ● | ● | ● | ● | ● | ● | ● | | Culture, purpose and values | | ● | | | | | | | | Sustainability | | ● | | ● | | | | | 1. An Investec Group Board and separate Investec Limited Board meeting were held. 2. An Investec group board and separate Investec plc board meeting were held. 3. Board strategy session. 120 --- 06 Governance Investec integrated annual report 2022 BOARD ACTIVITIES # What we did in 2021/22 2021 May - Agreed that regulatory approval be sought for the appointment of Philip Hourquebie as Chair - Agreed that regulatory approval be sought for the appointment of Brian Stevenson as a Non-Executive Director - Approved the appointments of Nicky Newton-King and Jasandra Nyker as Non-executive Directors - Considered the composition of the Board and the Board committees - Assessed the independence of the Non-Executive Directors - Reviewed and approved the going concern and the viability statement - Received a detailed update from the DLC Audit Committee in respect of the going concern considerations and matters raised by assurance providers - Considered uncertain tax and other legal matters - Assessed the performance of the UK structured products book - Approved the financial results for the year ended 31 March 2021 - Recommended a final dividend - Discussed the EPS guidance to be given to the market - Discussed and recommended the re-appointment of the external auditors. September - Received an update on the Group's performance and operating environment - Discussed progress against the Group's key strategic initiatives - Approved the pre-close briefing statement - Discussed the EPS guidance to be given to the market - Approved the Investec Limited ICAAP - Approved the Board Suitability Policy - Considered the composition of the Board and the Board committees - Considered the AGM results. July - Received an update on the Group's response to the social unrest experienced in South Africa - Received an update on the Group's performance and operating environment - Deliberated on the wellbeing of employees, given the backdrop of the pandemic and the social unrest in South Africa, with consideration also given to the future of work - Debated the potential distribution of a portion of the Group's shareholding in Ninety One - Considered capital planning proposals for Investec Limited - Discussed feedback from shareholder roadshows - Approved the Investec Limited Recovery and Resolution Plan - Approved the Investec plc ICAAP, ILAAP and CFRP - Approved changes to the Investec plc risk appetite - Reviewed a detailed presentation on workforce engagement, including key themes and actions. November - Received a detailed update from the DLC Audit Committee in respect of the going concern considerations and matters raised by assurance providers - Considered uncertain tax and other legal matters - Approved the financial results for the half year ended 30 September 2021 - Approved an interim dividend - Approved the updated EPS guidance - Concluded that it was satisfied that the solvency and liquidity test for Investec Limited had been applied - Debated the potential distribution of a portion of the Group's shareholding in Ninety One - Received an update on the recruitment process for the Chair of the DLC BRCC - Received an overview of the key outcomes of the COP26 conference. 121 --- 06 Governance Investec integrated annual report 2022 # BOARD ACTIVITIES CONTINUED 2021/22 # December (Board strategy session only) - Discussed progress against the Group's strategic objectives - Reviewed the Group's key strategic initiatives - Analysed an update on the Group's financial outlook - Considered proposals with regard to the strategies for the Group's principal operating subsidiaries - Discussed shareholder and stakeholder matters. # February - Received an update on the Group's performance and operating environment - Considered an update received on reward and talent - Deliberated on the Group's valuation, including consideration of the valuation methodology used - Received an update on the Private Client strategy - Debated the potential distribution of a portion of the Group's shareholding in Ninety One - Considered an update on the strategy formulation process - Approved the Investec Limited, Investec plc, Investec Bank Limited and Investec Bank plc risk appetite and policies. 2022 # March - Received an update on the Group's performance and operating environment - Discussed progress against the Group's key strategic initiatives - Reviewed the Group's key strategic initiatives - Analysed an update on the Group's financial outlook - Considered proposals with regard to the strategies for the Group's principal operating subsidiaries - Discussed shareholder and stakeholder matters - Approved the 2022/23 budget and operating plan - Approved the pre-close briefing statement - Discussed the EPS guidance to be given to the market - Discussed the outcome of the annual Board effectiveness review and agreed actions arising from it. # March (Board strategy session only) - Discussed progress against the Group's strategic objectives - Reviewed the Group's key strategic initiatives - Analysed an update on the Group's financial outlook - Considered proposals in regards to the strategies for the Group's principal operating subsidiaries - Discussed shareholder and stakeholder matters. 122 --- 06 Governance Investec integrated annual report 2022 BOARD ACTIVITIES CONTINUED # How the Board engages with our people Our people are at the heart of our business. We aim to be an organisation that values all of its people for their contributions and celebrates who they are. The recognition that our colleagues are vital to the delivery of the Group's strategy is reflected by the Board's extensive engagement with employees across our geographies. The Board has supported the adoption of appropriate arrangements for engaging with the Group's workforce in its respective geographies. The Board will continue to monitor these arrangements to ensure that they remain effective and continue to give a meaningful understanding of the views of the workforce and to encourage dialogue between the Board and our people. ## How we engage The Group has established a comprehensive workforce engagement programme, administered by our People and Organisation consulting teams. This programme includes various mechanisms to monitor, and evaluate how people experience our culture, as well as their alignment and adherence to our system of values. These include: - Listening posts: Regular focus groups to take the pulse of our culture and climate, including an understanding of the lived experience of all employees - Team culture reviews: Where needed, we conduct in-depth culture reviews in teams or business units to assess the distinctive beliefs, behaviours and practices of Investec against how they are perceived by our employees - Organisation climate reviews: Identify how an individual, specific team, department or division is functioning against the cultural norms and requirements - Dialogue sessions: Sessions with colleagues from across the globe to discuss a specific topic - BID forums: Bring leaders and representatives of the workforce together to discuss and co-create solutions and strategies in relation to belonging, inclusion and diversity - Executive communication and team check-in sessions: We frequently host Group, international, regional and division-specific sessions where employees have an opportunity to hear from and engage with the executive - Town halls: Provide an opportunity to share information about our strategy, growth plans, performance and results, changes to the economic and regulatory environment, and to celebrate successes, with a large audience These engagement activities are further supported by comprehensive wellbeing programmes, belonging, inclusion and diversity focused initiatives, and social events. ## What matters to our people The key matters identified by employees were similar across our geographies. These included: - The transition to hybrid working, with a particular focus on flexible working conditions and expectations around the future of work - Belonging, Inclusion and Diversity, with a continued focus on building an inclusive working environment, improving representation with respect to gender and ethnicity, particularly at a senior level and within decision-making bodies, and enhancing opportunities for progression - Fair remuneration, especially given the backdrop of rising inflation - Wellbeing. ## How we consider Given the different requirements in South Africa and the UK, the Board has developed an appropriate reporting framework to enable it to consider the arrangements for workforce engagement across our geographies. As detailed in last year's annual report, and in accordance with the UK Corporate Governance Code, the Board appointed a designated Non-Executive Director responsible for workforce engagement for the UK Group entity, Investec plc, and supported the appointment of the same for the principal UK subsidiaries, Investec Bank plc and Investec Wealth & Investment (UK). Following his appointment as Chair, it was agreed that Philip Hourquebie would stand down as the designated Non-Executive Director for workforce engagement, and that Henrietta Baldock, Chair of the DLC Remuneration Committee and Chair of Investec Wealth & Investment (UK) be appointed in his place. Moni Mannings, Senior Independent Director of Investec Bank plc and Chair of the IBP Remuneration Committee, and Cath Thorpe, Chair of the IW&I Remuneration Committee, act as the designated Non-Executive Directors for workforce engagement for the UK Banking and Wealth & Investment businesses respectively. They meet on a quarterly basis, to consider a workforce engagement report, comprising a summary of the Board and Management's employee engagement activity, the key issues raised by employees, and the actions undertaken to address those issues. The key items from these reports, and details of the workforce engagement activity that has taken place for all our workforce across the Group, including the common issues, are provided to the Board on a six monthly basis. Management also provide an update at each Board meeting, as to the key matters of note in respect of our people. The themes identified through our workforce engagement activities are invaluable in informing Board decisions and discussions. ### FY2022 highlights - Adoption of a hybrid working model - Enhanced communication of Executive remuneration to our employees - Attract exceptional and diverse talent across the business through our early career and graduate strategy. 