oOh!media
Annual Report 2004

OLD MUTUAL PLC ANNUAL REPORT AND ACCOUNTS 2004

We are an international financial services
group, whose activities are focused on
asset gathering and asset management.
We offer a diverse range of financial
services in three principal geographies,
South Africa, the United States and 
the United Kingdom. We have a 
talented team across all of our regions,
sharing skills to help deliver our vision.

Financial Highlights

Contents
01
04 Chairman’s Statement
06 Chief Executive’s Statement
10 Group Business Review
21 Corporate Citizenship
26 Corporate Governance 

and Directors’ Report

42 Board of Directors
44 Remuneration Report
53

Statement of Directors’
Responsibilities
Summary Consolidated 
Profit and Loss Account
Independent Auditors’ Report

56
57 Consolidated Profit and 

54

Loss Account

60 Consolidated Statement of Total

Recognised Gains and Losses

60 Reconciliation of Movements 
in Consolidated Equity
Shareholders’ Funds
61 Consolidated Balance Sheet
63 Company Balance Sheet
64 Consolidated Cash Flow Statement
65 Notes to the Financial Statements
138 Supplementary Disclosures
140 Achieved Profits – Statement 

of Directors’ Responsibilities
141 Achieved Profits – Independent

Auditors’ Report
142 Achieved Profits Basis

Supplementary Information

156 Financial History
160 Notice of Annual General Meeting
165 Shareholder Information

Financial Highlights

Financial Highlights | 01

£956m

> Adjusted operating profit* up 47% 

to £956 million (2003: £650 million), 
and up 40% to R11,296 million 
(2003: R8,041 million)

£908m

> Operating profit: 

£908 million (2003: £475 million), 
R10,711 million (2003: R5,884 million)

15.3p

14.1p

> Adjusted operating earnings per share*
up 53% to 15.3p (2003: 10.0p), and 
up 46% to 181.1c (2003: 123.8c)

> Basic operating earnings per share: 

14.1p (2003: 8.0p), 166.2c (2003: 99.1c)

£140bn

139.1p

> Funds under management: £140 billion

> Adjusted embedded value per share: 

(2003: £125 billion), an increase of 12%,
R1,520 billion (2003: R1,495 billion)

139.1p, R15.08 at 31 December 2004
(2003: 104.6p, R12.49)

19.1%

> Return on equity: 19.1%

(2003: 14.4%**)

13%

> Final dividend increased by 13% to 3.5p

making 5.25p for the year***

Wherever the items asterisked in the Financial Highlights are used, whether in the Financial Highlights, the Chairman’s Statement, the Chief Executive’s Statement or the
Group Business Review, the following apply:

*

Adjusted operating profit represents the directors’ view of the underlying performance of the Group. For life assurance and general insurance businesses, adjusted 
operating profit is based on a long term investment return and includes investment returns on own shares held within the policyholders’ funds. For banking business, 
adjusted operating profit excludes the loss on disposal of investment in Dimension Data Holdings plc, restructuring and integration costs and the transitional impact of 
the change in credit provisioning methodology. For all businesses, adjusted operating profit excludes goodwill amortisation and impairment, and fines and penalties.

Adjusted operating earnings per share is similarly based, but is stated after tax and minority interests, with the calculation of the weighted average number of shares 
including own shares held in policyholders’ funds.

The segmental analysis has been prepared on a gross of inter-segment transactions basis.

** Comparative figures have been restated to reflect the adoption of Urgent Issues Taskforce Abstract 38 “Accounting for ESOP Trusts”.

*** The dividend recommended (final 3.5p per share, making 5.25p per share for the year) will be converted, for payment to shareholders on the branch registers and the Namibian

section of the principal register, into local currencies at exchange rates ruling at the close of business on 31 March 2005 (or 30 March 2005 in the case of Zimbabwe).

02 | Financial Highlights

A year of delivery...

The Company achieved strong results 
in 2004 with profit, earnings per share,
assets under management and embedded
value all increased. A return on equity 
of 19.1% and net cash inflow at our 
US business of $12.3 billion further
demonstrate the power underlying 
this performance.

Adjustedembeddedvalue(£orRmillion)

1
3
8
,
1
6
R

5
6
4
,
5
£

3
8
8
,
9
5
R

7
3
4
,
3
£

,

4
3
1
8
5
R

9
5
3
5
£

,

0
9
8
,
2
5
R

8
2
8
,
3
£

9
2
9
,
7
4
R

5
1
0
,
4
£

2000

2001

2002

2003

2004

Shareholders’ adjusted net worth
Value of in-force business
Market value adjustments

New business annual premium 
equivalent (£orRmillion)

UK
£25

USA
£274

UK
R291

USA
R3,225

SA
£247

SA
R2,924

2004: £546

2004: R6,440

Year

2000
2001
2002
2003
2004

£ million

338
361
557
529
546

R million

3,556
4,546
8,791
6,532
6,440

Financial Highlights | 03

Dividend per share

Funds under management 2004

5.25p
58.5c***

£140bn

R1,520bn

UK

UK

Year

2000
2001
2002
2003
2004

***Indicative only

p

4.70
4.80
4.80
4.80
5.25

c

49.5
72.3
66.0
56.0
58.5***

USA

SA

Adjusted operating profit for 2004
(£ or R million)

5
8
5
,
9
R

1
1
9
£

1
0
6
,
0
1
R

6
5
8
£

,

6
9
2
1
1
R

6
5
9
£

1
3
4
,
1
1
R

4
2
7
£

1
4
0
,
8
R

0
5
6
£

Year

2000
2001
2002
2003
2004

USA

SA

£ billion

168
143
123
125
140

R billion

1,903
2,489
1,704
1,495
1,520

2000

2001

2002

2003

2004

04 | Chairman’s Statement

I retire this year, 
knowing that the  
business is in
good hands and set 
fair for the future

Mike Levett, Chairman

Chairman’s Statement | 05

DEAR SHAREHOLDER,
Old Mutual’s results rebounded in 2004, with good performances from
all businesses, and as a result earnings per share increased by 53% to
15.3 pence, a very pleasing outcome.

On behalf of the Board and all the Company’s shareholders, I would 
like to thank management and employees in each business for their
continued dedication and commitment to the Group. 

This commitment will ensure that your Company is well placed to
continue to build in the future on the momentum that has been created.

Investment performance was strong at Old Mutual South Africa,
benefiting sales of unit trusts, and our South African general insurance
business, Mutual & Federal, had a spectacularly good result. Nedcor 
is well on the recovery path that we have outlined. We are continuing to
develop our plans in South Africa to address Black Economic Empowerment.

In the USA, our asset management business had a successful year, 
and we were able to resolve the regulatory issues that had arisen at
Pilgrim Baxter & Associates, Ltd. Our US life business continued to
write a significant amount of new business.

In the UK our asset management operations continued to make 
good progress.

BOARD
Chris Liebenberg retired from the Board in October 2004, having served
as a non-executive director of the Company since 1999. I am most grateful
to him for his contribution to the Group, and wish him a long and 
happy retirement.

Russell Edey joined the Board as a non-executive director in June 2004
and we have also appointed Wiseman Nkuhlu as a non-executive
director with effect from 1 March 2005. I am delighted to welcome 
them to the Board.

I shall be retiring as Chairman of the Company at the end of the 
AGM on 11 May 2005, thereby ending over 46 years with the Group.
During that period Old Mutual has transformed itself from a major
Southern African mutual life assurer into the international financial
services group it is today. No greater changes have happened during
that time than those that have occurred since the Group demutualised
and listed in 1999, which was the springboard for our subsequent
international development. At the end of 2004, 38% of the Group’s net
assets were in countries other than South Africa and 52% of the value
of life new business came from those countries during the year. 

I have no doubt that the decision to demutualise and seek a primary
listing on the London Stock Exchange was the right one, and this year’s
figures clearly demonstrate this.

DIVIDEND
Your directors are proposing a final dividend of 3.5p per share, in line
with our progressive dividend policy, making a total dividend for the
year of 5.25p per share, an increase of 9.4%.

Your Company is financially strong, with a high return on equity,
talented management and staff, and a dedicated Board. I retire this
year, knowing that the business is in good hands and set fair for
the future.

I wish my successor as Chairman, Chris Collins, the Board and all
others involved with Old Mutual good fortune as the Group continues
to develop in the years ahead. 

Mike Levett
Chairman
28 February 2005

ANNUAL GENERAL MEETING 2005
There are a number of items of special business included in the 
agenda for our AGM, which is to be held at our offices in London 
on 11 May 2005. The notice of the AGM is set out on pages 160 to 164. 
The explanatory notes accompanying that notice provide further details
of these matters.

We are proposing that the existing authorities for the Company to buy
back its shares on the five exchanges where they are listed be renewed
for a further year at the AGM, and that the Company be authorised 
to hold any shares that are bought back in treasury, as permitted by UK
company law, as an alternative to their being cancelled. The equivalent
authorities were not activated during 2004, and we have no immediate
plans to use them in the forthcoming year, but they do provide the
Company with desirable flexibility in its capital management.

The directors recommend that you vote in favour of all of the items of
business at the AGM, as they intend to do in respect of their personal
shareholdings in the Company.

06 | Chief Executive’s Statement

We have established a
momentum in our business 
that has the potential to 
take us much further, as we 
pursue our ambition to build 
a world class financial
services group
Jim Sutcliffe, Chief Executive

Chief Executive’s Statement | 07

UK

> The UK and RoW adjusted operating profit1 grew to 

£42 million in 2004.

> Our UK asset management business, OMAM (UK), and
leading-edge funds supermarket, Selestia, are now well
established.

> OMAM (UK) had £3.4 billion of assets under management
at the end of 2004 and is well positioned for growth.
> Selestia was on track in terms of sales, with inflows of

£423 million during 2004.

USA

> Our US life business produced over half our life assurance sales 

and hit new highs. New premiums reached our target of 
$4 billion with a margin of 23% of APE.

> US asset management produced excellent investment

performance, with 72% of assets outperforming their customer
benchmarks on a three-year basis.

> Positive equity markets boosted assets under management 

by 20% to $185 billion.

> Strong net cash flows in the USA resulted in total funds under

management rising by 12% to £140 billion.

SA

> We had another very profitable year at our OMSA business and
the return on equity, at 24%, continued to be at the high end
of our target range. Total funds under management at OMSA
increased by 15% to R312 billion.

> Gross sales of unit trusts were up by 52%. Our direct sales 
force grew and produced an increasing volume of business.

> Nedcor achieved the milestones promised at the time of 
its rights issue. Tier 1 solvency exceeded the 7.5% goal.
> Mutual & Federal had an excellent year, with an outstanding
7.8% underwriting ratio and a return on equity of 24%.

1Excluding other shareholders’ expenses and debt service costs.

We are using our high 
quality and powerful 
SAbase to create an 
international financial
services company

GROUP RESULTS
2004 has seen us make significant progress. Adjusted operating earnings
per share rose by 53% in Sterling and 46% in Rand, with each major
business making a significant contribution. Our South African life business
produced its usual strong profit contribution with return on capital of
24%. Nedcor made good progress in its recovery and a welcome return
to profitability, while Mutual & Federal performed strongly as the short
term insurance cycle reached its peak. Our US businesses increased
their combined adjusted operating profit by 25% to $337 million.

Overall, our adjusted embedded value per share rose by 33% to 139.1p
and by 21% to R15.08. Good earnings, the recovery in Nedcor’s share
price and rising equity markets all contributed. The operating return on
embedded value was 19.4% and return on equity for our business rose
from 14.4% to 19.1%, reflecting the progress in the business and tight
capital management.

BUSINESS PERFORMANCE AND DEVELOPMENT
Our US life business now accounts for roughly half of our life new
business. Sales were up 29% on an Annual Premium Equivalent (APE)
basis to $501 million and, as a result, assets under management in
this business grew from $13.3 billion to $17.3 billion. Margins remained
at historically high levels under helpful interest rate conditions. We
continued to innovate and adapt our product range to changing
customer needs, particularly in the equity index annuity and mortgage
term insurance markets. In order to bolster our ratings in support of this
growth, we added a further $200 million of capital in December, making
a total of $300 million for the year. We successfully finalised the transfer
of our outsourced back-office functions in order to reduce costs and
improve service to customers and agents. We expect our US life
business to start paying dividends in 2007.

08 | Chief Executive’s Statement

South African life sales fell by 10%, impacted by disappointing
Employee Benefit sales, and we did not recover as well as we hoped in
the broker market. More encouragingly, our Personal Financial Advisors
(PFA) sales force grew by 14% to over 2,600, individual single premium
sales were up 16% and unit trust sales were up 52% to R5.0 billion.
Group Schemes sales were up by 10%, and our overall South African life
margins remained unchanged at 25%.

Investment performance at Old Mutual Asset Managers (OMAM)
South Africa was good – we came top in the Alexander Forbes Global
Manager Watch (Large) Survey and 50% of our unit trusts performed in
the top quartile of their comparator groups. Our new investment product,
MaxInvestments, which brings the best of the unit trust and life
assurance worlds to the customer, was the first product of its type to
be launched in the South African market in November. Total funds
under management at Old Mutual South Africa (OMSA) increased by
15% to R312 billion.

Nedcor achieved the milestones promised at the time of its rights 
issue. Tier 1 solvency exceeded the 7.5% goal and new governance 
is working effectively to control risks. The new management team is in
place, with a clearly defined strategy. Profits met our targets for the year
and, although growth was subdued overall, there were some notable
successes – bancassurance sales rose 57% for example. Our objective
remains a 20% return on equity at Nedcor by 2007. 

Mutual & Federal had an excellent year, producing an outstanding 
7.8% underwriting ratio and a return on equity of 24%. Its reputation 
for quality service was maintained and it won the three most prestigious
customer service awards in the general insurance industry.

We have been working hard to complete the Black Economic
Empowerment (BEE) ownership plans that are so important for the
growth of all our South African businesses, and expect to be able to
make a firm announcement on our detailed plans in this area in the
near future.

Our US asset management business continued to produce excellent
investment performance, with 72% of assets outperforming their
customer benchmarks on a three-year basis. The developing strength 
of our distribution effort, combined with underlying investment
performance, delivered $12.3 billion in net client cash flow which,
together with positive equity markets, boosted assets under management
by 20% to $185 billion. Almost two-thirds of Group assets under
management are now for the account of US clients.

Our UK start-up businesses produced positive results. Selestia, in only
its third year of operation, had sales of £423 million, and continued to
win awards for its South African built systems and service to independent
financial advisors. OMAM (UK) again won accolades for its investment
performance, and attracted high margin hedge fund investors to replace
unit trust funds withdrawn by Gerrard clients.

Our fledgling business in India is making steady progress and we 
now have over 40 branches. We have also established a representative 
office in Beijing to facilitate a Chinese life joint venture in due course.

Mike Levett’s retirement this year is in many ways the end of an era for the
Group. He has served Old Mutual with distinction for over 46 years and
has overseen the transformation of the business into its current powerful
form. Along with all my colleagues, I thank him for his great contribution
to Old Mutual and wish him a well-earned, happy retirement.

OUTLOOK
Market conditions in our industry are favourable at present, and the
South African economy is strong. The momentum we have built up 
is expected to continue into 2005, although we will spend further
amounts on the growth of our US asset management business and 
SA life distribution systems. We expect Nedcor to make steady progress
towards its 2007 goal for return on equity. Old Mutual has shown that 
it is well able to prosper as an international financial services company,
and we look forward to the next phase of our journey with confidence.

Jim Sutcliffe
Chief Executive
28 February 2005

Corporate
Investment

Insurance

Asset
Management

Healthcare

Old Mutual 
Financial Services

Old Mutual
South Africa

Unit Trusts

Personal
Banking

Nedcor

Integrity
Respect
Accountability
Pushing beyond
Boundaries

Mutual 
& Federal

General
Insurance

Capital
Management

US Asset 
Management

US Life

Fixed Income

Life Assurance

Value Equity

Our Group values of Integrity,
Respect, Accountability and 
Pushing beyond Boundaries are
central to our diverse businesses

Chief Executive’s Statement | 09

Strategy

Priorities

Value creation

• Our strategy has not changed. We are using
our high quality and powerful South African
base to create an international financial
services company. More than half our life
sales and nearly three-quarters of our
assetmanagement clients are now in the 
USA and the UK.

• In the UK our asset management businesses
and leading-edge fund supermarket are now
well established – exploitation of these skills
is our top organic priority. In India, we have
over 40 branches and in China we have a
representative office – fledgling businesses
under development for the long term.

• Old Mutual is in a very different position

today from three years ago. We have sold
non-core businesses and a number of asset
management companies. We have resolved
some difficult problems and established
common metrics, values and methodologies
around the Group.

• Our core industry is the management of

• In the USA we are committed to growing 

• Organic growth has the potential to

money. We provide high quality investment
skills to build and protect client assets.

• We are focused on the specific needs of 
our client base in whichever market we
operate. We are built for organic growth 
as well as being able to take on strategic
opportunities as they arise. We aim to
buildon our skills and potential in each
ofourmarkets.

our life business at a level that will produce
a dividend in 2007. In asset management,
the building of our load fund platform is well
underway and a top organic priority. Adding
new affiliates with new investment styles to
take advantage of changing customer needs
is at the top of our strategic agenda.

• Mutual & Federal is investing in better 
data management systems and claims
handling arrangements to prepare for the
downward pressure on rates. Nedcor has 
a clear five-point plan. At OMSA, our priority
is attracting more customers by improving
standards of investment and quality of
products, as well as building our sales
capability.

increaseour profitability in the USA and
ensure that the international diversity of
theGroup continues to develop. Our
ambitionremains to create value by
becoming a worldclass international
financial services company.

• Producing high returns on equity, returns 
on assets and returns on embedded value,
and growing the base from which these 
are derived, are key focuses for the future.

10 | Group Business Review

Operating earnings, 
at just short of £1 billion, 
have increased by 47% 
in Sterling due to good 
progress from all businesses,
none more so than Nedcor 
where recovery is making
good progress
Julian Roberts,
Group Finance Director

Group Finance Director’s Review

GROUP RESULTS

2004 EPS up by 53% to 15.3p
Strong delivery across all businesses contributed to an increase of 
47% in adjusted operating profit before tax to £956 million. Adjusted
operating profit after tax and minority interests increased by 54% from
2003 to £574 million in 2004, resulting in a 53% increase in adjusted
operating earnings per share to 15.3p for 2004. The basic earnings 
per share is 14.1p (2003: 8.0p), representing a 76% increase.

Operating profit on ordinary activities before tax increased to £908 million
compared to a profit of £475 million in 2003.

Funds under management and fund flows
During 2004 funds under management increased by 12% from £125
billion to £140 billion. Our international diversity delivered strong net
cash flows (increased from £1.8 billion in 2003 to £5.3 billion in 2004)
as strong performances by our US and UK businesses more than offset
weak flows in South Africa.

Achieved profits
The Group’s adjusted operating profit on an achieved profits basis of
£1,111 million increased by 57% from £707 million in 2003. Adjusted
operating profit for life assurance of £749 million was up by 25% from
£600 million in 2003, driven by increased new business in the USA
and improved experience variances in South Africa. Adjusted operating
earnings per share on an achieved profits basis rose from 10.8p to 19.1p.
Achieved profits equity shareholders’ funds (adjusted for own shares
held in policyholders’ funds and to bring listed Group subsidiaries to
market value) of £5,359 million at 31 December 2004 increased by
33% from £4,015 million at 31 December 2003. This benefited from 
an improvement in the Rand exchange rate, an increase in the share
prices of Nedcor and Mutual & Federal and the impact of the Nedcor
rights issue.

Adjusted embedded value per share (before dividends) up by 37%
Adjusted embedded value (EV) per share at 31 December 2004 was
139.1p after dividends (143.8p before dividends) representing a growth
in EV per share before dividends of 37% over 2003. EV per share has
benefited from the strong result for the year including the recovery at
Nedcor, increased Group net cash flows, higher market levels and a
stronger Rand offset by a weaker US Dollar.

Capital
The Group’s gearing level remains favourable, with senior debt gearing
at 31 December 2004 of 11.0% (14.7% at 31 December 2003) 
and total gearing, including hybrid capital, of 16.5% (21.7% at 
31 December 2003). Hybrid capital excludes hybrid debt from banking
activities and includes the $750 million of Guaranteed Cumulative
Perpetual Preferred Securities issued during 2003 that are reported 
as part of non-equity minority interests in the financial statements.

Senior debt gearing is defined as senior debt over senior debt plus
adjusted embedded value on an achieved profits basis. Senior debt
excludes debt from banking activities and is net of cash and short term
investments which are immediately available to repay debt. Total gearing
is similarly based, but includes hybrid capital instruments within debt.

Strong support from Old Mutual ensured that the Nedcor rights issue
completed in May 2004 was a success, raising R5.2 billion. That issue,
together with repatriation of surplus foreign capital and other management
actions, strengthened Nedcor’s capital base resulting in a capital
adequacy ratio at 31 December 2004 of 12.1% (10.1% at 
31 December 2003).

The Group’s shareholding in Mutual & Federal increased to 88%
early in 2004 as a result of the offer to acquire the outstanding
minority interests, which resulted in acceptances representing 37%
of Mutual & Federal’s issued share capital. Following that transaction,
Mutual & Federal paid a special dividend of R860 million, reducing its
solvency margin, being the ratio of net assets to net premiums, to 53%
at 31 December 2004 (61% at 31 December 2003). This remains
comfortably above the minimum required to support current operations
and to facilitate the future growth of the business.

The solvency ratios of the Group’s major life businesses at 31 December
2004 remain well above the minimum statutory requirements, with
South Africa’s excess assets (after regulatory asset limitations)
equivalent to 2.6 times the statutory minimum, and the US business 
at 299% of the risk-based capital requirement.

At 31 December 2004, the Group had in issue US$636 million 
3.625% Convertible Bonds maturing on 2 May 2005, which are
guaranteed by and convertible into ordinary shares in the Company 
at a conversion price of 190p per share and an exchange rate of one
US Dollar to 69.52p Sterling.

During 2004, Old Mutual plc entered into a new £1.1 billion five-year
multi-currency Revolving Credit Facility, which matures during May
2009, and cancelled its existing £900 million, US$600 million and
US$60 million Revolving Credit Facilities. The new facility was undrawn
at 31 December 2004.

Old Mutual is now twelve months into a Group-wide Economic Capital
(EC) Programme. Once completed, this will significantly improve the
Group’s ability to measure risk and business performance. It will also
improve transparency and communication with regulators, ratings
agencies and investors. Early results are highly encouraging, showing
the Group’s available financial resources to be well above the EC
required for our target rating.

Since 1 January 2005 the Group has met the minimum capital
resources requirement under the Financial Groups Directive which
applies to UK-based financial conglomerates.

Taxation
The Group’s effective tax rate (based on the tax charge as a proportion
of adjusted operating profit) of 25% decreased from 34% in 2003. 
This is primarily as a result of the much improved profitability at Nedcor.
In 2003 the Group’s effective rate was higher due to Nedcor’s non-tax
deductible expenses, which were relatively fixed amounts on a very low
profit base.

Group Business Review | 11

International Financial Reporting Standards (IFRS)
Implementation of IFRS across the Group is currently nearing completion.
We are planning to publish a restatement of our 2004 year-end income
statement and balance sheet under IFRS in May 2005. The aspects of
IFRS that will most impact the Group, in common with our peers, are
those that deal with financial instruments and insurance and investment
contracts. Currently there are a few remaining points of clarity regarding
the final version of certain elements of IFRS and interpretation of a
number of principles. We anticipate that these points will be resolved
before publication of our 2004 numbers restated under IFRS in May.

European Embedded Value (EEV)
The Group has continued to publish supplementary information on an
achieved profits basis for the 2004 financial year. We support the new
EEV proposals that have been developed by the European CFO Forum
with the purpose of increasing comparability and uniformity in EV
reporting. We are currently assessing the impact of those new proposals
and for the 2005 interim announcement we will discontinue publishing
information on an achieved profits basis and commence reporting in
line with EEV. We continue to be committed to monitoring our business
on an EV basis as we see this as a key indicator of long-term value.

Dividend
The directors of Old Mutual plc are recommending a final dividend for
the year ended 31 December 2004 of 3.5p per share (making a total of
5.25p for the year, an increase of 9.4% over 2003). The indicative Rand
equivalent of this final dividend is 38.0c*** (making a total of 58.5c***
for the year, an increase of 4.5%).

The record date for this dividend payment is the close of business on
Friday, 22 April 2005 for all the Exchanges where the Company’s shares
are listed. The last day to trade cum-dividend on the JSE Securities
Exchange South Africa (JSE), the Namibian and the Malawi Exchanges
will be Friday, 15 April 2005, on the Zimbabwe Stock Exchange,
Thursday, 14 April 2005, and on the London Stock Exchange, Tuesday,
19 April 2005. The shares will trade ex-dividend from the opening of
business on Monday, 18 April 2005 on the JSE, the Namibian and the
Malawi Exchanges, from the opening of business on Friday, 15 April
2005 on the Zimbabwe Stock Exchange, and from the opening of business
on Wednesday, 20 April 2005 on the London Stock Exchange.

Shareholders on the South African, Zimbabwe and Malawi branch
registers and the Namibian section of the principal register will be paid
the local currency equivalent of the dividend under the dividend access
trust arrangements established in each country. Local currency equivalents
of the dividend will be determined by the Company using exchange
rates prevailing at close of business on Thursday, 31 March 2005
(Wednesday, 30 March 2005 in the case of Zimbabwe) and will be
announced by the Company on Friday, 1 April 2005.

Share certificates may not be dematerialised or rematerialised on the
South African branch register between Monday, 18 April and Friday, 
22 April 2005, both dates inclusive, and transfers between the registers
may not take place during that period.

The final dividend is subject to approval at the Annual General Meeting
of Old Mutual plc, which is to be held in London on Wednesday, 
11 May 2005. Subject to being so approved, the final dividend 
will be paid on Tuesday, 31 May 2005.

Business Review: South Africa

LIFE ASSURANCE & ASSET MANAGEMENT – 
OLD MUTUAL SOUTH AFRICA (OMSA)

Strong returns continue

Highlights (Rm)

Life assurance technical result
LTIR
Asset management

Adjusted operating profit
ROC (Life business)
Client funds (Rbn)

2004

3,697
1,974
544

6,215
26%
312

2003

3,210
2,198
554

5,962
23%
270

Adjusted operating profit comprises the life assurance technical result,
the Long Term Investment Return (LTIR) of the shareholders’ funds 
and the adjusted operating profit of the asset management businesses.
The life assurance technical result increased by 15% to R3,697 million
reflecting the positive impact of the strong South African equity market,
favourable experience variances and the positive effect of assumption
changes predominantly relating to mortality.

The LTIR of R1,974 million declined by 10% from R2,198 million 
in 2003. This reduction reflects our participation (R2.6 billion) in the
Nedcor rights issue and the net impact (R0.6 billion) of our additional
stake in Mutual & Federal, both of which were funded from OMSA’s
existing financial resources, thus negatively impacting the average
shareholder assets used in the calculation. In addition, an increase 
in the cash component of the portfolio, coupled with the lower rates 
on cash, contributed towards the reduction of the LTIR.

Group Business Review | 13

Adjusted operating profit for the asset management businesses,
excluding Nedcor, decreased to R544 million in 2004 from R554 million
in 2003. Higher asset levels driven largely by the better performing
South African equity market contributed positively. This has been offset
by lower trading profit in the unit trust company resulting from changes
in industry guidelines regarding trading in units, charges relating to 
the accounting treatment of share incentive arrangements, the cost 
of the acquisition of Quaystone mandates and the development of
administration infrastructure.

Adjusted operating profit for OMSA increased by 4% to R6,215 million
in 2004. The efficient use of capital and performance improvement 
of the life business resulted in the return on life allocated capital
increasing to 26%.

Funds under management continue to grow
Client funds under management for the business increased by 15%
from R270 billion to R312 billion. Within this, life assets were 9% higher,
reflecting the equity market uplift partly offset by negative cash flows,
whilst asset management assets were 31% higher, driven by strong
market returns and positive client cash flow.

Total net client cash flow was a negative R4 billion, primarily due 
to net negative flows of R10 billion in Group Life business. This was 
offset by positive net cash flows of R6 billion in asset management, 
with Individual Life Business flows being broadly neutral.

Old Mutual Asset Managers (South Africa) (OMAM) delivered strong
investment performance, being ranked first out of the eleven institutional
asset managers in the Alexander Forbes Global Manager Watch (Large)
Survey over the year ended December 2004. This represents an
improvement from third position in the 2003 survey. Over three 
years OMAM was ranked third.

Rapid growth in unit trust sales
Unit trust sales increased by 52% from R3.3 billion in 2003, to
R5.0 billion in 2004, reflecting more positive consumer sentiment
towards unit trusts as investment vehicles. Unit trust investment
performance was good, with eleven funds positioned in the top quartile
of their respective peer groups and seven of these funds being top in
their respective categories. 

Total life sales impacted by weak Group Business
Total life sales, including Old Mutual International (OMI), on an
APE basis for the period were R3,084 million, 10% lower than the
comparative period in 2003, as Group Business sales continued to
disappoint throughout the year. Individual Life Business sales were at
similar levels to 2003 and Group Business significantly lower. Individual
Business and Group Business contributed R2,662 million (2003:
R2,632 million) and R422 million (2003: R809 million) respectively to
this result.

