DISCOVERY LIMITED | DMTN ROADSHOW - 23 & 24 October 2017 DEON VILJOEN (GROUP CFO) AND ANDREW RAYNER (GROUP CRO)

 
DISCOVERY LIMITED | DMTN ROADSHOW - 23 & 24 October 2017 DEON VILJOEN (GROUP CFO) AND ANDREW RAYNER (GROUP CRO)
DISCOVERY LIMITED | DMTN ROADSHOW
23 & 24 October 2017
DEON VILJOEN (GROUP CFO) AND ANDREW RAYNER (GROUP CRO)
DISCOVERY LIMITED | DMTN ROADSHOW - 23 & 24 October 2017 DEON VILJOEN (GROUP CFO) AND ANDREW RAYNER (GROUP CRO)
Team introduction

       01   Deon Viljoen: Group Chief Financial Officer

      02    Andrew Rayner: Group Chief Risk Officer

      03    Fareed Chothia: Group Corporate Finance

      04    Michael Curtis: Group Head Quants and Actuarial

      05    Jackie Symons: Group Head Investor Relations

                                                              2
DISCOVERY LIMITED | DMTN ROADSHOW - 23 & 24 October 2017 DEON VILJOEN (GROUP CFO) AND ANDREW RAYNER (GROUP CRO)
Overview
    Discovery is a global integrated financial services organisation that uses our pioneering
    Shared-Value Insurance model across businesses. Our growth has largely been organic.

 Funding to date has been sourced from relationship banks and Prudential in the UK

 The Group’s debt is managed within a prudent risk framework

 The DMTN program is a key element of Discovery’s long-term funding strategy as the Group
  continues to invest for growth

 The DMTN programme is being set-up to diversify funding sources

 The inaugural issuance will be used primarily for VitalityLife (UK) and general corporate purposes
  in SA

 Strong cash generation in Discovery Health (SA) supports debt servicing requirements

 Moody’s have assigned a Aa3.za national scale credit rating to Discovery Limited
                                                                                                       3
DISCOVERY LIMITED | DMTN ROADSHOW - 23 & 24 October 2017 DEON VILJOEN (GROUP CFO) AND ANDREW RAYNER (GROUP CRO)
01   Introduction and strategic focus

02   Governance and risk management

03   Financial performance

04   Debt overview and DMTN issuance

                                        4
DISCOVERY LIMITED | DMTN ROADSHOW - 23 & 24 October 2017 DEON VILJOEN (GROUP CFO) AND ANDREW RAYNER (GROUP CRO)
Introduction and strategic focus
DISCOVERY LIMITED | DMTN ROADSHOW - 23 & 24 October 2017 DEON VILJOEN (GROUP CFO) AND ANDREW RAYNER (GROUP CRO)
Our Ambition
               Be the best insurer in the world and a
       force for social good with powerful group assets and
        brilliant businesses resulting in a profound impact

Our Core Purpose
    Make people healthier and enhance and protect their lives

                                                                6
DISCOVERY LIMITED | DMTN ROADSHOW - 23 & 24 October 2017 DEON VILJOEN (GROUP CFO) AND ANDREW RAYNER (GROUP CRO)
Evolution of the group
                                                                                                                                                                                                                                                       June 2016
                                                                                                                                                                                                                                                       AIA Vitality is launched in Thailand and Malaysia

   March 1992                                                                      September 2007                           August 2010                                                                                                                July 2016
   Discovery Limited                                                               Discovery and Prudential PLC             Discovery acquires                                                                                                         Generali Vitality launches Vitality in Germany
   established                                                                     launch PruProtect                        Standard Life
                            October 1997                 October 2000                                                       Healthcare and merges
                                                                                                                                                      June 2012                      November 2014
                            Vitality launched            Discovery Life launched                                            its insurance book with   Discovery launches             Discovery full ownership of
                                                                                                                            that of PruHealth         Vitality to Ping An            PruHealth and PruProtect in
                                                                                                                                                      Health clients                 the UK and rebrands to Vitality
                                                                                                                                                                                     UK
                                                                                                                                                                                                                                                      July 2016
                                                                                                                                                                                                                                                      Discovery enters a strategic partnership with
                                                                                   October 2007                                                                                                                                                       Sumitomo Life Insurance Co. and SoftBank
                                                                                   Discover Invest launched                                                                                                                                           Corporation