123 --- 06 Governance Investec integrated annual report 2022 # BOARD EFFECTIVENESS # Board effectiveness The Board's annual effectiveness review, which is facilitated externally at least once every three years, provides an opportunity for the Board to reflect, and to consider ways of identifying greater efficiencies, maximising strengths and highlighting potential areas of further development, to enable the Board to continue to enhance its own performance. ## Progress against 2020 Board effectiveness review As reported last year, the 2020 review was an internal evaluation. Overall, the Board, the Board committees and each of the directors were found to be effective. The review highlighted certain areas of focus that would further improve effectiveness. These were considered by the Board, and an action plan was agreed. The Board action plan for 2021/2022 included: - Enhancing the role that the Board plays in respect of culture - Increasing the level of diversity on the Board - Supporting greater strategic and forward-looking discussion - Increasing the focus given to succession planning. Whilst the Board has made good progress against some of these recommendations, given the significant changes to the Board in the past year, certain of the recommendations will be carried forward. The Board continues to promote our purpose and to oversee the Group's unique values-led culture. Given the transformation to the Group in recent years, the Board recognises that it must continue to actively engage with our businesses, to guide and influence culture where it needs to. As indicated earlier in this report, the Board has appointed four Non-Executive Directors. Following these appointments, the Board is pleased to note that it has achieved a 40% female representation, as at the date of the annual report. The Board places great emphasis on ensuring that its membership reflects diversity in its broadest sense, and will continue to focus on ensuring that it meets the diversity objectives that it has set. The Board held two Board strategy sessions in the year, as the Group advances its strategy to pursue disciplined growth. Succession planning has and will continue to be a key focus area for the Board, with particular consideration given to planned Board retirements and the talent pipeline for senior managers. ## 2021 Board effectiveness review The 2021 evaluation of the Board, Board committees and individual directors was externally facilitated, as required by the UK Corporate Governance Code. Further to a selection process, led by the DLC Nomdac, in which a number of potential providers were considered, Fidelio Partners, an independent, external corporate governance advisory firm was chosen to facilitate the review. Fidelio Partners were also appointed to undertake an independent external evaluation of the effectiveness of the Boards of each of Investec Bank plc, Investec Bank Limited and Investec Wealth & Investment (UK). A key theme for the review, was how the current governance framework was working at both a DLC level and a subsidiary level. Below, we outline the various stages of the 2021 internal review. ### Stage 1 Fidelio Partners held in-depth one-on-one meetings with each of the directors, selected senior managers and the company secretaries. ### Stage 2 Fidelio Partners prepared a quantitative survey, in which the directors provided feedback on the key competencies and overall performance of the Board. ### Stage 3 Fidelio Partners reviewed and analysed Board and Board committee materials, including papers and terms of reference. ### Stage 4 Drawing upon best practice within the sector, and their understanding and insight of stakeholder expectations, Fidelio Partners determined their key findings and recommendations. This final report was presented to the Board in March 2022, following its consideration by the DLC Nomdac. A thorough review and discussion took place, with actions agreed for implementation and monitoring. ## Board review insights The review identified that the Board and the individual directors were performing effectively. The review highlighted, in particular, the strength of Investec's culture, and the active contribution of the Board in the promotion of our culture and the adoption of the Group's new purpose. It also recognised the extensive expertise of the Board, which was further supported by the skills of the directors serving on the subsidiary Boards. From a development perspective, the review highlighted certain areas of focus that would further improve the effectiveness of the Board: - There was considered to be scope to further enhance the efficiency of the Group's governance framework - The review encouraged an increased level of communication between the Group and the Group's principal subsidiaries These were considered by the Board and an appropriate action plan agreed. ### Board action plan The Board action plan for 2022/23 includes: - Reviewing the Group's governance structure - Enhancing the working relationship between the Group and the Group's principal subsidiaries - Supporting greater strategic and forward-looking discussion - Increasing the level of diversity on the Board when considering the succession plan. ## Committees The Board committees were also reviewed and were considered to function well in terms of their effectiveness, decision-making and the rigorous manner in which they addressed any issues brought to their attention. 124 --- 06 Governance Investec integrated annual report 2022 # DIRECTORS' REPORT The directors' report for the year ended 31 March 2022 comprises pages 125 to 133 of this report, together with the sections of the annual report incorporated by reference. The directors' report deals with the requirements of the combined consolidated Investec Group, comprising the legal entities Investec plc and Investec Limited. As permitted by Section 414C(11) of the UK Companies Act, some of the matters required to be included in the directors' report have instead been included in the strategic report on pages 1 to 105, as the Board considers them to be of strategic importance. Specifically, these are: - Future business developments (throughout the strategic report) - Risk management on pages 77 and 78 - Information on how the directors have had regard to the Group's stakeholders, and the effect of that regard, on pages 28 to 35. The strategic report and the directors' report together form the management report for the purposes of Disclosure Guidance and Transparency Rules (DTR) 4.1.8R. Information relating to the use of financial instruments by the Company can be found on pages 34 to 35 of the Investec Group's 2022 annual financial statements and is incorporated by reference. Information relating to the Group's carbon footprint and Greenhouse Gas (GHG) emissions may be found on page 102 and are incorporated here by reference. Additional information for shareholders of Investec plc is detailed in schedule A to the directors' report on pages 132 and 133. Other information to be disclosed in the Directors' report is given in this section. The directors' report fulfils the requirements of the corporate governance statement for the purposes of DTR 7.2.3R. # Directors The directors' biographies are provided on pages 109 to 111. Changes to the composition of the Board during the year and up to the date of this report are shown in the table below: | | Role | Effective date of departure/ appointment | | --- | --- | --- | | **Departures** | | | | Charles Jacobs | Non-Executive Director | 30 June 2021 | | Lord Malloch-Brown | Non-Executive Director | 5 August 2021 | | Perry Crosthwaite | Chair | 5 August 2021 | | **Appointments** | | | | Nicky Newton-King | Non-Executive Director | 21 May 2021 | | Jasandra Nyker | Non-Executive Director | 21 May 2021 | | Brian Stevenson | Non-Executive Director | 22 June 2021 | | Vanessa Olver | Non-Executive Director | 18 May 2022 | In accordance with the UK Corporate Governance Code, all of the directors will retire and those willing to serve again will submit themselves for re-election at the AGM. # Company Secretaries The Company Secretary of Investec plc is David Miller and the Company Secretary of Investec Limited is Niki van Wyk. The Company Secretaries are professionally qualified and have gained experience over many years. Their performance is evaluated by Board members during the annual board evaluation process. They are responsible for the flow of information to the Board and its committees and for ensuring compliance with board procedures. All directors have access to the advice and services of the Company Secretaries, whose appointment and removal are a board matter. In compliance with the UK Corporate Governance Code, the UK Companies Act, the King IV™ Code, the South African Companies Act and the JSE Listings Requirements, the Board has considered and are satisfied that each of the Company Secretaries is competent, and has the relevant qualifications and experience. # Debt Officer Laurence Adams currently serves as the Debt Officer of Investec Limited with effect from 27 November 2020. In compliance with the JSE Listings Requirements, the Board of Investec Limited has considered and is satisfied with the competence, qualifications and experience of the Debt Officer. # Induction, training and development The Chair leads the training and development of directors and the Board generally. A comprehensive development programme operates throughout the year, and comprises both formal and informal training and information sessions. On appointment to the Board, all directors benefit from a comprehensive induction which is tailored to the new director's individual requirements. The induction schedule is designed to provide the new director with an understanding of how the Group works and the key issues that it faces. The company secretaries consult the Chair when designing an induction schedule, giving consideration to the particular needs of the new director. When a director joins a Board committee, the schedule includes an induction to the operations of that committee. # Directors and their interests The directors' shareholdings and options to acquire shares are detailed in the Investec Group's 2022 remuneration report # Directors' conflicts of interest The Group has procedures in place for managing conflicts of interest. Should a director become aware that they, or any of their connected parties, have an interest or a potential interest in an existing or proposed transaction with the Group, they are required to notify the Board in writing or at the next Board meeting. Internal controls are in place to ensure that any related party transactions involving directors, or their connected parties, are conducted on an arm's length basis. Directors have a continuing duty to update any changes to their declarations. 125 --- 06 Governance Investec integrated annual report 2022 # DIRECTORS' REPORT CONTINUED # Directors' and officers' liability insurance The Group maintains directors' and officers' liability insurance which provides appropriate cover for legal action brought against its directors. # Change of control The Articles of Association of Investec plc and the Memorandum of Incorporation of Investec Limited ensure that a person cannot make an offer for one company without having made an equivalent offer to the shareholders of both companies on equivalent terms. Pursuant to the terms of the agreements establishing the DLC structure, if either Investec plc or Investec Limited serves written notice on the other at any time after either party becomes a subsidiary of the other party, or after both Investec plc and Investec Limited become subsidiaries of a third party, the agreements establishing the DLC structure will terminate. All of the Group's share plans contain provisions relating to a change of control. Outstanding awards and options would normally vest and become exercisable on a change of control and, where applicable, subject to the satisfaction of any performance conditions at that time. # Powers of directors The Board manages the business of the Group under the powers set out in the Articles of Association of Investec plc and the Memorandum of Incorporation of Investec Limited, which include the ability of directors to issue or buy back shares. Directors were granted authority to issue and allot shares and to buy back shares at the 2021 AGM. Shareholders will be asked to renew this authority at the 2022 AGM. # Contracts Details of contracts with directors can be found on pages 18 and 19 of the Investec Group's 2022 remuneration report. # Authorised and issued share capital # Investec plc and Investec Limited Details of the share capital are set out on pages 121 to 123 of the Investec Group's annual financial statements in note 44. # Investec plc Investec plc did not issue any ordinary shares during the financial year ended 31 March 2022. Investec plc did not repurchase any of its ordinary shares during the financial year ended 31 March 2022. At 31 March 2022, Investec plc held 48 997 877 shares in treasury (2021: 41 576 257). The maximum number of shares held in treasury by Investec plc during the period under review was 49 677 266 shares. # Investec Limited Investec Limited repurchased 8 496 839 ordinary shares during the financial year ended 31 March 2022, representing 2.66% of the issued share capital. The ordinary shares remaining in issue following these repurchases amounts to 310 407 870. At 31 March 2022 Investec Limited held 52 277 446 shares in treasury (2021: 48 832 795). The maximum number of shares held in treasury by Investec Limited during the period under review was 54 427 984 shares. Investec Limited repurchased 1 537 823 non-redeemable non-cumulative non-participating preference shares, representing 5% of the issued share capital. Repurchases of the preference shares were pursuant to, and in accordance