14 | Group Business Review

Individual Life Business sales mixed

Individual APE (Rm)

Savings
Protection
Immediate annuity
Group Schemes

Total excl. OMI
OMI

Total incl. OMI

– Single
– Recurring

2004

1,075
651
164
612

2,502
160

2,662

792
1,870

2003

1,138
701
125
556

2,520
112

2,632

686
1,946

Var %

(6%)
(7%)
31%
10%

(1%)
43%

1%

16%
(4%)

Whilst Individual Life Business sales were at similar levels overall to
2003, the mix was different. Single premium sales were R792 million,
16% ahead of prior year, driven by strong sales growth in savings and
annuity products. OMI’s new international product range also led to
significant growth in its single premium sales. Single premium sales
growth was similar in both the agency and broker channels.

Recurring premium sales were R1,870 million, 4% below 2003, with
sales through brokers, particularly of savings products, being markedly
lower than in 2003. Reasons for the reduction in broker channel
recurring premiums included the impact of regulatory changes, 
the establishment of broker networks, as well as media perceptions
regarding the value provided by recurring premium investment
products. In the case of recurring premium sales the performance in
the agency channel was much stronger in the second half of the year,
reflecting growth in agent manpower. Group Schemes sales were 10%
higher overall than the prior year, although the second half sales were
adversely affected by attrition in the sales force headcount, which
finished the year some 12% lower than in June 2004.

Group Business sales disappoint

Group APE (Rm)

Savings
Protection
Annuity

Total

– Single
– Recurring

2004

260
120
42

422

240
182

2003

495
86
228

809

582
227

Var %

(47%)
41%
(82%)

(48%)

(59%)
(20%)

A low level of Group Business sales continued throughout 2004 with 
no material single premium flows, the exception being the protection
business which increased by 41% to R120 million. Group Business
single premiums fell 59% to R240 million; recurring premiums also
decreased by 20% to R182 million. Group Business single premium
sales arise principally from restructuring of benefit plans or the movement
of existing assets between different providers. The time-consuming
nature of pension fund surplus apportionments (a legislative
requirement) and a slow response by companies to provide for 
post-retirement medical aid liabilities meant that few opportunities
crystallised in 2004 for Group Business single premium sales.

Lower value of new business, but steady margins
The after-tax value of new business excluding OMI, was 13% down 
on 2003 to R719 million. Growth of 18% in the value of Individual Life
Business, reflecting the positive impact of economic and assumption
changes, was offset by a 65% reduction in the value of Group Business.
The overall new business margin remained stable at 25%. Higher margins
were recorded on Individual Life Business following assumption changes
and offset the shortfall in Employee Benefits margins.

The value of in-force business (VIF) of R10,903 million at 31 December
2004 increased from R9,832 million at 31 December 2003. Within this
total, the VIF for Individual Life Business increased by 25% due largely
to the positive effect of economic and operating assumption changes,
primarily reflecting positive mortality experience and the valuation 
of some sources of profit that were not previously valued. The Group
Business VIF declined by 12% on account of the relatively low new
business value added, the negative impact of operating assumption
changes and the increase in the cost of solvency capital.

Management actions showing returns
OMSA has increased its Personal Financial Advisors (PFA) sales force
from 2,314 at 31 December 2003 to 2,643 at 31 December 2004. 
More than 50% of the Advisor sales force is now on a new remuneration
model and benefits are starting to be seen in increasing sales arising
from this channel. 

Our new investment product Max Investments was successfully
launched in November. This product uses both life and non-life
investment structures to offer investors a cost- and tax-efficient wrapper
in one investment and aims to address the need for lower client charges
in a low inflation environment. Encouraging sales were achieved in the
last two months of 2004 and these have continued into 2005. This has
been one of the fastest new product take-ups ever in the PFA
distribution channel, confirming the positive market response.

A year of solid progress
by responding to change

16 | Group Business Review

The Masthead independent broker network has helped to protect the
independent broker market, with over 2,200 brokers signed up in 2004.

Addressing the sales performance of our Group Business, we continue
to work towards the delivery of an integrated distribution approach.
Furthermore, the implementation of the Compass administration
platform will provide increased efficiency and service benefits for
administration clients.

Solid capital position
The capital strength of the life company has been demonstrated through
Statutory Capital Adequacy Requirement (SCAR) coverage of 2.6 times,
after allowing for statutory limitations on the value of certain assets. 
In addition, the proportion of cash in shareholders’ funds backing
statutory capital requirements increased from 20% in 2003 to 43% 
in 2004. During 2004 R2.6 billion was invested in Nedcor to support 
its recapitalisation and a net R0.6 billion was invested to acquire our
increased shareholding in Mutual & Federal.

BANKING – NEDCOR

Nedcor has been stabilised
Nedcor has been stabilised and the balance sheet significantly de-risked.

The Nedcor rights issue completed in May 2004 was a success, raising
R5.2 billion of additional ordinary capital. The capital injection, together
with the active management of assets, including the disposal of non-core
assets, the repatriation of R5.1 billion of foreign capital and the improving
attributable profits by Nedcor, have all strengthened capital. This improved
the mix between the bank’s tier 1 and tier 2 capital. Nedcor’s capital
adequacy (which is defined as regulatory capital as a percentage of 
risk-weighted assets) was 12.1% at 31 December 2004 (2003: 10.1%),
with tier 1 capital at 8.1% (2003: 5.0%).

A formal relationship agreement has been put in place. We have
finalised the appointment of the executive team and we have introduced
the Old Mutual Group Enterprise Risk Management framework.

Foreign exchange translation risk has been substantially reduced by 
the repatriation and hedging of part of the foreign capital, which has
been reduced to R4.5 billion at 31 December 2004 from R9.3 billion 
at 31 December 2003. Nedcor continues to be exposed to foreign
exchange rate movements on the remaining capital held offshore to
support foreign operations. During 2004 the translation losses on the
remaining foreign capital amounted to R372 million, substantially lower
than in 2003 (R1,356 million).

Recovery is on track
Nedcor’s adjusted operating profit, including asset management
operations, of R2,423 million was a substantial increase on the
disappointing year in 2003 (R67 million). This reflects moderate revenue
growth in both net interest income (NII) and non-interest revenue (NIR).
Revenue was enhanced through margin improvement and controlled
asset growth at the expense in some areas of market share.

Nedcor’s NII, on a UK GAAP basis, increased by 11% to R7,529 million
over 2003, driven by improved margins. This margin increase resulted
from improved funding and hedging strategies, offshore capital being
repatriated and the positive endowment effects of the rights issue.

NIR at R7,580 million reflected an upturn in the second half of the year
due to improved deal flow in investment banking, increasing 10% over
the comparative period in 2003. NIR throughout the year was adversely
affected by strategic disposals, and exchange and securities dealing
revenue remaining muted.

The cost to income ratio at 74.5% (2003: 72.5%) was adversely
affected by the merger and recovery programme costs, while not yet
fully recognising the benefits of these programmes realised towards
the latter part of 2004. During 2004, management actively reduced
headcount by 13% from 24,205 to 21,103. The full effect of headcount
reductions will be reflected in 2005. Nedcor continues to focus on
improving its cost to income ratio and is on track to achieve its goal
of 20% return on equity in 2007.

GENERAL INSURANCE – MUTUAL & FEDERAL

Mutual & Federal achieved exceptional results
Mutual & Federal had an exceptional year with an adjusted operating
profit (on a UK GAAP basis) of R1,057 million, an increase of 16% from
R909 million in 2003. This excellent performance was largely attributable
to the continued favourable underwriting cycle, which is reflected in the
increase in the underwriting surplus of R527 million in 2004, up 60%
from R329 million in 2003. The Group now owns 87% of Mutual &
Federal following the acquisition of the 37% previously owned by 
Royal & Sun Alliance.

Strong premium growth – up 13%
Gross premiums (on a UK GAAP basis) increased to R7,360 million 
in 2004, an increase of 13%, reflecting new business acquired plus
corrective action and rating adjustments in less profitable segments 
of the business. An overall reduction in claims frequency and severity
resulted in one of the strongest cycles the general insurance industry
has experienced.

Underwriting ratio climbs to 9.8% (SA GAAP)
The underwriting surplus of R527 million compared to 2003 
(R329 million) reflects the exceptional insurance cycle, improved 
claims management and close control of management expenses. 
The strong underwriting ratio (the ratio of the underwriting surplus 
to net earned premiums) was accordingly 7.8%, up from 5.8% in 2003.
The corresponding SA GAAP ratio was 9.8% for 2004, up from 6.9%
in 2003.

Insurance cycle softening
Although conditions remain conducive to underwriting profitability, 
the softer cycle and pressure on rates indicate more normal trading
conditions are likely to prevail in 2005.

Business Review: United States

US ASSET MANAGEMENT

Group Business Review | 17

US LIFE

Growth in assets delivers improved profits – up 25%
Our US life business’s adjusted operating profit of $174 million was 25%
up on the $139 million achieved in 2003 as our strategy to manage growth
in profitable product areas and to drive towards capital self-sufficiency
in 2007 made good progress. The impact of the continued growth in
scale of the business is shown by funds under management increasing
by 30% to $17 billion during 2004.

Strong APE growth continues – up 29%
Total APE for 2004 was $501 million, an increase of 29% from $389
million in 2003, with the business reaping the benefits of successfully
diversifying from fixed to equity-linked products during 2004, coupled
with the maturing of the offshore and corporate channels. Total premiums
exceeded $4 billion. OMNIA and Corporate channels continued to mature,
with 44% growth of APE over 2003 ($41 million to $59 million). Life
assurance sales grew by 25% from $85 million in 2003 to $106 million
in 2004.

Managing product mix enhances margin to 23%
Over the past year the business has demonstrated its flexibility to seize
new opportunities in changing market conditions by rapid product
development. We succeeded in producing profitable equity index
annuity and term life products, both of which achieved second place
market share nationally for the period for our Managing General Agents
channel. The average margin on new business after tax increased from
15% to 23% of APE and the value of new business after tax at $113
million increased by 92% on 2003, reflecting the positive movements
in interest rates and changes in product mix.

Capital position strengthened
We continued to manage the capital position of our US life business
carefully. In order to support our ratings, we decided to increase the
target risk-based capital (RBC) ratio to 300%. Consequently, the
capital base was strengthened by a one-off injection of $200 million
(making a total of $300 million for the year). At the same time we
repatriated to the USA a significant block of annuity business from
Old Mutual Re (Ireland). This repatriation improved our Group solvency
position, but had one-off negative impacts of $39 million on our
consolidated embedded value and $43 million on the statutory profit
before tax of Fidelity & Guaranty Life Insurance Company. The US life
business continues to mature and is expected to begin releasing capital
from 2007.

Adjusted operating profit up 22%
The Group’s US asset management business delivered adjusted
operating profit of $163 million, an increase of 22% on 2003. The
combination of increased client inflows and strong equity markets in the
latter half of 2004 led to a 21% improvement in average asset levels to
$165 billion for 2004. Management fees increased from $497 million in
2003 to $570 million in 2004, significantly improving adjusted operating
profit. Strong performance fees, transaction fees and improved revenues
from securities lending also contributed to the overall growth in revenue.
Offsetting this improvement, expenses increased by 17%, as a result of
costs associated with our retail initiative ($6 million) and increased
variable compensation costs together with one-off expenses, including
the cost of restructuring the Dwight Stable Value Fund ($7 million).

Funds under management up 20%
Funds under management increased 20% overall during 2004, from
$154 billion at 31 December 2003 to $185 billion at 31 December 2004.
Investment returns in the funds under management accounted for 12%
of the increase, while net inflows of client assets, including $3.2 billion
in cash collateral assets, contributed a total of $12.3 billion, or 8% of the
increase for the year. 2004 marks the fourth consecutive year of net
inflows of client assets to our member firms.

Strong fund performance
The inflows reflect the continuing strong investment performance
achieved by our member firms. At 31 December 2004, 72% and 95%
of assets were outperforming their benchmarks over three and five years
respectively. Over the same periods, 61% and 73% of assets ranked in
the first quartile of their peer group.

Retail initiative launched
In October, Old Mutual Capital launched the Old Mutual Advisor Funds,
establishing the foundation for a full-scale retail distribution initiative.
These funds utilise the diverse asset management capabilities of our
affiliates to construct asset allocation mutual fund products tailored 
to different investor risk profiles. This initiative is targeted to increase 
our presence in the mutual fund market and is designed to give 
our affiliates access to a higher margin market, further diversifying
revenue-generating sources for the Group.

Group Business Review | 19

Business Review: UK&Rest of World

Adjusted operating profit from the Group’s UK and Rest of World 
asset management and life assurance businesses, excluding Nedcor,
was £22 million in 2004, higher than the £12 million earned in the
equivalent period in 2003. This result includes the adjusted operating
profit from the UK, African countries other than South Africa, OMI and
the Far East.

Total funds under management in the UK grew by 9% to £4.3 billion.
Strong net cash inflows into our hedge fund products continued, 
offset by funds withdrawn by Gerrard clients. During the year, 
the operations of Bright Capital were merged into OMAM (UK).

Selestia continued to grow, with funds under management increasing
from £289 million to £730 million, predominantly through new business
sales of £423 million (2003: £218 million). Selestia reduced its adjusted
operating loss to £5 million from £9 million in 2003.

Julian V F Roberts
Group Finance Director
28 February 2005

Managing the portfolio
The US asset management group continually assesses its business
position and ability to maintain product leadership. In line with this
strategy, several adjustments were made to the manager group in 2004.
We reached agreement with the principals of one of our remaining
revenue-sharing firms, First Pacific Advisors, under which they have 
an option to acquire certain of the firm’s assets and liabilities with effect
from October 2006. Its assets under management at 31 December
2004 were $8.4 billion (31 December 2003: $5.5 billion). At the 
end of 2004 we discontinued the operations of another member firm, 
Sirach Capital Management. The firm, predominantly a growth equity
manager, had suffered steep asset declines since 2000. Funds 
under management at the beginning of 2004 were $1.6 billion, and
management has taken the decision to return the remaining funds to
clients. The resultant non-operating loss to the Group was $14 million,
principally the write-off of goodwill.

In June 2004, Liberty Ridge Capital (LRC) (formerly Pilgrim Baxter 
& Associates) reached agreement with the Securities and Exchange
Commission and the Office of the New York Attorney General to settle
regulatory action against the firm. Total fines and penalties agreed were
$90 million and have been disclosed as a non-operating loss. LRC has
also committed to future fee reductions of $10 million. During 2004, 
all outstanding class action lawsuits filed against Old Mutual in relation
to these activities were consolidated into a single lawsuit, along with 
all other cases against US parties alleging market timing and late 
trading violations. Proceedings in this case are at the preliminary 
stage. Following the resolution of regulatory matters and reflecting 
new company management, LRC underwent a firm-wide revitalisation,
revising its product strategy, enhancing its investment processes and
rebranding under its new name. Despite net outflows of $2.4 billion 
in 2004, funds under management remain robust, and management
continues to focus on rebuilding the franchise.

Early in 2005, we created a strategic alliance with Copper Rock Capital
Partners. This is a small cap growth firm, and the alliance is designed 
to supplement our capability in this product area.

Clients benefit from diversity and focus
Looking ahead, we are committed to derive business growth organically,
leveraging off the diversity and styles of the individual firms. We are
currently in negotiations to add a hedge fund capability and will continue
to seek targeted investment opportunities in other areas to strengthen
and broaden product capability.

Corporate Citizenship | 21

REDI
REDI had a very active year in 2004, the highlight being a celebratory
event in Johannesburg attended by a variety of representatives of
Government and the business sector at which the REDI champions
mounted a display of their regional products. This event and the annual
conference held before it were the first time all the REDI champions had
gathered together. REDI continues to make a profound impact on the
communities within its network and in 2004 it supported 58 different
projects with total funding of R4.1 million.

The community development component of REDI funding was allocated
primarily to AIDS and food security projects. A total of 50 individual
projects received funding this year. In total some 140 food security 
and AIDS projects have been established over the past four years.

There was a significant shift in focus in Local Economic Development
activities, with funding being allocated during 2004 to fewer, but larger,
initiatives with the potential to impact on a greater number of people,
such as the establishment of a soya processing plant. In total 18 new
businesses were established under this aspect of the REDI programme
during 2004. This brings the total over the four years to 211, 123 of which
are owned or managed by women, with the creation of 2,000 jobs.

In the area of educational projects REDI supported the “Out of the Box”
Environmental Education Programme. A total of R500,000 was provided
in the first half of the year towards the development of materials and
teacher workshops for this programme, which aims, among other things,
to encourage environmental awareness among teachers and pupils.

AIDS Orphans Programme
Old Mutual has adopted a four-pronged strategy to address the 
socially and economically crippling challenges caused by the HIV/AIDS
epidemic in South Africa. This covers the workplace (employees), 
the broader community, financial services and advice (customers), 
and business impacts.

In 2004 OMSA’s AIDS Orphans Programme provided R1.8 million 
to support around 2,000 orphans and vulnerable children via Heartbeat,
Noah, Living Hope Hospice and SOS Children’s Village. It is clear from
feedback received that this programme has had a positive impact on
the children of orphan-headed households during the three years it 
has been in operation.

Staff Volunteer Programme
The Staff Volunteer Programme consists of the Staff Community Builder
Programme, “Adopt an Orphan” and the Staff Charity Fund.

In its tenth year the Staff Community Builder Programme supported 
101 projects in seven provinces, giving a total of R2 million.

Corporate Citizenship:
During 2004 we continued our 
social investment programme by
supporting selected charities and 
carrying outother significant 
community activities in countries 
where our businesses operate

The Group’s social investment programmes continued to concentrate 
on education, health and welfare, local economic development, 
the environment and the arts during 2004. In South Africa particular
attention was given to Black Economic Empowerment and HIV/AIDS.

SOUTH AFRICA

OLD MUTUAL SOUTH AFRICA (OMSA)
OMSA is committed to growing and investing in socially responsible
business activities, employment equity and diversity, skills development
and affirmative procurement, as well as sustainable social investment
projects and the active involvement of employees in social and community
affairs. Its Corporate Citizenship programme recognises the value of
non-financial performance and social accountability.

The Old Mutual (South Africa) Foundation (the OMSA Foundation) 
is the primary source of funds for OMSA’s social investment programme. 
At the year end, the assets of the OMSA Foundation comprised 14.4
million shares in Old Mutual plc. The Group has also committed as part
of the arrangements for the extension, in modified form, of its unclaimed
shares trusts, to make a donation of the net amount released on expiry
of the original unclaimed shares trusts to its Foundations (or another
public benefit or similar organisation) in the five territories where 
these operate. For South Africa, this will result in OMSA committing 
an additional R190 million of endowment to the OMSA Foundation or
other public benefit causes.

In 2004 some R15.5 million was expended by the OMSA Foundation, 
of which R8.7 million was devoted to its flagship projects, namely the
Rural Economic Development Initiative (REDI), the AIDS Orphans
Programme, which has entered its third year and supports the children
of orphan-headed households, and the Staff Community Volunteer
Programme. This last programme comprises both the Community Builder
Programme, through which staff volunteers support a range of
community-based projects, and initiatives to encourage and support
staff involvement in charities through payroll giving.

OMSA also has a general donations programme. During the year 
R4.2 million was distributed by way of general donations among 
31 education programmes, 42 community development projects 
and 12 ad hoc projects.

22 | Corporate Citizenship

During 2004, 543 staff members committed funds on a regular basis
through the Staff Charity Fund. On average R100,000 was paid 
to various charities and “adopted” orphans on a monthly basis from 
this fund. Donations were also made to animal welfare, the elderly,
abused women and children and HIV/AIDS prevention and treatment. 
A total of 375 members of staff have “adopted” 650 orphans to date. 
Of these, 156 receive additional tertiary educational support.

Black Economic Empowerment (BEE)
The Old Mutual Group remains committed to achieving the targets to
ensure it is considered an ‘A’ performer for the purposes of the Financial
Sector Charter Scorecard. To this end, initiatives continue to be
implemented to develop black management, make sound infrastructural
investments, facilitate the entry of black entrepreneurs into corporate
South Africa through structuring and investing in BEE deals, and make
direct investments into communities and society at large.

OMSA is well on track to achieve its BEE objectives. The company is
already a leader in empowerment financing through various structured
financing transactions and partnerships with Wiphold, J & J, Aka Capital
and Amabubesi. OMSA plays a leading role in social investing and
infrastructural investment and asset management, and the company’s
robust employment equity programme positions it well to exceed the
Charter targets. 

In addition, the Group is committed to completing the empowerment
ownership transaction required under the Financial Sector Charter.

OMSA will be publishing a more detailed report on its corporate
citizenship activities in April 2005, which will be available on the
Company’s website www.oldmutual.com from April 2005. It will 
also be obtainable upon request from the Public Affairs Manager, 
Old Mutual (South Africa), PO Box 66, Cape Town 8000 and from the
Director of Corporate Affairs, Old Mutual plc, 5th Floor, Old Mutual Place, 
2 Lambeth Hill, London EC4V 4GG.

NEDCOR
The Nedcor group focused its corporate social investment (CSI) work 
in 2004 mainly through the Nedbank Foundation, which funded over
450 projects (an increase of almost 100 on the previous year) in the
fields of welfare, community development and sustainable development.

Projects were supported throughout South Africa and were grouped
through a programmatic approach to ensure higher impact for
beneficiaries and optimal use of resources.

The Community Support Programme was launched in 2004 to broaden
staff involvement in Nedbank’s CSI work. The programme encourages staff
members around the country to act as the Foundation’s eyes and ears, 
so as to align CSI activities more closely to the business of the bank and
identify worthy and relevant projects needing its support, and increase
cooperation between Nedbank’s staff, clients and the broader community. 

The largest Foundation Programme is the Corporate Collaborative
Programme. This involves the raising of capital for larger projects
by engaging Nedbank’s corporate and other business clients. The
Foundation partners these clients in support of projects that involve
relief aid on a larger scale, the building of schools, roll-out of IT
infrastructure in disadvantaged areas, and similar ventures. An example 
is the funding of the Western Cape Red Cross Children’s Hospital. 

The Nedbank Heritage Programme supports projects that leave 
a legacy footprint. These include funding the regeneration of 
Clarkebury Educational Institute in the rural Eastern Cape. 

While the Foundation is primarily responsible for the Nedcor group’s
external CSI, its Roots Programme involves Foundation support for
employees or the families of employees with relevant, unusual and
urgent needs for relief aid, as well as for helping to support objectives
under the Financial Sector Charter and the bank’s HIV/AIDS programmes. 

The National Economic Development Incubator Programme provides
infrastructure for small business development and partners with 
skills development centres to increase their reach among the poorest
communities. Focus is placed on developing artisan, building,
mechanical, catering, garment industry-related and agricultural and
related skills. It also facilitates relevant community-wide development
that assists general upliftment.

In addition to continuing collaborations between the Foundation and 
the public sector, in 2004 it enjoyed the involvement of prominent
politicians at a variety of functions. President Thabo Mbeki presented
the first Nedbank Digital Hope IT training container to the community 
of Makopane. This was a corporate collaborative project involving
Hewlett Packard and Nedbank, among others. Labour Minister
Membathisi Mdladlana and Deputy Correctional Services Minister Cheryl
Gillwald opened the Qalabotjha Multi-Purpose Community Centre at
Villiers and Education Minister Naledi Pandor launched the national
Readathon campaign in Cape Town and the National Business Initiative
Adult Learners Week Campaign at Nedbank.

A national tour by Josh Groban was the latest in a series of collaborative
partnership efforts undertaken by the Foundation and Tiger Brands to
support the Unite Against Hunger campaign. Beneficiary organisations 
of this campaign include the O R Tambo Foundation, Heartbeat and
African Children’s Feeding Scheme. The Foundation, in conjunction
with the O R Tambo Foundation, has undertaken the feeding of
approximately 10,000 destitute elderly people on the East Rand for the
past nine years. Beneficiaries receive bulk packs of food, designed to last
three months at a time. The success of the Josh Groban tour enabled
the Foundation to increase the reach and impact of this feeding scheme
substantially. As a result, trucks carrying food aid to the destitute on 
the East Rand, in parts of greater Soweto and in Sharpeville were
despatched, with almost 24,000 disadvantaged families being fed. 

Non-profit organisations (NPOs) comprise the core of the Foundation’s
client base. NPOs rated Nedbank in 2004 as third-highest placed
among 70 companies in the category “Good Corporate Grantmaker”,
third among 48 companies as “Most Widely Recognised Corporate
Grantmakers”, and as having the third biggest CSI budget out of 
39 identified companies. 

In 2004 Nedbank sponsored the South African Paralympic team, 
which won 35 medals in total, 15 of them gold, at the Athens Paralympic
Games. A Nedbank employee, who was a member of the Paralympic
swimming team, won four medals.

The Nedbank Green, Sport and Arts Affinities continued to grow during
2004. Together these have donated over R83 million to environmental,
sports and art projects since they began.

In 2004 the Green Trust supported a variety of projects including tree
planting, food gardens and species-based projects. More than 30 projects
were supported and almost R4 million was given through this trust.

Nedbank again supported the Nedbank Golf Challenge and the day 
after this prestigious event the Sports Trust held its annual golf challenge,
which raised over R1 million for a variety of projects to support golf at 
a grass roots level.

Donations from Nedbank’s Arts affinity bank accounts grew by 27% in
2004, which increased the amount available for use by the Arts and
Culture Trust. R1.2 million was split between nine disciplines and 30
projects. An open-air music and arts and crafts festival received funding,
as well as the Jazzart Dance Theatre and the Zanendaba Storytellers.

During 2004, Nedcor revised its environmental policy as part of 
its commitment to environmental responsibility, also evidenced by
involvement with its conservation partner WWF-SA, and its membership 
of the United National Environment Programme Finance Initiative.

Nedcor is publishing a Sustainability Report in April 2005, which will 
be available on its website www.nedcor.co.za. It will also be obtainable
upon request from the Senior Manager, Corporate Governance and
Sustainability, Nedcor Limited, PO Box 1144, Sandton 2196.

MUTUAL & FEDERAL
Mutual & Federal supports community-based projects that contribute
towards the creation of a stable and prosperous society. Funding is
directed to projects that are non-profit making in nature. Support is
generally given to the same projects each year to establish long-standing
relationships. In 2004, R1.6 million of investment was directed to 25
organisations in five areas: education, health and welfare, road traffic
safety, crime prevention and conservation/environment. Road traffic
safety and crime prevention have a direct relevance to Mutual &
Federal’s business, as high accident rates and car hijacking translate
into higher insurance costs. Mutual & Federal also supports national
initiatives aimed at improving road safety, including the Drive Alive Trust,
which promotes safe and responsible driving. Its safety campaigns are
particularly visible during the holiday seasons and have resulted in the
steady reduction of road accidents and fatality rates.

Six educational projects received funding in 2004, including Thusenang
Training and Development, a community project which supports illiterate
and unemployed rural women. The project supplies basic courses such
as knitting, needlework, embroidery, cooking and nutrition. It also offers
advanced courses in business skills, life guidance and AIDS guidance
and supplements these courses with job creation projects including
bakeries, vegetable gardens and sewing groups.

The National Institute for Crime Prevention and the Reintegration 
of Offenders (Nicro) was one of the crime prevention projects that
received support. Nicro offers help to young offenders and communities
to rise above the effects of crime. Its Diversion Programme diverts youth
in conflict with the law from the criminal justice system by providing
courses on drug abuse prevention, anger management, parenting skills
and life skills.

REST OF AFRICA 
The Old Mutual (Namibia) Foundation strives to develop and maintain
an effective social empowerment programme, which will have a
beneficial impact on health and welfare and education and community
development in Namibia. Its approach to social investment is to support
activities that are linked to its national agenda and in communities that
are close to its business operations.

In 2004 significant donations were made by the Namibia Foundation to
national AIDS programmes, Rehoboth Primary and Secondary Schools
and the Onamulele Primary School. The Mathematics Teachers’ Support
System project, which is aimed at improving examination results in
mathematics, was successfully launched in partnership with Nedbank
Namibia’s Social Investment Fund. 

Corporate Citizenship | 23

The Namibia Foundation also supported four other major school
education projects, the Cancer Association and the Genadegawe
feeding scheme during 2004.

Old Mutual Namibia’s staff participated actively in various community
initiatives, including the Mariental “Day of the Homeless”, clean-up
operations in Opuwo and Rundu Town Councils, the Erongo House of
Safety for orphans in Swakopmund, the Cancer Association, Childline
Namibia, and SOS Children Villages’ Christmas Card initiative.

At the end of the year, the Namibia Foundation had assets of 
N$6.2 million, comprising 300,000 shares in Old Mutual plc and cash 
and other assets of N$2 million. In addition to these, the Namibia
Foundation has received a donation of N$4,354,235 from the Namibian
Unclaimed Shares Trust under the proposals approved by the Group’s
shareholders in May 2004 relating to the extension of the arrangements
for claiming entitlements under the original demutualisation of the
Group. 

Old Mutual Zimbabwe has a structured social responsibility programme,
which is actively involved in the sponsorship of sport, education and
health projects. 

Old Mutual continued to sponsor the Zimbabwe cricket team in 2004,
covering home and away test matches, one-day internationals and
overseas tours. The Group continues to believe it is important to support
the development of cricket in Zimbabwe.

In 2004 Old Mutual Zimbabwe pledged to support the Jairos Jiri
Association, which cares for disabled and blind children from pre-school
through to secondary education. Jairos Jiri is an indigenous association
established over 50 years ago and now has centres in every major urban
area in Zimbabwe. As part of its support, Old Mutual has adopted 
pre-school centres for the blind and disabled in Harare.