1992                        1995                                                       2000                                              2005                                       2010                                                       2015                                              2020

  February 1993                                             April 2004                               2009                                             July 2013                      November 2014
  Discovery Health starts                                   Discovery and Prudential plc             Discovery acquires a                             Discovery launches             Discovery announces an
  writing new business                                      announce their JV and launch                                                              a JV with AIA Group            intent to enter a strategic
                            September                       PruHealth
                                                                                                     25% share in Ping An
                                                                                                     Health
                                                                                                                            May 2011                  Limited in                     partnership with the
                                                                                                                                                                                                                       April 2015                     September 2016                  January 2017
                            1999                                                                                            Discovery Insure
                                                                                                                            launched
                                                                                                                                                      Singapore                      Generali Group
                                                                                                                                                                                                                       Discovery and John
                                                                                                                                                                                                                       Hancock enters into a
                                                                                                                                                                                                                                                      Vitality launches in Canada     Generali Vitality becomes
                                                                                                                                                                                                                                                      as Manulife Vitality            available to corporate
                            Discovery lists on the JSE
                                                                                                                                                                                                                       strategic partnership                                          clients in France

                                                                                                                                                      October 2013
                                                            October 2004                                                                              AIA Vitality is launched in                                                                                                     July 2017
                                                            Discovery Card launched                                                                   Australia                                                                                                                       MyOwn launches in
                                                                                                                                                                                                                                                                                      Australia

                                                                                                                                                                                                                                                                                      October 2017
                                                                                                                                                                                                                                                                                      Bank licence granted
                                                                                                                                                                                                                       October 2015
                                                                                                                                                                                                                       AIA Vitality is launched in
                                                                                                                                                                                                                       the Philippines, Hong Kong
                                                                                                                                                                                                                       and Macau

                                                                                                                                                                                                                                                                                                             7
DISCOVERY LIMITED | DMTN ROADSHOW - 23 & 24 October 2017 DEON VILJOEN (GROUP CFO) AND ANDREW RAYNER (GROUP CRO)
Group operational structure
                                                   DISCOVERY                                  PING     VITALITY
                                                PRIMARY MARKETS                                AN      GROUP
                                                                                             HEALTH

                                    Core purpose                                     Footprint
                                                                                   16 countries
                       Make people healthier and enhance                           c10m clients
                             and protect their lives                         Adding ~150k every month
   Discovery Health is administrator to Discovery Health Medical Scheme & 18 closed medical schemes
                                                                                                                  8
   Discovery Card will integrate into Discovery Bank on launch
DISCOVERY LIMITED | DMTN ROADSHOW - 23 & 24 October 2017 DEON VILJOEN (GROUP CFO) AND ANDREW RAYNER (GROUP CRO)
Operating model

Why & How                  Growth Methodology          Capital Philosophy
     Core purpose
  Make people healthier
   and enhance and
    protect their lives

   Vitality Shared-Value
     Insurance Model

                                 Target group profit       Separation of Solvency Capital,
                                     growth of             known initiatives and buffer for
                                    CPI + 10%                   unplanned events

                                                                                              9
DISCOVERY LIMITED | DMTN ROADSHOW - 23 & 24 October 2017 DEON VILJOEN (GROUP CFO) AND ANDREW RAYNER (GROUP CRO)
The Vitality Shared-Value model

        WHY                   HOW    WHAT

  Make people                       Health insurance

  healthier and                     Life insurance

  enhance and                       Long-term savings
protect their lives
                                    Short-term insurance

                                    Intent to enter banking

                                                         10
Consequence of the Vitality Shared-Value Insurance
Model

                                                  Competitive advantage

                                                  Initial selection

                                                  Selective lapsation

                                                  Behaviour change

                                                  Bent lapse and claims
                                                   experience