with, the general authority granted to Investec Limited by its shareholders at the AGM held on 5 August 2021 and approved by the South African Prudential Authority. The preference shares remaining in issue following these repurchases amounts to 29 218 638 shares. # Ordinary dividends # Investec plc An interim dividend of 11.0p per ordinary share (2020: 5.5p) was paid on 22 December 2021, as follows: - 11.0p per ordinary share to non-South African resident shareholders registered on 10 December 2021 - To South African resident shareholders registered on 10 December 2021, through a dividend paid by Investec plc of 1.0p and through Investec Limited on the SA DAS share, equivalent to 10.0p per ordinary share. The directors have proposed a final dividend to shareholders registered on 22 July 2022, of 14.0p (2021: 7.5p) per ordinary share, subject to the approval of the members of Investec plc at the AGM which is scheduled to take place on 4 August 2022. If approved, this will be paid on 08 August 2022, as follows: - 14.0p per ordinary share to non-South African resident shareholders registered on 22 July 2022 - To South African resident shareholders registered on 22 July 2022, through a dividend paid by Investec Limited on the SA DAS share, equivalent to 14.0p per ordinary share. # Investec Limited An interim dividend of 230 cents per ordinary share (2020: 122 cents) was declared to shareholders registered on 10 December 2021 and was paid on 22 December 2021. The directors have proposed a final dividend to shareholders registered on 22 July 2022, of 279 cents (2021: 150 cents) per ordinary share, subject to the approval of the members of Investec Limited at the AGM which is scheduled to take place on 4 August 2022. If approved, this will be paid on 8 August 2022. # Preference dividends # Investec plc # Non-redeemable, non-cumulative, non-participating preference shares Preference dividend number 31 for the period 1 April 2021 to 30 September 2021, amounting to 5.51508p per share, was declared to members holding preference shares registered on 03 December 2021 and was paid on 13 December 2021. Preference dividend number 32 for the period 1 October 2021 to 31 March 2022, amounting to 6.41369p per share, was declared to members holding preference shares registered on 10 June 2022 and was paid on 20 June 2022. # Rand-denominated non-redeemable, non-cumulative, non-participating preference shares Preference dividend number 21 for the period 1 April 2021 to 30 September 2021, amounting to 333.41097 cents per share, was declared to members holding Rand-denominated non-redeemable, non-cumulative, non-participating preference shares registered on 10 December 2021 and was paid on 13 December 2021. 126 --- 06 Governance Investec integrated annual report 2022 ## DIRECTORS' REPORT CONTINUED Preference dividend number 22 for the period 1 October 2021 to 31 March 2022, amounting to 344.99315 cents per share, was declared to members holding preference shares registered on 10 June 2022 and was paid on 13 June 2022. ### Investec Limited #### Non-redeemable, non-cumulative, non-participating preference shares Preference dividend number 34 for the period 1 April 2021 to 30 September 2021, amounting to 272.94074 cents per share, was declared to shareholders holding preference shares registered on 10 December 2021 and was paid on 13 December 2021. Preference dividend number 35 for the period 1 October 2021 to 31 March 2022, amounting to 282.26249 cents per share, was declared to shareholders holding preference shares registered on 10 June 2022 and was paid on 13 June 2022. #### Redeemable cumulative preference shares Dividends amounting to R15 388 595 (2021: R17 448 522) were paid on the redeemable cumulative preference shares. ### Viability statement In accordance with the UK Corporate Governance Code, in addition to providing a going concern statement (disclosed on page 129), the Board is required to make a statement with respect to the Group's viability (i.e. its ability to continue in operation and meet its liabilities), taking into account the current position of the Group, the Board's assessment of the Group's prospects and the principal risks it faces. Following confirmation by the DLC BRCC (comprising a majority of Non-Executive Directors, which includes certain members of the Audit Committees), the Audit Committees recommended the viability statement for Board approval. The Board has identified the principal and emerging risks facing the Group and these are highlighted on pages 8 to 22 of the Investec Group's 2022 risk and governance report. Through its various sub-committees, notably the Audit Committees, the DLC BRCC and the capital committees, the Board regularly carries out a robust assessment of these risks and their potential impact on the performance, liquidity, solvency and operational resilience of the Group. The activities of these Board sub-committees and the issues considered by them are described in the Group's 2022 Risk and Governance Report. Taking these risks into account, together with the Group's strategic objectives and the prevailing market environment, the Board approved the overall mandated risk appetite frameworks for Investec plc and Investec Limited. The risk appetite frameworks set broad parameters relating to the Board's expectations around performance, business stability and risk management. The Board considers that prudential risk management is paramount in all it does. Protection of depositors, customers' interests, capital adequacy and shareholder returns are key drivers. To manage the Group's risk appetite, there are a number of detailed policy statements and governance structures in place. The Board ensures that there are appropriate resources in place to manage the risks arising from running the business by having independent Risk Management, Compliance, and Financial Control functions. These are supplemented by an Internal Audit function that reports independently to a non-executive Audit Committee Chair. The Board believes that the risk management systems and processes, supported by the conclusions of the Internal Audit function, are adequate to support the Group's strategy and allow the Group to operate within its risk appetite framework. A review of the Group's performance/measurement against its risk appetite framework is provided at each DLC BRCC meeting and at the main Board meetings. In terms of the South African Prudential Authority (South African PA), the FCA and PRA requirements, the Group is also required to meet regulatory standards with respect to capital and liquidity. In terms of these requirements, the Group is required to stress its capital and liquidity positions under a number of severe stress conditions. Investec's stress testing framework is well embedded in its operations and is designed to identify and regularly test the Group's key 'vulnerabilities under stress'. In order to manage liquidity risk, liquidity stress testing is performed for a range of scenarios, each representing a different set of assumptions. These include market-wide, firm specific, and combined scenarios (combination of the market-wide and firm specific stresses). The Group manages its liquidity risk appetite in relation to combined stress parameters which represent extreme but plausible circumstances. The objective is to have sufficient liquidity under a combined stress scenario to continue to operate for a minimum period as detailed in the Board-approved risk appetite. In addition to these stress scenarios, the Group's risk appetite also requires it to maintain specified minimum levels for both the liquidity coverage ratio and net stable funding ratio, greater than those required by the regulators; a minimum cash and near cash to customer deposit ratio of 25%; and to maintain low reliance on wholesale funding to fund core asset growth. Each banking entity within the Group is required to be fully self-funded. The Group currently has £17.2 billion in cash and near cash assets, representing 42.8% of customer deposits. The Group develops annual capital plans (refreshed after six months), that look forward over a three-year period. The capital plans are refreshed on an ad hoc basis if a material event occurs or is likely to occur. These plans are designed to assess the capital adequacy of the Group's respective banking entities under a range of economic and internal conditions, with the impact on earnings, asset growth, risk appetite and liquidity considered. The output of capital planning allows senior management and the Board to make decisions to ensure that the Group continues to hold sufficient capital to meet internal and regulatory capital targets over the medium term (i.e. three years). The Group targets a CET1 ratio in excess of 10%, a tier 1 ratio greater than 11%, a minimum capital adequacy ratio of 14% to 17%, and a leverage ratio in excess of 6% for each of its banking entities. The parameters used in the capital and liquidity stresses are reviewed regularly, taking into account the principal and emerging risks facing the Group, changes in the business environments and inputs from business units. Scenarios are designed considering macro-economic downside risks, portfolio-specific risk factors and business model vulnerabilities. As the Group's banking entities are regulated separately and ring-fenced from one another, different stress scenarios apply across the respective banking entities and jurisdictions. ### Investec Limited: - Base case: Economic growth lifts to 3% by the end of the period – sufficient global and domestic monetary and other policy supports to growth and financial markets occur and risk sentiment is neutral to positive. Expropriation of private sector property is limited and does not have a negative impact on the 127 --- 06 Governance Investec integrated annual report 2022 ## DIRECTORS' REPORT CONTINUED economy or on market sentiment. South Africa remains in the BB category rating bracket – fiscal consolidation (debt to GDP stabilisation) occurs. Civil and political unrest wanes. Inflation is impacted by the normal course of weather patterns via food price inflation and extreme rand strength, with modest transition to renewable energy and a slow move away from fossil fuel usage. Measures to alleviate the impact of climate change on the economy are modestly implemented. - • **Lite down case:** The international environment (including risk sentiment) is that of the base case. There is very limited expropriation of private commercial sector property without compensation, with a negative impact on the economy. Business confidence is depressed, there is rand weakness, significant load shedding, civil and political unrest, weak investment growth and recession. There is high domestic inflation on unfavourable weather conditions and severe rand weakness, little transition to renewable energy, and greater pressure on government finances from disaster relief from unfavourable weather conditions driven by climate change. Debt projections initially fail to stabilise, South Africa falls into single B credit ratings from all three agencies for local and foreign currency, and fiscal consolidation ultimately occurs, preventing ratings falling into the C grades. - • **Severe down case:** There is a lengthy global recession (more than two quarters), and a global financial crisis – with temporarily insufficient monetary and other policy support domestically and globally. There is limited expropriation of private sector property, widespread services load shedding, strike action and civil unrest. South Africa's economy goes into a depression and there is unprecedented rand weakness. The government borrows from increasingly wider sources as it sinks deeper into a debt trap. South Africa is rated single B from all three key agencies, with further rating downgrades eventually into CCC grade and the risk of moving towards default. Very high domestic inflation builds on very unfavourable weather conditions, as well as severe rand weakness. There is failure to achieve the transition to renewable energy as well as to sufficient measures to alleviate the impact of climate change on the economy. ### Investec plc: - • **Base case:** The base case narrative envisages that UK