Old Mutual Zimbabwe continued to run the Mathematics Olympiad in
conjunction with the University of Zimbabwe. This programme is designed
to promote mathematics at high school level and to identify outstanding
mathematical talent. In 2004 Old Mutual sponsored two students to the
Pan-African Mathematics Olympiad, one of whom won a bronze medal.

At the end of the year, the Zimbabwe Foundation had assets of
Z$67,521,018,956, comprising 2,680,000 shares in Old Mutual plc and
cash and other assets of Z$531,018. In addition to these, the Zimbabwe
Foundation has received a donation of Z$91,452,000 from the Zimbabwe
Unclaimed Shares Trust under the proposals approved by the Group’s
shareholders in May 2004 relating to the extension of the arrangements
for claiming entitlements under the original demutualisation of the
Group.

Old Mutual Malawi supported a number of projects in the areas of health
and education during 2004, giving a total of MK1.3 million. Sponsorship
was offered to medical students through a prize for the top medical
student of each class, with financial prizes being awarded to five of
them. In 2004 Old Mutual Malawi registered as a member of the
Coalition against AIDS. Donations were also given in support 
of the Red Cross for its work on HIV/AIDS, the Kamuzu College of
Nursing and the Kachere Rehabilitation Centre.

At the end of the year, the Malawi Foundation had assets of
MK38,523,976, comprising 190,000 shares in Old Mutual plc 
and cash and other assets of MK2,423,976. In addition to these, the
Malawi Foundation has received a donation of MK13,913,369 from the
Malawi Unclaimed Shares Trust under the proposals approved by the
Group’s shareholders in May 2004 relating to the extension of the
arrangements for claiming entitlements under the original demutualisation
of the Group.

24 | Corporate Citizenship

USA
Old Mutual Asset Management (OMAM)’s Charitable Foundation
supports local communities in need around its Boston headquarters
and wherever OMAM has a presence through member firms. The
OMAM Foundation continued to focus its efforts during 2004 on making
meaningful contributions to its partner organisations in four target areas:
community, healthcare, homelessness and emergency/crisis
intervention. In 2004, it made 19 direct gifts totalling $278,000,
including $25,000 in staff matching.

Grants were made to national organisations such as The Rose Fund,
Boys and Girls Club of America and Health Care for All, as well as local
organisations including Pine Street Inn, Home for Little Wanderers and
Rosie’s Place.

OMAM’s member firms also made a wide range of charitable gifts. 
Support was provided to healthcare organisations, such as American
Cancer Society, St. Jude’s Children’s Hospital, and the Heart Association;
cultural organisations, including schools, museums and libraries; and
community causes, including The Family Place, Bottom Line and the
Bethesda Project.

In addition to making monetary grants through its Foundation, OMAM
seeks to promote employee involvement by encouraging employees 
to take advantage of paid volunteer days, sponsoring company-wide
charitable events and matching personal charitable gifts from
Foundation assets.

In 2004, more than 65% of OMAM’s employees volunteered in five or
more service projects or events. In June, employees joined the JP Morgan
Corporate Challenge to benefit the Bay State Games, which provide
Olympic-style athletic competitions and developmental programmes 
for Massachusetts amateur athletes of all ages and abilities. In October,
OMAM served another year as a Neighbourhood Sponsor for City Year’s
Serve-a-Thon event, at which a team of OMAM employees, family
members and friends banded together and worked to restore a local
Boston community. Additionally, throughout the calendar year, OMAM
employees lent their support to Daffodil Day, benefiting the American
Cancer Society, Lee Denim Day benefiting the Susan G. Komen
Foundation, and the Winter Clothing Drive benefiting the Salvation Army.

Old Mutual US Life (OMUSL) focused its support in 2004 on the
community, arts and education.

Employee gifts to charitable organisations were matched by OMUSL
through its matching programme on a dollar-for-dollar basis up to an
annual limit of $1,000. During 2004 the projects supported in this way
included several cancer foundations, the Baltimore School for the Arts,
the Baltimore Shakespeare Festival and several universities.

OMUSL also continued to support employee involvement in charitable
organisations such as the Baltimore Child Abuse Centre and Rebuilding
Baltimore Together, a community project that repairs and rehabilitates
the homes of low-income, elderly or disabled homeowners in Baltimore,
where OMUSL’s headquarters are based.

Other organisations supported by OMUSL during 2004 were the Living
Classrooms Foundation, an organisation focused on teaching academic
and social skills by using community work sites and other real-world
environments, and the Salem Children’s Trust, a school with both
residential and non-residential programmes that help facilitate a
successful transition to public schools and society for emotionally
disturbed and abused children.

UK
The UK/SA schools twinning project, a partnership between Old Mutual plc
and the British Council involving six schools from the London Borough 
of Southwark and six schools in the Cape Town area, began in earnest 
in 2004. Most of the schools made reciprocal visits during the year and 
a number of new curricular activities have been developed as a result.
Highlights of the first year included the writing of plays, participation in 
a video-conference link to mark South Africa Freedom Day on 16 June
2004 and a series of special Drum Café workshops in all the schools to
celebrate the tenth anniversary of democratic government in South Africa. 

The relationships within the twinned schools have been extended, 
at the instigation of the head teachers, to include all the pupils – far
beyond the individual classes and teachers originally allocated to the
project, clear evidence of the enthusiasm with which the partnerships
have been embraced. Additional funding has also been provided to
assist the schools with the development of the programme in 2005.

Old Mutual staff from all its London-based businesses were invited to
volunteer as stewards for the Drum Café workshops. A formal volunteering
programme centred on numeracy partnering, using a Maths games 
kit developed by the Group in Cape Town, is now being developed for
2005 and beyond. Staff are allowed two hours a month to spend in the
schools if they wish to participate. Additional Maths kits have also been
provided to the participating Cape Town schools.

To mark the celebrations in the UK of the tenth anniversary of South
African democracy, Old Mutual sponsored the 2004 City of London
Festival South Africa series, supporting a number of South African
musicians and artists in activities in the UK. The highlight of the festival
was a concert in St Paul’s Cathedral where Lady Blacksmith Mambazo
performed in front of a full house. A programme of team-building
activities was developed for the Company’s UK staff around the festival
including arts workshops, Drum Cafés, access to the concerts and other
volunteering activities. The Company was delighted to receive a grant 
of £35,000 from Arts in Business in support of this programme. 
This funding also helped the Company to run the Drum Café activities 
in the London schools involved in the twinning project described above.
Old Mutual has been nominated for an award for its programme 
of external and internal events associated with the Festival activities. 

The Company operates a staff matching scheme, which supports 
Old Mutual employees in their own activities to raise money for a wide
range of charities. In 2004, these included The Tusk Trust, the Race for
Life, a 5km walk which was supported by a group of women from head
office, Jeans for Genes Day and Children in Need.

Ad hoc donations were made throughout the year and Old Mutual plc
began a three-year supporting role with the South African High
Commission’s aim of building a cinema in the High Commission. 
Old Mutual has committed funds towards the cinema’s running costs. 
At the beginning of 2005 Old Mutual gave £20,000 to the Disasters
Emergency Commission’s appeal for victims of the Tsunami in East Asia.

Other good causes supported by the Bermuda Foundation at the request
of the Group’s UK businesses were the Shooting Star Trust and the
Friends of the Citizens, a charity which promotes quality education to
primary and secondary school age children in an environment that
encourages not only intellectual growth, but also spiritual and moral
growth. 

At the end of the year, the Bermuda Foundation had assets of £4,487,000,
comprising 3,650,000 shares in Old Mutual plc and cash and other
assets of £107,000. In addition to these, the Bermuda Foundation has
received a donation of £25,170 from the Bermuda Unclaimed Shares
Trust under the proposals approved by the Group’s shareholders in
May 2004 relating to the extension of the arrangements for claiming
entitlements under the original demutualisation of the Group.

Corporate Citizenship | 25

Old Mutual was looking to finalise its commitment to the UK government
scheme “Making a Corporate Commitment” (MACC2) in 2004, but this
programme ceased before it could do so. 

Old Mutual participated in Business in the Community’s Corporate
Environmental Engagement Index for the third time in 2004 and
submitted data for The Giving List, published by The Guardian and
co-ordinated by Business in the Community. Participation in these systems
and indices allows the Group to benchmark itself against other members
of the financial services industry in the countries where it operates.

In 2004 the Group joined the London Stock Exchange’s Corporate
Responsibility Exchange system, allowing it to input information on 
to a database system to enable interested parties to review information 
on its environmental and CSR activities without having to contact the
Company directly. This tool covers many of the issues previously raised
through questionnaires and allows the Group to input data to one
common reference point.

HEALTH AND SAFETY
The Group recognises its obligation to supply its employees with a safe
and clean working environment. Data on health and safety compliance
are collated and reported to the Board twice yearly via Julian Roberts,
the director responsible.

Nedcor is aware of the risk of robberies and attacks at its banking
business and works continually to improve its systems to minimise 
the risk to its employees.

During 2004 there were no significant accidents, and no material 
health or safety issues at work were reported from around the Group.

FTSE4GOOD/JSE SRI INDICES
Old Mutual plc is a member of the FTSE4Good Index, the selection
criteria for which include working towards environmental sustainability,
developing positive relationships with stakeholders, and upholding and
supporting universal human rights.

Old Mutual and Nedcor both qualified for inclusion in the JSE Securities
Exchange South Africa’s Socially Responsible Investment Index launched
in the second quarter of 2004. The JSE SRI Index will measure participant
companies’ commitment and performance against a triple bottom line 
of sustainability in terms of environmental, economic and social impacts.

CODE OF BUSINESS CONDUCT AND ETHICS
The Old Mutual Group has adopted and aims to abide by a Code 
of Business Conduct and Ethics. This Code is provided to staff, is
accessible on the Company’s website and may also be obtained free of
charge upon request from the Company Secretary at the registered office.

Martin C Murray
Group Company Secretary
28 February 2005

Old Mutual International continued to support the Guernsey Maths
Challenge during 2004. Staff from Fairbairn Private Bank (IoM) Limited,
in Douglas, raised money for three Manx registered charities, the Manx
Cancer Help Association (Lisa Lowe Centre), The Isle of Man Children’s
Society and The Koru Hospital Fund, which provides support for the
construction and operation of a hospital in Koru, Kenya, raising a total 
of over £3,000.

ENVIRONMENT
As a financial services provider, the Group’s primary aim is to meet 
the financial needs of its clients. In doing so, the Group recognises that
it has an impact on the environment, both directly through the running
of its offices and indirectly through meeting the investment needs of 
its clients.

The Group introduced its environmental policy three years ago and
designated Julian Roberts, the Group Finance Director, as the member
of the Board responsible for the Group’s environmental performance.
Objectives were set and individuals named at business unit level to
oversee environmental issues. Monitoring and reporting against Key
Performance Indicators (KPIs) fall under these individuals’ control 
and this discipline is, where possible, being applied across the Group.
The Group’s KPIs and environmental targets are reviewed annually 
to ensure their continuing appropriateness.

The Group’s environmental objectives are:

• to ensure compliance at local, national and international levels;
• to minimise the consumption of energy, water and materials across

operations;

• to minimise solid waste generation by waste re-use and recycling

wherever possible;

• to avoid the use of materials that may cause harm to the

environment;

• to promote internal awareness of environmental issues with staff; and
• to support environmentally-related initiatives by employees and

relevant external groups.

These objectives are applied across the Group at the business unit level,
using best practice in environmental management. Where appropriate,
business units have introduced policies more specific to their operations.

Raising environmental awareness continued throughout 2004 and, with
the introduction of Environmental Management Systems (EMSs) at many
key sites across the Group, specific targets and management plans were
put in place to deal with any impact considered significant. The EMSs 
in place all follow ISO14001 guidelines. Certification is achieved on a site
basis and therefore the number of certified sites is increasing as roll-out
continues across the Group. EMSs establish guidelines and procedures
that, when followed, aid site-specific objectives, target-setting and
monitoring. EMSs require regular reviews and this in turn requires the
Group to revisit its impacts frequently. The systems in place speed up
data collection and enable the Group to track improvements and issues
more easily. Data is gathered centrally at least twice a year and reported to
the Board. The roll-out of EMSs and raising of employee awareness will
continue during 2005. Data disclosure occurs through both 
Old Mutual South Africa and Nedcor, which each report separately on
resource use in their Corporate Citizenship and Sustainability Reports.

The Group has little contact with materials that could do great damage
to the environment. It has ensured, where relevant, that it has avoided
using materials that may cause harm.

26 | Corporate Governance and Directors’ Report

Corporate Governance and Directors’ Report

INDEX TO THIS SECTION OF THE REPORT

Introduction and Combined Code compliance

Board of Directors
• Membership and directors’ interests
• Rotation and re-election of directors
•
• Mandate, governance and 

Skills, experience and review

Scheme of Delegated Authority
Executive and non-executive roles
Independence of non-executive directors
2004 operations and Turnbull statement

•
•
•

Committees
• Group Audit Committee
• Actuarial Review Committee
• Remuneration Committee
• Nomination Committee
• Chairman’s Selection Committee
•
• Group Capital Management Committee
•

Executive Committee

Terms of reference

Attendance record

Auditors

Annual General Meeting
• Results of the AGM and Court Meeting in 2004

Internal Control Environment
• Approach to risk management
• Risk governance
• Risk appetite
• Group risk principles
• Risk methodologies

South Africa – Life business

Management of Specific Risks
•
• Old Mutual Asset Managers (South Africa)
• Nedcor
• Mutual & Federal
• US businesses
• UK

Policy matters
• Relations with shareholders and analysts
•
Employment matters
Supplier payment policy
•
• Charitable contributions 
Environmental matters
•

Other Directors’ Report matters
• Political donations
• Dividend
•
•
• Going concern

Share capital
Substantial interests in shares

26

26

31

33

33

33

35

37

39

41

INTRODUCTION AND COMBINED CODE COMPLIANCE
The directors of Old Mutual plc submit their report and the audited
financial statements of the Group for the year ended 31 December 2004.

The Company is the holding company of the Old Mutual group of
companies, whose principal activities are life assurance (including
retirement savings), asset management (including unit trusts and
portfolio management), banking and general insurance.

The Chief Executive’s Statement, the Group Finance Director’s Review
and the Business Reviews contained in this document include a
review of the year and the outlook for the Group. The Group’s profit,
appropriations and financial position are shown in the financial
statements.

The Group is committed to the objective of achieving high standards 
of corporate governance. In the year ended 31 December 2004 and 
in the preparation of this Annual Report and Accounts, the Company
has complied with the main and supporting principles and provisions
set out in the Combined Code on Corporate Governance of the Financial
Reporting Council (the Combined Code) as described in the following
sections of this Report. The Company’s compliance with Combined
Code provisions C1.1, C2.1, C3.1, C3.2, C3.3, C3.4, C3.5, C3.6 and
C3.7 and the statement relating to the going concern basis adopted 
in preparing the financial statements have been reviewed by the
Company’s auditors, KPMG Audit Plc, in accordance with guidance
published by the Auditing Practices Board.

BOARD OF DIRECTORS

Membership and directors’ interests
The Board currently has ten members, consisting of two executive 
and eight non-executive directors. All of the current directors except 
for Mr M J P Marks and Mr R P Edey (who were appointed to the Board
on 1 February and 24 June 2004 respectively) served throughout the
year ended 31 December 2004. Mr C F Liebenberg retired from the
Board as a non-executive director on 2 October 2004, upon reaching
his seventieth birthday.

The Company has recently announced the appointment of an additional
non-executive director, Professor Wiseman Nkuhlu, who will join the
Board from 1 March 2005.

Mr M J Levett is the Chairman of the Board and Mr C D Collins is the
current senior independent director.

Details of the directors’ interests (within the meaning of section 346 of
the Companies Act 1985, including interests of connected persons) in
the share capital of the Company and quoted securities of its subsidiaries
at the beginning and end of the year under review are set out in the
following tables, whilst their interests in share options and restricted
share awards are described in the section of the Remuneration Report
entitled “Directors’ Interests Under Employee Share Plans”. There have
been no changes to any of these interests between 31 December 2004
and 28 February 2005.

Corporate Governance and Directors’ Report | 27

Old Mutual plc
Number of shares

Nedcor Limited
Number of shares

Mutual & Federal
Insurance Company
Limited
Number of shares

–
19,000
2,416
30,700
5,541
–
5,465,130
–
250,103
815,996

–
–
–
2,849
–
–
17,804
–
–
–

–
–
–
–
–
–
5001
–
5001
–

Old Mutual plc
Number of shares

Nedcor Limited
Number of shares

Mutual & Federal
Insurance Company
Limited
Number of shares

–
19,000
2,416
30,700
5,541
–
4,159,518
–
178,948
766,689

–
–
–
2,000
–
–
12,333
–
–
–

–
–
–
–
–
–
864,1001
–
5001
–

At 31 December 2004
N D T Andrews
R Bogni
N N Broadhurst
W A M Clewlow
C D Collins
R P Edey
M J Levett
M J P Marks
J V F Roberts
J H Sutcliffe

At 1 January 2004 (or date of appointment as a director, if later)
N D T Andrews
R Bogni
N N Broadhurst
W A M Clewlow
C D Collins
R P Edey
M J Levett
M J P Marks
J V F Roberts
J H Sutcliffe

Note:
1 Included in the above interests are non-beneficial interests in 500 shares in Mutual & Federal Insurance Company Limited held as qualification

shares by each of M J Levett and J V F Roberts at both 1 January and 31 December 2004.

No director had a material interest in any significant contract with the Company or any of its subsidiaries during the year.

Rotation and re-election of directors
The Articles of Association of the Company require that any newly-
appointed directors be subject to election at the next following Annual
General Meeting and also that at least one-third of the directors (excluding
those appointed by the Board during the year) shall retire by rotation
each year. These provisions are applied in such a manner that each
director will submit himself for election or re-election at regular intervals
and at least once every three years.

The Nomination Committee considered the candidates who are standing
for election or re-election at this year’s Annual General Meeting (as
referred to in Ordinary Resolutions 3 (i) to (iv) in the Notice of Annual
General Meeting on pages 160 to 164 of this document) at its meeting 
in February 2005. In accordance with its findings, it recommends to
shareholders the election of each of Mr Edey and Professor Nkuhlu 
and the re-election of Mr Collins as non-executive directors (and, in 
the case of Mr Collins, as Chairman to succeed Mr Levett) based upon
their professional qualifications, prior business experience and actual or
prospective contribution to the Board, and the re-election of Mr Sutcliffe
as Chief Executive on the basis of his satisfactory performance since
being promoted to that role in November 2001. Biographical details of
each of the candidates are contained in the descriptions accompanying
their photographs on pages 42 and 43 of this document.

Skills, experience and review
The balance of skills and experience and of executive and non-executive
representation on the Board, the independence of non-executive
directors and the overall size of the Board are each kept under review
by the Nomination Committee. All of these aspects are currently believed
by that Committee to be satisfactory and appropriate for the requirements
of the Group’s business. Whilst there are currently only two executive
directors, the Board has regular contact with the other most senior
executive management (including the chief executives of the six most
significant business units of the Group, together with the Director of
Group HR and Strategy) through the periodic attendance at or participation
in Board meetings by those executives. The Board also receives copies
of Minutes of Management Board meetings, which are attended by
those executives, the Chief Executive and the Group Finance Director
and at which high-level business matters are considered and debated.

Plans for refreshing and renewing the Board’s composition are proactively
managed by the Nomination Committee so as to ensure that changes
take place without undue disruption.

28 | Corporate Governance and Directors’ Report

Corporate Governance and Directors’ Report
Continued

Mandate, governance and Scheme of Delegated Authority
The Board’s role is to provide entrepreneurial leadership to the Company
within a framework of prudent and effective controls which enables risk
to be assessed and managed. The Board sets the Company’s strategic
aims, ensures that the necessary financial and human resources are in
place for it to meet its objectives and reviews management performance.
It regularly reviews strategic issues through the Chief Executive’s report
and has a two-day strategy session during the second quarter of each
year at which high-level strategic matters are thoroughly debated. The
Board sets the Company’s values and standards, and ensures that its
obligations to its shareholders and others are understood and met.

The Board acknowledges its collective responsibility for the success 
of the Company. It receives a wide array of information on the Group’s
businesses on a regular basis. Detailed monthly management accounts
are circulated to each member of the Board, usually within three weeks
of the month-end, and these contain detailed analysis of the businesses’
financial performance, including comparisons against budget. Any issues
arising from these are addressed at Board Meetings or can be raised 
directly with management. There is a Board calendar which ensures
that all key matters are dealt with over the course of the year. These
include presentations on the Group’s major businesses, and one or
more Board meetings are held each year in the overseas territories
where the Group operates.

The Board has oversight of the Group’s wholly-owned businesses 
but also: (i) delegates specific responsibilities for certain matters to 
its committees (Executive, Group Capital Management, Nomination,
Chairman’s Selection, Remuneration, Group Audit, and Actuarial Review),
subject to their respective terms of reference; and (ii) receives assurance
from boards (and their respective committees) at the Group’s subsidiaries,
Old Mutual Life Assurance Company (South Africa) Limited, Old Mutual
(US) Holdings, Inc. and Old Mutual Financial Services (UK) plc 
(the Principal Subsidiaries).

The governance relationships with the Group’s majority-owned
subsidiaries, Nedcor Limited and Mutual & Federal Insurance Company
Limited, are somewhat different, in recognition of their own governance
expectations as separately listed entities on the JSE Securities Exchange
South Africa and the fact that they each have minority shareholders.

With respect to Nedcor, the Company entered into a relationship
agreement in February 2004 setting out the Company’s requirements
and expectations as its majority shareholder. The full text of that
relationship agreement is available on the Company’s website,
www.oldmutual.com. Among the matters covered are: (i) transactions
involving members of the Nedcor group that require prior consultation
with or agreement by the Company; (ii) provision of information, including
that required for assuring the Company about various aspects of
corporate governance; (iii) consultation over senior appointments; 
and (iv) business co-operation.

The policyholders’ funds of the Group’s South African and Zimbabwean
life assurance operations have holdings representing in aggregate 
in excess of 20% of the issued share capital of a number of major 
South African and Zimbabwean companies listed on the JSE Securities
Exchange South Africa and the Zimbabwe Stock Exchange, respectively.
These are held purely as investments, and the companies concerned
are not subject to the governance or control structures of the Group.

The Chairman and Company Secretary are both involved in ensuring
good information flows within the Board and its committees and between
senior management and the non-executive directors, as well as in
facilitating induction and encouraging non-executive directors to attend
courses at the Company’s expense to update their skills and knowledge.

On appointment, new directors receive induction, including a package 
of information about matters of immediate importance to the Group,
such as the current budget, strategy document, management accounts,
the Scheme of Delegated Authority and details of the Company’s
directors’ and officers’ liability policy. They are also invited to have such
meetings with other directors, senior management, external advisors
(such as the auditors), and major shareholders as they wish.

Processes are in place for any potential conflicts of interest to be
disclosed and for directors to recuse themselves from participation in any
decisions where they may have any such conflict or potential conflict.

The directors may take independent professional advice at the
Company’s expense, if necessary, for the furtherance of their duties,
whether as members of the Board or of any of its committees.

The Company maintains directors’ and officers’ liability insurance 
in respect of legal action against its directors.

All directors have access to the Company Secretary, who is responsible
to the Board for ensuring that Board procedures are complied with.

There is an agreed list of matters reserved for the Board’s decision:
these are set out in the Company’s Scheme of Delegated Authority 
and currently include, inter alia, the following:

• payment or recommendation of dividends;

• approval of results announcements, interim and annual reports and
any other public statement relating to the Group’s financial position
which is likely to have a material impact on the Group’s reputation;

• approval of the Group’s budgets and the formulation of medium and

long-term direction and strategy for the Group;

• establishment of committees of the Board, their constitution and 

terms of reference;

• monitoring of compliance with the Group’s environmental policies;

• approval of the acquisition or disposal of any business or investment

for a consideration of £25 million or more;

• approval of expenditure by a Principal Subsidiary in excess of its

respective delegated expenditure authority;

• approval of significant changes to the accounting policies or practices

of the Group;

• approval of any proposal as a result of which either Nedcor Limited 
or Mutual & Federal Insurance Company Limited would cease to 
be a majority-owned subsidiary of the Company;

Corporate Governance and Directors’ Report | 29

• approval of appointments to the Board and renewal of non-executive
directors’ appointments, following prior review by the Nomination
Committee;

• approval of any major decision relating to the conduct or settlement 
of any material litigation involving the Company or its subsidiaries;

Informal meetings among the non-executive directors, without the
Chairman or any executive being present, are also facilitated by the
Company. Among the activities carried out at such meetings is the
annual review of the Chairman’s own performance, under the aegis 
of the senior independent non-executive director, who also obtains 
input for such purpose from the executive directors.

• appointment and removal of the Company Secretary;

• appointment or termination of appointment of key professional

advisors to the Group; and

• any other matters which are likely to have a material effect 

on the Group’s financial position, future strategy or reputation.

Executive and non-executive roles
The executive element of the Board is balanced by a strong independent
group of non-executive directors, such that no individual or small 
group of individuals can dominate the Board’s decision making. 
The non-executive directors scrutinise the performance of management
in meeting agreed goals and objectives, and monitor the reporting 
of performance. Procedures are in place to enable them to satisfy
themselves on the integrity of the Group’s financial information and 
that financial controls and systems of risk management are robust 
and defensible.

Those non-executive directors who are members of the Remuneration
Committee are responsible for determining appropriate levels of
remuneration for the executive directors, and members of the
Nomination Committee have a primary role in recommending the
appointment, and where necessary removal, of executive directors. 
The Board as a whole receives and considers regular reports on
succession planning.

Separately from the formal Board meeting schedule, the Chairman holds
periodic meetings with the other non-executive directors, without any
executives being present, in order to provide a forum for any issues to 
be raised. He also conducts, in consultation with the senior independent
non-executive director, an annual performance evaluation of each of the
other non-executive directors, the results of which are reported to the
Nomination Committee. These are designed to ensure that each director
is continuing to contribute effectively and to demonstrate commitment 
to the role (including commitment of time for Board and Committee
meetings and any other duties). The outputs from these performance
evaluations are taken into account by the Nomination Committee 
in deciding whether to recommend to the Board the extension of
engagement of any non-executive director and also whether to recommend
to shareholders the re-election of any non-executive director who is due
to retire by rotation at the Annual General Meeting. They would also 
form the basis, if the need arose, for the Chairman to act to address 
any weaknesses identified in the Board by seeking the resignation of
underperforming directors or proposing, through the Nomination
Committee, that additional directors be appointed.

Where directors have concerns that cannot be resolved about the
running of the Company or a proposed action, they are encouraged 
to make their views known and these would be recorded in the Minutes 
of the Board meeting. No written statements on resignation containing
matters of concern, such as are referred to in paragraph A.1.4 of the
Combined Code, have been received by the Chairman.

The division of responsibilities between the current Chairman, Mr Levett,
and the Chief Executive, Mr Sutcliffe, is documented so as to ensure
that there is a clear division of responsibilities between the running of
the Board and executive responsibility for running the Company’s
business. This was put in place and approved by the Board when
Mr Sutcliffe succeeded Mr Levett as Chief Executive in November 2001
and a similar arrangement has been made for when Mr Collins succeeds
Mr Levett as Chairman in May 2005. This, together with the Scheme of
Delegated Authority and the matters reserved for decision by the Board,
ensures that no one individual has unfettered powers of decision.

For both Mr Levett as outgoing Chairman and Mr Collins as incoming
Chairman, responsibilities include those contained in the Supporting
Principle to paragraph A.2 of the Combined Code, namely that the
Chairman is responsible for leadership of the Board, ensuring its
effectiveness on all aspects of its role and setting its agenda; ensuring
that the directors receive accurate, timely and clear information;
ensuring effective communication with shareholders; facilitating the
effective contribution to the Board of non-executive directors in particular;
and ensuring constructive relationships between the executive and 
non-executive directors.

The Board has determined that, in the absence of exceptional
circumstances, no non-executive director’s three-year cycle of
appointment (which is itself subject to re-election and to Companies Act
provisions relating to the removal of a director) should be renewed more
than twice, i.e. that non-executive directors should serve a maximum 
of nine years in that role, and that no non-executive director should
continue beyond his seventieth birthday. The renewal of non-executive
directors’ terms for successive three-year cycles is not automatic and
the continued suitability of each non-executive director is assessed 
by the Nomination Committee before renewal of his appointment takes
place. A particularly searching review is carried out at the end of six
years. The section of the Remuneration Report entitled “Non-Executive
Directors’ Terms of Engagement” describes the current position of each
of the non-executive directors with respect to their maximum three terms
of three years and how the extension process has been applied to the
directors concerned.

30 | Corporate Governance and Directors’ Report

Corporate Governance and Directors’ Report
Continued

The current Chairman, Mr Levett, was Chairman and Chief Executive
until November 2001, when he was succeeded as Chief Executive 
by Mr Sutcliffe. His appointment as non-executive Chairman was
carefully considered by the Board, which decided at that time that this
was in the best interests of the Company in view of his long experience
with the Group’s South African businesses, depth of relevant knowledge
and wealth of ability. Mr Levett is a director of the Company’s 87%-owned
general insurance subsidiary, Mutual & Federal Insurance Company
Limited, and was, until the end of 2004, also a director of its 52%-owned
banking subsidiary, Nedcor Limited and its main banking operation,
Nedbank Limited. He is also a non-executive director of the non-Group
companies, Barloworld Limited and Old Mutual South Africa Trust plc.
Until July 2004 he was a non-executive director of SAB Miller plc.
These external interests do not adversely affect his ability to discharge
his duties as Chairman of the Board.