                                                  Healthier society

                                                                           11
Organic growth engine

                                                                    Profit growth of

                        ESTABLISHED                                 CPI + 5%

             ~3 years
                                                                                              Targeted group
Investment                                                          Profit growth of          profit growth of
 of 10% of
   profit                EMERGING                                   CPI + 30%
                                                                                             CPI + 10%
             ~5 years

                                                                   Growth in investment of

                           NEW                                     CPI + 10%

                                      Mathematical derivation
                                      CPI + 10% = X(CPI+5%) + Y(CPI + 30%) + Z (CPI + 10%)
                                      X + Y + Z = 1; Z < 0
                                                                                                                 12
Capital management philosophy

 Three pillars of capital                                                          Targeted capital measures

      Solvency                                      Allocated
      Capital                                       Capital
                                                                                        Return on capital

    Dedicated capital and reserves                Dedicated                          risk free + 10%
                                                  capital for
    5 Year Capital Plan Projection                planned
                                                  initiatives      Additional
    Individual business ORSA         Solvency
                                      1 in 200    5 Year           Buffer                    FLR
    assessment including new
                                                  Capital Plan
                                                                                          < 28%
                                     year event

    business written
                                                  Projection
    Earning a rate of: risk free + 10%                           New initiatives
                                                                 and safety
                                                                 margins in
                                                                 emerging and
                                                                 new businesses           Cash buffer
                                                                                      R1bn - R2bn

                                                                                                            13
Deconstructing our Ambition
 BRILLIANT BUSINESSES         PROFOUND IMPACT

 1   Insurgent                          1   CPI + 10% profit growth

 2   Significant                        2   Risk free + 10% return on capital
     engagement
                                        3   10m Vitality members
     Superior actuarial
 3   dynamics

 4   Meeting complex
     consumer needs

 5   Exceptional service

                                            FOUNDATION

                                        1   Global platform, science and data
           BUSINESSES
                                        2   Powerful brand
                                        3   Employer of choice for critical skills
                                        4   Values-based culture
                                                                                     14
Governance and risk management
Governance structure

                                                           Capital Allocation Committee

   UK operations have an independent Board and governance structure
   The Discovery Bank governance structure is separately defined in line with SARB guidelines   16
Leadership team

    Group Executive   Executive Directors   Non-executive Directors

                                                                      17
Group risk management framework

                                                   Risk Appetite and Strategy

                                               ERM Framework and Risk Policies

                                                    Risk Management Process

                                      Assess
                                                                 Enterprise wide
                        Identify                   Manage        Modelling and projection capability
                                                                 Stress testing and scenario analysis
                                                                 Own Risk and Solvency Assessment
                             Report            Monitor

                                                            Risk Governance

                                                    Boards and Sub-Committees
              Management                                                         Oversight and Assurance

          First Line of Defence                                 Second Line of Defence              Third Line of Defence

                                                                                                                            18
Management of Financial Risks

                    01                                     02                                       03
                   Leverage                               Funding                                 Liquidity

 Debt is a key part of the funding      5-year financial projections          Non-insurance entities - Detailed
  strategy                                maintained                             12-month cashflow forecast
                                             – Known funding requirements        maintained to manage liquidity
 Manage FLR within Board approved             are built into plan
  risk appetite limit of 28%                                                    Insurance entities - Risk framework
                                             – Sources of funding identified     sets minimum liquidity for
 Debt covenants impose an external                                              operational cashflows (incl. claims
  constraint                             Internal target for Group cash         and expenses)
                                          buffer is R1bn to R2bn
 Aim to optimize the cost of funding        – Buffer for volatility and        Each business maintains cash
                                               unknown future investments        resources for operational liquidity

                                                                                                                       19
Management of Financial Risks

                   04                                         05                                        06
             Capital allocation                              Interest rates                  Asset liability matching