economic activity continues to recover in line with other advanced markets, as social restrictions are lifted and pent-up demand fuels a rebound in consumer spending. Inflation is expected to rise sharply over the near-term, but begins to come down as upward influences dissipate over time. In light of this, major central banks tighten monetary policy gradually, with the Bank of England (BoE) raising the Bank rate to 1.5% in Q1 2023 and reducing its Quantitative Easing holdings. COVID-19 remains a risk, but vaccination programs prove effective in preventing the need for further restrictions. - • **Inflation:** In the inflation scenario, the current rise in inflation proves to be more sustained and at elevated levels. Principally this is driven by developments in the labour market. As such, central banks respond by raising interest rates more aggressively, with the UK Bank rate rising to a peak of 4% from the current setting of 1.25%. Markets correct sharply on the restrictive central bank policy, tightening financial conditions and weak economic activity. The resultant shock to UK GDP is 4.2% (peak-to-trough), with a recession across advanced markets in 2023. - • **Synchronised global economic downturn:** This is a hypothetical scenario, designed to encapsulate a variety of tail risks. It involves a severe global economic downturn and a sharp repricing of all asset classes, particularly those witnessing the most elevated valuations. Major equity indices see falls of between 30-40% and higher yield bond markets witness a sell off, with corporate credit spreads widening. Residential and commercial real estate are also severely affected. Whilst the start of the shock occurs in year one, there are lasting headwinds resulting in slow economic and asset price recoveries. Monetary policy is loosened, with the BoE cutting the Bank rate and conducting Quantitative Easing (although on a more limited scale than during the pandemic given the already large holdings of bonds). Inflation falls below 1% as the economy contracts and energy prices fall. UK GDP experiences a shock of around 5% (peak to trough). The Group also typically incorporates the South African PA biennial and the BoE regulatory scenario into its capital processes. The South African PA scenarios were run in June 2021 and the results were included in the financial stability review that was published by the South African PA in November 2021. The BoE will return to its annual cyclical scenario (ACS) stress testing framework in 2022, following two years of COVID-19 crisis-related stress testing. However, in light of uncertainty related to the Russian invasion of Ukraine, and in order to help lenders focus on managing the ongoing financial markets disruption associated with the invasion, there is a delay to the launch of the 2022 ACS, with revised timelines to be communicated by BoE in 2Q22. The Board has assessed the Group's viability in its 'base case' and stress scenarios. In assessing the Group's viability, a number of assumptions are built into its capital and liquidity plans. In the stress scenarios these include, for example, foregoing or reducing dividend payments and asset growth being curtailed. We also carry out 'reverse stress tests', i.e. scenarios that would cause the Group business model to fail. Reverse stress scenarios are developed thematically and their impact is assessed in qualitative and quantitative terms with respect to regulatory capital and liquidity threshold conditions, taking into account the loss absorbing effects of the bank's capital stack. Escalating losses may expose the business model to unacceptable levels of risk well before regulatory threshold conditions are breached, and mitigation actions are identified with the aim to prevent the failure of the Group. Reverse scenarios are extreme tail events and are considered remote, and mainly serve the purpose of identifying and addressing potential weaknesses that may not be identified through the ongoing risk management and stress testing processes. In addition, Investec plc performs climate scenario analysis in line with the requirements stipulated by Supervisory Statement SS3/19 'Enhancing banks' and insurers' approaches to managing the financial risks from climate change', on a proportionate basis for the size and complexity of the firm. The BoE's '2021 Climate Biennial Exploratory Scenario' has been used as the framework for scenario analysis, with initial focus on climate transition risk, and physical risks prioritised for the second half of 2022. To date, findings indicate that short-term transition risk is low and Investec plc has sufficient capital and liquidity to continue as a going concern and meet regulatory capital and liquidity requirements. 128 --- 06 Governance Investec integrated annual report 2022 ## DIRECTORS' REPORT CONTINUED Investec Bank Limited completed the climate stress scenario of the 2021 SARB Common Scenario Stress Test (CSST). The SARB climate risk scenario captured a severe drought and was translated into an impact on economic variables. Under this scenario it was demonstrated that Investec Limited has sufficient capital and liquidity to continue as a going concern and meet regulatory minimum capital and liquidity requirements. Furthermore, the Group is required to have a recovery plan for both Investec Limited and Investec plc as well as a resolution pack for Investec plc. The purpose of the recovery plans are to document how the Board and senior management will ensure that the Group recovers from extreme financial stress to avoid liquidity and capital difficulties in its separately regulated companies. The Group also maintains an operational resilience framework for building organizational resilience to respond effectively to operationally disruptive events. This not only ensures continuity of business but also safeguards the interests of key stakeholders, as well as our reputation, brand and value-creating activities. The capital and liquidity plans, stress scenarios, recovery plans, resolution pack and the risk appetite statement are reviewed at least annually. In times of severe economic distress and if applicable, stress scenarios are reviewed more regularly; for example, as was the case with the COVID-19 pandemic. In addition, senior management hosts an annual risk appetite process at which the Group's risk appetite frameworks are reviewed and modified to take into account risk experience and changes in the environment. Furthermore, strategic budget processes take place within each business division at least annually. These focus on, amongst other things: the business and competitive landscape; opportunities and challenges; and financial projections. A summary of these divisional budgets, together with a consolidated Group budget, is presented to the Board during its strategic review process early in the year. In assessing the Group's viability, the Board has taken all of the above-mentioned factors, documents and processes into consideration. The directors can confirm that they have a reasonable expectation that Investec will continue to operate and meet its liabilities as they fall due over the next three years. The Board has used a three-year assessment period as this is aligned to the Group's medium-term capital plans which incorporate profitability, liquidity, leverage and capital adequacy projections and include impact assessments from a number of stress scenarios. Detailed management information therefore exists to provide senior management and the Board sufficient and realistic visibility of the Group's viability over the three years to 31 March 2025. The viability statement should be read in conjunction with the following sections in the annual reports, all of which have informed the Board's assessment of the Group's viability: - • Pages 5 to 72, which show a strategic and financial overview of the business - • Pages 8 to 22 of the Investec Group's 2022 risk and governance report, which provide detail on the principal and emerging risks the Group faces - • Pages 77 to 78, which provide information on the overall Group's risk appetite - • Pages 23 to 24 of the Investec Group's 2022 risk and governance report, which provide an overview of the Group's approach to risk management, and the processes in place to assist the Group in mitigating its principal risks - • Page 78 of this report, and pages 26, 58 to 61, and 87 of the Investec Group's 2022 risk and governance report which highlight information on the Group's various stress testing processes - • Pages 64 to 69 of the Investec Group's 2022 risk and governance report which specifically focus on the Group's philosophy and approach to liquidity management - • Page 83 of the Investec Group's 2022 risk and governance report which provides detail on the recovery and resolution planning for Investec plc and Investec Limited - • Pages 84 to 87 of the Investec Group's 2022 risk and governance report which explain the Group's capital management framework. This forward-looking viability statement made by the Board is based on information and knowledge of the Group at 22 June 2022. There could be a number of risks and uncertainties arising from (but not limited to) domestic and global economic and business conditions beyond the Group's control that could cause the Group's actual results, performance or achievements in the markets in which it operates to differ from those anticipated. ## Going concern In adopting the going concern basis for preparing the consolidated financial statements, the directors have considered the Group's business activities, objectives and strategy, principal risks and uncertainties in achieving its objectives, and performance that are set out on pages 5 to 14, pages 17 to 21, pages 24 to 42 and pages 79 to 91. The directors have performed a robust assessment of the Group's financial forecasts across a range of scenarios over a 12 month period from the date the financial statements are authorised for issue. Based on these, the directors confirm that they have a reasonable expectation that the Group, as a whole, have adequate resources to continue in operational existence for the 12 months from the date the financial statements are authorised for issue. Therefore, the directors consider it appropriate to adopt the going concern basis of accounting in preparing the accompanying consolidated financial statements. ## Audit Committees The Audit Committees comprising independent Non-Executive Directors meet regularly with senior management, the external auditors, operational risk, internal audit, compliance and the finance division to consider the integrity of financial reporting, the nature and scope of the internal and external audit reviews and the effectiveness of our risk and control systems, taking note of the key deliberations of the subsidiary Audit Committees as part of the process. Further details on the role and responsibility of the Audit Committees are set out on pages 99 to 109 of the Investec Group's 2022 risk and governance report. ## Independent auditor and audit information Each director, at the date of approval of this report, confirms that, so far as the director is aware, there is no relevant audit information of which the Group's auditor is unaware and that each director has taken all steps that he or she ought to have taken as a director to make himself or herself aware of any relevant audit information and to establish that the Group's auditor is aware of that information. This confirmation is given pursuant to Section 418 of the UK Companies Act and should be interpreted in accordance with and subject to those provisions. 