The Board conducts an annual self-assessment exercise to evaluate 
the effectiveness of its procedures. For 2004, it decided to carry out this
process through a detailed questionnaire exercise, with returns being
submitted anonymously to the Company Secretary, who collated a report
on the outputs for the Board. The areas covered by the survey included
Governance and Processes (Board meetings, Board functions, Board
structure, Board Committees, financial and operational reporting and
compliance) and strategic matters (planning and objectives, risk
management, new business opportunities and projects, and human
resources). The feedback was generally positive, but where suggestions
for improvements were made, these have been noted by the Board and
efforts will be made to address them in 2005.

Independence of non-executive directors
Six of the seven non-executive directors other than the Chairman
(Messrs Andrews, Bogni, Broadhurst, Collins, Edey and Marks) are
considered by the Board to be independent within the meaning of, and
having regard to the criteria set out in, paragraph A.3.1 of the Combined
Code – i.e. independent in character and judgement and there being 
no relationships or circumstances which are likely to affect, or could
appear to affect, their judgement. Professor Nkuhlu, who will join the
Board as a non-executive director on 1 March 2005, is also considered
by the Board to be independent.

The Board decided in December 2004, following a review by the
Nomination Committee, that it was no longer appropriate to classify 
Mr Clewlow as independent, in view of his increased involvement, 
as Chairman of Nedcor, in supporting the executive management 
of that company. He thereupon stepped down as a member of the
Remuneration and Group Audit Committees so that all members of those
Committees remained independent as required by the Combined Code.

Mr Collins has served as the senior independent non-executive
director since February 2003 and will be succeeded in that role by
Mr Broadhurst when Mr Collins becomes non-executive Chairman of the
Company at the end of the AGM in May 2005. The senior independent
non-executive director is available to shareholders if they have concerns
that are unresolved after contact through the normal channels of the
Chairman, Chief Executive or Group Finance Director or where such
contact would be inappropriate. His contact details can be obtained
from the Company Secretary at the registered office.

The terms and conditions for each of the non-executive directors 
are available in the Corporate Governance section of the Company’s
website, www.oldmutual.com, and these include details of the expected
time commitment involved (which each of the non-executive directors
has accepted). Other significant commitments of potential appointees
are considered by the Nomination Committee as part of the selection
process and are disclosed to the Board when recommendation of the
appointment is submitted. Non-executive directors are also required 
to inform the Board of any subsequent changes to such commitments,
which must be pre-cleared with the Chairman if material.

The executive directors are permitted to hold one external (i.e. non-Group)
non-executive directorship (but not a chairmanship) of another listed
company, subject to prior clearance by the Board and the directorship
concerned not being in conflict or potential conflict with any of the
Group’s businesses. Neither Mr Sutcliffe nor Mr Roberts currently 
holds such a directorship.

2004 operations and Turnbull statement
The Board met on a scheduled basis regularly during the year. 
Meetings were co-ordinated with the Company’s reporting calendar 
to allow for detailed consideration of the interim and preliminary results
and the first and third quarters’ trading updates. Two further sessions
were specifically devoted to strategy and business planning respectively.
The Board also met ad hoc as and when required to deal with specific
matters requiring its consideration. During 2004, there were nine
scheduled Board meetings and four ad hoc meetings. 

The scheduled meetings included a three-day site visit to the Group’s
businesses in South Africa, which included presentations to the Board
by Nedcor and Mutual & Federal as well as by Old Mutual South Africa.

During the year the Board approved and adopted four core Group values
– Integrity, Respect, Accountability and Pushing beyond Boundaries.
These have been communicated throughout the Group and
incorporated into management’s performance statements so as 
to ensure they are lived and observed by all key employees.

The Board has reviewed the effectiveness of the system of internal
control during and at the end of the year. This review covered all
material controls, including financial, operational and compliance
controls and risk management systems. 

The Board is of the view that there is a sufficient ongoing process 
for identifying, evaluating and managing the significant risks faced 
by the Group, and that this process has been in place for the year
ended 31 December 2004 and up to the date of approval of this Report. 
The process accords with the Turnbull guidance set out in “Internal
Control Guidance for Directors on the Combined Code” and is regularly
reviewed by the Board.

The Company referred in its Directors’ Report for 2003 to civil suits that
had been filed against a subsidiary, Pilgrim Baxter & Associates, Ltd
(PBA) (now renamed Liberty Ridge Capital, Inc.), by the United States
Securities and Exchange Commission (SEC) and the office of the 
New York State Attorney General (NYAG). In June 2004 PBA reached
agreements with the SEC and the NYAG, which settled all charges
brought by those authorities against PBA in relation to market timing 
in the US mutual fund business. PBA neither admitted nor denied 
any wrongdoing. Under the settlement PBA agreed to pay $40 million
disgorgements of past fees plus $50 million in penalties. In addition 
PBA agreed to reduce fees to investors by approximately $10 million 
over the next five years.

Corporate Governance and Directors’ Report | 31

Some class actions related to the above remain pending. It is not
possible to determine what the outcome of these class actions will 
be and whether there will be any costs to the Group.

The Directors’ Report for 2003 also made reference to Nedcor, whose
2003 results were poor due to the effect of adverse currency and interest
rate movements, amongst other things. This resulted in Nedcor launching
a rights issue to raise R5 billion of ordinary share capital to strengthen its
capital position. During 2004 the bank’s interest rate and currency risks
were minimised through proactive management. Nedcor’s results for
2004 also contributed to an improvement in its capital position.

COMMITTEES
The Board has a number of standing committees or sub-committees, 
to which it has delegated various matters in accordance with terms 
of reference contained in the Scheme of Delegated Authority. It also
establishes committees on an ad hoc basis to deal with particular matters
as and when thought fit: in doing so, it specifies a remit, quorum and
appropriate mix of executive and non-executive participation. Further
information on the main standing committees and sub-committees of
the Board is set out below.

Group Audit Committee
Current members: N N Broadhurst (Chairman), N D T Andrews, 
R Bogni, C D Collins, R P Edey. Other member during part of 2004:
WAMClewlow. Secretary: M C Murray
All of the members of the Group Audit Committee are independent 
non-executive directors. The Chairman of the Committee, Mr Broadhurst,
is a Chartered Accountant and has recent and relevant financial
experience, having been Finance Director of Railtrack plc until 2000.

The terms of reference of the Committee set out its role and
responsibilities and these include:

• monitoring the integrity of the financial statements of the Company
and any formal announcements relating to the Company’s financial
performance, including reviewing significant financial reporting
judgements contained in them;

• reviewing the Company’s internal financial controls;

• monitoring and reviewing the independence and effectiveness of the
Company’s internal audit function and its activities. An internal audit
charter, reviewed and approved by the Committee, governs internal
audit activity within the Group and is conducted in accordance with
an annual audit plan. Progress against that plan is reported regularly
to the Committee;

• receiving and reviewing reports on risk. Management teams in each

subsidiary and business unit have applied the Criteria of Control Model
(CoCo) developed by the Canadian Institute of Chartered Accountants
to produce a control integrity profile for successive assurances given at
increasingly higher levels of management and finally to the Committee.
This process is co-ordinated by the Group risk function;

• making recommendations to the Board, for it to put to shareholders
for their approval in general meeting, in relation to appointment, 
re-appointment and removal of the external auditors and approving
their remuneration and terms of engagement;

• reviewing and monitoring the external auditors’ independence and
objectivity and the effectiveness of the audit process, taking into
consideration relevant UK professional and regulatory requirements;

• developing and implementing policy on the engagement of the

external auditors to supply non-audit services, taking into account
relevant ethical guidance regarding the provision of non-audit services
by the external audit firm, and reporting to the Board any matters 
in respect of which it considers that action or improvement is needed
and making recommendations as to the steps to be taken; and

• reviewing “whistleblowing” arrangements – i.e. arrangements by which
staff of the Group may, in confidence, raise concerns about possible
improprieties in matters of financial reporting or other matters – with 
a view to ensuring that these arrangements enable the proportionate
and independent investigation of such matters and result in
appropriate follow-up action.

A number of audit or audit, risk and compliance committees operated at
subsidiary level during 2004, including at Old Mutual Financial Services
(UK) plc, Old Mutual Life Assurance Company (South Africa) Limited,
Old Mutual (US) Holdings, Inc., Nedcor Limited and Mutual & Federal
Insurance Company Limited, with terms of reference (in relation to the
businesses under their respective remit) broadly equivalent to those 
of the Committee. The Committee receives minutes of the proceedings
and reports from subsidiary audit committees on a regular basis and
Chairmen of these subsidiary audit committees are invited to attend
meetings of and report to the Committee periodically. A planning meeting
was held between the Chairman of the Committee and the Chairmen of
the subsidiary audit committees mentioned above, the regional heads of
internal audit and representatives of the Group’s auditors in October 2004
to co-ordinate the audit committees’ activities and to review and approve
the scope of internal audit plans for 2005. Similar planning meetings
will take place on an annual basis going forward.

Actuarial Review Committee
Current members: R Bogni (Chairman), M J Levett, J V F Roberts.
Secretary: M Carey
The Actuarial Review Committee is a sub-committee of the Group 
Audit Committee and covers the Group’s life operations worldwide. 
The role of the Committee is: (i) to review the actuarial content of the life
assurance figures included in the Group’s externally published financial
statements (annual and interim); (ii) to verify the appropriateness of 
the actuarial methods and assumptions used and changes thereto and
the appropriateness of the financial results which depend on actuarial
calculations; and (iii) to review the financial soundness of each of the
life assurance companies within the Group. The Committee met four times
during 2004 and each meeting was attended by all of the members.

Upon Mr Levett’s retirement in May 2005, Mr Broadhurst will replace
him as a member of this Committee and Mr Sutcliffe will replace 
Mr Roberts, so that there will continue to be a qualified actuary 
as a member of the Committee.

Remuneration Committee
Current members: C D Collins (Chairman), N D T Andrews, 
N N Broadhurst, M J P Marks. Other member during part of 2004:
WAMClewlow. Secretary: M C Murray
Details of the role and activities of the Remuneration Committee and
how the Remuneration Committee and the Board have applied the 
main and supporting principles and the Code Provisions in Section B 
of the Combined Code are provided in the Remuneration Report.

32 | Corporate Governance and Directors’ Report

Corporate Governance and Directors’ Report
Continued

Nomination Committee
Current members: M J Levett (Chairman), N D T Andrews, R Bogni, 
N N Broadhurst, W A M Clewlow, C D Collins, R P Edey, M J P Marks, 
J H Sutcliffe. Secretary: M C Murray
The Nomination Committee makes recommendations to the Board in
relation to the appointment of directors, the structure of the Board and
membership of the Board’s main standing committees. It also reviews
development and succession plans for the most senior executive
management of the Group and proposed appointments to the Boards
and standing committees of principal subsidiaries where these are
material in the context of the Group as a whole. It is chaired by the
Chairman of the Board, Mr Levett, and a majority of its members 
(six out of nine) are independent non-executive directors.

The Nomination Committee seeks to ensure that its process for identifying
candidates for recommendation to the Board as new directors is formal,
rigorous and transparent. Vacancies generally arise in the context of either 
planned refreshing and renewal of the Board, or replacing directors 
who are due to retire, or rebalancing the balance of knowledge, skills 
or independence of the Board. The two new independent non-executive
directors appointed during 2004, Mr Marks and Mr Edey, were selected 
to increase the cadre within the Board who had direct experience of
international financial services markets. External search agents were
provided with guidelines on objective criteria for the individuals sought
and recruitment of the two new non-executive directors followed a short-
listing and interview process which involved a majority of members of the
Board. Professor Nkuhlu, who is joining the Board from 1 March 2005,
was selected from a short list of eligible South African candidates 
to replenish South African representation on the Board following 
Mr Liebenberg’s and ahead of Mr Levett’s retirements. In identifying
candidates, appropriate regard is paid to ensuring that they will have
sufficient time available in the light of their other commitments to 
devote to discharging their duties as directors of the Company.

Chairman’s Selection Committee
The question of Chairman’s succession was dealt with during 2004
through a separate committee established by the Board, comprising
Messrs Andrews, Bogni, Broadhurst and Clewlow. Objective criteria for
the successor were agreed by members of the Committee: these included
an assessment of the time commitment expected (an average of two 
to three days per week) and the need for the person appointed to be
available in the event of crises.

The results of an external confidential search for potential candidates
were reviewed against internal candidates. Having weighed up the
respective merits of all potential candidates who had been identified, 
the Chairman’s Selection Committee recommended to the Board that 
Mr Collins be appointed as Chairman elect to succeed Mr Levett in 
May 2005. This recommendation was unanimously endorsed by the
Board (in the absence of Mr Collins himself), subject to Mr Collins’
confirmation that he would, by the time the appointment took effect,
have stepped down as Chairman of Hanson PLC, so as to avoid his
being chairman of two FTSE 100 companies at the same time. This 
was subsequently confirmed. Mr Collins’ main other commitments 
are as Chairman of Forth Ports PLC and as a non-executive director of 
The Go-Ahead Group plc and Alfred McAlpine PLC. He has confirmed
to the Company that these will not adversely affect his ability to
discharge his role as Chairman of the Company.

Executive Committee
Current members : J V F Roberts, J H Sutcliffe
The Executive Committee is a committee comprising the executive
directors of the Company, to which executive control and decision-
making are delegated, subject to reservation of matters that require
approval by the Board itself. A quorum comprises the two executive
directors. The Committee met 16 times during 2004.

Group Capital Management Committee
Current members : J V F Roberts (Chairman), DIHope, A Patterson, 
M Walton, J H Sutcliffe. Secretary: D I Hope
The Group Capital Management Committee is a sub-committee of the
Executive Committee. Its role is: (i) to set an appropriate framework and
guidelines to ensure the appropriate management of the Group’s capital;
(ii) to support the Business Planning and Quarterly Business Review
process in terms of allocating capital to the Group’s businesses; and 
(iii) to monitor the return based on allocated capital per business relative
to the hurdle rate and limit the allocation of capital to underperforming
businesses, as appropriate. In addition, it is tasked: (i) to ensure that
the strategic investment goals of the Group are clearly disseminated; 
(ii) to consider and approve the overall investment strategy of the
Group’s shareholders’ funds, including those supporting regulatory 
and solvency capital, in order that the shareholders’ assets are managed
prudently having regard to risk, liquidity, tax and the need to support 
the Group’s businesses; and (iii) to consider projects referred to it and 
to approve (or, where appropriate, refer up for approval) those deemed
most likely to support the Group’s core strategies and to build shareholder
value. The Committee met twice during 2004 and both meetings were
attended by all of the members.

Terms of reference
The terms of reference of each of the principal committees of the Board
are available in the Corporate Governance section of the Company’s
website, www.oldmutual.com, and may also be obtained upon request
free of charge from the Company Secretary at the registered office.

The membership and chairmanship of the Board’s standing committees
are regularly reviewed by the Nomination Committee so as to ensure
that they are refreshed and that undue reliance is not placed on
particular individuals.

Each of the Group Audit, Remuneration and Nomination Committees
conducted a self-assessment exercise during 2004 to address, inter
alia, whether their respective terms of reference had been satisfactorily
fulfilled during the year, whether the Committees had the necessary
skills and resources and were receiving a satisfactory level of information
in order to discharge their responsibilities, and whether their processes
and methods could be improved. These were each conducted by
anonymous questionnaires to members of the Committee concerned and
other key participants in the Committee’s activities (including the external
auditors, in the case of the Group Audit Committee) and the results were
collated by the Company Secretary and reported to the Committees 
for consideration.

Corporate Governance and Directors’ Report | 33

ATTENDANCE RECORD
The following table sets out the number of meetings held and individual
directors’ attendance records at the Board and its principal standing
committees in 2004:

• All projects in excess of £300,000 (R4.5 million) are to be subject to
competitive tender and agreed by the Group Finance Director or 
the Group Chief Executive, and any projects in excess of £1,000,000
(R15 million) are to be pre-approved by the Group Audit Committee.

Board
(scheduled)

Board
(ad hoc)

Group
Audit Remuneration Nomination
Committee Committee

Committee

No. of meetings held
N D T Andrews
R Bogni
N N Broadhurst
W A M Clewlow
C D Collins
R P Edey
M J Levett
C F Liebenberg
M J P Marks
J V F Roberts
J H Sutcliffe

9
9/9
8/9
8/9
8/9
9/9
6/6
9/9
6/6
6/8
9/9
9/9

4
4/4
3/4
2/4
3/4
2/4
2/2
4/4
3/3
3/3
4/4
4/4

5
4/5
4/5
5/5
5/5
4/5
1/2
–
–
–
–
–

3
2/3
–
3/3
2/3
3/3
–
–
–
1/2
–
–

5
–
4/5
5/5
4/5
5/5
–
5/5
4/4
–
–
5/5

Messrs Levett, Roberts and Sutcliffe attended all of the Group Audit
Committee Meetings held during 2004 at the invitation of the Chairman
of that Committee (but were absent for the private sessions between
members of that Committee and the auditors). Messrs Levett and
Sutcliffe also attended all of the Remuneration Committee Meetings 
at the invitation of the Chairman of the Remuneration Committee, 
but absented themselves for any matters relating to their own respective
remuneration arrangements. No one other than the Chairman and 
the members of the Group Audit Committee, Nomination Committee 
or Remuneration Committee has a right to be present at their respective
meetings: attendance by others is always at the invitation of the Chairman
of the Committee concerned.

AUDITORS
During the year ended 31 December 2004 fees paid by the Group 
to KPMG Audit Plc, the Group’s auditors, and its associates (KPMG)
totalled £5.2 million for statutory audit services, £2.2 million for other
audit and assurance services, and £4.9 million for tax and other services.
In addition to the above, Nedcor paid a further £2.5 million to Deloitte 
& Touche in respect of joint audit arrangements. The primary
component within the £4.9 million paid to KPMG for tax and other
services was advisory work in connection with the Group’s transition to
reporting under International Financial Reporting Standards.

The following guidelines have been approved by the Group Audit
Committee and are applied in placing non-audit work:

• No non-audit work should be given to the external auditors where the
consequences of using them would mean that they were effectively
auditing their own work. However, this does not preclude the provision
of accounting resources on contract or secondment, provided that
those specific resources are not involved in the audit and would be
managed by an individual/partner not involved in the audit.

• All non-audit related work undertaken by the external auditors would

normally be the responsibility of a partner not involved in the Company’s
audit. However, there may be certain assignments which are so closely
related to the audit (e.g. certificates, bad debt reviews, regulatory returns)
or which involved a transaction (e.g. acquisition or disposal) that it
would be sensible for the audit partner to undertake those assignments.

• All non-audit projects in excess of £50,000 (R750,000) placed with

the external auditors should be agreed by the Group Finance Director.

• Cumulative non-audit fees (excluding audit-related fees such as review
of regulatory returns) for the Group should not exceed total statutory
audit and audit-related fees in any one year without the approval of
the Group Audit Committee.

• All non-audit work placed with the external auditors should be
retrospectively reported to the appropriate audit committee.

The Group Audit Committee considered the balance of audit and 
non-audit remuneration paid to KPMG at its meeting in February 2005
and declared itself satisfied that the non-audit work was awarded 
on arm’s length terms and did not compromise the independence 
of KPMG Audit Plc as auditors to the Company. 

KPMG Audit Plc has expressed its willingness to continue in office 
as auditors to the Company and, following a recommendation by the
Audit Committee to the Board, a resolution proposing its re-appointment
will be put to the Annual General Meeting (Resolution 4 in the Notice of
Annual General Meeting).

Arrangements have been made, in conjunction with KPMG, for
appropriate audit partner rotation in accordance with recommendations
of the Institute of Chartered Accountants in England and Wales. As a
result of these, the current lead audit partner in the UK, Mr Richard
Bennison, will be succeeded during 2005 by Mr Alastair Barbour.

ANNUAL GENERAL MEETING
The Board uses the Annual General Meeting (AGM) to provide an
update on the Group’s first quarter’s trading. A full transcript of the 
AGM proceedings is made available on the Company’s website as soon
as practicable after the end of the Meeting. All items of formal business 
at the AGM are now conducted on a poll, rather than by a show of
hands. The Company has arrangements in place through its registrars,
Computershare Investor Services, to ensure that all validly submitted
proxy votes are counted, and a senior member of Computershare’s 
staff acts as scrutineer to ensure that votes cast are properly received
and recorded.

Each substantially separate issue at the AGM is dealt with by a separate
resolution and the business of the AGM always includes a resolution
relating to the approval of the Report and Accounts. All directors,
including the Chairmen of the Group Audit, Remuneration and Nomination
Committees (who are available to answer any questions on the matters
covered by these Committees), are expected to attend the AGM and all
of them did so in 2004.

The notice of AGM and related materials contained in the Report and
Accounts or Summary Financial Statements are sent out to shareholders
in time to arrive in the ordinary course of the post at least 20 working
days before the date of the AGM.

Results of the AGM and Court Meeting in 2004
All resolutions considered at the Company’s AGM held on 14 May 2004
and the Meeting of Shareholders convened by order of the UK High
Court (the Court Meeting) on 14 May 2004 to consider a scheme 
of arrangement to authorise the directors to extend the Company’s
unclaimed shares trust arrangements were dealt with on a poll. 
The results of the polls on each of the resolutions were announced 
to the markets later on 14 May 2004 and were as follows:

34 | Corporate Governance and Directors’ Report

Corporate Governance and Directors’ Report
Continued

ORDINARY RESOLUTIONS
Resolution 1
To receive and adopt the directors’ report and accounts
Against
In favour
2,899,368
1,783,591,896

% in favour
99.84%

Resolution 2
To declare a final dividend of 3.1 pence per ordinary share
% in favour
In favour
99.99%
1,826,191,939

Against
96,335

Resolution 3 (i)
Election of Michael Marks as a director of the Company
Against
In favour
1,073,589
1,815,895,358

% in favour
99.94%

Resolution 3 (ii)
Re-election of Rudi Bogni as a director of the Company
Against
In favour
1,105,695
1,815,787,183

% in favour
99.94%

SPECIAL RESOLUTIONS
Resolution 8
Authority to allot equity securities up to maximum nominal aggregate
amount of £19,187,000
In favour
1,394,035,668

Against
424,243,718

% in favour
76.67%

Resolution 9
Authority in accordance with section 166 of the Companies Act 1985
to purchase up to 383,752,930 Ordinary Shares of 10p each in the
Company by way of market purchase
In favour
1,817,474,833

% in favour
99.73%

Against
4,974,669

Resolution 10 (i)
Approval of contingent purchase contract to enable shares to be
bought back on the JSE Securities Exchange South Africa
% in favour
In favour
99.92%
1,817,316,278

Against
1,495,217

Resolution 3 (iii)
Re-election of Norman Broadhurst as a director of the Company
In favour
1,805,146,590

% in favour
99.65%

Against
6,303,783

Resolution 3 (iv)
Re-election of Julian Roberts as a director of the Company
% in favour
In favour
99.60%
1,809,742,666

Against
7,356,819

Resolution 4
Re-appointment of KPMG Audit Plc as auditors to the Company
In favour
1,797,800,999

% in favour
99.58%

Against
7,506,721

Resolution 5
To authorise the Audit Committee of the Company to settle the
remuneration of the auditors
In favour
1,804,581,632

% in favour
99.79%

Against
3,823,078

Resolution 10 (ii)
Approval of contingent purchase contract to enable shares to be
bought back on the Namibian Stock Exchange 
In favour
1,816,549,384

% in favour
99.91%

Against
1,674,309

Resolution 10 (iii)
Approval of contingent purchase contract to enable shares to be
bought back on the Zimbabwe Stock Exchange 
In favour
1,816,778,772

% in favour
99.91%

Against
1,568,199

Resolution 10 (iv)
Approval of contingent purchase contract to enable shares to be
bought back on the Malawi Stock Exchange
In favour
1,816,431,152

% in favour
99.91%

Against
1,686,756

Resolution 6
To approve the Remuneration Report in the Company’s report 
and accounts
In favour
1,649,850,335

Against
33,853,841

% in favour
97.99%

Resolution 7*
Authority to allot relevant securities up to an aggregate nominal
amount of £127,917,000
In favour
1,350,584,574

Against
468,340,374

% in favour
74.25%

Resolution 11
Adoption of amended Articles of Association
In favour
1,861,828,092

Against
322,342

% in favour
99.98%

Resolution 12
Approval of arrangements relating to the proposed extension of the
Unclaimed Shares Trusts, including amendment of the Company’s
objects clause
In favour
1,853,573,012

% in favour
99.97%

Against
607,237

*During the meeting the Chairman, Mr Levett, made the following
statement:

Each of the resolutions at the 2004 AGM was accordingly duly passed.

“This Resolution, which is in accordance with UK institutional investors’
guidelines, does not accord with what is now regarded as best practice
in South Africa. 

In the light of this, the Board undertakes that the Company will not use
the authority to be granted by this resolution beyond 10% of the existing
issued shares – that is, to an aggregate nominal value of £38,374,000 
– without coming back to shareholders, notwithstanding the higher
figure contained in the resolution.”

Court Meeting relating to the Company’s Unclaimed Shares Trusts 
Resolution to approve the proposed scheme of arrangement
In favour
1,711,443,781

% in favour
99.97%

Against
527,488

The Court Meeting resolution was accordingly duly passed and the
scheme of arrangement authorising the directors of the Company 
to extend the period within which claims can be made to certain
entitlements that arose upon demutualisation of the Group was
subsequently confirmed, without amendment, by the UK High Court.

Corporate Governance and Directors’ Report | 35

INTERNAL CONTROL ENVIRONMENT
The Board acknowledges its overall responsibility for the Group’s 
system of internal control and for reviewing its effectiveness, whilst 
the role of executive management is to implement Board policies 
on risk and control.

Executive management have implemented an internal control system
designed to facilitate the effective and efficient operation of the Group
and its business units and aimed at enabling management to respond
appropriately to significant business, operational, financial, compliance
and other risks to achieving the Group’s business objectives. These
include protecting policyholders’ interests, safeguarding shareholders’
investments, safeguarding assets from inappropriate use or from loss 
or fraud, ensuring that liabilities are identified and managed, and
addressing any social, environmental or ethical matters that have
significance for the Group’s businesses.

The system of internal control also helps to ensure the quality of internal
and external reporting, compliance with applicable laws and regulations,
and internal policies with respect to the conduct of business.

The Group’s internal control system is designed to manage, rather than
eliminate, the risk of failure to achieve the Group’s business objectives,
and can only provide reasonable, and not absolute, assurance against
material misstatement or loss.

Approach to risk management
Creating shareholder value is the Group’s overriding business objective,
and the Group therefore derives its approach to risk management 
and control from a shareholder value perspective. As a result, the 
risk process covers a much broader range than the narrowly defined
traditional risk categories and specifically includes strategic risk, also
referred to as business risk, and Enterprise Risk Management (ERM).

The Group’s overall approach is to understand the diversity and 
full breadth of risk and then to manage it, with a strong emphasis on
implementing controls that reduce residual risk to a level calculated to
optimise the level of return on investment. However, risk management 
is not limited solely to the downside or risk avoidance; it is about taking
risk knowingly.

The Group operates a risk management framework, which is based 
on COSO’s ERM Framework, and the Group is planning to transition
more fully to the COSO framework. The current risk framework contains
the following components: (i) a robust risk governance structure; (ii) risk
appetites established at Group and subsidiary level; (iii) Group-wide risk
policies; and (iv) methodologies that focus on risk identification, risk
measurement, risk assessment, action plans, monitoring and reporting.
Each component is explained in more detail below.

Risk governance
The formal governance structures described earlier in this report are
complemented by a risk governance model based on three lines of
defence. This model distinguishes between functions owning and
managing risks, functions overseeing risks and functions providing
independent assurance:

• The Board sets the Group's risk appetite, approves the strategy for
managing risk and is responsible for the Group's system of internal
control. The Group Chief Executive, supported by the plc Management
Board, has overall responsibility for the management of risks facing
the Group and is supported in the management of these risks by
management at the operating subsidiaries. Management and staff
within each business have the primary responsibility for managing
risk. They are required to take responsibility for the identification,
assessment, management, monitoring and reporting of enterprise 
risks arising within their respective areas.

• The second line of defence is provided by the Group Chief Risk

Officer, supported by the Group risk function and other specialist 
in-house functions at Company and subsidiary levels, who provide
technical support and advice to operating management to assist them
with the identification, assessment, management, monitoring and
reporting of financial and non-financial risks. The Group risk function
recommends Group Risk Policies to the Board for approval, provides
objective oversight and co-ordinates ERM activities in conjunction 
with other specialist risk-related functions. Group risk is not, however,
accountable for the day-to-day management of financial and 
non-financial risks. 

• The third line of defence is designed to provide independent objective
assurance on the effectiveness of the management of enterprise risks
across the Group. This is provided to the Board through the Group
Internal Audit function, the external auditors and the Group Audit
Committee, supported by audit committees at subsidiaries. 