 Group produces cash on existing         Policyholder assets subject to
  business and re-invests into new         interest rate risk (discounted            Asset-liability management policy
  business (new insurance policies or      cashflow valuation)                        establishes matching approach
  new initiatives)                            – Nature of long term insurance         and governance
                                                business                             Positions are matched by nature,
 Capital allocation decisions made in
  the context of the growth               Policyholder liabilities closely           amounts, timing and currency
  methodology, capital management          matched so low residual risk
  philosophy and risk appetite
                                          Interest rate sensitive shareholder
 Decisions consider return, profit        assets – Risk accepted for yield
  growth, cash generation, capital and
  risk metrics                            Low appetite for interest rate risk in
                                           finance costs – Hedging instruments
                                           used

                                                                                                                          20
Challenges and Opportunities

                                                                    UK’s exit from EU impacts our UK
               Macro-economic pressure
                                                                     business
Economic                                           International
               Slow pace of economic growth
Uncertainty                                        Markets          Low interest rates
               Negative impact on consumers
                                                                    Currency fluctuations

               SA political uncertainty driving
Political       economic uncertainty               Growth           Key focus area
Uncertainty    Enhanced focus on perceived        Strategy         Shared-Value Insurance and
                slow pace of transformation                          2018 Ambition drive operations

               National Health Insurance
               Role of the private healthcare
Healthcare
                system
System
               Sustainability of the overall
                healthcare system
                                                                                                   21
Financial performance
Financial results overview | Year ended 30 June 2017

     Core new business                      Normalised operating profit                           Normalised headline                            Dividend declaration
                                                                                                      earnings

      +16%                                           +10%                                               +8%                                         +11%
        to R 16 993m                                    to R 7 048m                                    to R 4 656m                              to 98cpsm (+6% FY)

         5 year CAGR: 15.2%1                          5 year CAGR: 15.5%                               5 year CAGR: 13.7%                             5 year CAGR: 10.6%

   Return on Embedded                               Investment in new                                  Interest cover2
                                                                                                                                                    Bank Borrowings
          Value                                         initiatives
                                                                                                                                                     R8 524m
  +10.2%                                                   8%                                         13.1x                                        Other Borrowings3
 closing EV R 57 294m                                    to R 577m
                                                                                                                                                     R3 251m
         5 year CAGR: 12.5%

 1 Appliedto core new business. Total new business 5 year CAGR (including closed schemes and fees earned by VG) is 16.6%
 2 Interest
          Cover = EBIT / Finance Costs
 3 Other Borrowings is made up of R3 080m owed to Prudential in respect of historic new business liquidity funding and R171m in respect of recourse financial reinsurance balances
                                                                                                                                                                                     23
Core new business

    +16%                                                                                             Rm
                                                                                                          12 months
                                                                                                           to 30 Jun
                                                                                                             2017
                                                                                                                        12 months
                                                                                                                         to 30 Jun
                                                                                                                           2016
                                                                                                                                        %
                                                                                                                                      change
    to R 16 993m
    +11% total new business incl. DH take-on of new closed
    schemes and gross revenue for the Vitality Group of R18 250m
                                                                             16,993                           6 1091        5 1871    +18%
                                                                                                               2 175         1 866    +17%

                                                                                       Established
                                                                   14,602

                                               13,064                                                          2 496         2 413      +3%

                           11,335                                                                                 562           542     +4%
         9,864
                                                                                                                  622           622     -1%
                                                                                                                 895           749    +19%

                                                                                       Emerging
                                                                                                                6343          5123    +24%

       FY 2013            FY 2014             FY 2015              FY 2016   FY 2017
                                                                                                               3 111         1 732    +80%
1Excludes new scheme take-ons
2 In GBP terms
3 Includes gross revenue in respect of the Vitality Group                                                                                      24
Strong operating profit growth

     +10%                                                                                              Rm
                                                                                                             12 months
                                                                                                              to 30 Jun
                                                                                                                2017
                                                                                                                           12 months
                                                                                                                            to 30 Jun
                                                                                                                              2016
                                                                                                                                         % change

     to R 7 048m                                                                                                  2 505         2 265      +11%
                                                                         7,048
                                                                                                                  3 588         3 271      +10%