129 --- 06 Governance Investec integrated annual report 2022 ## DIRECTORS' REPORT CONTINUED Ernst & Young LLP have indicated their willingness to continue in office as auditors of Investec plc and Ernst & Young Inc. and KPMG Inc. have indicated their willingness to continue in office as joint auditors of Investec Limited. The Board having satisfied itself as to their independence and effectiveness, has proposed a resolution to re-appoint them as auditors at the AGM scheduled to take place on 4 August 2022. Following a comprehensive tender process, PricewaterhouseCoopers (PwC) Inc. was nominated as one of the new joint external auditors for Investec Limited for the financial year starting 1 April 2023. A formal transition process will commence during 2022, whereby PwC Inc. will observe the full audit cycle performed by the incumbent joint external auditors. The formal shadow period will commence from 1 April 2022 for the year ending 31 March 2023. ### Major shareholders The largest shareholders of Investec plc and Investec Limited are shown on page 143. ### Special resolutions #### Investec plc At the AGM held on 5 August 2021, special resolutions were passed in terms of which: - A renewable authority was granted to Investec plc to acquire its own ordinary shares in accordance with the terms of Section 701 of the UK Companies Act - A renewable authority was granted to Investec plc to acquire its own preference shares in accordance with the terms of Section 701 of the UK Companies Act. #### Investec Limited At the AGM held on 5 August 2021, the following special resolutions were passed in terms of which: - A renewable authority was granted to Investec Limited and any of its subsidiaries to acquire its own ordinary shares in terms of the provisions of the South African Companies Act No. 71 of 2008, as amended (the South African Companies Act) - A renewable authority was granted to Investec Limited and any of its subsidiaries to acquire its own preference shares in terms of the provisions of the South African Companies Act - A renewable authority was granted to Investec Limited to provide financial assistance in order to comply with the provisions of Sections 44 and 45 of the South African Companies Act - A renewable authority was granted to Investec Limited to approve the directors' remuneration in order to comply with the provisions of Sections 65(11)(h), 66(8) and 66(9) of the South African Companies Act. ### AGM update statement At the AGM on 5 August 2021, resolution 15 (approval of the DLC directors' remuneration report for the year ended 31 March 2021), resolution 23 (re-appointment of Ernst & Young (EY) Inc. as joint auditors of Investec Limited), resolution 24 (re-appointment of KPMG Inc. as joint auditors of Investec Limited) and resolution 38 (political donations), passed with a less than 80% majority. The Board recognises that effective communication is integral to building stakeholder value and is committed to providing meaningful, transparent, timely and accurate financial and non-financial information to our stakeholders. In addition to formal, written communication, executive management and Non-Executive Board members continue to engage with our shareholders on a regular basis. ### Commenting on the less than 80% vote received for the Group's remuneration report We consulted with shareholders in early 2021 to obtain their input on our new three year remuneration policy. We further engaged with shareholders during July 2021 to discuss the Group's final remuneration policy and the 2021 remuneration outcomes. The Board was pleased to receive strong support for the new Group's remuneration policy, at 86.17%. We anticipate that the material increase in support for our new remuneration policy at the AGM will translate into an increased level of votes in favour of our future remuneration reports. We will continue with the annual programme of engagement with our shareholders with a view to ensuring that future remuneration policies and resultant outcomes are reflective of business performance and the experience of our stakeholders while balancing this with an increasingly competitive labour market. Refer to pages 12 to 20 of the Investec Group's 2022 remuneration report for a summary of the remuneration policy. ### Commenting on the less than 80% vote received for the re-appointments of EY Inc. and KPMG Inc. as joint auditors of Investec Limited As required by the South African Prudential Authority, Investec Limited has to appoint joint external auditors. EY Inc. and KPMG Inc. are the current joint auditors of Investec Limited. The DLC Audit Committee considered the implications of the Mandatory Audit Firm Rotation (MAFR) rule as issued by the Independent Regulatory Board for Auditors (IRBA), the requirements of the South African Companies Act No. 71 of 2008, as amended, and the state of the audit profession in South Africa including reputational or apparent audit failure perceptions. The views expressed by shareholders have been a key consideration balanced with the implications of having joint auditors and the risks inherent to an audit transition. Based on this assessment, following a comprehensive tender process, PwC Inc. was nominated as one of the new joint external auditors of Investec Limited for the financial year starting 1 April 2023. The appointment of PwC Inc. in a shadow capacity, for the 2022 financial year, will be recommended to shareholders at the AGM to be held in August 2022. A formal transition process will commence during 2022, whereby PwC Inc. will shadow the full audit cycle performed by the incumbent joint external auditors. A competitive tender process for the second rotation will commence during the 2023 financial year, to appoint the second incoming audit firm to perform the audit for the financial year starting 1 April 2025, in accordance with the MAFR rules as published by the IRBA. It is intended that the second incoming joint audit firm will replace Ernst & Young Inc. as one of the joint external auditors of Investec Limited. Refer to pages 108 and 109 of the Investec Group's 2022 risk and governance report for further details with regard to the DLC Audit Committee's review of the external auditors, and the MAFR process. 130 --- 06 Governance Investec integrated annual report 2022 # DIRECTORS' REPORT CONTINUED # **Commenting on the less than 80% vote received for authority to make political donations and to incur political expenditure** As stated in the notices to the AGMs, Investec plc does not give any money for political purposes in the UK nor does it make any donations to UK political organisations or incur UK political expenditure. However, the definitions of political donations and political expenditure used in the UK Companies Act 2006 (UK Companies Act) are very wide. In line with UK market practice, the authority is therefore requested only as a precautionary measure to ensure that Investec plc and any company which is or becomes a subsidiary of Investec plc does not inadvertently breach the relevant provisions of the UK Companies Act. # **Diversity and employees** We have various processes to encourage debate and dialogue around valuing diversity and difference. Emerging and established leaders are invited to participate in discussions with the executive leadership around all issues related to talent management and diversity. The Investec Group policy is to adopt an open management style, thereby encouraging informal consultation at all levels about aspects of the Group's operations, and to incentivise employees to take an interest in the Group's performance by means of employee share schemes. Further information is provided in the Investec Group's 2022 sustainability report. # **Empowerment and transformation** The Group endeavours to prevent and/or eliminate any form of discrimination based on gender, race, ethnicity, religion, age, disability, nationality or sexual preferences. People with disabilities are an essential part of a diverse talent pool and are always considered, with every effort made to accommodate and facilitate an accessible environment. In the event of employees becoming disabled while in our employ, we are committed to ensuring their continued employment to the extent that this is possible. We have various processes to encourage debate and dialogue around valuing diversity and differences. Emerging and established leaders are invited to participate in discussions with the executive leadership around all issues related to talent management and diversity. # **Research and development** In the ordinary course of business, the Group develops new products and services in each of its business divisions. # **Political donations and expenditure** The Group did not make any political donations in the financial year ended 31 March 2022 (2021: Nil). # **Subsidiary and associated companies** Details of principal subsidiary and associated companies are reflected on pages 137 to 142 of the Investec Group's 2022 annual financial statements. # **Uncertain tax and other legal matters** The Board considered legal and uncertain tax matters with a view to ensuring appropriate accounting treatment in the financial statements. Refer to note 53 on page 131 of the annual financial statements. # **Events after the reporting date** On 31 May 2022, a distribution of 138.4 million Ninety One shares (representing a 15% shareholding in Ninety One DLC) was successfully completed. The total value of the distribution of the 15% shareholding was £315.3 million. Considering the equity accounted carrying value of the 25% investment in Ninety One at 31 March 2022 of £382.6 million and the total market value of the 25% stake as at 30 May 2022 of £527.8 million, a gain of approximately £145.2 million (pre-tax) would be recognised in profit and loss as a result of the distribution. This gain will be adjusted by the equity accounted earnings between 1 April 2022 and 30 May 2022 when that information is available. The remaining shareholding in Ninety One will be accounted for at fair value through other comprehensive income from 31 May 2022. The distribution was classified as a non-adjusting event after the reporting date as defined by IAS 10 Events after the Reporting Period. Signed on behalf of the Boards of Investec plc and Investec Limited **Philip Hourquebie** Chair 22 June 2022 **Fani Titi** Chief Executive 22 June 2022 131 --- 06 Governance Investec integrated annual report 2022 # SCHEDULE A TO THE DIRECTORS' REPORT # **Additional information for shareholders** Set out below is a summary of certain provisions of Investec plc's current Articles of Association (the Articles) and applicable English law concerning companies (the UK Companies Act). This is a summary only and the relevant provisions of the Articles or the UK Companies Act should be consulted if further information is required. # **Share capital** The issued share capital of Investec plc at 31 March 2022 consists of 696 082 618 ordinary shares of £0.0002 each, 2 754 587 non-redeemable, non-cumulative, non-participating preference shares of £0.01 each, 131 447 ZAR non-redeemable, non-cumulative, non-participating preference shares of R0.001 each, 318 904 709 special converting shares of £0.0002 each, the special voting share of £0.001, the UK DAS share of £0.001 and the UK DAS share of £0.001 (each class as defined in the Articles). # **Purchase of own shares** Subject to the provisions of the Articles, the UK Companies Act, the UK Uncertificated Securities Regulations 2001 and every other statute for the time being in force concerning companies and affecting Investec plc, the approval of shareholders as provided in the Articles, and without prejudice to any relevant special rights attached to any class of shares, Investec plc may purchase, or may enter into a contract under which it will or may purchase any of its own shares of any class, including without limitation any redeemable shares, in any way and at any price (whether at par or above or below par). # **Dividends and distributions** Subject to the provisions of the UK Companies Act, Investec plc may by ordinary resolution from time-to-time declare dividends not exceeding the amount recommended by the board. The Board may pay interim dividends whenever the financial position of Investec plc, in the opinion of the Board, justifies such payment. The Board may withhold payment of all or any part of any dividends or other monies payable in respect of Investec plc's shares from a person with a 0.25% or more interest in the nominal value of the issued shares if such a person has been served with a notice after failure to provide Investec plc with information concerning interests in those shares required to be provided under the UK Companies Act. # **Voting rights** Subject to any special rights or restrictions attaching to any class of