Risk appetite
The fundamental purpose of the Group's risk appetite is to define how
much risk the Group is willing to take. Risks or events falling outside 
the agreed risk appetite are identified for immediate remedial action 
and subjected to executive management and audit committee oversight.
The Group's risk appetite framework is currently under development
and will encompass: (i) a process for setting the Group risk appetite; 
(ii) a process for allocating the Group risk appetite among the business
units, including the identification of existing appetites for risk within
those businesses; (iii) risk reporting against those limits; (iv) application
of stress and scenario testing; and (v) risk appetite governance laid
down in a Group risk appetite policy.

Some components of the Group risk appetite are dependent on the
completion of the Group’s Economic Capital project, which is currently
scheduled for completion in 2006.

36 | Corporate Governance and Directors’ Report

Corporate Governance and Directors’ Report
Continued

Group risk principles
Group risk principles have been established for each major risk 
category to which the Group is exposed. These are designed to provide
management teams across the Group with guiding principles within
which to manage risks. Business unit risk policies expand on these
principles and contain detailed requirements and/or limits for the
specific business concerned.

Adherence to these principles provides the Board and the Company’s
stakeholders with assurance that high-level common standards are
consistently applied throughout the Group and also contributes to 
how the Group governs itself. 

Group risk principles are reviewed annually. 

Risk methodologies
Risk identification
Strategic objectives reflect management’s choice as to how the Group
will seek to create value for its stakeholders. Strategic objectives are
translated into business unit objectives. Risks (and risk events) are then
identified that would prevent the achievement of both the strategic and
business objectives, i.e. objective-setting is a pre-condition to the risk
management process. For this reason, risk identification is part of the
annual business planning process. The resultant risks are recorded in 
a risk register, with details of existing controls or actions to mitigate the
risks and any associated time frame, details of who owns the control or
action plans and a measure of the residual risk. Where the residual risk
is deemed to be outside the risk appetite, it is transferred to a control
log for remedial action.

Risk assessment and measurement
Various means of assessing and measuring enterprise risks and risk
events are used throughout the Group. These include estimating the
financial impact and the likelihood of risk occurrence, trend and traffic
light assessments and high/medium/low assessments. With regard to
credit risk, asset and liability risk and market risk, a mixture of quantitative
and qualitative measurement methods is used by the business units
commensurate with the complexity of the risk, such as exposures
against limits, stress and scenario testing, sensitivity analysis and 
value-at-risk measures.

Action plans
Detailed action plans to mitigate the occurrence of a risk or to remedy 
a breakdown in control are recorded on risk and control logs maintained
by each business grouping.

Monitoring and control
The Board reviews the effectiveness of the system of internal control.
This review covers all material controls, including financial, operational
and compliance controls and risk management systems. 

Management teams in each subsidiary and business unit have applied
the Criteria of Control Model (CoCo) developed by the Canadian Institute
of Chartered Accountants, and have produced a control integrity profile
for successive assurances given at increasingly higher levels of
management and finally to the Group Audit Committee. This process 
is co-ordinated by the Group risk function.

Risk monitoring is also undertaken at Group, Principal Subsidiary and
business unit level by management, ERM functions, specialised risk
management functions, internal audit and subsidiary audit committees.

The following are some of the other key processes of risk monitoring
used around the Group:

• The Group Finance Director provides the Board with monthly

performance information, which includes key performance and risk
indicators. These are complementary to the monthly management
reports, which include a status report on key risks to the achievability
of business objectives.

• Items on risk logs and control logs (which contain details of any

control failures) are reported pursuant to an escalation protocol to
the appropriate level of management board or committee, where
rectification procedures and progress are closely monitored. Planned
corrective actions are independently monitored for timely completion
by internal audit and, as appropriate, by the Group Audit Committee
and Board.

• Exposure reporting, risk concentrations and solvency and capital
adequacy reports are submitted to the relevant credit and capital
management committees in the normal course of business. Where
exposures are in excess of limits, they are treated in the same way 
as control breakdowns and reported on the relevant control log for 
audit committee review.

• The Group’s internal audit function operates on a decentralised basis

co-ordinated at Group level by the Group head of internal audit,
who reports directly to the Chairman of the Group Audit Committee
and the Group Chief Executive. It carries out regular risk-focused
reviews of the system of internal control and reports to local executive
management, with unrestricted access to the Chairman of the Group
Audit Committee.

Corporate Governance and Directors’ Report | 37

Reporting
As part of the Board’s annual review process, the Chief Executive of
each of the Group’s major businesses completes a letter of representation.
This letter confirms that there has been no indication of any significant
business risk occurring, nor any material malfunction in controls,
procedures or systems during the reporting period, resulting in loss or
reputational damage, which impacts negatively on the attainment of the
business’s objectives during the year and up to the date of approval of
the Annual Report. Exceptions are noted and reported. In addition the
letter confirms that the business unit will continue as a going concern
for the year ahead. The collated results of these letters are reported to
the Group Audit Committee.

Monthly management reports, reports by the Group Finance Director,
risk logs, control logs and exposure reports described under “Monitoring
and control” above also form part of the reporting process.

For fixed annuities, market risks are managed by investing in fixed interest
securities with a duration closely corresponding to those liabilities.
Market risks on policies where the terms are guaranteed in advance 
and the investment risk is carried by the shareholders, principally 
reside in the South African guaranteed non-profit annuity book, which 
is closely matched with gilts and semi-gilts. Other non-profit policies 
are also suitably matched through comprehensive investment guidelines.
Market risks on with-profit policies, where investment risk is shared, 
are minimised by appropriate bonus declaration practices.

Equity price risk and interest rate risk (on the value of securities) are
modelled by the Group’s risk-based capital practices, which require
sufficient capital to be held in excess of the statutory minimum to allow
the Group to manage significant equity exposures. Credit risk is
monitored by the business’s Credit Committee covering life and third
party funds, which has established appropriate exposure limits.

MANAGEMENT OF SPECIFIC RISKS
At Company level, the principal risks are the volatility of the major
currencies in which the Group operates (Rand and US$) to Sterling, 
and investment market and interest rate movements.

Given the lack of deep and liquid markets for African trading currencies
and the size of currency-related risks, the Group does not currently
hedge translation risk for African currencies, although action may be
taken to hedge specific forecast cash flows, such as the payment of
dividends from South Africa.

In order to manage investment risk, the Group makes limited use of
derivative contracts, outside regulated entities, only for the purposes 
of risk reduction or efficient portfolio management. Speculative activity 
is not permitted and all transactions must be fully covered by cash or
corresponding assets and liabilities. The total income from all derivative
instruments outside regulated entities is not material to the Group.

The other principal risks managed by the Group’s businesses are
described below.

South Africa – Life business
Underwriting risk is controlled by underwriting principles governing
product repricing procedures and authority limits. The underwriting
process takes into account actual and prospective mortality, morbidity
and expense experience. The impact of HIV/AIDS is mitigated wherever
possible by writing products that allow for repricing on a regular basis 
or are priced to allow for the expected effects of AIDS. The Group also
conducts HIV and other tests for lives insured above certain values and
offers reduced premiums for those willing to undergo regular testing.

Old Mutual Asset Managers (South Africa)
The exposure of the Group’s asset management businesses to market
fluctuations gives rise to potential impacts on revenue levels, which are
a function of the value of client portfolios. Investment risk is principally
borne by the client. Compliance risks faced by these businesses are
monitored and reviewed by compliance and risk committees established
for this purpose. The risk of loss of key employees is managed by the use
of long term incentive schemes aligned with shareholder value targets,
and by competition restrictions in employment agreements.

Nedcor
Risk is an integral component and driver of Nedcor’s success in achieving
shareholder value. Nedcor does not, however, look to avoid risk, but
rather seeks to understand it, manage it effectively and measure it in
the context of an appropriate system that derives its approach to risk
management and control from a shareholder value perspective.

Nedcor’s risk process covers the entire range of risk categories and
specifically includes strategic risk and enterprise-wide risk management.

As a bank, Nedcor’s core activity is risk taking, and accordingly risk
management is seen as a core competency.

Risks relating to trading and non-trading activities are managed through
a framework of policies, methods and independent monitoring committees.

Asset and liability management is conducted within a formal structure
which monitors the levels of acceptable financial risk. This structure is not
heavily reliant on trading securities and derivatives, but focuses on using
on-balance sheet mechanisms.

38 | Corporate Governance and Directors’ Report

Corporate Governance and Directors’ Report
Continued

Interest rate risk for Nedcor is its net income exposure to adverse
movements in rates arising as a result of mismatches in the repricing
terms of assets and liabilities. Prospective repricing of assets and
liabilities is assessed using gap analysis and earnings at risk modelling
techniques to quantify the potential impact.

Liquidity risk is the risk of being unable to raise funds at market prices
to meet commitments as they fall due or to satisfy client demands for
funds. This risk is managed by the maintenance of adequate capital,
combined with sophisticated cash flow forecasting and strategic
planning, maintaining an adequate pool of high quality marketable
assets and ensuring appropriate diversity in liabilities.

Credit risk is governed by policy guidelines and administered by 
an appropriately constituted committee at Nedcor, which approves 
all facilities in excess of 10% of capital, and also monitors other 
large exposures, risk limits, provisions and non-performing loans.
Concentrations in country credit risk are similarly managed.

Nedcor’s trading in foreign exchange and interest rate markets primarily
involves interest rate swaps, forward rate agreements, bonds and bond
options. Currency options, equities and equity derivatives are also traded
on a limited basis. Trading exposures are measured using sensitivity
analysis, value at risk and scenario testing, and Nedcor operates a
formal system of monitoring and oversight on market trading risk.

Mutual & Federal
Underwriting risks are controlled through a formal system of parameters
within Mutual & Federal, which is regularly updated and only deviated
from following approval by senior management. Reinsurance cover 
is in place, with retentions set at conservative levels. Equity price risk 
is covered by the capital strength of the Mutual & Federal group.

US businesses
USLife
Underwriting risk is controlled by underwriting principles governing
product repricing procedures and authority limits. The underwriting
process takes into account prospective mortality, morbidity and expense
experience. A large amount of the mortality and morbidity risk is
reinsured to highly rated companies.

For fixed annuities, policyholder option risk is managed by investing 
in fixed securities with durations within a half-year of the duration of 
the liabilities. Cash flows in any period are closely aligned to ensure 
any mismatch is not material. Extensive interest rate scenario testing 
is required by regulatory authorities to ensure that the amounts reserved 
are sufficient to meet the guaranteed obligations.

The guaranteed returns provided under Equity Index Annuities are
dynamically hedged to ensure a close matching of option payoffs to
the liability growth. Hedging positions are reviewed daily to re-adjust
them as necessary.

Credit risk is monitored by the business's Investment Committee, 
which has established appropriate exposure limits.

US Asset Management
The exposure of the Group’s US asset management businesses to
market fluctuations gives rise to potential impacts on revenue levels,
which are a function of the value of client portfolios. Investment risk
is principally borne by the client. Compliance risks faced by these
businesses are independently monitored and reviewed by compliance
functions and committees, which also need to meet stringent US
regulatory requirements. The risk of loss of key employees is managed
by the use of long-term incentive schemes aligned with shareholder
value targets, and by competition restrictions in employment
agreements.

UK
The UK asset management business is exposed to market fluctuations
in terms of the potential impacts on revenue levels, which are a function
of the value of client portfolios. This exposure is reduced through product
diversification, including through the portfolio of hedge funds managed by 
Old Mutual Asset Managers (UK).

The business is exposed to operational risk. The means of managing
this include: tight control environment, careful planning and controlled
execution of business integration, stress testing and parallel running of
new operational systems and software, monitoring of operational key risk
indicators, performing regular audit reviews, and maintaining insurance
policies.

The Group’s UK businesses operate in a highly regulated and changing
environment. Compliance risk is mitigated through embedded compliance
procedures and controls, ensuring adherence to regulations, and
ongoing compliance monitoring by internal compliance functions.

The risk of loss of key employees is managed by the use of long-term
incentive schemes aligned with shareholder value targets, and by
competition restrictions in employment agreements.

Corporate Governance and Directors’ Report | 39

POLICY MATTERS

Relations with shareholders and analysts
The Company is committed to a continuing open dialogue with investors
and analysts in order to raise understanding and awareness of the
Group’s strategy, operations, management and plans and to realise 
a fair valuation for the Company’s shares.

Under the programme for 2004, the Chief Executive and/or the 
Group Finance Director hosted over 100 one-to-one meetings across
South Africa, the UK, the USA and Europe with current and potential
investors. A divisional executive accompanied them to almost half 
of these meetings, in order to offer greater insight into their specific
business. The programme was complemented by educational seminars
on the Group’s US life and asset management businesses held in the
UK and South Africa.

In addition to the above, the Corporate Affairs team carried out almost
100 meetings around the world, some in conjunction with the Treasury
team on non-deal roadshows.

Group strategy and performance are communicated to financial 
markets through annual and interim reports, news releases, speeches,
transcripts and presentations, using a wide range of internal and
external communication channels. The Company holds two results
meetings a year, at the time of its preliminary and interim results, 
and these are hosted and webcast simultaneously in London and
Johannesburg. In addition, in May and November the Company holds
analyst teleconference calls to present its quarterly trading statements.
Transcripts and materials are held on the Company’s website to allow
access (subject to applicable legal restrictions) for those unable to 
be present. All major announcements by the Company are e-mailed 
to Corporate Affairs’ investor database as they are made public.

The Company’s shares are now covered by 20 analysts in South Africa
and the UK and they offer commentary and views on valuation in the
Company’s two major listed regions. Corporate Affairs continued to strive
during 2004 to increase the coverage of the Company’s shares outside
South Africa so that a balanced spread of benchmarks and peer
comparisons would be available.

The Company’s website has undergone continued development in
2004, creating state-of-the-art tools for retail investors and allowing
access to materials and records of all public presentations, as well 
as media and regulatory communications.

Frequently asked questions are posted on the website and the Company
responds to many direct requests for information and also provides
answers to specific queries. The website offers a wide range of services
for investors, including the Company’s share price, details of dividends,
procedures for electing to receive communications electronically and
other relevant data for shareholders.

The Company’s share registrars in the UK and each country where 
its shares are listed offer services to personal shareholders to deal with
specific requests that they may have. The Company’s brokers in each 
of the five markets where Old Mutual’s shares are listed also maintain
active communication with, and provide other services for, the
Company’s shareholders.

The Board monitors investor relations matters closely and receives 
a report on the subject at each of its scheduled meetings. It also receives
the results of an annual externally-conducted survey by Makinson Cowell,
which seeks to capture the views of the Company’s largest shareholders
on a wide range of issues. These include feedback on governance and
strategy. The use of an external agency to collate these views enables
shareholders to be more open about any concerns or issues they may
have. In addition, the Chairman, the senior independent non-executive
director and the other non-executive directors attend various functions
during the year to which major shareholders are invited, thereby enabling
them to understand any issues or concerns that such shareholders may
wish to raise. Press cuttings and brokers’ and analysts’ comments on the
Company are also provided to all of the directors on a weekly basis by the
Corporate Affairs department.

The senior independent non-executive director, Mr Collins, currently
obtains an understanding of issues and concerns of major shareholders
primarily through the Makinson Cowell survey referred to above, but he
also dealt with direct representations or issues from shareholders and
other stakeholders during 2004.

Employment matters
The Group’s employment policies are designed to promote a working
environment that supports the recruitment and retention of highly effective
employees, improves productivity and fosters relationships that build on
the diversity of its workforce. They are regularly reviewed and updated to
ensure their relevance for the locations to which they apply. Whilst local
employment policies and procedures are developed by each business
according to its own circumstances, the following key principles of
employment are applied consistently throughout the Group:

• employees are recruited, retained, trained and promoted on the basis
of their suitability for the job, without discrimination in terms of race,
religion, national origin, colour, gender, age, marital status, sexual
orientation or disability (whether in existence at the commencement 
of employment or developing subsequently) unrelated to the task at
hand. In South Africa this principle is balanced with the requirement 
to address issues of employment equity, and the local businesses’
practices take due account of this; 

40 | Corporate Governance and Directors’ Report

Corporate Governance and Directors’ Report
Continued

• clear goals are established, together with training and feedback 
on performance, to deliver the Group or business objectives and 
to provide a satisfying working environment for employees; 

• a working environment is provided that meets the health and safety

standards of the Group and local regulations and allows employees to
work to the best of their abilities, free from discrimination and harassment; 

• employee involvement, consultation and communication are promoted

The benefits of a continuous drive to promote performance management
across the Group over the last three years are now being seen in
improvements in performance management processes and culture,
measurement of performance and delivery, and the relationship
between performance and reward.

Key initiatives at the Group’s South African businesses during 2004
included:

through in-house publications, briefings, roadshows and internet-
based channels; and

• HIV/AIDS workplace programmes, which enable improved access to

counselling of employees and their families on HIV/AIDS-related issues;

• the efforts of employees in contributing to the success of the Group
are appropriately recognised. Compensation systems are structured 
to recognise both the efforts of individuals and the performance of 
the sector of the business in which they work.

• active involvement by Old Mutual South Africa and Nedcor in working
through employer bodies to finalise proposals on the Financial Sector
Charter dealing with Black Economic Empowerment and employment
equity; and

Various initiatives have been implemented to enhance talent
management processes across the Group including:

• acceleration of employment equity and management transformation

through cultural diversity and voluntary early retirement programmes.

• using the Top Leadership Group, which comprises approximately 

100 senior people from across the Group, to develop, review,
implement and communicate talent management as well as 
other strategic initiatives;

• agreeing a common set of values to be applied consistently across 

the Group and encouraging their adoption and implementation
through surveys, road shows, written media and incorporation 
into the performance appraisal cycle;

• identifying international and other cross-business employment
opportunities to develop talented individuals across the Group;

• setting an objective for each of the Group’s businesses to be an

employer of choice, supported by the creation of centres of excellence
in human resource practice in the larger and more established
businesses. These centres of excellence support and assist the
development and implementation of world-class practice in the
Group’s newer and smaller businesses; and

• continuing to focus on leadership and management development,

supported by the Old Mutual Business School in Cape Town.

Supplier payment policy
In most cases suppliers of goods or services to the Group do so under
standard terms of contract which lay down terms of payment. In other
cases, specific terms are agreed beforehand. It is the Group’s policy to
ensure that the terms of payment are notified in advance and adhered
to. The Company has signed the Better Payment Practice Code, an
initiative promoted by the Department of Trade and Industry in the 
UK to encourage prompt settlement of invoices. 

The total outstanding indebtedness of the Company (and its
service company subsidiary, Old Mutual Business Services Limited)
to trade creditors at 31 December 2004 amounted to £1,281,000,
corresponding to 20 days’ payments when averaged over the year
then ended.

Charitable contributions
The Company, its subsidiaries in the UK, and the Old Mutual Bermuda
Foundation collectively made charitable donations of £234,000 during
2004 (2003: £222,000). In addition, the Group made a wide range of
other significant donations to charitable causes and social development
projects, as described in more detail in the Corporate Citizenship 
section of this document.

Environmental matters
A description of the Group’s environmental policy and activities during
2004 is contained in the Corporate Citizenship section of this document.

Corporate Governance and Directors’ Report | 41

OTHER DIRECTORS’ REPORT MATTERS

Political donations
The Group made no EU political donations during the year. US political
donations totalling $3,000 were made by the Group’s US businesses
during 2004.

Dividend
The directors recommend a final dividend of 3.5p per share, which,
together with the interim dividend of 1.75p per share paid in November
2004, makes a total dividend for the year of 5.25p per share. Subject to
shareholders’ approval at the Annual General Meeting, the final dividend
will be paid on 31 May 2005 to members on the register at the close of
business on 22 April 2005. Shareholders on the South African, Malawi
and Zimbabwe branch registers and the Namibian section of the principal
register will be paid the final dividend in the respective local currencies
of those territories by reference to the relevant exchange rates prevailing
on 31 March 2005 (30 March 2005, in the case of Zimbabwe), as
determined by the Company. The equivalents of the recommended
Sterling dividend in these currencies will be announced by the Company
on 1 April 2005. It is expected that payment will be made via dividend
access trust mechanisms in each country concerned. This means that
holders of shares on the South African branch register will receive their
dividend from a South African domestic entity and will therefore not be
subject to the South African tax on foreign dividends in relation to it.

The Board’s policy on dividends is to seek to achieve steadily increasing
returns to shareholders over time, reflecting the underlying rate of progress
and the cash flow requirements of its businesses. The Board anticipates
declaring an interim dividend for the current year in August 2005, for
payment in November 2005.

Authorities from the shareholders for the Company to make market
purchases of, and/or to purchase pursuant to contingent purchase
contracts relating to each of the four African stock exchanges on which
the Company’s shares are listed, up to an aggregate of 383,752,930 
of its own shares were in force at 31 December 2004. No purchases 
of shares were made pursuant to any of those authorities during the
year then ended.

Substantial interests in shares
At 28 February 2005, the following substantial share interests had 
been declared to the Company in accordance with Part VI of the
Companies Act 1985:

Barclays plc

Legal & General Investment 
Management Limited

Number of shares

% of total
issued shares

159,868,102

4.15%

131,113,007

3.40%

Old Mutual Life Assurance Company 
(South Africa) Limited

274,950,790

7.13%

Public Investment Commissioners 
of the Republic of South Africa

398,417,574

10.34%

Going concern
The Board has satisfied itself that the Group has adequate resources 
to continue in operation for the foreseeable future. The Group’s financial
statements have accordingly been prepared on a going concern basis.

Share capital
The Company’s issued share capital at 31 December 2004 was
£385,394,299.00 divided into 3,853,942,990 Ordinary Shares of 
10p each (2003: £383,689,581.10 divided into 3,836,895,811 Ordinary
Shares of 10p each). During the year ended 31 December 2004, a total
of 17,047,179 shares in the Company were issued at an average price
of 85.08p each under the Group’s share option schemes.

By order of the Board

Martin C Murray
Group Company Secretary
28 February 2005

42 | Board of Directors

Board of Directors
The Board has ten members,
with two executive and eight
non-executive directors. 
Professor Nkuhlu joins the Board 
as an additional non-executive 
director on1 March 2005

2

6

10

3

7

11

4

8

1

5

9

Board of Directors | 43

1 MIKE LEVETT (65)2
B.Com., D.Econ.Sc. (hc), FIA, FFA, FASSA, is non-executive Chairman,
having previously held the role of Chairman and Chief Executive until October
2001. He has also been Chairman of the Nomination Committee since
February 2003. He joined the Group in 1959. He is a non-executive director
of Barloworld Limited, Central Africa Building Society, Mutual & Federal
Insurance Company Limited and Old Mutual South Africa Trust plc.

7 WARREN CLEWLOW (68)2
OMSG, CA(SA), D.Econ. (hc), has been a non-executive director of the
Company since March 1999. He became Chairman of Nedcor Limited in
May 2004, having previously been its Deputy Chairman. He has also been
Chairman of Barloworld Limited since 1991. He was previously Chief
Executive of the Barloworld group and has managed many of its various
divisions. He is also a non-executive director of Sasol Limited.

2 JIM SUTCLIFFE (48)2
B.Sc., FIA, became Chief Executive in November 2001, having been
appointed to the Board as Chief Executive of the Group’s life businesses 
in January 2000. He is also a non-executive director of Nedcor Limited 
and of Nedbank Limited. Before joining the Group, he was Chief Executive, 
UK, of Prudential plc and Chief Operating Officer of Jackson National,
Prudential’s US subsidiary. 

3 JULIAN ROBERTS (47)
B.A., FCA, MCT, is Group Finance Director, a position he has held since
joining the Group in August 2000. He is also a non-executive director of
Mutual & Federal Insurance Company Limited and of Nedcor Limited. He
was formerly Group Finance Director of Sun Life & Provincial Holdings PLC.
Before joining Sun Life & Provincial Holdings PLC, he was a director and
Chief Financial Officer of Aon UK Holdings Limited.

4 NIGEL ANDREWS (57)1, 2, 3
B.Sc., MBA, has been a non-executive director of the Company since June
2002. He is a non-executive director of the Company’s principal US holding
company, Old Mutual (US) Holdings, Inc. and chairs that company’s
Remuneration Committee. He is non-executive Chairman of Great Lakes
Chemical Corporation, a member of the board of the Victory Funds and 
a governor of the London Business School. Previously he was an Executive
Vice President and member of the office of the CEO of GE Capital, having
spent 13 years with The General Electric Company Inc.

5 RUDI BOGNI (57)1, 2
D.Econ. (Bocconi), has been a non-executive director of the Company since
February 2002. He chairs the Actuarial Review Committee. He is Chairman 
of Medinvest International SCA, Luxembourg and of the International Advisory
Board of Oxford Analytica. He is also a member of the boards of the LGT
Foundation, Common Purpose International Limited and Prospect Publishing,
and of the governing council of the Centre for the Study of Financial Innovation.
He served previously as a member of the Executive Board and Chief Executive,
Private Banking of UBS AG, and before that he was Group Treasurer and 
a member of the Executive Committee of Midland Bank plc.

6 NORMAN BROADHURST (63)1, 2, 3
FCA, FCT, has been a non-executive director of the Company since March 1999
and will succeed Mr Collins as senior independent non-executive director in
May 2005. He chairs the Group Audit Committee. He was Group Finance
Director of Railtrack plc from 1994 to 2000. He is Chairman of Freightliner
Limited and of Chloride Group plc. He is also a non-executive director of
Cattles plc, Tomkins plc and United Utilities plc.

8 CHRISTOPHER COLLINS (65)1, 2, 3
FCA, has been a non-executive director of the Company since March 1999
and became the senior independent non-executive director in February
2003. He chairs the Remuneration Committee. He has been Chairman of
Hanson PLC since 1998, a position that he will be relinquishing in April 2005
before succeeding Mr Levett as non-executive Chairman of the Company
following the Annual General Meeting in May 2005. He is Chairman of Forth
Ports PLC and a non-executive director of The Go-Ahead Group plc and of
Alfred McAlpine PLC.

9 RUSSELL EDEY (62)1, 2
FCA, has been a non-executive director of the Company since June 2004.
He is deputy chairman of N M Rothschild Corporate Finance Limited, a 
non-executive director of FKI plc and Chairman of Anglogold Ashanti Limited. 
He previously served on the boards of English China Clays plc, Wassall plc,
Northern Foods plc and Express Dairies plc. His career began in the 
Finance Division of the Anglo American Corporation of South Africa Limited in
Johannesburg. In the 1970s he was General Manager – Corporate Finance 
of Capel Court Corporation in Melbourne. He joined Rothschild in 1977 
and was Head of Corporate Finance from 1991 to 1996.

10 MICHAEL MARKS (63)2, 3
CBE, has been a non-executive director of the Company since February
2004. He is one of the founding partners of New Smith Capital Partners LLP
and is also a non-executive director of RIT Capital Partners PLC. Until
February 2003 he had held a number of senior roles with Merrill Lynch,
including Executive Chairman of Merrill Lynch Europe, Middle East and
Africa and Executive Vice-President of Merrill Lynch & Co. Prior to joining
Merrill Lynch in 1995, he had been Chairman of Smith New Court PLC,
having earlier been responsible for the international operations of that company
in New York, Hong Kong, Singapore and South Africa. He was also formerly
a non-executive director of the London Stock Exchange, Chairman of the
London Investment Banking Association and Vice-President of the British
Bankers’ Association.

11 WISEMAN NKUHLU (61)
B.Com., CTA, MBA, has been appointed as a non-executive director from 
1 March 2005. He is a qualified chartered accountant, Chief Executive of the
New Partnership for Africa’s Development and a former economic adviser 
to South African President Thabo Mbeki. He is also a non-executive director
of the Company’s South African life subsidiary, Old Mutual Life Assurance
Company (South Africa) Limited. His previous appointments include
presidency of the South African Institute of Chartered Accountants and
chairmanship of the Development Bank of Southern Africa.

Key:
1 Member of the Group Audit Committee
2 Member of the Nomination Committee
3 Member of the Remuneration Committee

44 | Remuneration Report

Remuneration Report

This Remuneration Report has been prepared by the Remuneration
Committee (referred to in this report as the Committee) and has been
approved by the Board of the Company.

The figures included in the sections of this report headed “Directors’
Emoluments” on pages 49 to 51 and “Directors’ Interests Under Employee
Share Plans” on pages 46 to 48 have been audited by KPMG Audit Plc
as required by the Directors’ Remuneration Report Regulations 2002.
Their audit report is set out on page 56. The information in the remainder 
of this report has not been audited.

MEMBERSHIP AND ROLE OF THE COMMITTEE
The Committee consists exclusively of non-executive directors who 
are considered by the Board to be independent. Mr C D Collins is
Chairman of the Committee and the other members throughout 2004
were Mr N D T Andrews and Mr N N Broadhurst. Mr W A M Clewlow 
was a member of the Committee until 9 December 2004 and 
Mr M J P Marks joined the Committee from 1 July 2004. The Company
Secretary, Mr M C Murray, acts as Secretary to the Committee.

The Committee is responsible for:

• determining the remuneration, incentive arrangements and benefits,
including pension rights and any compensation payments, of the
executive directors;

• determining the remuneration of the Chairman of the Board and

monitoring and approving the level and structure of remuneration 
of senior management who report directly to the Chief Executive,
together with the Company Secretary; and

• reviewing, monitoring and approving, or recommending for approval,

share incentive arrangements (including option schemes) of 
the Company.

The full terms of reference of the Committee are published on the
Company’s website, www.oldmutual.com, and are also available free 
of charge on request from the Company Secretary.