                                                                                       Established
                                                         6,407
                                                                                                                    744           665      +12%
                                         5,789
                                                                                                                   1401           121      +16%
                         4,962                                                                                    16.42           8.72     +89%
                                                                                                                  28.12         31.62      -11%
         4,030
                                                                                                                    (21)        (151)      +86%

                                                                                       Emerging
                                                                                                                  (116)         (189)      +39%
                                                                                                                    (33)          (99)     +66%
       FY 2013         FY 2014          FY 2015         FY 2016         FY 2017              New     OTHER        (577)         (384)      -50%
1   54.99% share of DiscoveryCard. Card will be moved to the Banking Segment in time
2   In GBP terms                                                                                                                                    25
Strong SA Health profit and cash generation

 Profit after tax (Rm)

    +9%                                                            Cash Generation
    to R 1 826m

                                         1,826    Strong cash generation in SA Health supports debt
                                 1,672             servicing requirements
                         1,474
              1,341
    1,220                                         Profit for the year reasonable proxy for cash
                                                   generation

                                                  Continued strong growth in profit and cash generation

    2013      2014       2015    2016    2017

                                                                                                           26
Performance against the organic growth methodology
                                                                    Target   Performance
                                                                             In constant currency terms

                                                                                CPI* +6%

                                                                                CPI* +55%

                                                                                8%
                                                                                of earnings

                                       Group profit growth of

                                         CPI + 10%                              CPI* +7%
* Weighted average CPI rate of 4.8% based on CPI rates in markets
                                                                                                          27
Performance against the capital management philosophy

  Three pillars of capital                                                               Target         Performance
    Solvency                                      Allocated
    Capital                                       Capital
                                                                                                      Return on capital
                                                                                    Return on
   5 Year Capital Plan Projection              Dedicated                            capital           risk free +
   Individual business ORSA
   assessment including new
                                 Solvency
                                 1 in 200
                                  year event
                                               capital for
                                               planned
                                                                                    risk free + 10%
                                                                                                      9.3%
   business written                            initiatives         Additional
                     26% R14bn                 5 Year              Buffer
                     Solvency   Reserves
                                               Capital                                                FLR =
                                                                                   FLR < 28%
                                               Plan
                     3.9x CAR
                                               Projection        New                                  26.7%
                     2.2x CAR                  Banking
                                                                 initiatives and
                                                                 safety margins
                     145% SCR                  Global Vitality   in emerging
                                               Network           and new           Cash buffer        Cash buffer
                     215% SCR                  Commercial
                                               insurance
                                                                 businesses
                                                                                   R1bn-R2bn          R1.6bn
                     A- A.M Best rating        etc.

                                                                                                                          28
Debt overview and DMTN issuance
Group Funding Plan

                               FLR* projection                                          Group debt projection
 5-year financial
  projections maintained

 Funding strategy               26.7%
  includes debt subject to
  FLR cap of 28%

 Debt levels remain well
  within risk appetite and
  existing debt covenants

 Interest cover in FY2017
  is 13.1x and remains
                              FY2017 FY2018 FY2019 FY2020 FY2021 FY2022                   FY2018    FY2019    FY2020    FY2021    FY2022
  above 6x through the
  projection                                   FLR        FLR Cap of 28%

                             * Financial Leverage Ratio (“FLR”) = Debt (Excl. Lease Liability) / [Debt (Excl. Lease Liability) + Equity]

                                                                                                                                           30
Key Drivers of Funding Requirements

              1-2 years                         2-3 years                                  3-5 years

 Vitality Life new business       Transfer of Vitality Life business         Refinance maturing South African
                                    from Prudential balance sheet to            and UK bank debt arrangements
 General corporate purposes        Vitality Life Limited (Part VII)
                                   Refinance maturing South African
                                    and UK bank debt arrangements

                               All included in 5-year financial projections

                                                                                                                   31
Vitality Life Funding Requirements

  Vitality Life new business funding required                                  Vitality Life Part VII funding