shares, at a general meeting, every member present in person has, upon a show of hands, one vote and, on a poll, every member who is present in person or by proxy has one vote for each share. In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the register of members in respect of the share. Under the UK Companies Act, members are entitled to appoint a proxy, who need not be a member of Investec plc, to exercise all or any of their rights to attend and vote on their behalf at a general meeting or class meeting. A member may appoint more than one proxy in relation to a general meeting or class meeting, provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that member. A member that is a corporation may appoint an individual to act on its behalf at a general meeting or class meeting as a corporate representative. The person so authorised shall be entitled to exercise the same powers on behalf of such corporation as the corporation could exercise if it were an individual member of Investec plc. # **Restrictions on voting** No member shall be entitled to vote either in person or by proxy at any general meeting or class meeting in respect of any shares held by them if any call or other sum then payable by them in respect of that share remains unpaid. In addition, no member shall be entitled to vote if they have been served with a notice after failure to provide Investec plc with information concerning interests in those shares required to be provided under the UK Companies Act. # **Deadlines for exercising voting rights** Votes are exercisable at a general meeting of Investec plc in respect of which the business being voted upon is being heard. Votes may be exercised in person, by proxy, or in relation to corporate members, by corporate representatives. The Articles provide a deadline for submission of proxy forms of not less than 48 hours before the time appointed for the holding of the meeting or adjourned meeting. # **Variation of rights** Subject to the UK Companies Act, the Articles specify that rights attached to any class of shares may be varied with the written consent of the holders of not less than three-fourths in nominal value of the issued shares of that class, or with the sanction of an extraordinary resolution passed at a separate general meeting of the holders of those shares. The rights conferred upon the holders of any shares shall not, unless otherwise expressly provided in the rights attaching to those shares, be deemed to be varied by the creation or issue of further shares ranking pari passu with them. Where, under the Company's share incentive plan, participants are the beneficial owners of the shares, but not the registered owners, the participants are not entitled to exercise any voting rights until the shares are released to the participants. Under the Company's employee trust, the trustee does not vote in respect of unallocated shares. # **Transfer of shares** All transfers of shares may be effected by transfer in writing in any usual or common form or in any other form acceptable to the directors. The instrument of transfer shall be signed by or on behalf of the transferor and (except in the case of fully paid shares) by or on behalf of the transferee. Transfers of shares which are in uncertificated form are effected by means of the CREST system. The directors may, in the case of shares in certificated form, in their absolute discretion and without assigning any reason, refuse to register any transfer of shares (not being fully paid shares), provided that such discretion may not be exercised in such a way as to prevent dealings in the shares of that class from taking place on an open and proper basis. The directors may also refuse to register an allotment or transfer of shares (whether fully paid or not) in favour of more than four persons jointly. The directors may decline to recognise any instrument of transfer unless the instrument of transfer is in respect of only one class of share and, when submitted for registration, is accompanied by the relevant share certificates and such other evidence as the directors may reasonably require. Subject to the UK Companies Act and regulations and applicable CREST rules, the directors may determine that any class of shares may be held in uncertificated form and that title to such shares may be transferred by means of the CREST system or that shares of any class should cease to be so held and transferred. 132 --- 06 Governance Investec integrated annual report 2022 # SCHEDULE A TO THE DIRECTORS' REPORT CONTINUED A number of the Company's employee share plans include restrictions on transfer of shares while the shares are subject to the plans, in particular, the share incentive plan. # **Plc preference shares** The following are the rights and privileges which attach to the plc preference shares: - On a return of capital, whether or not on a winding up (but not on a redemption or purchase of any shares by Investec plc) or otherwise, the plc preference shares will rank, pari passu inter se and with the most senior ranking preference shares of Investec plc in issue (if any) from time-to-time and with any other shares of Investec plc that are expressed to rank pari passu herewith as regards to participation in the capital, and otherwise in priority to any other class of shares of Investec plc - Investec plc may, at its option, redeem all or any of the plc preference shares for the time being issued and outstanding on the first call date or any dividend payment date thereafter - Holders of plc preference shares will not be entitled to attend and vote at general meetings of Investec plc. Holders will be entitled to attend and vote at a class meeting of holders of plc preference shares. # **Non-redeemable, non-cumulative, non-participating preference shares** The following are the rights and privileges which attach to the perpetual preference shares: - Each perpetual preference share will rank as regards to dividends and a repayment of capital on the winding up of Investec plc prior to the ordinary shares, the plc special converting shares, the UK DAN share, the UK DAS share, but pari passu with the plc preference shares. The perpetual preference shares shall confer on the holders, on a per perpetual preference share and equal basis, the right to a return of capital on the winding up of Investec plc of an amount equal to the aggregate of the nominal value and premiums in respect of perpetual preference shares issued, divided by the number of perpetual preference shares in issue - Each perpetual preference share may confer upon the holder thereof the right to receive out of the profits of Investec plc which it shall determine to distribute, in priority to the ordinary shares, the plc special converting shares, the UK DAN share and the UK DAS share, but pari passu with the plc preference shares, the preference dividend calculated in accordance with the Articles - The holders of the perpetual preference shares shall be entitled to receive notice of and be present but not to vote, either in person or by proxy, at any meeting of Investec plc, by virtue of or in respect of the perpetual preference shares, unless either or both of the following circumstances prevail at the date of the meeting: - The preference dividend or any part thereof remains in arrears and unpaid as determined in accordance with the Articles after six months from the due date thereof; and/or - A resolution of Investec plc is proposed which directly affects the rights attached to the perpetual preference shares or the interests of the holders thereof, or a resolution of Investec plc is proposed to wind up or in relation to the winding up of Investec plc or for the reduction of its capital. in which event the preference shareholders shall be entitled to vote only on such resolution. # **Rand-denominated non-redeemable, non-cumulative, non-participating perpetual preference shares (the ZAR perpetual preference shares)** The ZAR perpetual preference shares are subject to substantially similar terms and conditions as the existing Pound Sterling non-redeemable, non-cumulative, non-participating preference shares, as outlined above, save that they are denominated in South African Rands. # **Shares required for the DLC structure** Investec SSC (UK) Limited, a UK trust company, specially formed for the purpose of the DLC structure, holds the plc special voting share, the plc special converting shares, the UK DAN share and the UK DAS share. These shares can only be transferred to another UK trust company, in limited circumstances. The plc special voting shares are specially created shares so that shareholders of both Investec plc and Investec Limited effectively vote together as a single decision-making body on matters affecting shareholders of both companies in similar ways, as set out in the Articles. Prior to a change of control, approval of termination of the sharing agreement (which regulates the DLC), liquidation or insolvency of Investec plc, the plc special converting shares have no voting rights, except in relation to a resolution proposing the: (i) Variation of the rights attaching to the shares or (ii) Winding up, and they have no rights to dividends. The special converting shares are held on trust for the Investec Limited ordinary shareholders. Investec plc and Investec Limited have established dividend access trust arrangements as part of the DLC. Investec plc has issued two dividend access shares, the UK DAS share and UK DAN share which enables Investec plc to pay dividends to the shareholders of Investec Limited. This facility may be used by the Board to address imbalances in the distributable reserves of Investec plc and Investec Limited and/or to address the effects of South African exchange controls and/or if they otherwise consider it necessary or desirable. 133 --- 07 Remuneration Investec integrated annual report 2022 # Remuneration ![img-28.jpeg](img-28.jpeg) --- 07 | Remuneration Investec integrated annual report 2022 IN THIS SECTION Annual statement from the Remuneration Committee chair 136 --- 07 Remuneration Investec integrated annual report 2022 ANNUAL STATEMENT FROM THE REMUNERATION COMMITTEE CHAIR # Annual statement from the Remuneration Committee chair **Henrietta Baldock** **22 June 2022** | | Eligible to attend | Attended | | --- | --- | --- | | Henrietta Baldock (Chair) | 8 | 8 | | Philip Hourquebie | 8 | 8 | | Zarina Bassa | 8 | 8 | ## Key achievements in FY 2022 - Engaged with key shareholders to develop the revised Directors' Remuneration Policy that was approved at the AGM in August 2021 - Developed a robust approach to the assessment of the non-financial measures for the short-term incentive and long-term incentive, particularly relating to the ESG measures ## Areas of focus in FY 2023 - Continuing to ensure that the remuneration structures throughout the Group align with our strategy and appropriately incentivise long term performance - Continue to engage with our key stakeholders including shareholders and our employees - Continuing to set stretching and appropriate Executive Director targets ## In this section - Performance in the year - Remuneration overview for the year - Executive director outcomes - Exercise of discretion - Malus and clawback - Group-wide employee remuneration - Directors' Remuneration Policy - Proposed amendment - Compliance and governance statement - Response to shareholder feedback - Non-executive director fees - Looking ahead - Approvals ## Dear shareholders On behalf of the Board and as Chair of the Remuneration Committee, I am pleased to introduce the Directors' Remuneration Report for the year. We are thankful for the constructive engagement we had with our shareholders and executives during the year. ## Performance in the year The Group continued to successfully navigate the social, economic and geopolitical challenges that have characterised the past two years, and has made significant progress against the strategic goals outlined at the 2019 Capital Markets Day. Our focused approach delivered a strong rebound, with adjusted operating profit increasing by 82% to £687 million. Revenue performance was strong as underlying franchises effectively supported our clients, with costs well contained. Full