During the year under review, the Committee met on three occasions.
The meetings were attended by all of the then members of the Committee,
save for one from which Mr Clewlow was absent, one from which 
Mr Marks was absent and one from which Mr Andrews was absent. 
The Board accepted the recommendations made by the Committee
during the year without amendment. 

The Committee retained Hewitt Bacon & Woodrow, a leading firm of UK
remuneration consultants, as its independent advisers throughout 2004
and a representative of that firm attended all meetings. The terms of the
letter of engagement of Hewitt Bacon & Woodrow are published on the
Company’s website and are also available on request from the Company
Secretary. Any work that the Company wishes Hewitt Bacon & Woodrow
to do on its behalf, rather than for the Committee, is pre-cleared with
the Chairman of the Committee with a view to avoiding any conflicts of
interest. Hewitt Bacon & Woodrow advised the Company during the year
in connection with certain aspects of its employee share plans.

The Committee was also assisted during the year by Stephen Mulliner,
Kevin Stacey and Judy Gathercole of the Group Human Resources
department, a specialist function within head office. It provides
supporting materials for the matters that come before the Committee,
including comparative data and justifications for proposed salary,
benefit, bonus and share awards and criteria for performance targets
and appraisals against those targets. It uses the services of external
advisers as necessary. The Chairman of the Committee has access to,
and regular contact with, members of the Group Human Resources
department independently of the executive directors.

REMUNERATION POLICY
The Company embraces the principles and complies with the provisions
of the Combined Code relating to directors’ remuneration.

The guiding principles which the Committee has applied during 2004,
and which it intends to continue to apply, are as follows:

• to take account of appropriate benchmarks, while using such
comparisons with caution, recognising the risk of an upward
ratchet of remuneration levels with no corresponding improvement
in performance. Members of the UK FTSE 100 Index provide the
benchmark for UK-based executive directors, with particular
reference to peer companies;

• to be sensitive in determining, reviewing, monitoring or approving

matters under its remit to pay and employment conditions around 
the Group where relevant;

• to make a significant percentage of potential maximum rewards

conditional on both short-term and long-term performance. These
rewards include share-based incentives, in order to align the 
executive directors’ interests closely with those of shareholders;

• to provide an opportunity for overall remuneration packages to be in
the upper quartile of the comparator group through payments under
short-term and long-term incentive schemes if superior performance 
is delivered, while the fixed elements of remuneration remain
benchmarked at or below appropriate median levels;

• to use predominantly measured and targeted objectives to determine

performance-related remuneration to focus attention on the main drivers
of shareholder value; and

• to attract, retain and motivate individuals of the exceptional calibre
needed to lead the international development of the Group. The
Committee’s policy is influenced by the need to be competitive with
other international financial services groups, whilst also aiming to
avoid paying more than is necessary.

The Committee seeks, where it considers appropriate, the views of
institutional investors (including representative groups such as the
Association of British Insurers (ABI)) on any significant changes to
remuneration structures applicable to the executive directors. During
2004, it consulted about the continued use of earnings per share-based
targets for executive directors’ long-term incentives and obtained
feedback that this was preferred to certain other proposals.

In valuing share option awards, the Committee has regard to, but does
not rely exclusively on, Black-Scholes modelling of share option values.

DIRECTORS’ REMUNERATION PACKAGES
Remuneration during 2004 for Mr Sutcliffe and Mr Roberts comprised 
a basic salary, a benefit allowance, an annual performance-based 
short-term incentive award paid partly in cash and partly in restricted
shares, a bonus matching plan, and participation in the Company’s
share option schemes.

The Committee reviews the structure of the executive directors’
remuneration packages annually to satisfy itself that the balance
between fixed and variable remuneration and short- and long-term
incentives and rewards remains appropriate.

Basic salary
In setting the basic salary of each executive director, the Committee
takes into account market competitiveness and the performance of the
director concerned, together with any changes in role or responsibility.
This is consistent with the reward structure in place for executives below
Board level and that used by comparable companies. Mr Sutcliffe’s basic
salary of £500,000 p.a. remained unchanged during 2004 from that paid
in 2003 and 2002, whilst Mr Roberts’ basic salary was increased by
approximately 3% from £340,000 to £350,000 p.a.

Benefits and benefit allowance
The Company has a cash-based package approach for the executive
directors and other senior UK executives. The benefit allowance (equal
to 35% of basic salary for Mr Sutcliffe and Mr Roberts) is provided in lieu
of contributions to pension funds and certain other benefits that would
be usual at their level. Recipients of the benefit allowance may use it to
purchase benefits appropriate to their needs from independent suppliers
of their choice or may, if they wish, participate at their own expense in
certain benefit arrangements established for Group employees in the UK.

Participation in any Group defined contribution pension arrangement 
is on a commercial basis, which must be fully funded from the benefit
allowance. Mr Sutcliffe and Mr Roberts have both joined the defined
contribution section of the Old Mutual Staff Pension Fund, and each
made contributions to it from their benefit allowance in 2004. Life cover
up to four times the UK statutory earnings cap and disability cover up 
to the free cover limit of £120,000 were provided to Mr Sutcliffe and 
Mr Roberts at the Company’s expense during the year as part of a
Company-wide insurance policy.

Remuneration Report | 45

Short-term incentive awards
The executive directors’ short-term incentive scheme for 2004 was
altered to provide a maximum potential award equal to 130% of basic
salary, of which two-thirds was payable in cash and the balance in
restricted shares of the Company. For the awards to be made in 2005
relating to performance during 2004, such restricted shares will be
subject to the attainment of the same performance conditions as apply
to the “bonus match” shares described below and will not attract
dividends during the performance period.

Achievement of financial targets based on the Group’s results for the
year accounted for a potential maximum of 110% of basic salary for 
Mr Sutcliffe and 90% for Mr Roberts. These financial performance
targets were subdivided between adjusted earnings per share (EPS),
which accounted for 70% of the financial targets component, and return
on average equity (RoAE), which accounted for the other 30%. The EPS
component was calibrated in such a way that the maximum payment
would only be made upon the attainment of EPS of 15.7p, and no part
of this element of the bonus would be paid if EPS was less than 11.3p
(which was 13% above the Company’s EPS in 2003). For RoAE, the
range was 13% to 17%.

The outcomes for EPS and RoAE were 15.3p and 19.1% respectively
and the percentage of basic salary earned by Mr Sutcliffe was 103.8%
and that by Mr Roberts was 85.0%.

The balance of the maximum short-term incentive award, equal to 
20% of basic salary for Mr Sutcliffe and 40% for Mr Roberts, was
related to the fulfilment of specific personal objectives agreed by the
Committee in advance. These were subject to a formal performance
appraisal process at the end of 2004. Based on those performance
appraisals, the Committee determined that, out of the maximum 
20% for Mr Sutcliffe 15.4% should be paid and, out of the maximum 
40% for Mr Roberts, 32% should be paid.

The Committee reviews personal objectives each year in the light 
of what are considered to be the key deliverables for each member 
of the executive management under its remit.

Bonus match
The Committee has determined that both Mr Sutcliffe and Mr Roberts
may elect to invest some or all of the cash element of their short-term
incentive award for 2004 by purchasing shares in the Company and
holding them for three years in order to receive a matching award of
restricted shares. The value of the matching award will be equal to 
the gross value of the amount used to purchase shares, namely before
deduction of tax and National Insurance. The matching shares will cease
to be subject to restrictions on the third anniversary of the award date,
provided that: (1) a performance condition has been satisfied, namely
that (i) in relation to one-half of the matching shares, the Group’s EPS 
in Sterling increases by at least 9% above the increase in the UK Retail
Price Index (UK RPI) over the three-year period commencing on
1 January in the year of the award; and (ii) as to the other half of the
matching award, the Group’s EPS in Rand increases by at least 9%
above the increase in the South African Consumer Price Index (SA CPI)
over the same period; (2) the shares purchased using the recipient’s
short-term cash award are retained until the third anniversary of the
award date; and (3) the recipient remains employed by the Group until
the third anniversary of the award date.

46 | Remuneration Report

Remuneration Report
Continued

Long-term incentive awards
Details of the executive directors’ long-term incentive awards are 
set out under the heading “Directors’ Interests Under Employee Share
Plans” below.

DIRECTORS’ INTERESTS UNDER EMPLOYEE SHARE PLANS

Share Option and Deferred Delivery Plan (SOP)
The SOP is generally used for the grant of executive options (or, until 2004,
in the case of South African participants, deferred delivery shares) to
qualifying senior employees. Regular annual grants were made under
this plan in March 2004 and interim grants, for new appointments 
or promotions, were made in August 2004. Options and deferred
delivery shares awarded during 2004 have a maximum life of six years. 
Mr Sutcliffe’s and Mr Roberts’ awards under the SOP in 2004 were 
over shares equal in value to 180% (out of a potential maximum of 200%) 
of their respective basic salaries at the time of grant. Awards under the
SOP are phased annually so that no undue incentive arises in relation 
to any year of maturity. The quantum of annual awards made to 
the executive directors is decided by the Committee in the light 
of evaluation of performance of the recipients in the previous year.

Grants made under the SOP in 2004 were subject to: (i) as to one-half 
of the shares comprised in each grant, a Sterling-denominated EPS
performance target linked to UK RPI; and (ii) as to the other half of the
shares comprised in each grant, a Rand-denominated EPS performance
target linked to SA CPI. The minimum target for option grants of up
to 100% of basic salary was that growth in EPS must exceed the
accumulated growth in: (i) as to one-half of the shares, UK RPI over 
the three-year vesting period plus 9%; and (ii) as to the other half of 
the shares, SA CPI over the three-year vesting period plus 9%. Higher
targets apply to grants in excess of 100% of basic salary, namely up
to 12% above the relevant indices for multiples of between 100% and
200% of basic salary and up to 15% above the relevant indices for
multiples (where applicable) of over 200% of basic salary. The
Committee considers these to be demanding performance targets in the
current market environment. Awards made under the SOP in 2000 and
2001 lapsed completely upon non-fulfilment of the performance targets,
and those made in 2002 vested only partially, following partial fulfilment
of the performance targets.

Restricted Share Plan (RSP)
The RSP is used: (i) to assist in recruiting and retaining key individuals
by making awards of shares which are restricted for three or more 
years and are subject to forfeiture in the event of prior termination of
employment, unless special circumstances apply; (ii) as an adjunct to
the annual bonus arrangements for the executive directors, to provide
contingent matching awards of shares, subject to performance targets
and to some or all of the cash element of their short-term incentive
awards being invested and retained for the three-year matching period
in shares in the Company; (iii) to make contingent awards of shares
subject to a three-year holding period as a form of payment of short-term
incentive awards based upon performance evaluation for the prior year;
and (iv) to make awards of restricted shares under long-term incentive
plans for the Group’s US asset management business.

Performance targets
In choosing the performance targets for the SOP and the RSP, the
Committee has considered the merits of EPS-based targets against
alternative possibilities, such as comparative performance against a
selected group of other companies or growth in embedded value. The
Committee has determined that EPS is currently the most appropriate
criterion, as the Company’s mix of businesses and geographical profile,
together with the volatility of life peers, makes it difficult to establish 
a suitable basket of comparator businesses, and growth in embedded
value would not, because of the way in which embedded value is
calculated, reflect the full contribution to the Group’s performance 
of its important asset management and banking activities.

Since 2002, in recognition of the location of the Company’s shareholding
base, the Committee has decided that it would be more appropriate for
EPS to be tested in both Sterling and Rand terms, and awards granted
from 2002 onwards have therefore been split as to one-half UK RPI-based
and as to the other half SA CPI-based. The Committee intends to
continue to apply this during 2005, but will keep the suitability and
incentivising effect of performance target-linked share-based
remuneration under periodic review. It also recognises that the
application of International Financial Reporting Standards (IFRS) to the
Group’s results from 2005 onwards will affect reported EPS and the
direct comparability between EPS for different years pre- and post-IFRS,
which it will need to consider. In evaluating to what extent performance
targets have been fulfilled, the Committee will use post-IFRS numbers
adjusted to make them as closely comparable as possible to the base
year. This will include the smoothing of long-term investment returns 
in the Group’s life assurance and general insurance businesses. It will
liaise with the Group Audit Committee to ensure that the evaluation 
of the performance conditions is accurately validated.

Savings-Related Share Option Scheme (Sharesave)
The Group operates a savings-related share option scheme, which
provides a savings and investment opportunity for full-time and part-
time employees of the Group’s participating UK businesses. Options
may normally be exercised after three or five years at a price equivalent
to not less than 80% of the market value of the shares at the date of
invitation to participate.

The following options and rights over shares in the Company were
outstanding in favour of directors of the Company under the share
schemes described above at 31 December 2004, those granted during
the year then ended being highlighted in bold, and those that lapsed
after the year-end being printed in italics:

J V F Roberts

J H Sutcliffe

Remuneration Report | 47

Share plan

Date of grant

RSP
SOP
SOP
RSP
RSP
Sharesave
SOP
RSP
SOP
RSP

SOP
SOP
RSP
RSP
Sharesave
SOP
RSP
SOP
RSP

08.09.00
04.03.02
04.03.02
05.03.02
05.03.02
05.04.02
26.02.03
26.02.03
03.03.04
03.03.04

04.03.02
04.03.02
05.03.02
05.03.02
05.04.02
26.02.03
26.02.03
03.03.04
03.03.04

Number
of shares

50,200
357,000
357,000
39,178
39,179
11,445
788,406
69,151
661,418
35,695

524,950
524,950
68,631
68,631
19,939
1,159,421
155,853
944,882
83,989

Exercise
price

nil
95.25p
95.25p
nil
nil
83.0p3
86.25p
nil
95.25p5
nil6

95.25p
95.25p
nil
nil
83.0p3
86.25p
nil
95.25p5
nil6

Date exercisable
or receivable
21.08.051
Lapsed2
04.03.05 – 04.03.08

Lapsed2

05.03.05
01.06.05 – 30.11.05
26.02.064 – 26.02.09
26.02.064
03.03.074 – 03.03.10
03.03.074
Lapsed2
04.03.05 – 04.03.08
Lapsed2
05.03.05
01.06.07 – 30.11.07
26.02.064 – 26.02.09
26.02.064
03.03.074 – 03.03.10
03.03.074

Save as mentioned in the table above, there have been no changes in the directors’ interests in any of the Group’s employee share plans between 
31 December 2004 and 28 February 2005.

Notes:
1 Restricted shares, which are to be released on the fifth anniversary 
of Mr Roberts’ appointment (i.e. on 21 August 2005), subject to his
still being in employment with the Group on that date. Mr Roberts 
is entitled to the dividends on these shares, pending vesting.

2 The SA CPI-related options granted under the SOP on 4 March 2002
and SA CPI-related restricted share awards made under the RSP on 
5 March 2002 lapsed on 28 February 2005 because the performance
condition (relating to growth in the Company’s Rand-denominated
EPS between 2001 and 2004) was not fulfilled.

3 The Sharesave option price was determined as 20% below the average

of the Company’s share price on 7, 8 and 11 March 2002. The
Company’s share price at the date of grant (5 April 2002) was 109p.

4 Subject to the fulfilment of performance targets prescribed by the

Committee, under which:

• options granted on 26 February 2003 will only be exercisable if the
Company’s EPS in the year ending 31 December 2005 increases 
by prescribed factors of between 9% and 15% in excess of as to 
one-half, UK RPI, and as to the other half, SA CPI, in comparison 
to EPS for the year ended 31 December 2002. The basic factor of 
at least 9% over UK RPI/SA CPI applies to multiples of up to one
times basic salary, with a sliding scale up to 15% applicable to
multiples over one times basic salary;

• restricted shares awarded on 26 February 2003, in conjunction with
the investment by the director concerned of some or all of his net
bonus for 2002 in shares in the Company, will only be released if the
Company’s EPS in the year ending 31 December 2005 increases by at
least 9% in excess of as to one-half, UK RPI, and as to the other half,
SA CPI, in comparison to EPS for the year ended 31 December 2002.
No entitlement to dividends applies to these restricted shares, 
pending vesting;

• options granted on 3 March 2004 will only be exercisable if the

Company’s EPS in the year ending 31 December 2006 increases 
by prescribed factors of between 9% and 15% in excess of as to 
one-half, UK RPI, and as to the other half, SA CPI, in comparison 
to EPS for the year ended 31 December 2003. The basic factor of at
least 9% over UK RPI/SA CPI applies to multiples of up to one times
basic salary with a sliding scale up to 15% applicable to multiples over
one times basic salary;

• restricted shares awarded on 3 March 2004, in conjunction with the
investment by the director concerned of some or all of his net bonus
for 2003 in shares in the Company, will only be released if the Company’s
EPS in the year ending 31 December 2006 increases by at least 
9% in excess of as to one-half, UK RPI, and as to the other half, 
SA CPI, in comparison to EPS for the year ended 31 December 2003. 
No entitlement to dividends applies to these restricted shares, 
pending vesting.

5 Options granted under the SOP on 3 March 2004 were based on the
closing middle market price of the Company’s shares on the London
Stock Exchange on 1 March 2004.

6 The numbers of shares awarded under the RSP on 3 March 2004
were calculated by reference to a price of 95.25p per share, being 
the price at which shares were acquired for the account of the
director concerned with some or all of his net of tax bonus for the
year ended 31 December 2003.

48 | Remuneration Report

Remuneration Report
Continued

During the year the following restricted shares awarded as joining grants under the RSP were released. Mr Roberts paid the associated income tax
and employee’s National Insurance contributions arising from their receipt out of his own funds, enabling him to retain all of the shares.

J V F Roberts

Date of release

Number of shares

23.08.04

50,200

Share price at 
date of release

100.50p

Gross value at
date of release

£50,451

2005 REMUNERATION ARRANGEMENTS FOR THE 
EXECUTIVE DIRECTORS
Mr Sutcliffe’s basic salary for 2005 has increased from £500,000 p.a. 
to £550,000 p.a. and Mr Roberts’ basic salary has increased from 
£350,000 p.a. to £385,000 p.a. Both increases were considered by 
the Committee to be appropriate in the light of comparative market data
for the UK financial services sector, with particular reference to larger
UK life assurance companies. The Committee took note of the fact that
Mr Sutcliffe’s basic salary had not changed since his appointment as
Chief Executive in November 2001 and that Mr Roberts’ basic salary had
increased only twice and in each case by small percentage amounts
since his appointment as Group Finance Director in August 2000.

The structure of short-term and long-term incentives for 2005 has not
been changed other than to remove the performance condition from 
the deferred element of any short-term incentive award receivable by
the executive directors for their 2005 performance. This reflects the fact
that the bonus has already been earned at the time of the award and is
in line with practice at comparator companies. This does not affect the
“bonus match” arrangements described on page 45 and the receipt 
of shares under those arrangements remains subject to the attainment
of a performance condition.

EXECUTIVE DIRECTORS’ SERVICE CONTRACTS
Directors holding executive office have service contracts with the
Company. Their terms are considered by the Committee to provide 
a proper balance of responsibilities and security between the parties.

The Company’s policy is to fix notice periods for executive directors 
at a maximum of 12 months. Compensation for loss of office, where
applicable, is tailored to reflect the Company’s contractual obligations
and the obligation on the part of the employee to mitigate loss.

Mr Sutcliffe and Mr Roberts have service contracts terminable by the
Company on 12 months’ notice. If not terminated, these contracts can
continue until the director attains the age of 60 (i.e. until 20 April 2016
for Mr Sutcliffe and 7 June 2017 for Mr Roberts). Their current contracts
are dated 6 February 2002 and 15 November 2002 respectively.

Mr Roberts’ contract contains a liquidated damages provision under
which, if the Company terminates his employment other than for cause
or if he is constructively dismissed, the Company is required to pay him
compensation for the period of unexpired notice equal to three-quarters
of his then annual salary and benefit allowance plus a further three-
eighths of annual salary on account of potential bonus entitlement. 
This has been agreed to constitute a genuine pre-estimate of his loss
over the notice period after taking into account appropriate mitigation.
Mr Sutcliffe’s contract does not contain any provisions quantifying
compensation that would be payable on early termination.

NON-EXECUTIVE DIRECTORS’ TERMS OF ENGAGEMENT
The terms of engagement of the seven non-executive directors (other than
the Chairman, Mr Levett) provide for their positions to be held at the will
of the respective parties, i.e. on terms that they may be terminated by
either side without notice. However, it is envisaged that they will remain
in place on a three-year cycle, in order to provide assurance to both the
Company and the non-executive director concerned that the appointment
is likely to continue. The same arrangement will apply to Professor Nkuhlu,
whose appointment to the Board will begin on 1 March 2005.

The Board has determined that, in the absence of exceptional
circumstances, no non-executive director's cycle of appointment should
be renewed more than twice, i.e. that non-executive directors should serve
a maximum of nine years in that role, and that no non-executive director
should continue in office beyond his seventieth birthday. The renewal 
of non-executive directors’ terms for successive three-year cycles is not
automatic, with the continued suitability of each non-executive director
being assessed by the Nomination Committee. A particularly searching
review is carried out after the second three-year cycle.

The second three-year cycles applicable to Messrs Broadhurst and Clewlow
(both of whom were first appointed as directors from 25 March 1999)
were due to expire on 24 March 2005. Having regard to the need 
for continuity and experience, balanced against progressive renewal, 
of the non-executive component of the Board, and having assessed
positively their contribution, the Nomination Committee recommended
to the Board, and the Board in January 2005 approved, the extension 
of Mr Broadhurst’s term of appointment for a further three years
(expiring on 24 March 2008) and the extension of Mr Clewlow’s term 
of appointment for a further 15 months (to expire at the end of the
Annual General Meeting in May 2006).

Mr Collins was first appointed to the Board on 25 March 1999 and 
his second three-year term was due to expire on 24 March 2005. 
His contribution to the Board was assessed as part of the process
leading to the Board’s decision to appoint him as Chairman elect to
succeed Mr Levett. He entered into a new engagement letter with the
Company in January 2005 setting out the terms applicable when he
becomes Chairman in May 2005. Under these, subject to 12 months’
notice at any time given by either the Company or Mr Collins, to his 
being duly re-elected at any intervening Annual General Meetings 
and to the provisions of the Company’s Articles of Association relating 
to the removal of directors, Mr Collins’ appointment may continue until 
his seventieth birthday (19 January 2010).

The first three-year cycles applicable to Mr Bogni and Mr Andrews
expired or were due to expire on 31 January 2005 and 31 May 2005
respectively. Following a review by the Nomination Committee of their
contribution to the Board and their continued suitability, the Nomination
Committee recommended and the Board in January 2005 agreed to
extend their expected periods of engagement for a further three years
(i.e. until 31 January 2008 and 31 May 2008 respectively).

Remuneration Report | 49

Mr Marks’ and Mr Edey’s appointments are each expected to last for 
an initial term of three years from their dates of appointment (i.e. until
31 January 2007 and 23 June 2007 respectively) and will then be
considered for renewal.

Mr Levett is due to retire as Chairman at the conclusion of the Annual
General Meeting on 11 May 2005. No compensation or terminal payment
is due to him from the Company in connection with his retirement.

NON-EXECUTIVE DIRECTORS’ FEES
The Company’s policy on remuneration for non-executive directors is that
this should be fee-based and the Company has regard, in setting such fees,
to market data on fees paid to non-executive directors by other members
of the FTSE 100 Index, as well as considering the time commitment
involved in fulfilling their roles. It is also the Company’s policy that
neither the Chairman nor any of the other non-executive directors
should receive share incentives geared to share price performance.

The basic fee for non-executive directors (other than the Chairman) was
£35,000 p.a. in 2004 and, following a review carried out in November
2004 by a sub-committee appointed for the purpose by the Board 
on which none of the non-executive directors whose fees were being
determined sat, was increased to £36,500 p.a. from 1 January 2005.

Additional fees were payable during 2004 for: Chairmanship (£14,000
p.a.) and membership (£5,000 p.a.) of the Group Audit Committee;
Chairmanship (£9,000 p.a.) and membership (£3,000 p.a.) of the
Remuneration Committee; membership of the Nomination Committee
(£2,500 p.a.) (fees for the Chairmanship of this Committee having been
waived by Mr Levett); and Chairmanship (£5,000 p.a.) and membership
(£1,500 p.a.) of the Actuarial Review Committee. These additional fees
remain unchanged in 2005.

A fee of £235,000 p.a. will be paid to Mr Collins upon his becoming
Chairman from 11 May 2005. In addition, the Company will provide 
him with an office at its headquarters in London.

DIRECTORS’ EMOLUMENTS

1) Remuneration
Remuneration for the years ended 31 December 2004 and 
31 December 2003 (including, in each case, remuneration from 
offices held with the Company’s subsidiaries, Old Mutual Life Assurance
Company (South Africa) Limited (OMLAC(SA)), Old Mutual (US) Holdings,
Inc. (OMUSH), Nedcor and Mutual & Federal Insurance Company Limited
(Mutual & Federal) and their respective subsidiaries, where relevant)
was as follows:

Year to 31 December 2004
M J Levett
J V F Roberts
J H Sutcliffe
N D T Andrews
R Bogni
N N Broadhurst
W A M Clewlow
C D Collins
R P Edey
M J P Marks

Former director
C F Liebenberg

Year to 31 December 2003
M J Levett
J V F Roberts
J H Sutcliffe
N D T Andrews
R Bogni
N N Broadhurst
W A M Clewlow
C D Collins
C F Liebenberg

Former directors
R C M Laubscher
P G Joubert
C M Stuart

Salary
and fees
£000

Benefits
and benefit
allowance
£000

Bonus
£000

Pension
£000

250
350
500
4
79
47
54
5
207
51
21
34

6
164

2

–
2
409
596
–
–
–
–
–
–
–

–

1

1

1

1
57
121
215
17
1
9
1
9
–
11
10
10

1

1

1

3

3

–
20
18
–
–
–
–
–
–
–

Total
£000

307
900
1,329
96
56
63
207
62
31
44

1
6

–

170

Salary
and fees
£000

Bonus
£000

Termination
payment
£000

Benefits
and benefit
allowance
£000

Pension
£000

235
340
500
4
80
45
50
105
48
6
251

5

9

331
65
24

–
2
68
2
80
–
–
–
–
–
–

8

121
–
–

–
–
–
–
–
–
–
–
–

127
–
–

1, 7

70
1
106
1
206
1
19
1
3
1
18
–
1
10
1
45

1
7
–
–

3

3

–
20
18
–
–
–
–
–
–

42
–
–

Total
£000

305
534
804
99
48
68
105
58
296

628
65
24

50 | Remuneration Report

Remuneration Report
Continued

Notes:
1 Benefits include cash allowances payable to the executive directors, 
as well as travel and accommodation costs for directors’ spouses 
to accompany them to certain Board meetings or other corporate
events of the Company and its major subsidiaries. The amount of 
this expenditure is reported to and considered by the Committee, 
and procedures are in place for such costs to be authorised. 
The Committee is satisfied that such expenditure is reasonable 
and in the interests of the Company in enabling the directors
concerned to fulfil their roles better.

2 The cash bonus amounts for 2004 (£273,000 for Mr Roberts and

£397,000 for Mr Sutcliffe) are eligible for deferment, at the director’s
election, into a bonus matching arrangement under the Restricted
Share Plan. The bonuses for 2003 were applied net of tax, as to
£34,000 gross (in the case of Mr Roberts) and as to £80,000 gross
(in the case of Mr Sutcliffe) to purchase shares in the Company,
which are held in trust for the director under the bonus matching
arrangement under the Restricted Share Plan.

3 Pension contributions were deducted from the directors’ benefit

allowance.

4 Includes fees of £36,000 (2004) and £40,000 (2003) from OMUSH.

7 Inclusive of the cost of accommodation in London provided by the

Company until 19 April 2003.

8 Bonus paid by Nedcor to Mr Laubscher in March 2003, which related

to the year ended 31 December 2002.

9 Includes fees of £19,000 from OMLAC(SA) and £25,000 from Nedcor.

Certain of the directors waived fees for non-executive directorships 
held in subsidiary companies totalling £72,000 during the year ended 
31 December 2004 in favour of the Company or its subsidiaries. 
These waivers are expected to continue in effect in the future.

2) Pension benefits
Mr Sutcliffe and Mr Roberts continued to contribute from their benefit
allowance to the Old Mutual Staff Pension Fund (which is a defined
contribution scheme) during 2004. The accumulated value of Mr Roberts’
funds in that scheme was £96,000 at 31 December 2004 (£67,000 
at 31 December 2003) and the accumulated value of Mr Sutcliffe’s
funds in that scheme was £66,000 at 31 December 2004 (£41,000 
at 31 December 2003).

None of the other directors of the Company had any accrued pension
fund benefits in any Group pension fund at 31 December 2004 and
none of them contributed to any Group pension fund during 2004.

5 Includes fees of £34,000 (2004) and £34,000 (2003) from

OMLAC(SA), and £127,000 (2004) and £23,000 (2003) from Nedcor.

OTHER SHARE SCHEME INFORMATION

6 Includes fees of £13,000 (2004) and £14,000 (2003) from OMLAC(SA),
£120,000 (including £46,000 of entitlements arising from previous
years) (2004) and £191,000 (including £66,000 of entitlements arising
from previous years) (2003) from Nedcor, and £3,000 (2004) and
£5,000 (2003) from Mutual & Federal.