                                                                                                                             Strengthen VLL Balance
                                                                                                                             Sheet
                                                                                                                             Liability to PAC Refinanced

                                                                                                                             Part VII Funding Required

                                                      0        0        0

         FY2018                FY2019               FY2020   FY2021   FY2022     Funding Required       Funding Use

     New business funding required                                                Part VII Funding required:
        – Life insurance pays significant up-front commission                         – Historic new business liquidity funding provided by the
        – Recovered over the life of the policy                                           Prudential
        – Paid back over 8-10 years                                                   – On transfer this “debt balance” needs to be refinanced
        – Results in a liquidity strain                                            Part VII expected to be complete by November 2020
     Post Part VII (FY19) the business is expected to be self-funding

  The two charts above have the same y-axis scale
                                                                                                                                                           32
Existing Bank Debt Repayment Profile

        South African debt refinance profile                                    UK debt refinance profile
                                                                                              70
              3,500

              3,000                                                                           60

              2,500                                                                           50
 R millions

                                                                                 £ millions
              2,000                                                                           40

              1,500
                                                                                              30
              1,000
                                                                                              20
               500
                                                                                              10
                 -
                                                                                              -
                      FY2018    FY2019   FY2020     FY2021   FY2022   FY2023
                                                                                                   FY2018   FY2019   FY2020   FY2021   FY2022   FY2023
                               Other Funding      DMTN Funding

                  South African bank loan syndicate established in FY2016                          Two bank loans with HSBC
                     – R5bn of 5-year bullet and amortising                                            – £100m 5-year amortising loan
                  Investec Funding (R0.5bn) on 5-year basis raised in FY2017                          – £50m 5-year bullet loan

                                                     DMTN Programme to refinance existing debt
                                                                                                                                                         33
DMTN programme will broaden funding base for the
Group’s debt requirements
 Group debt projection overlaying DMTN*

       FY2017             FY2018             FY2019             FY2020             FY2021        FY2022

                                            Other Funding    DMTN Funding

   * The mix between bank and DMTN funding may vary depending on market conditions at the time
                                                                                                          34
Debt Programme Objectives

             Broaden funding base

             Optimise cost of funding

            Ensure funding capacity for Group over 5-year time horizon

              – New funding requirements
              – Refinance of existing debt arrangements

                                                                         35
Existing Bank Debt Covenants

 Covenant                     Minimum Requirement         As at 30 June 2017          As at 30 June 2016

 Group Debt to EBITDA ratio   Less than 2.5X              1.74                        1.76

 Group financial              Less than 30% of Group EV   21%                         21%
 Indebtedness to Embedded
 Value

 Group Embedded Value         Greater than R30 billion    ZAR 57.3 billion            ZAR 53.1 billion

 Discovery Life Capital       Greater than 1.5 times      3.9 times                   3.6 times
 Adequacy Requirement

 Value of New Business (VNB) Positive VNB for 3           Jun 2017: R1 281 million    Jun 2016: R946 million
                             consecutive 6-month period
                                                          Dec 2016 : R1 156 million   Dec 2015: R1 386 million

                                                          Jun 2016: R946 million      Jun 2015: R1 393 million

                                                                                                                 36
Group structure: Key operations                                                                                 Guarantors            SA Ops

                                                                                                                  Bank          International

                                                               Discovery Limited (JSE Listed)                      UK
                                                                           Issuer
South Africa
Guarantors

                                                Discovery                                                                              Discovery Pref
       Discovery             Discovery                                 Discovery              Discovery    Discovery Connect                                Discovery Finance
                                                  Purple                                                                                  Holding
        Health                Vitality                                    Life                 Insure         Distribution                                     Co Europe
                                               Holdings Ltd                                                                           Company (Pty)
                                                                                                                Services                                    Limited (UK SPV)
                                              (Bank Hold Co)                                                                          Ltd (Card 55% JV)
100%                  100%                  100%                   100%                  100%              100%                      100%                  100%