details of our performance in the year can be found in the section 'Our Performance' in the Integrated Report. ## Remuneration overview for the year In August 2021 shareholders approved a revised Directors' Remuneration Policy that we believe is aligned with our strategy to simplify and focus the business for growth, through five strategic objectives: - Capital discipline; - Growth initiatives; - Improved cost management; - Digitalisation; and - Greater connectivity. Key features of the policy included: - on-target Short-term Incentive (STI) at 100% of fixed remuneration and 50% of maximum opportunity, in line with ISS guidance - standard Long-term Incentive (LTI) grant reduced from 100% to 80% of fixed remuneration - delivering all variable remuneration in shares; and - the introduction of Profit Before Tax as a measure in the STI and Relative Total Shareholder Return as a measure in the LTI. The 2022 Chief Executive remuneration single figure increased by 130.3% from 2021 for three key reasons: - Overall financial performance of the Group, including adjusted operating profit that increased by 82% to £687 million - This is the first year that an LTI award has vested to the current Chief Executive; this vested at 100.8% of on-target number of shares and 74.7% of maximum opportunity which equates to £1,651,000 - The share price has increased 23% over the performance period, contributing £308,000 of the increase. The Remuneration Committee believes that the Executive Directors have performed very well and the remuneration outcomes are reflective of the overall financial and non-financial performance for the one and three year performance periods. ## Executive Director outcomes STI 2022 Group Profit Before Tax (PBT) and Group RoE outcomes both exceeded the stretch targets set. The group Cost to Income Ratio and the Group Cost Growth metric both exceeded on-target but did not achieve the stretch targets set. This resulted in overall achievement of the Group financial metrics at 189.5% of on-target amount and 94.7% of maximum opportunity. The committee assessed achievement against the non-financial objectives at stretch level for culture and values, on-target level for ESG related measures and in between on-target and stretch for the strategic objectives, with the exception of Ciaran Whelan for whom the committee assessed achievement against the strategic measures at stretch. This resulted in the overall achievement of non-financial elements at 150.0% of on-target amount and 75.0% of maximum opportunity for Fani Titi, Nishlan Samujh and Richard Wainwright, and overall achievement of 175.0% of on-target amount and 87.5% of maximum opportunity on the non-financial measures for Ciaran Whelan. The overall STI achievement was 181.6% of on-target amount and 90.8% of maximum opportunity for Fani Titi and Nishlan Samujh. Due to the regulatory 136 --- 07 Directors' remuneration report Investec integrated annual report 2022 ## ANNUAL STATEMENT FROM THE REMUNERATION COMMITTEE CHAIR CONTINUED cap, their STI was capped at 167.9% of fixed remuneration. Richard Wainwright and Ciaran Whelan had a portion of their financial metrics based on their primary business areas, being the entire Southern Africa business and Wealth & Investment UK respectively. PBT achievement for the Southern African business was in excess of stretch while RoE, the Cost to Income Ratio and the Cost Growth metric were all in excess of on-target but did not achieve stretch. This resulted in overall achievement of the financial metrics at 189.5% of on-target amount and 94.7% of maximum opportunity. The overall STI vested at 170.3% of on-target amount and 85.1% of maximum opportunity for Richard Wainwright. This was capped at 167.9% of fixed remuneration. Achievement against PBT, the Cost to Income Ratio and the Cost Growth metric for the UK Wealth & Investment business were all in excess of on-target but did not achieve stretch. The RoE underpin of 25% was also met. This resulted in overall achievement of the financial metrics for the UK Wealth & Investment business at 146.7% of on-target amount and 73.3% of maximum opportunity. The overall short-term incentive vested at 169.5% of on-target amount and 84.7% of maximum opportunity for Ciaran Whelan. This was capped at 167.9% of fixed remuneration. For full details of the financial and non-financial performance measures and outcomes refer to the Investec Group Remuneration Report that is published separately. ### LTI 2019 – 2022 The growth in tangible net asset value over the three year period was 56.6%, above the stretch target of 45.0%. As outlined in volume 1 of the 2020 Integrated Annual report the average return on risk-weighted assets (RoRWA) was split into two periods; pre- and post-demerger of Ninety One. The pre-demerger RoRWA was below threshold and the post-demerger RoRWA was above threshold but below on-target. The committee assessed culture and values at stretch and franchise development, employee relationships, governance and regulatory relationships were all in excess of on-target but did not achieve stretch. Achievements against both financial and non-financial measures resulted in the 2019 long-term incentive vesting at 100.8% of on-target number of shares and 74.7% of maximum opportunity. For full details of the financial and non- non-financial performance measures and outcomes refer to the Investec Group Remuneration Report that is published separately. ### Exercise of discretion The committee considered exercising its discretion in relation to the remuneration levels and vesting but was comfortable that the remuneration outcomes were aligned with performance and therefore did not exercise its discretion in this regard. The committee did exercise a minor discretion in electing to not reduce the capped remuneration equally between the STI and LTI, as allowed for in the Policy, following feedback from shareholders that it would be better to not reduce the weighting of the LTI. Therefore, all of the reduction in remuneration due to the regulatory cap was from the STI. ### Malus and clawback The committee duly and carefully considered, against pre-established criteria, whether malus and/or clawback should be applied to any unvested or vested variable remuneration awards, respectively. The committee considered significant losses, write-downs and risk events during the year, if any, and considered whether due governance and process had been adhered to. None of the malus and clawback thresholds were triggered and no application of these mechanisms was made. ### Group-wide employee remuneration Our remuneration approach is designed to foster a high performance culture that enables an entrepreneurial spirit as well as a strong sense of ownership. We reward our people for the contribution that they make through payment of a fixed package, variable performance bonus, and ownership through a share incentive scheme. We strive to provide a working environment that stimulates extraordinary performance within our risk appetite and prudential limits so that Executive Directors and employees may be positive contributors to clients, our communities and the Group. The fixed pay comprises salary, role based allowances in certain circumstances, and benefits. The fixed pay is generally aligned with local market practice. The general employee pension contribution is funded by the company in addition to the salary and allowances. For the Executive Directors, the pension contribution is deducted from the fixed pay. Therefore on a net basis the Executive Directors are not in a preferential position in relation to pension contributions when compared to the general employee population. All employees are generally eligible for an annual bonus and/or short-term incentive based on a mix of financial and non-financial measures. Non-financial performance is more heavily weighted for non-revenue generating employees when determining their bonus. In principle, all employees are eligible for long-term share incentives; this is designed to give our people a sense of ownership, so they feel invested in the organisation. ### Directors' Remuneration Policy The current Directors' Remuneration Policy was approved by Investec shareholders at the AGM held on 5 August 2021. The Committee believes that the Policy remains fit for purpose, is aligned with the strategy of the Group and the interests of shareholders, and provides appropriate levels of reward for the Executive Directors. The Committee wishes to make one amendment to the Policy, as explained in more detail below. To comply with UK company law, shareholder approval for this amendment is required. Accordingly, a resolution amending the Policy will be included on the agenda for the AGM to be held on 4 August 2022. ### Proposed amendment The existing Remuneration Policy provides for the Executive Directors to receive fixed remuneration, payable in cash, up to levels as agreed by the Committee. The cost of any benefits provided to the Executive Directors, and the value of any pension/provident contributions made, is deducted from fixed pay. In practice, therefore, the agreed level of fixed remuneration covers annual salary, benefits and pension. Benefits currently provided to the Executive Directors include life, disability and personal accident insurance and medical cover. In light of continued concerns around the personal security of senior businesspeople in South Africa, the Committee has agreed to make available an additional benefit to the Executive Directors entitling them to enhanced personal security services in South Africa. This is currently a taxable benefit in South Africa and the annual cost for each Executive Director, including the income tax due on the benefit, is expected to be in the region of £100,000. Such a benefit is standard for senior executives of large South African companies and the Committee has agreed that it should be available to Investec's Executive Directors in light of the risks to which they are unfortunately exposed when travelling within the country. 137 --- 07 Directors' remuneration report Investec integrated annual report 2022 ## ANNUAL STATEMENT FROM THE REMUNERATION COMMITTEE CHAIR CONTINUED As noted above, under the Remuneration Policy the cost of this additional benefit must be deducted from fixed pay. The Committee wishes to amend the Policy such that the cost of this specific benefit is not deducted from fixed pay. The rationale for this approach is that these security services are viewed as necessary for the enhanced protection of senior executives, and the Committee does not believe it is fair or appropriate for the Executive Directors' fixed pay to effectively be reduced through the provision of a benefit which is considered essential. The amendment to the Policy would involve changes to the Directors' Policy table, as set out below. The amendments are underlined. | Purpose and link to strategy | Operation | Maximum value and performance targets | Proposed changes from current Policy | | --- | --- | --- | --- | | Benefits | Other than in respect of benefits related to personal security whilst in South Africa, the cost of any benefits provided are deducted from fixed pay. Benefits are benchmarked against relevant comparator groups^{1} Executive Directors may elect to sacrifice a portion of their annual gross remuneration in exchange for benefits such as travel allowances and medical aid | Benefits include: life, disability and personal accident insurance; medical cover; and other benefits, including personal security measures (and any income taxes due), as dictated by competitive local market practices There is no maximum value but the value of benefits provided will generally be in line with market comparators | The cost of any benefits (grossed up for any income taxes due on the benefit) provided which are linked to personal security will not be deducted from fixed pay | 1. Peer group companies include Absa Group, Brewin Dolphin, Close Brothers Group, FirstRand, Julius Baer, Nedbank Group, Quilter, Rathbones Group, Standard Bank Group and Virgin Money. Subject to shareholders approving the amendment to the Policy at the AGM, the cost of the enhanced personal security will not be deducted from fixed