A) Old Mutual Group Achievements (OMGA) Share Incentive Scheme
During the year Mr Levett took delivery of his remaining interests 
under the OMGA Share Incentive Scheme, which operated prior 
to demutualisation of the Group in 1999. Details are set out in the
following table:

M J Levett

Date of grant

01.10.98
01.10.98

Number of
Company shares

607,068
698,544

Price per
Company share
under the grant

R8.98
R9.07

Date of delivery

13.04.04
13.04.04

Price per
Company share
at date of delivery

R12.44
R12.44

Note:
The aggregate amount of unrealised gains made by Mr Levett in relation to the above at the date of delivery was R4,454,548.

B) Subsidiaries’ Share Incentive Schemes
The Company’s separately listed subsidiaries, Nedcor Limited (Nedcor)
and Mutual & Federal Insurance Company Limited have their own share
incentive schemes which are under the control of the remuneration
committees of their respective boards.

A former director, Mr Laubscher, had the following options over shares
in Nedcor under the terms of the Nedcor Group (1994) Employee
Incentive Scheme at 31 December 2004:

R C M Laubscher

Date of grant

01.06.99
06.11.01
15.04.02
11.06.03
10.05.04

Number of
Nedcor shares

Price per share
R

110,000
43,000
40,600
22,500
90,041

125.00
131.00
125.00
94.00
45.00

Expiry date
01.06.051
30.06.051
30.06.051
30.06.051
30.06.052

Remuneration Report | 51

Notes:
1 Under his termination arrangements with Nedcor, Mr Laubscher was allowed to retain the above options on terms that, if not exercised by
whichever was the earlier of their prescribed expiry dates and 30 June 2005, they would then lapse. The performance conditions originally
applicable to the awards made in 2001, 2002 and 2003 no longer apply.

2 In accordance with the rules of the Nedcor Group (1994) Employee Incentive Scheme, all optionholders (whether still employed by the Nedcor

Group or not) were entitled to receive an additional award of options in connection with Nedcor’s rights issue in May 2004 to compensate for the
dilutive effect of that issue on pre-existing options. Details of the award made to Mr Laubscher were as follows:

R C M Laubscher

Date of grant

10.05.04

Number of
Nedcor shares

161,457

Price per share
R

45.00

Expiry date

30.06.05

Mr Laubscher exercised the following options over shares in Nedcor during 2004:

R C M Laubscher

Date of grant

01.03.94
10.05.04
08.11.94
10.05.04

Number of
shares exercised

Exercise price
R

38,000
42,251
70,000
29,165

26.50
45.00
35.25
45.00

Price at exercise date
R
61.08001
55.7339
65.7357
65.7357

Date of exercise

27.02.04
13.08.04
08.11.04
08.11.04

Notes:
1 Average price of shares sold on exercise date.

2 The aggregate amount of gains made by Mr Laubscher under the above exercises was R4,506,313.

3 Options granted to Mr Laubscher under the Nedcor Group (1994) Employee Incentive Scheme on 14 August 1998 over 101,400 Nedcor shares 

at an exercise price of R98.75 per share lapsed on 14 August 2004.

Mr Laubscher exercised the following options over shares in Old Mutual plc during 2004:

R C M Laubscher

Date of grant

04.03.02
26.02.03

Number of
shares exercised

210,000
231,885

Exercise price
£

Price at exercise date
£

0.9525
0.8625

1.3275
1.3275

Date of exercise

22.12.04
22.12.04

The aggregate amount of gains made by Mr Laubscher under the above exercises was £186,576. Options granted to Mr Laubscher under the SOP
on 8 March 2001 over 92,500 shares in Old Mutual plc at an exercise price of £1.6225 per share lapsed on 30 December 2004.

C) Option exercises and releases of restricted shares during 2004
Save as set out in A) and B) above and for the release of restricted shares to Mr Roberts described under “Directors’ Interests under Employee
Share Plans” earlier in this report, none of the directors of the Company exercised any options or received delivery of any share awards under 
any of the Group’s employee share schemes during 2004.

52 | Remuneration Report

Remuneration Report
Continued

D) Employee Share Ownership Trusts
The Group operates a number of Employee Share Ownership Trusts (ESOTs),
through which it collateralises some of its obligations under employee
share schemes relating to the Company’s shares. At 31 December 2004
the following shares in the Company were held in ESOTs:

Trust

Capital Growth Investment Trust1
Old Mutual Employee Share Trust2
OMGA Conversion Trust3
OMGA Limited Trust3
OMIOPT Limited Trust3
OMIOPT Share Trust3
OMSA Shares Trust3

Country

Zimbabwe
Guernsey
South Africa
South Africa
South Africa
South Africa
South Africa

Old Mutual plc
shares held in trust

2,031,338
2,848,742
1,558,872
25,588,503
160,813
1,085,226
63,721,194

Notes:
1 The Capital Growth Investment Trust is used to satisfy restricted share
awards or Deferred Delivery Shares in Zimbabwe. Any surplus shares
held in trust because of non-vesting are taken into account when
purchasing shares in respect of future grants.

2 The Old Mutual Employee Share Trust is primarily used to satisfy
awards under the Old Mutual Restricted Share Plan around the 
Group (excluding South Africa and Zimbabwe). The strategy is to 
hold shares approximately equal to the number of shares awarded,
but not yet vested, at any time. Any surplus shares held in trust
because of non-vesting are taken into account when purchasing
shares in respect of future grants.

3 There are various trusts in existence in South Africa relating to various
current and historic share incentive schemes. The strategy for each
scheme has been to ensure that sufficient shares are acquired to
match at least 90% of the obligations of each share incentive grant.
Where excess shares are held by any of the trusts, transfers between
them are made to rebalance holdings appropriately.

The general practice of the ESOTs mentioned above is not to vote 
shares held at shareholder meetings, although beneficiaries of restricted 
shares may in principle give directions for those shares to be voted.

COMPANY SHARE PRICE PERFORMANCE
The market price of the Company’s shares was 132.5p (R14.30) 
at 31 December 2004, ranging from a low of 90.25p (R10.80) to 
a high of 136p (R15.30) during the year then ended. The graphs in the
adjacent column show the total shareholder return on the Company’s
shares (in green) over the five-year period from 1 January 2000 to 
31 December 2004, firstly in Sterling on the London Stock Exchange,
compared to the average total shareholder return of other members 
of the FTSE 100 Index, and secondly in Rand on the JSE Securities
Exchange South Africa, compared to the other members of the Index 
of 40 leading companies listed on that exchange (the ALSI 40). 
The Company’s opening share price has been re-based to 100 in 
each case for the purposes of these graphs.

Jan 00

Jan 01

Jan 02

Jan 03

Jan 04

Dec 04

Old Mutual (LSE listing) total shareholder return
Total shareholder return of the FTSE 100 Index

Source: Bloomberg

120

110

100

90

80

70

60

50

40

150

130

110

90

70

50

Jan 00

Jan 01

Jan 02

Jan 03

Jan 04

Dec 04

Old Mutual (JSE listing) total shareholder return
Total shareholder return of the ALSI 40

Source: Bloomberg and i-Net Bridge

In the opinion of the directors, the FTSE 100 Index and the ALSI 40 are
the most appropriate indices against which to measure total shareholder
return of the Company, as they are indices of which Old Mutual plc 
is in each case a member and relate to the two markets where most of
the Company’s shares are held and traded. The Board and Committee
also have regard to a variety of other, sector-specific, comparators in
reviewing the Company’s performance.

SHAREHOLDER APPROVAL OF THE REMUNERATION REPORT
An advisory vote on the Remuneration Report will be put to shareholders
at the Annual General Meeting on 11 May 2005 in accordance with the
Directors’ Remuneration Report Regulations 2002. 

Christopher Collins
Chairman of the Remuneration Committee, 
on behalf of the Board
28 February 2005

Statement of Directors’ Responsibilities | 53

Statement of Directors’ Responsibilities
in respect of the preparation of the Financial Statements

Company law requires the directors to prepare financial statements for
each financial year which give a true and fair view of the state of affairs
of the Company and Group and of the profit or loss for that period. 
In preparing those financial statements the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the
financial statements.

The directors are responsible for keeping proper accounting records
which disclose with reasonable accuracy at any time the financial
position of the Company and to enable them to ensure that the financial
statements comply with the Companies Act 1985. They have general
responsibility for taking such steps as are reasonably open to them 
to safeguard the assets of the Group and to prevent and detect fraud
and other irregularities.

54 | Summary Consolidated Profit and Loss Account

Summary Consolidated Profit and Loss Account
for the year ended 31 December 2004

The following table summarises the Group’s results in the profit and loss accounts on pages 57 to 59. Adjusted operating profit represents the 
directors’ view of the underlying performance of the Group. This summary does not form part of the statutory financial statements.

Adjusted operating income
Life assurance – gross premiums written
General insurance – gross premiums written
Asset management – total revenue
Banking – total operating income

Adjusted profit and loss account
South Africa

Technical result
Long term investment return

Life assurance
Asset management
Banking
General insurance

United States

Life assurance
Asset management

United Kingdom and Rest of World

Life assurance
Asset management
Banking

Other shareholders’ income/expenses
Debt service costs

Adjusted operating profit**
Goodwill amortisation and impairment
Loss on disposal of investment in Dimension Data Holdings plc
Restructuring and integration costs
Change in credit provisioning methodology
Fines and penalties
Short term fluctuations in investment return
Investment return adjustment for own shares held in policyholders’ funds

Operating profit on ordinary activities before tax
Non-operating items

Profit on ordinary activities before tax
Tax on profit on ordinary activities

Profit on ordinary activities after tax
Minority interests – equity

– non-equity

Profit for the financial year
Dividends paid and proposed

Retained profit for the financial year

£m

Rm

Year to
31 December
2004

Year to
31 December
2003
(Restated)*

Year to
31 December
2004

Year to
31 December
2003
(Restated)*

4,901
624
639
1,280

4,577
526
688
1,107

57,818
7,360
7,551
15,109

56,520
6,486
8,500
13,671

313
167

480
53
177
89

799

96
89 

185

18
10
14 

42 

1,026 
(33)
(37)

956
(110)
–
(21)
–
(49)
226
(94)

908 
(35)

873
(286)

587 
(44)
(59)

484
(182)

302

260
178

438 
55 
(10)
73 

556 

85 
81 

166 

20
(8)
4 

16 

738 
(40)
(48)

650 
(206)
(5)
(32) 
(87)
–
143
12

475
(32)

443 
(241)

202
117
(46)

273
(166)

107

3,697 
1,974 

5,671 
639 
2,099
1,057 

9,466 

1,126 
1,050 

2,176 

206
117 
158 

481 

12,123
(390)
(437)

11,296 
(1,290)
–
(246)
–
(596)
2,662
(1,115)

10,711
(418)

10,293 
(3,374)

6,919
(519)
(696)

5,704 
(2,001)

3,703

3,210 
2,198 

5,408 
678 
(118)
909 

6,877 

1,050 
1,000 

2,050 

248
(95)
48 

201 

9,128 
(494)
(593)

8,041 
(2,544)
(60)
(394) 
(1,074) 
– 
1,767 
148

5,884
(404) 

5,480 
(2,976)

2,504
1,445
(568)

3,381
(2,006)

1,375

Notes

5(b)(i)

5(e)

5(c)(i)

5(d)(i)

5(b)(iii)

5(c)(i)

5(d)(i)

5(e)

5(b)(iii)

5(c)(i)

5(b)(iii)

5(c)(i)

5(d)(i)

5(f)

7

18

5(d)(ii)

5(d)(iii)

11

8(a)

5(b)(iv)

17(b)

15(b)

29(a)

4

Summary Consolidated Profit and Loss Account | 55

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

Notes

15(b)

29(a)

956
(240)

716
(83)
(59)

574

11,296 
(2,834)

8,462
(980)
(696)

6,786

650
(224)

426
(7)
(46)

373

p

8,041 
(2,763)

5,278
(96)
(568)

4,614

c

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

Notes

3

3

3

4

3

3

15.3
14.1
14.1
5.25 

3,748
3,432

10.0
8.0
8.0
4.8

3,727
3,411

181.1
166.2 
166.2 
58.5 

3,748
3,432 

123.8 
99.1
99.1
56.0

3,727
3,411

The adjusted operating profit after tax and minority interests is determined as follows:

Adjusted operating profit
Tax on adjusted operating profit

Minority interests – equity

– non-equity

Adjusted operating profit after tax and minority interests

Earnings and dividend per share attributable to equity shareholders

Earnings per share
Adjusted operating earnings per share**
Basic earnings per share
Diluted earnings per share
Dividend per share***

Adjusted weighted average number of shares – millions
Weighted average number of shares – millions

*

2003 comparatives have been restated to be consistent with the current year segmental presentation.

** For life assurance and general insurance businesses, adjusted operating profit is based on a long term investment return and includes investment returns on own shares held within 
the policyholders’ funds. For banking business, adjusted operating profit excludes the loss on disposal of investment in Dimension Data Holdings plc, restructuring and integration 
costs and the transitional impact of the change in credit provisioning methodology. For all businesses, adjusted operating profit excludes goodwill amortisation and impairment, and 
fines and penalties.

Adjusted operating earnings per share is similarly based, but is stated after tax and minority interests, with the calculation of the weighted average number of shares including own
shares held in policyholders’ funds.

The segmental analysis within the summary consolidated profit and loss account has been prepared on a gross of inter-segment transactions basis. Details of the inter-segment revenue
and expenses are set out in note 5.

*** Indicative only – the actual amount of the final dividend per share in Rand will be determined by reference to the exchange rate prevailing on 31 March 2005 and will be announced by

the Company on 1 April 2005.

56 | Independent Auditors’ Report

Independent Auditors’ Report to the Members of Old Mutual plc
for the year ended 31 December 2004

BASIS OF AUDIT OPINION
We conducted our audit in accordance with Auditing Standards issued
by the Auditing Practices Board. An audit includes examination, on a
test basis, of evidence relevant to the amounts and disclosures in the
financial statements and the part of the directors’ remuneration report 
to be audited. It also includes an assessment of the significant estimates
and judgements made by the directors in the preparation of the
financial statements, and of whether the accounting policies are
appropriate to the Group’s circumstances, consistently applied and
adequately disclosed. 

We planned and performed our audit so as to obtain all the information
and explanations which we considered necessary in order to provide 
us with sufficient evidence to give reasonable assurance that the
financial statements and the part of the directors’ remuneration report 
to be audited are free from material misstatement, whether caused 
by fraud or other irregularity or error. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in 
the financial statements and the part of the directors’ remuneration
report to be audited.

OPINION
In our opinion:

• the financial statements give a true and fair view of the state of affairs
of the Company and the Group as at 31 December 2004 and of the
profit of the Group for the year then ended; and

• the financial statements and the part of directors’ remuneration report
to be audited have been properly prepared in accordance with the
Companies Act 1985.

KPMG Audit Plc
Chartered Accountants
Registered Auditor
8 Salisbury Square
London EC4Y 8BB

28 February 2005

We have audited the financial statements set out on pages 57 to 137. 
We have also audited the information in the directors’ remuneration
report that is described as having been audited.

This report is made solely to the Company’s members, as a body, in
accordance with section 235 of the Companies Act 1985. Our audit
work has been undertaken so that we might state to the Company’s
members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company and the Company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The directors are responsible for preparing the Annual Report and the
directors’ remuneration report. As described on page 53, this includes
responsibility for preparing the financial statements in accordance 
with applicable United Kingdom law and accounting standards. 
Our responsibilities, as independent auditors, are established in the
United Kingdom by statute, the Auditing Practices Board, the Listing
Rules of the Financial Services Authority, and by our profession’s 
ethical guidance.

We report to you our opinion as to whether the financial statements 
give a true and fair view and whether the financial statements and 
the part of the directors’ remuneration report to be audited have 
been properly prepared in accordance with the Companies Act 1985. 
We also report to you if, in our opinion, the directors’ report is not
consistent with the financial statements, if the Company has not kept
proper accounting records, if we have not received all the information
and explanations we require for our audit, or if information specified 
by law regarding directors’ remuneration and transactions with the
Group is not disclosed. 

We review whether the Corporate Governance and Directors’ Report
on pages 26 to 41 reflects the Company’s compliance with the nine
provisions of the 2003 Financial Reporting Council Code specified for
our review by the Listing Rules, and we report if it does not. We are not
required to consider whether the Board’s statements on internal control
cover all risks and controls, or form an opinion on the effectiveness of
the Group’s corporate governance procedures or its risk and control
procedures.

We read the other information contained in the Annual Report, including
the corporate governance statement and the unaudited part of the
directors’ remuneration report, and consider whether it is consistent
with the audited financial statements. We consider the implications 
for our report if we become aware of any apparent misstatements 
or material inconsistencies with the financial statements. 

Consolidated Profit and Loss Account
for the year ended 31 December 2004

Technical account – long term businesses

Earned premiums, net of reinsurance
Premiums written
Gross amount
Outward reinsurance premiums

Investment income
Unrealised gains on investments
Other technical income, net of reinsurance

Claims incurred, net of reinsurance
Claims paid
Gross amount
Reinsurers’ share

Change in the provision for claims, net of reinsurance

Changes in other technical provisions, net of reinsurance
Long term business provision, net of reinsurance
Gross amount
Reinsurers’ share

Change in technical provisions for linked liabilities, net of reinsurance

Net operating expenses
Investment expenses and charges
Other technical charges
Tax attributable to the long term business
Long term business allocated investment return transferred 
to the non-technical account

Balance on the technical account – long term business

Analysis of balance on the technical account – long term business

Technical result before investment return
Long term investment return on shareholders’ funds

Balance on the technical account – long term business

Technical account – general business

Earned premiums, net of reinsurance
Premiums written
Gross premiums written
Outward reinsurance premiums

Consolidated Profit and Loss Account | 57

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

Notes

5(b)(i)

6

5(b)(v)

4,901 
(84) 

4,817
2,547
1,445 
84 

8,893

4,577 
(44) 

4,533 
1,984 
1,078
94 

57,818 
(991) 

56,827 
30,051 
17,042 
991 

7,689

104,911

56,520
(543)

55,977
24,499
13,312 
1,161 

94,949

(3,920)
113

(3,807)
(147)

(3,580) 

62

(3,518)
(15) 

(46,251)
1,333

(44,918)
(1,734)

(44,208)
766

(43,442)
(185) 

(3,954) 

(3,533)

(46,652)

(43,627) 

(2,117)
6

(2,111)
(1,484)

(2,445) 

46

(2,399) 
(401) 

(24,978)
71

(24,907)
(17,509)

(30,193)
568

(29,625)
(4,952)

(3,595) 

(2,800)

(42,416)

(34,577) 

(520)
(31)
(33)
(263)

(188)

309

137 
172 

309 

624
(57)

567 

(498)
(24)
(88)
(227)

(6,136)
(366)
(389)
(3,104)

(6,149)
(296)
(1,087)
(2,802)

(143)

(2,213)

(1,766)

376

3,635

4,645

193
183 

376

526
(72)

454

1,610 
2,025 

3,635 

2,385 
2,260 

4,645

7,360
(669)

6,691 

6,486 
(888)

5,598 

9

7

15(a)

8(a)

8(a)

5(e)

58 | Consolidated Profit and Loss Account

Consolidated Profit and Loss Account
for the year ended 31 December 2004 continued

Technical account – general business continued

Changes in the provision for unearned premiums, net of reinsurance
Gross amount
Reinsurers’ share

Allocated investment return transferred from the non-technical account

Claims incurred, net of reinsurance
Claims paid
Gross amount
Reinsurers’ share

Changes in the provision for claims, net of reinsurance
Gross amount
Reinsurers’ share

Net operating expenses

Balance on the technical account – general business

Analysis of balance on the technical account – general business

Technical result before investment return
Long term investment return on shareholders’ funds

Balance on the technical account – general business

Non-technical account – banking business

Interest receivable
Interest payable

Net interest income
Dividend income
Fees and commissions receivable
Fees and commissions payable
Other operating income

Operating income
Administrative expenses
Depreciation
Goodwill amortisation and impairment
Loss on disposal of investment in Dimension Data Holdings plc
Restructuring and integration costs
Other net operating charges

Banking result before provisions
Provisions (including impact of change in credit provisioning methodology)

Share of associated undertakings’ operating profit

Banking operating profit/(loss)

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

Notes

12
(8)

4

571 
45 

(360)
28 

(332)

(35)
(2)

(37)

(369) 
(158)

89 

44 
45 

89 

11
(5)

6

460 
47 

(329)
28 

(301)

(32)
11

(21)

(322) 
(112)

140
(95)

45

6,736 
530 

(4,245)
330 

(3,915)

(410)
(18)

(428)

(4,343) 
(1,866)

73 

1,057 

135
(59)

76 

5,674 
580

(4,064)
347 

(3,717)

(395)
145

(250)

(3,967)
(1,378)

909 

26
47 

73 

527 
530 

1,057 

329 
580 

909

2,029 
(1,385)

2,270 
(1,723)

23,944 
(16,342)

28,030 
(21,276)

644 
12 
456 
(61)
235

1,286 
(850)
(72)
(55)
–
(21)
(58)

230 
(120)

110
11

121

547 
12 
415 
(38)
171 

1,107 
(675)
(81)
(146)
(5)
(32)
(133) 

35 
(321)

(286) 
10 

(276) 

7,602
143 
5,379 
(715)
2,773 

15,182 
(10,031)
(850)
(648)
–
(246)
(681)

2,726
(1,451)

1,311
125

1,436

6,754 
152 
5,120 
(473)
2,118 

13,671 
(8,335)
(1,000)
(1,803)
(60)
(394)
(1,642) 

437 
(3,960)

(3,523) 
121 

(3,402) 

5(e)

8(a)

5(e)

9

8(a)

5(d)(i)

5(d)(i)

18

5(d)(ii)

5(d)(i), (iii)

5(d)(i)

Consolidated Profit and Loss Account | 59

Notes

15(b)

5(c)(i)

11

6

7

18

17(b)

10

15(b)

29(a)

4

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

309
202 

511 
89
121 

135 
(49) 

46 
52

188
(45)
(37)
4
(52)
(55)

908 
(35)

873
(286)

587
(44)
(59)

484 
(182)

302

3,635 
2,383 

6,018 
1,057 
1,436 

1,603 
(596) 

543 
614

2,213
(530)
(437)
46
(614)
(642)

10,711
(418)

10,293 
(3,374)

6,919 
(519)
(696)

5,704 
(2,001)

3,703

376 
185 

561 
73 
(276) 

120 
– 

41 
15

143 
(47)
(48)
2 
(49)
(60)

475
(32)

443 
(241)

202
117
(46)

273
(166)

107

p

4,645
2,284

6,929 
909
(3,402)

1,485 
– 

506 
186

1,766
(580)
(593)
25 
(606)
(741)

5,884 
(404) 

5,480 
(2.976)

2,504
1,445
(568)

3,381
(2,006)

1,375

c

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

Notes

3

3

3

4

3

3

15.3
14.1
14.1
5.25

10.0
8.0
8.0
4.8 

3,748
3,432

3,727
3,411

181.1
166.2
166.2
58.5

3,748
3,432

123.8 
99.1
99.1
56.0 

3,727
3,411

Non-technical account – 
insurance, asset management and banking businesses

Technical account – long term business
Tax attributable to shareholders’ profits on long term business

Technical account – general business
Banking operating profit/(loss)

Asset management result before goodwill amortisation, and fines and penalties
Fines and penalties
Other non-technical account

Investment income 
Unrealised gains on investments

Allocated investment returns transferred from the technical account
– Long term business
– General business
Investment expenses and charges
Other income
Other charges 

Goodwill amortisation (insurance and asset management)

Operating profit on ordinary activities before tax 
Non-operating items

Profit on ordinary activities before tax 
Tax on profit on ordinary activities

Profit on ordinary activities after tax
Minority interests – equity

– non-equity

Profit for the financial year
Dividends paid and proposed

Retained profit for the financial year

Earnings and dividend per share attributable to equity shareholders

Earnings per share
Adjusted operating earnings per share after tax and minority interests
Basic earnings per share
Diluted earnings per share
Dividend per share (Rand dividend indicative only for 2004)

Adjusted weighted average number of shares – millions
Weighted average number of shares – millions

60 | Consolidated Statement of Total Recognised Gains and Losses

Reconciliation of Movements in Consolidated Equity Shareholders’ Funds

Consolidated Statementof Total Recognised Gains and Losses
for the year ended 31 December 2004

Profit for the financial year
Foreign exchange movements

Total recognised gains and losses for the year

Prior year adjustment

Total recognised gains and losses since last annual report

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

Notes

27

1

484
141

625 

27

652 

273
176

449

5,704
(1,879)

3,825

–

3,825

3,381
(2,574) 

807 

Reconciliation of Movements in Consolidated Equity Shareholders’ Funds
for the year ended 31 December 2004

Total recognised gains and losses for the year
Dividends paid and proposed

Issue of new capital
Shares issued under share incentive schemes
Net sale of shares held in ESOP Trusts and Policyholders’ funds

Net increase/(decrease) in equity shareholders’ funds
Equity shareholders’ funds at the beginning of the year

Equity shareholders’ funds at the end of the year

£m

Rm

Year to
31 December
2004

Year to
31 December
2003
(Restated)*

Year to
31 December
2004

Year to
31 December
2003
(Restated)*

Notes

4

27

27

27

625
(182)

443
–
15 
33 

491 
2,754 

3,245

449
(166)

283
37
4 
6 

330
2,424 

2,754

3,825
(2,001)

1,824
–
177 
327 

2,328
32,874 

35,202 

807 
(2,006)

(1,199)
457 
49 
76 

(617) 

33,491

32,874 

* Comparative figures have been restated to reflect the adoption of Urgent Issues Taskforce Abstract 38 “Accounting for ESOP Trusts”. The effects of this restatement are reductions in 
equity shareholders’ funds at 31 December 2004 and 31 December 2003 of £127 million (R1,380 million) and £109 million (R1,301 million) respectively, representing the original 
cost of these shares of £143 million (R1,380 million) (2003: £136 million (R1,301 million)) less cumulative foreign exchange losses of £16 million (Rnil) (2003: £27 million (Rnil)).
Details of the changes are set out in notes 1, 3 and 27.

Consolidated Balance Sheet
at 31 December 2004

Intangible assets 
Goodwill

Insurance and other assets
Investments
Land and buildings
Other financial investments

Assets held to cover linked liabilities

Reinsurers’ share of technical provisions
Provision for unearned premiums
Long term business provision
Claims outstanding

Debtors
Debtors arising from direct insurance operations 
Debtors arising from reinsurance operations
Other debtors

Other assets
Tangible fixed assets
Cash at bank and in hand
Present value of acquired in-force business
Other assets

Prepayments and accrued income
Accrued interest and rent
Deferred acquisition costs
Other prepayments and accrued income

Total insurance and other assets

Banking assets
Cash and balances at central banks
Treasury bills and other eligible bills
Loans and advances to banks
Loans and advances to customers
Debt securities
Equity shares and other variable yield securities
Interests in associated undertakings
Tangible fixed assets
Land and buildings
Other assets
Prepayments and accrued income

Total banking assets

Total assets

Consolidated Balance Sheet | 61

£m

Rm

At
31 December
2004

At
31 December
2003
(Restated)*

At
31 December
2004

At
31 December
2003
(Restated)*

Notes

18

1,152 

1,264 

12,497

15,088 

19

20

20

5(i)

31

21

22

23

24

25

26(a)

26(b)

26(c)

26(f)

26(g)

26(h)

22

19

24

773 
25,840 

26,613 
7,977 

34,590

677 
22,756

23,433
5,860 

8,386 
280,317

288,703
86,536 

8,081 
271,631 

279,712
69,949 

29,293

375,239 

349,661 

14 
269 
70 

353 

173 
22 
305 

500 

74 
504 
164 
425 

19 
301 
54 

374 

225 
7 
470 

702 

81 
695 
194 
332 

152 
2,918 
759 

3,829 

1,877 
239 
3,309 

5,425 

803 
5,467 
1,780 
4,610 

227 
3,593 
645 

4,465 

2,686 
84 
5,610 

8,380

966 
8,296 
2,315 
3,963 

1,167 

1,302 

12,660 

15,540 

210 
665 
123 

998 

184 
427 
127 

738 

2,278 
7,214 
1,334 

10,826 

2,196 
5,097 
1,516 

8,809 

37,608 

32,409

407,979 

386,855 

926 
1,485
2,522 
17,174 
1,934 
259 
91 
223 
160 
2,456 
270 

27,500 

1,025 
888 
2,092 
15,136 
1,420 
317 
144 
221 
141 
2,396 
262 

10,055 
16,110 
27,358 
186,316 
20,976 
2,811 
987 
2,423 
1,738 
26,638 
2,933 

12,235 
10,600 
24,972 
180,674 
16,952 
3,784 
1,719 
2,638 
1,683 
28,602 
3,126 

24,042 

298,345 

286,985 

66,260 

57,715

718,821 

688,928

* Comparative figures have been restated to reflect the adoption of Urgent Issues Taskforce Abstract 38 “Accounting for ESOP Trusts”. Details of the changes are set out in notes 1, 3 and 27.