                                                   Discovery
                                                     Bank

    UK

                          Discovery Group                                          Vitality Group
                                                                                                                 AIA Vitality Hong
                          Europe Limited                                     International Inc. United                                                Ping An Health
                                                                                                                    Kong Ltd.
                                                                                 States of America
                   100%                                                   100%                            44%                                24.99%

                                                                                   Discovery Vitality
   Vitality Health          Vitality Life   Vitality Corporate
                                                                                       Australia
      Limited                 Limited       Services Limited
                                                                                      (Australia)

100%                      100%              100%                              100%
                                                                                                                                                                                37
Discovery Credit rating
                                                                 Credit strengths
      Moody’s Insurance Financial
        Strength Rating (IFSR)            1. Very strong franchise in South Africa and a growing global
                                          footprint
  •    Baa2
  •    1 above the Sovereign (Baa3)       2. Strong profitability and significant non-insurance fee income
                                          from SA Health

   Moody’s long-term issuer (LT           3. Moderate exposure to local investments because of the
          Issuer) rating                  capital-light nature of its business

  •    Ba1 (global) / Aa3.za (national)   4. Good capitalisation on both regulatory and economic basis

                                                                   Strength offsets

                                          1. Challenging operating environment in South Africa
            Rating outlook
                                          2. Complexity inherent in shared-value insurance model
  •    Negative outlook reflects
       outlook on South African           3. Ambitious expansion initiatives
       sovereign

                                                                                                             38
Key Features of the DMTN Programme
ISSUER                  Discovery Limited
SIZE (NOMINAL AMOUNT)   R10 billion
GUARANTORS              Discovery Health and Discovery Vitality (as per current SA Bank Loans)

LISTING                 The Interest Rate Market of the JSE Limited
                        Notes to be issued under the Programme may comprise:
                        • Senior notes (the “Senior Notes”);
TYPES OF NOTES          • Subordinated notes which are subordinated to the Senior Notes (the “Subordinated Notes”); and/or
                        • Capital subordinated notes with terms capable of qualifying the proceeds of such Notes as Regulatory Capital. Regulatory Capital Notes will require FSB
                          approval at the time of Issuance.
CROSS DEFAULT           The cross default will be triggered by a default by Discovery Limited and or its Guarantors in relation to the greater of R50m or 1% of EBITDA
                        A material subsidiary is defined as:
                        • any Guarantor; and
                        • any Subsidiary
MATERIAL SUBSIDIARY         • of which the Issuer owns more than 50% (fifty percent) of the ordinary shares and
                            • which has EBITDA (calculated on an unconsolidated basis), representing 10% (ten percent) or more of the EBITDA of the Discovery Group
                               (calculated on a consolidated basis), according to the methodology used in the latest audited financial statements of the Issuer, consistently
                               applied, but excluding any Subsidiary
                        Investors will have the option to redeem their Notes should the following events occur:

OPTIONAL REDEMPTION     • Issuer is no longer listed on a Financial Exchange
EVENTS                  • The Notes are no longer listed on a financial Exchange
                        • There is no rating assigned to the Notes
                        Standard events of default including but not limited to non-payment, breach of the negative pledge, liquidation or winding up, judicial proceedings, cross
EVENTS OF DEFAULT
                        default, inability to continue to operate the whole or substantial part of the business
                                                                                                                                                                                 39
Indicative Issuance Terms

 ISSUER                  Discovery Limited

 GUARANTORS              Discovery Health and Discovery Vitality (as per current SA Bank Loans)

 LISTING                 Interest Rate Market of the JSE Limited

 ISSUER RATING           Aa3.ZA

 RANKING                 Senior

 INDICATIVE SIZE         R1.25bn to R1.75bn
                         • 5-year;
 TENOR
                         • or a combination of 5-year and 7-year notes

 INTEREST RATE PROFILE   Floating rate notes

 PROPOSED AUCTION DATE   15 November 2017

                                                                                                  40
Notes

        41
Notes

        42
Notes

        43
DISCOVERY LIMITED | DMTN ROADSHOW
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