remuneration. There are no other changes to the Directors' Remuneration Policy. ### Compliance and governance statement The Investec Group Remuneration Report, published separately, complies with the provisions of Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended), the UK Corporate Governance Code, the UK Companies Act 2006, the Rules of the UK Listing Authority, the UK Financial Conduct Authority rules, the PRA and FCA Remuneration Code, the South African King IV Code of Corporate Practice and Conduct, the South African Companies Act 2008, the JSE Limited Listings Requirements and the South African Notice on the Governance and Risk Management Framework for Insurers, 2014. The report also contains Pillar III disclosure as mandated by the UK's PRA. ### Response to shareholder feedback We undertook extensive consultation with our key shareholders in 2021, focusing on our new proposed remuneration policy, which was approved at the 2021 AGM. We received positive and constructive feedback. We incorporated changes as a result of this feedback. These changes aimed to align reward more closely with business performance and adherence to our strategy. We were pleased to receive votes in favour of the remuneration policy of 86%. We look forward to consulting further in the run up to the AGM, as we normally do. ### Non-Executive Director fees The fee structure for Non-Executive Directors has been reviewed, for proposed 2023 fees refer to the Investec Group Remuneration Report that is published separately. ### Looking ahead Our proposed approach to executive remuneration is designed to incentivise exceptional long term performance from our executives, adherence to our strategy and ensure that all stakeholders, including shareholders and executives, are rewarded appropriately. We are committed to ensuring that we have remuneration structures that support the Group's strategy and align with all stakeholder interests (as appropriate), allowing the Group to deliver strong performance. ### Approvals We are seeking shareholder approval at the 2022 annual general meeting for: - An amendment to the Directors' Remuneration Policy, as outlined in 'Details of the proposed amendment' above (binding vote per the UK regulations) - A non-binding vote (per the King IV Code and JSE Listings requirements) on our Directors' Remuneration Policy - Our Non-executive Directors' remuneration - Our Directors' Remuneration Report for the year ended 31 March 2022 For further information refer to the Investec Group Remuneration Report that is published separately ### Signed on behalf of the Board **Henrietta Baldock** Chair, DLC Remuneration Committee **22 June 2022** 138 --- 08 Annexures Investec integrated annual report 2022 # Annexures ![img-29.jpeg](img-29.jpeg) --- 08 | Annexures Investec integrated annual report 2022 # IN THIS SECTION | Our credit ratings | 141 | | --- | --- | | Shareholder analysis | 142 | | Sustainability ratings and rankings | 146 | | Overview – Climate-related disclosures | 148 | | Alternative performance measures | 151 | | Glossary | 154 | | Definitions | 156 | | Corporate information | 157 | --- 08 Annexures Investec integrated annual report 2022 # OUR CREDIT RATINGS In terms of our DLC structure, creditors are ring-fenced to either Investec Limited or Investec plc as there are no cross-guarantees between the companies. Capital and liquidity are prohibited from flowing between the two entities and thus capital and liquidity are not fungible. As a result, the rating agencies have assigned separate ratings to the significant banking entities within the group, namely Investec Bank plc (IBP) and Investec Bank Limited (IBL). Rating agencies have also assigned ratings to the holding companies, namely, Investec plc and Investec Limited. In South Africa, adjustments in the sovereign rating lead to an automatic adjustment in the ratings of the major banks in the country, as it is generally accepted that a bank cannot have a higher rating than the sovereign of the country in which it operates. Our ratings at 22 June 2022 were as follows: | Rating agency | Investec Limited | IBL A subsidiary of Investec Limited | Investec plc | IBP A subsidiary of Investec plc | | --- | --- | --- | --- | --- | | **Fitch** | | | | | | **Long-term ratings** | | | | | | Foreign currency | BB- | BB- | | BBB+ | | National | AA+(zaf) | AA+(zaf) | | | | **Short-term ratings** | | | | | | Foreign currency | B | B | | F2 | | National | F1+(zaf) | F1+(zaf) | | | | **Outlook** | Stable | Stable | | Stable | | **Moody's** | | | | | | **Long-term ratings** | | | | | | Foreign currency | | Ba2 | Baa1 | A1 | | National | | Aa1.za | | | | **Short-term ratings** | | | | | | Foreign currency | | NP | P-2 | P-1 | | National | | P-1.(za) | | | | **Outlook** | | Stable | Stable | Stable | | **S&P** | | | | | | **Long-term ratings** | | | | | | Foreign currency | | BB- | | | | National | | za.AA | | | | **Short-term ratings** | | | | | | Foreign currency | | B | | | | National | | za.A-1+ | | | | **Outlook** | | Positive | | | | **Global Credit Ratings** | | | | | | **Long-term ratings** | | | | | | International scale, local currency | | BB | | BBB+ | | National scale | | AA(za) | | | | **Short-term ratings** | | | | | | International scale, local currency | | B | | A2 | | National scale | | A1+(ZA) | | | | **Outlook (International scale)** | | Negative | | | | **Outlook (National scale)** | | Stable | | Stable | Further information on our credit ratings may be found on our website. 141 --- 08 | Annexures Investec integrated annual report 2022 # SHAREHOLDER ANALYSIS # **Investec ordinary shares** As at 31 March 2022, Investec plc and Investec Limited had 696.1 million and 310.4 million ordinary shares in issue respectively. # **Spread of ordinary shareholders as at 31 March 2022** # **Investec plc ordinary shares in issue** | Number of shareholders | Holdings | % of total shareholders | Number of shares in issue | % of issued share capital | | --- | --- | --- | --- | --- | | 15 945 | 1 – 500 | 58.1% | 2 371 418 | 0.3% | | 4 239 | 501 – 1 000 | 15.5% | 3 193 823 | 0.5% | | 4 895 | 1 001 – 5 000 | 17.8% | 10 863 963 | 1.6% | | 780 | 5 001 – 10 000 | 2.8% | 5 687 355 | 0.8% | | 828 | 10 001 – 50 000 | 3.0% | 18 635 961 | 2.7% | | 206 | 50 001 – 100 000 | 0.8% | 14 597 966 | 2.1% | | 549 | 100 001 and over | 2.0% | 640 732 132 | 92.0% | | **27 442** | | **100.0%** | **696 082 618** | **100.0%** | # **Investec Limited ordinary shares in issue** | Number of shareholders | Holdings | % of total shareholders | Number of shares in issue | % of issued share capital | | --- | --- | --- | --- | --- | | 8 776 | 1 – 500 | 65.5% | 827 525 | 0.3% | | 1 319 | 501 – 1 000 | 9.8% | 1 003 859 | 0.3% | | 1 949 | 1 001 – 5 000 | 14.6% | 4 424 207 | 1.5% | | 441 | 5 001 – 10 000 | 3.3% | 3 228 326 | 1.0% | | 534 | 10 001 – 50 000 | 4.0% | 12 529 670 | 4.0% | | 138 | 50 001 – 100 000 | 1.0% | 9 935 644 | 3.2% | | 243 | 100 001 and over | 1.8% | 278 458 639 | 89.7% | | **13 400** | | **100.0%** | **310 407 870** | **100.0%** | # **Geographical holding by beneficial ordinary shareholder as at 31 March 2022** # **Investec plc** ![img-30.jpeg](img-30.jpeg) | ■ South Africa | 52.0% | | --- | --- | | ■ UK | 22.8% | | ■ USA and Canada | 15.0% | | ■ Rest of Europe | 4.9% | | ■ Other countries and unknown | 5.3% | # **Investec Limited** ![img-31.jpeg](img-31.jpeg) | ■ South Africa | 66.5% | | --- | --- | | ■ UK | 2.8% | | ■ USA and Canada | 14.3% | | ■ Rest of Europe | 5.4% | | ■ Other countries and unknown | 11.0% | 142 --- 08 | Annexures Investec integrated annual report 2022 ## SHAREHOLDER ANALYSIS ### Largest ordinary shareholders as at 31 March 2022 In accordance with the terms provided for in Section 793 of the UK Companies Act, 2006 and Section 56 of the South African Companies Act, 2008, the group has conducted investigations into the registered holders of its ordinary shares (including nominee and asset management companies) and the results are as disclosed below. #### Investec plc | Shareholder analysis by manager group | Number of shares | % holding | | --- | --- | --- | | 1. Public Investment Corporation (ZA) | 78 056 948 | 11.2% | | 2. M&G Investments (UK & ZA) | 76 081 326 | 10.9% | | 3. BlackRock Inc (EU, US & UK) | 32 650 262 | 4.7% | | 4. The Vanguard Group, Inc (US, UK & AUS) | 30 569 393 | 4.4% | | 5. Investec Staff Share Scheme (UK & ZA) | 29 302 251 | 4.2% | | 6. Ninety One (ZA) | 26 902 702 | 3.9% | | 7. Allan Gray (ZA) | 26 513 728 | 3.8% | | 8. BrightSphere Investment Group (US & UK) | 26 362 156 | 3.8% | | 9. Old Mutual Investment Group (ZA) | 20 113 596 | 2.9% | | 10. T Rowe Price Associates (UK & US) | 13 817 308 | 2.0% | | **Cumulative total** | **360 369 670** | **51.8%** | The top 10 shareholders account for 51.8% of the total shareholding in Investec plc. This information is based on a threshold of 20 000 shares. Some major fund managers hold additional shares below this, which may cause the above figures to be marginally understated. #### Investec Limited | Shareholder analysis by manager group | Number of shares | % holding | | --- | --- | --- | | 1. Public Investment Corporation (ZA) | 45 916 573 | 14.8% | | 2. Investec Staff Share Scheme (UK & ZA) | 26 103 097 | 8.4% | | 3. Allan Gray (ZA) | 19 013 412 | 6.1% | | 4. Old Mutual Investment Group (ZA) | 16 211 644 | 5.2% | | 5. Sanlam Group (ZA) | 13 931 951 | 4.5% | | 6. The Vanguard Group, Inc (US) | 10 044 144 | 3.2% | | 7. M&G Investments (ZA) | 7 894 142 | 2.5% | | 8. Swedbank Robur (EU) | 7 688 918 | 2.5% | | 9. Truffle Asset Management (ZA) | 6 928 476 | 2.2% | | 10. BlackRock Inc (US & UK & AUS) | 6 826 150 | 2.2% | | **Cumulative total** | **160 558 507** | **51.6%** | The top 10 shareholders account for 51.6% of the total shareholding in Investec Limited. This information is based on a threshold of 20 000 shares. Some major fund managers hold additional shares below this, which may cause the above figures to be marginally understated. #### Shareholder classification as at 31 March 2022 | | Number of Investec plc shares | % holding | Number of Investec Limited shares | % holding | | --- | --- | --- | --- | --- | | Public* | 661 820 824 | 95.1% | 282 718 736 | 91.1% | | Non-public | 34 261 794 | 4.9% | 27 689 134 | 8.9% | | Non-executive directors of Investec plc/Investec | 3 483 329 | 0.5% | 221 235 | 0.1% | | Executive directors of Investec plc/Investec Limited | 1 476 214 | 0.2% | 1 364 802 | 0.4% | | Investec staff share schemes | 29 302 251 | 4.2% | 26 103 097 | 8.4% | | **Total** | **696 082 618** | **100.0%** | **310 407 870** | **100.0%** | \* As per the JSE Listings Requirements. 143 --- 08 | Annexures Investec integrated annual report 2022 # SHAREHOLDER ANALYSIS CONTINUED # **Share statistics** | For the year ended | 31 March 2022 | 31 March 2021 | | --- | --- | --- | | Price earnings ratio^{1} | 9.1 | 7.6 | | Dividend payout ratio (%) | 45.4 | 45.0 | | Dividend yield (%) | 5.0 | 5.9 | | Earnings yield (%)^{1} | 10.9 | 13.2 | # **Investec plc** | For the year ended | 31 March 2022 | 31 March 2021 | | --- | --- | --- | | Daily average volumes of shares traded ('000) | 1 605 | 2 802 | | Closing market price per share (Pound Sterling) | 5.03 | 2.19 | | Number of ordinary shares in issue (million) | 696.1 | 696.1 | | Market capitalisation (£'million)^{2} | 3 255 | 1 433 | # **Investec Limited** | For the year ended | 31 March 2022 | 31 March 2021 | | --- | --- | --- | | Daily average volumes of shares traded ('000) | 1 242 | 2 089 | | Closing market price per share (Rands) | 97.51 | 43.27 | | Number of ordinary shares in issue (million) | 310.4 | 318.9 | | Market capitalisation (R'million)^{2} | 88 268 | 40 007 | | Market capitalisation (£'million)^{2} | 4 553 | 2 025 | 1. Calculations are based on the adjusted earnings per share and the closing share price. 2. This calculation of market capitalisation excludes the Group's treasury shares. For the market capitalisation of Investec plc, the LSE only includes the shares in issue for Investec plc, as Investec Limited is not incorporated in the UK. For the market capitalisation of Investec Limited, the JSE has agreed to use the total number of shares in issue for the combined Group, comprising Investec plc and Investec Limited. 144