62 | Consolidated Balance Sheet

Consolidated Balance Sheet
at 31 December 2004 continued

Capital and reserves
Called up share capital
Share premium account
Merger reserve
Profit and loss account

Reserve in respect of own shares held in policyholders’ funds

Equity shareholders’ funds

Minority interests
Equity
Non-equity

Subordinated liabilities

Insurance and other liabilities
Technical provisions
Provision for unearned premiums
Long term business provision
Claims outstanding 

Technical provisions for linked liabilities
Provisions for other risks and charges 
Creditors
Creditors arising from direct insurance operations
Creditors arising from reinsurance operations
Other creditors including tax and social security
Amounts owed to credit institutions
Convertible loan stock

Accruals and deferred income

Total insurance and other liabilities

Banking liabilities
Deposits by banks
Customer accounts
Debt securities in issue
Other liabilities
Provisions for deferred tax
Subordinated liabilities
Convertible loan stock

Total banking liabilities

Total liabilities

Commitments
Contingent liabilities

£m

Rm

At
31 December
2004

At
31 December
2003
(Restated)*

At
31 December
2004

At
31 December
2003
(Restated)*

Notes

27

27

27

27

27

27

27

27

31

32

33(a)

33(b)

34

34(a)(i)

35

36

37

38

39

30

34(a)(ii)

386 
600 
184 
2,444 

3,614 
(369) 

3,245 

384 
587 
184 
2,000

3,155
(401)

2,754

4,187 
6,509 
1,996 
26,103 

38,795 
(3,593) 

4,584 
7,007 
2,196 
22,995 

36,782 
(3,908) 

35,202 

32,874 

869 
658

652 
658 

9,427 
7,138

7,783 
7,854

1,527 

1,310 

16,565 

15,637 

– 

15 

– 

179 

77 
23,138 
680 

23,895 
7,977 
639 

305 
10 
1,783 
467 
332 

2,897 
181 

80 
20,660 
417 

21,157 
5,860 
551

478 
3 
1,806 
377 
357 

3,021 
135 

835 
251,006 
7,376 

259,217
86,536 
6,932 

3,308 
108 
19,346 
5,065 
3,602 

31,429 
1,964 

955 
246,612 
4,978 

252,545 
69,949 
6,576 

5,706 
36 
21,550 
4,501 
4,261 

36,054 
1,611 

35,589 

30,724 

386,078 

366,735 

2,821 
17,508 
1,563 
3,228 
95 
678 
6 

25,899 

4,381 
13,976 
468 
3,200 
229 
648 
10 

30,607 
189,933 
16,956 
35,025 
1,030 
7,358 
67 

52,295 
166,827 
5,586 
38,199 
2,732 
7,745 
119 

22,912 

280,976 

273,503 

66,260 

57,715 

718,821 

688,928 

44

45

1,072 
1,907 

1,017 
2,422 

11,629 
20,688

12,144 
28,910 

* Comparative figures have been restated to reflect the adoption of Urgent Issues Taskforce Abstract 38 “Accounting for ESOP Trusts”. Details of the changes are set out in notes 1, 3 and 27.

Company Balance Sheet
at 31 December 2004

Fixed assets 
Investments
Shares in Group undertakings
Loans due from Group undertakings
Shares in associated companies
Shares and other variable yield securities
Deposits with credit institutions

Current assets
Debtors
Other debtors
Amounts owed by Group undertakings
Other prepayments and accrued income
Cash at bank and in hand

Creditors: amounts falling due within one year
Amounts owed to credit institutions
Amounts owed to Group undertakings
Other creditors including tax and social security
Accruals and deferred income
Dividends payable

Net current liabilities

Total assets less current liabilities

Creditors: amounts falling due after one year
Amounts owed to credit institutions

Provisions for liabilities and charges

Net assets

Capital and reserves
Called up share capital
Share premium account
Profit and loss account

Equity shareholders’ funds

Company Balance Sheet | 63

£m

Rm

At
31 December
2004

At
31 December
2003
(Restated)*

At
31 December
2004

At
31 December
2003
(Restated)*

731 
2,290
16
45 
135 

3,217

2 
1 
4 
11 

18 

5 
1,332
27 
10 
56 

1,430 

722 
2,014 
15 
23 
45 

2,819 

– 
5 
4 
12

21 

28 
1,169 
52 
11
49 

1,309

7,930 
24,843 
174 
488 
1,465 

34,900 

22 
11 
43 
119

195 

54 
14,450
293 
111 
607 

15,515 

8,618 
24,041 
179 
275 
537 

33,650 

– 
60 
48 
143 

251 

334 
13,954 
621 
131 
585 

15,625

1,412

1,288

15,320

15,374

1,805

1,531

19,580

18,276

402 

21

1,382

386 
600 
396

295

26

4,360

3,522

228

310 

1,210 

14,992 

14,444

384 
587 
239 

4,187 
6,509 
4,296

4,584
7,007 
2,853 

1,382

1,210 

14,992 

14,444 

Notes

40

40

34

4

34

32(b)

27

27

28

* Comparative figures have been restated to reflect the adoption of Urgent Issues Taskforce Abstract 38 “Accounting for ESOP Trusts” as described in note 1.

These financial statements have been approved by the Board and signed on its behalf by:

Julian V F Roberts
Group Finance Director
28 February 2005

64 | Consolidated Cash Flow Statement

Consolidated Cash Flow Statement
for the year ended 31 December 2004

Operating activities
Net cash inflow from insurance and other operating activities
Net cash outflow from banking operating activities

Net cash inflow from operating activities

Net cash outflow from returns on investments and servicing of finance
Total tax paid
Net cash (outflow)/inflow from capital expenditure and financial investment
Net cash (outflow)/inflow from acquisitions and disposals
Equity dividends paid

Net cash (outflow)/inflow before financing activities
Net cash inflow from financing activities

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

952
(412) 

540

(113)
(293)
(2)
(31)
(181)

(80) 
284 

916
(679)

237 

(128)
(174)
227
83
(178)

67
231 

11,239 
(4,863)

6,376

(1,334)
(3,457)
(23)
(366)
(2,132)

(936)
3,346 

11,312 
(8,387) 

2,925 

(1,580)
(2,149)
2,804
1,025
(2,198)

827
2,851

Notes

47

47

47(a)

47(a)

47(a)

47(a)

47(a)

Net cash inflow of the Group excluding long term business

204 

298 

2,410 

3,678 

Cash flows relating to insurance and other activities were invested as follows:
(Decrease)/increase in cash holdings
Increase in net portfolio investments

Cash flows relating to banking activities were invested as follows:
Decrease in cash and balances at central banks

Net cash inflow of the Group excluding long term business

47(b),(c)

47(b),(c)

47(d)

(157) 
546 

389 

(185) 

204 

36 
616 

652 

(1,852) 
6,442 

4,590 

445 
7,605 

8,050 

(354)

298 

(2,180) 

(4,372)

2,410 

3,678 

The cash flows presented in this statement exclude all cash flows relating to policyholders’ funds for the long term business.

Notes to the Financial Statements
for the year ended 31 December 2004

1 ACCOUNTING POLICIES

BASIS OF PREPARATION – GROUP
The Group’s consolidated financial statements have been prepared
under the historical cost convention, as modified by the revaluation of
certain assets as required by the Companies Act 1985 and applicable
accounting standards. A summary of the significant Group accounting
policies is set out below, together with an explanation of where changes
have been made to previous policies on adoption of new accounting
standards issued during the year. 

The accounting policies adopted reflect applicable accounting standards
under UK Generally Accepted Accounting Practice (UK GAAP) which
includes UK accounting standards, Urgent Issues Task Force (UITF)
Abstracts and companies legislation. 

The Group’s operations include life assurance, general insurance, asset
management and banking. Due to the diverse nature of the operations,
these are separately disclosed where it is considered appropriate.

The results and balance sheet of the Group’s insurance and asset
management operations have been prepared in accordance with the
provisions of Section 255A of, and the special provisions relating to
insurance companies of Schedule 9A to, the Companies Act 1985 and
with the Statement of Recommended Practice issued by the Association
of British Insurers in November 2003 (the ABI SORP), except for
treatment of deferred acquisition costs (see note 1, long term business
(iv) below).

The results of the Group’s banking operations have been prepared in
accordance with the requirements of Schedule 9 (Special Provisions 
for Banking Companies and Groups) to the Companies Act 1985 and
the British Bankers’ Association Statements of Recommended Practice
(BBA SORPs) on Advances (1997), Securities (1990), Derivatives (2001),
Contingent Liabilities and Commitments (1996) and Segmental Reporting
(1993). This disclosure takes the form of the non-technical banking profit
and loss account, separation of banking items within the consolidated
balance sheet and appropriate notes to the financial statements.

As a result of the increase in the Group’s holding in Mutual & Federal
Insurance Company Limited during the year and in accordance with the
ABI SORP, a general business technical account has been presented in
the financial statements. The results were previously reported within the
long term business technical account – other technical income.

Notes to the Financial Statements | 65

CHANGES IN ACCOUNTING POLICIES
Comparative figures have been restated to reflect the adoption of UITF
Abstract 38 “Accounting for ESOP Trusts”. This Abstract requires that
the Group’s holdings in own shares held by Employee Share Ownership
Plan Trusts (ESOP Trusts) be accounted for as a deduction from
shareholders’ funds rather than recorded as an asset. In addition,
purchases and sales of such own shares should be shown as changes
in shareholders’ funds (as a deduction from the profit and loss reserve)
such that no profit or loss is recognised. In the majority of cases, the
ESOP Trusts have waived their rights to dividends such that there is 
no impact on operating profit after tax. Shares held in ESOP Trusts 
were previously held at cost such that the only impact was due to
foreign exchange movements recognised within the statement of total
recognised gains and losses in respect of shares held on the South
African register.

The reductions in equity shareholders’ funds at 31 December 2004
and 31 December 2003 were £127 million (R1,380 million) and 
£109 million (R1,301 million) respectively, representing the original 
cost of these shares of £143 million (R1,380 million) (2003: £136 million
(R1,301 million)) less cumulative foreign exchange losses of £16 million
(Rnil) (2003: £27 million (Rnil)).

The adoption of the ABI SORP has not had a material impact on the
annual financial statements.

BASIS OF CONSOLIDATION
The Group accounts include the assets, liabilities and results of the
Company and its subsidiary undertakings. Unless otherwise stated, 
the acquisition method of accounting has been adopted. Under this
method, the results of subsidiary undertakings acquired or disposed 
of in the year are included in the consolidated profit and loss account
from the date of acquisition or up to the date of disposal. All intercompany
transactions are eliminated on consolidation, except for certain 
fees negotiated on an arm’s length basis between operationally and
functionally distinct segments of the Group. Elimination of these fees
would result in a misleading presentation of the segmental results.
These fees are described in more detail in note 42.

An associate is an undertaking in which the Group has a long term
interest, usually from 20% to 50% of the equity voting rights, and over
which it exercises significant influence. The Group’s share of the profits
less losses of associates outside the long term business fund is included
in the consolidated profit and loss account and its interest in their net
assets is included in investments in the consolidated balance sheet.
Investments in associated undertakings attributable to long term
business are accounted for as investments.

66 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

1 ACCOUNTING POLICIES continued

BASIS OF CONSOLIDATION continued
The results of the Group’s US life assurance subsidiaries are determined
initially using United States Generally Accepted Accounting Practice 
(US GAAP) bases of accounting with subsequent adjustments where
necessary to comply with the Group’s accounting and other business
policies. In accordance with the ABI SORP, policyholder liabilities of the
Group’s US life subsidiaries are incorporated into the Group’s accounts
on a US GAAP basis. For investment accounting, however, the US GAAP
results are adjusted to comply with UK GAAP.

SEGMENTAL ANALYSIS
The segmental disclosure of results by geography is determined by 
the origin of business transacted. This is not materially different to the
segmental disclosure determined by market destination. Business
transacted with South African residents in terms of their personal
offshore allowances is conducted by the Group’s offshore companies
and is therefore disclosed under the Rest of World segment.

BASIS OF PREPARATION – COMPANY
The Company’s balance sheet has been prepared in accordance 
with Section 226 of, and Schedule 4 to, the Companies Act 1985. 
As permitted by Section 230 of the Companies Act 1985, the Company
has taken advantage of the exemption from presenting its own profit
and loss account.

As described above, comparative figures have been restated to 
reflect the adoption of UITF Abstract 38 “Accounting for ESOP Trusts”. 
This has resulted in the £5 million (R54 million) (2003: £5 million) 
(R60 million) of own shares held in ESOP Trusts previously held as 
an asset on the Company’s balance sheet being deducted from the
Company’s profit and loss reserve. There was no impact on the profit
and loss account in either period.

No note of historical cost profits has been prepared, as the Company’s
only material gains or losses on assets relate to the holding and disposal 
of Company investments.

Shares in subsidiary undertakings are included in the Company balance
sheet at historical cost, adjusted for any impairment.

INSURANCE BUSINESS
(i) Investments 
Investments, including those classified under assets held to cover linked
liabilities, are stated at their current value. Listed investments are stated 
at year-end market value. Unlisted investments are valued, on a prudent
basis, by the directors having regard to their likely realisable value.
Investments in own shares held in policyholders’ funds have been
deducted from equity shareholders’ funds.

Investment properties are accounted for in accordance with Statement
of Standard Accounting Practice 19 as follows:

a) Investment properties are revalued annually at open market values 
by internal professional valuers. Surpluses and deficits arising are
taken to the profit and loss account for the year.

b) No depreciation or amortisation is provided in respect of freehold

investment properties and leasehold investment properties with over
20 years to run.

This treatment, as regards certain of the Group’s investment properties,
may be a departure from the requirements of the Companies Act 1985
concerning depreciation of fixed assets. However, these properties are
not held for consumption but for investment, and the directors consider
that systematic annual depreciation would be inappropriate. The
accounting policy adopted is therefore necessary for the accounts to give
a true and fair view. Depreciation or amortisation is only one of the many
factors reflected in the annual valuation and the amount which might
otherwise have been shown cannot be separately identified or quantified.

Securities borrowed and lent that are collateralised by cash are 
included in the balance sheet at amounts equal to the collateral
advanced or received.

Dividends on equity investments are accrued on an ex-dividend basis.
Interest on fixed income securities, net rental income from property
investments and investment expenses are recorded on an accruals basis.

Realised gains and losses represent the difference between net sales
proceeds and purchase price. Unrealised gains and losses represent 
the difference between the valuation of investments at the balance 
sheet date and their original cost, or if they have been previously valued, 
their valuation at the last balance sheet date. Movements in unrealised
gains and losses are recorded in the profit and loss account, and
include an adjustment for previously recognised unrealised gains 
and losses on investments disposed during the reporting period.

Income arising from securities lending and borrowing is recognised in the
non-technical account on an accruals basis over the term of the related loans.

For long term business, an allocation is made from the long term
business technical account to the non-technical account, representing
the difference between the long term investment return and the actual
return on shareholder assets supporting the long term business. The
long term investment return for relevant categories of investments takes
into account past performance, current trends and future expectations.

Notes to the Financial Statements | 67

The long term investment return on investments supporting general
insurance technical provisions and related shareholders’ funds is
allocated from the non-technical account to the general business
technical accounts.

For the US business, the long term business provision is calculated
using the net premium method, based on assumptions as to investment
yields, mortality, withdrawals and policyholder dividends. Assumptions
are set at the time the contract is issued.

For the US long term business, due to the nature of its products,
investment risk is borne by the shareholders. Therefore, in determining
the operating profit for the business, the investment return earned 
by the whole of the portfolio is smoothed on the basis of a market rate
appropriate to the portfolio of investments, management philosophy 
and US market conditions for each reporting period.

The long term investment return on investments supporting general
insurance technical provisions and related shareholders’ funds is
allocated from the non-technical account to the general business
technical account.

LONG TERM BUSINESS 
The results are prepared on a modified statutory solvency basis, as set
out in the ABI SORP. The main features of this basis are outlined below.

(i) Premiums 
Premiums and annuity considerations are stated gross of commission,
exclude taxes and levies and are accounted for when due for payment,
except for unit-linked premiums which are accounted for when the
liability is established. Outward reinsurance premiums are accounted 
for on a payable basis.

(ii) Claims
Claims paid include maturities, annuities, surrenders, death and disability.

Maturity and annuity claims are recorded as they fall due for payment.
Death and disability claims and surrenders are accounted for when notified. 

Reinsurance recoveries are accounted for in the same period as the
related claim.

(iii) Long term business provision 
Long term business provisions for South African and other African
businesses have been computed using a gross premium valuation
method. Provisions in respect of South African business have been
prepared in accordance with the Financial Soundness Valuation basis as
set out in the guidelines issued by the Actuarial Society of South Africa
in Professional Guidance Note (PGN) 104 (2001). Under this guideline,
provisions are valued using realistic expectations of future experience,
with prescribed margins for prudence and deferral of profit emergence.
This method makes implicit allowance for deferred acquisition costs.

Technical provisions supporting linked policies reflect the market value
of assets supporting these liabilities. 

Universal life and deferred annuity reserves are computed on the
retrospective deposit method, which produces reserves equal to the
cash value of the contracts.

Reserves on immediate annuities and guaranteed payments are
computed on the prospective deposit method, which produces 
reserves equal to the present value of future benefit payments.

For other territories, the valuation bases adopted are in accordance 
with the local actuarial practices and methodologies.

Whilst the directors consider that the gross long term business provision
and the related reinsurance recovery are fairly stated on the basis of 
the information currently available to them, the ultimate liability will 
vary as a result of subsequent information and events and may result 
in significant adjustments to the amount provided.

The provision estimation techniques and assumptions are periodically
reviewed, with any changes in estimates reflected in the long term
business technical account as they occur.

Liability adequacy testing is performed to ensure that the carrying
amount of technical provisions (less related deferred acquisition costs
and intangible assets) is sufficient in view of estimated future cash
flows. When performing the liability adequacy test, contractual cash
flows are discounted and compared to the carrying value of the liability.
Where a shortfall is identified an additional provision is made.

(iv) Acquisition costs
Acquisition costs comprise all direct and indirect costs arising from the
sale of insurance contracts. 

As the gross premium valuation method used in South Africa and other
African territories to determine the long term business provision makes
implicit allowance for the deferral of acquisition costs, no explicit deferred
acquisition cost asset has been included in the balance sheet for these
businesses.

For the US life business, an explicit deferred acquisition costs asset has
been established in the balance sheet. Deferred acquisition costs are
amortised over the period that profits on the related insurance policies
are expected to emerge. Acquisition costs are deferred to the extent 
that they are deemed recoverable from available future profit margins.

Deferral of costs on other long term business is limited to the extent 
that there are available future margins.

68 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

1 ACCOUNTING POLICIES continued

LONG TERM BUSINESS continued
(v) Present value of acquired in-force business
The present value of acquired in-force business is calculated by performing
a cash flow projection of the long term fund and the in-force policies in
order to estimate future after-tax profits attributable to shareholders.
These profits are then discounted at a rate of return allowing for the risk
of uncertainty of the future cash flows. This calculation is particularly
sensitive to the assumptions regarding discount rate, future investment
returns and the rate at which policies discontinue.

The present value of acquired in-force business is capitalised 
in the consolidated balance sheet as an asset and amortised over 
the expected profit recognition period on a systematic basis over 
the anticipated lives of the related contracts which the directors consider
to be 30 years. The amortisation charge is stated net of any unwind in
the discount rate used to calculate the asset.

The carrying value of the asset is reviewed annually for impairment.

The amortisation charge and any adjustments to reflect impairments 
are recorded in the long term business technical account under 
“Other technical charges”.

GENERAL INSURANCE BUSINESS 
All classes of general business are accounted for on an annual basis.

(i) Premiums 
Premiums are stated gross of commissions, exclude taxes and levies 
and are accounted for in the period in which the risk commences. The
proportion of the premiums written relating to periods of risk after the
balance sheet date is carried forward to subsequent accounting periods
as unearned premiums, so that earned premiums relate to risks carried
during the accounting period.

Outward reinsurance premiums are accounted for in the same
accounting period as the premiums for the related direct insurance.

(ii) Claims 
Claims incurred comprise the settlement and handling costs of paid 
and outstanding claims arising during the year and adjustments to prior
year claim provisions. Outstanding claims comprise claims incurred up
to, but not paid, at the end of the accounting period, whether reported
or not.

Whilst the directors consider that the gross provisions for claims and 
the related reinsurance recoveries are fairly stated on the basis of the
information currently available to them, the ultimate liability will vary 
as a result of subsequent information and events, and may result in
significant adjustments to the amounts provided. Adjustments to the
amounts of claims provisions established in prior years are reflected 
in the financial statements for the period in which the adjustments are
made, and disclosed separately if material. The methods used and
estimates made are reviewed regularly.

Liability adequacy testing is performed to ensure that the carrying amount
of claim liabilities (less related deferred acquisition costs) is sufficient 
in view of estimated future cash flows. Where a shortfall is identified 
an additional provision is made.

(iii) Acquisition costs
Acquisition costs, which represent commission and other related
expenses, are deferred and amortised over the period in which the
related premiums are earned.

BANKING BUSINESS
(i) Banking income
Interest receivable and payable are recognised in the banking 
non-technical account as they accrue. 

Fee and other income is recognised in the banking non-technical account
when receivable, except where it is charged to cover the costs of a
continuing service to, or risk borne for, the customer. In these cases, 
the income is recognised over the relevant period.

Other operating income is derived from township development and
computer-related services, including distribution and servicing of
equipment. The net income from these activities is accounted for 
on the accruals basis and included within “Other operating income”.

(ii) Advances and provisions for doubtful debts
Certain advances are held for trading purposes and are not held to
maturity. Such advances are held in the balance sheet at fair value 
and any change in the fair value of these instruments are accounted 
for through the profit and loss account.

Notes to the Financial Statements | 69

All operating companies make provisions for bad and doubtful debts
where required on a prudent basis. Advances are designated as non-
performing based on credit risk management tools and indicators as
well as management judgement as to the ultimate collectability of the
principal or interest. When an advance is designated as non-performing,
interest is suspended and specific provisions raised where required.

There are two basic types of provision, specific and general, each of
which is assessed in terms of the charge and the amount outstanding. 
The provisions made during the year, less recoveries of advances
previously written off, are charged to the profit and loss account.

The Group creates a specific provision for impairment when there is
objective evidence that it will not be able to collect all amounts due. 
The amount of such impairment is the difference between the carrying
amount and the recoverable amount, calculated as the present value 
of expected future cash flows, including amounts recoverable from
guarantees and collateral, discounted at the effective interest rate 
of the advance.

The Group creates an additional general provision where there is
objective evidence that components of the advances portfolio contain
probable losses at the balance sheet date, which will only be identified
in the future. The estimated probable losses are based on historical
information and take into account historical patterns of losses in each
component, the credit ratings allocated to the borrowers and the current
economic climate in which the borrowers operate.

Provisions are deducted from advances in the balance sheet.

Interest on non-performing loans is charged to the customer’s account
and recorded as income, provided that there is a realistic prospect of
interest being paid at some future date. However, where interest to be
recovered is considered to be doubtful, the interest is suspended and is
not credited to income but to an interest reserve account in the balance
sheet, which is included as part of specific provisions and deducted
from advances in the balance sheet. Where the probability of receiving
interest payments is remote, interest is no longer accrued.

(iii) Instalment transactions 
Instalment credit agreements are regarded as financing transactions
and total instalments, less unearned finance charges, are included in
loans and advances.

Lease income and finance charges are determined at the
commencement of the contractual periods and are recognised in income
in proportion to the net cash investment capital balances outstanding.
Unearned lease income and finance charges are carried forward as
deferred income and deducted from advances. 

(iv) Investments 
Securities which are intended to be held to maturity are stated at cost,
adjusted for differences between cost and redemption value which are
amortised over the period to redemption date. Securities held for trading
purposes are marked to market value and the related gains and losses
are taken directly to the banking non-technical profit and loss account
as they arise. Other investments are stated at cost and provision is made
where, in the opinion of the directors, there has been a permanent
impairment in value.

Freehold and leasehold buildings and buildings occupied for own use
are depreciated over their estimated useful lives. Land is not depreciated.

Unsold properties in possession are included under advances and
valued at the lower of cost or net realisable value. Cost includes the
outstanding balance on repossession, which may or may not include
capitalised interest incurred by the client, together with other charges
relating to the repossession.

Where securities sold under agreements to repurchase at future dates
are recorded in the financial statements, the corresponding liability 
to repurchase those securities is included in deposits from banks or
customers as appropriate. Securities purchased under agreements to
resell at future dates are treated as secured loans and reflected on the
balance sheet. Profits and losses arising from these transactions are
treated as interest and accounted for over the period of the contracts.

Acceptances, promissory notes, trade and other bills drawn by
customers and discounted by banking subsidiaries are included under
advances. Amounts rediscounted are included under the contra items
for liabilities under acceptances.

70 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

1 ACCOUNTING POLICIES continued

BANKING BUSINESS continued
(v) Debt securities in issue and subordinated debt instruments issued
Premiums and discounts incurred in the issue of debt securities and
fixed rate subordinated liabilities are accounted for as an adjustment 
to the amount of the liability and amortised over the relevant period 
to maturity.

(vi) Financial instruments
Financial instruments on the balance sheet include cash and bank
balances, investments, receivables and trade creditors. These instruments
are generally carried at fair value and the accounting treatment for each
is disclosed in the accounting policy note for that particular balance.

In addition, the banking business uses a variety of derivative financial
instruments including forwards, swaps, options and exchange traded
financial futures. Transactions in the foreign exchange, interest rate and
equity markets are negotiated directly with customers, with the banking
business acting as a counterparty, or can be dealt directly through
exchanges.

Accounting for financial instruments is dependent on whether the
transactions are undertaken for trading or non-trading purposes:

(a) Trading activities
Trading transactions include transactions undertaken for market-
making, to service customers’ needs and for propriety purposes, 
as well as any related hedges.

Transactions undertaken for trading purposes are measured at fair
value, including an allowance for credit and market risk, and the
resulting profits and losses are accounted for in the non-technical
account. Fair values are based on quoted market prices when available.
Where no quoted prices are available for a particular derivative, its fair
value is determined by reference to quoted market prices for its
component parts.

(b) Non-trading activities
Non-trading transactions are those that are held for hedging purposes
as part of the banking business’ overall risk management strategy as 
a means of managing exposure to price, foreign currency and interest
rate risk. To qualify as a hedge:

a) the transaction must be reasonably expected to match or eliminate
a significant proportion of the risk inherent in the assets, liabilities,
other positions or cashflows being hedged and which results from
potential movements in interest rates, exchange rates and market
values, both at the inception and over the life of the contract;

b) adequate evidence of the intention to hedge and linkage with the
underlying risk inherent in the assets, liabilities, other positions 
or cashflows being hedged, must be established at the start of 
the transaction; and

c) there must be a continual assessment of whether the market 

value of the hedge instrument matches the market value of the
hedged item.

If these criteria are met, the derivative is accounted for in the non-
technical account on the same basis and over the same period as the
underlying hedged item to which it relates.

Qualifying hedges, which cease to be effective or are terminated prior 
to the end of the life of the underlying hedged item, are measured at 
fair value and transferred to the trading portfolio. Any resulting gain or
loss is deferred and amortised to earnings over the original life of the
underlying item.

Off balance sheet financial instruments are measured on a basis
consistent with on balance sheet instruments. Potential losses arising 
on these instruments are recognised as contingent liabilities.

Where the banking business has entered into legally binding contracts
with a counterparty that permits offsets, positive and negative values 
of derivatives are offset within the balance sheet totals.

ASSET MANAGEMENT BUSINESS 
Asset management revenue includes gross fees and commissions which
are credited as earned.

Performance fees are recognised once all contractual obligations 
have been satisfied and the fees are expected to be collected. Any fees
collected in advance are deferred and recognised as income over the
period earned.

Expenses are recognised as they are incurred.

Notes to the Financial Statements | 71

ALL BUSINESSES 
(i) Tax
Tax is charged on all taxable profits arising during the year and 
is determined in accordance with the relevant tax legislation. 

The tax charge attributable to long term business includes the tax expense
for both policyholders and shareholders, at rates applicable to those parties.

The tax attributable to shareholders’ profits on long term business,
calculated at the effective tax rate of the underlying businesses, is added
to the balance on the long term business technical account to present
life assurance profits on a pre-tax basis, and is then included in the tax
expense on profit on ordinary activities in the non-technical account.

Deferred tax assets and liabilities arise from timing differences between
the recognition of gains and losses in the financial statements and their
recognition for tax purposes. Deferred tax liabilities are fully recognised
and deferred tax assets are recognised when the Group believes it is more
likely than not that the asset will be recoverable. Deferred tax assets and
liabilities are recognised on an undiscounted basis.

(ii) Goodwill
Purchased goodwill (representing the excess of the fair value of the
consideration given for acquired businesses and associated costs over
the fair value of net assets acquired) is capitalised and amortised to 
nil by equal annual instalments over its estimated useful life, normally
20 years. 

On the subsequent disposal or termination of a business, the profit 
or loss on disposal or termination is calculated after charging the
unamortised amount of any related goodwill. 

The carrying value of goodwill is reviewed periodically for indicators 
of impairment in value. In determining if any impairment is required,
recoverable amounts are assessed on a value in use basis. Where
businesses are acquired as part of the same investment, these are
combined for the purposes of determining recoverabilty of the related
goodwill. Adjustments to reflect an impairment in value are recognised
in the non-technical account in the period in which the impairment is
determined.

(iii) Tangible fixed assets
Tangible fixed assets, principally computer equipment and software,
motor vehicles, fixtures and furniture, are capitalised and depreciated
by equal annual instalments over their estimated useful lives.

(iv) General provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, for which it is probable
that an outflow of economic benefits will occur, and where a reliable
estimate can be made of the amount of the obligation. Where the effect
of discounting is material, provisions are discounted and the discount
rate used is a pre-tax rate that reflects current market assessments 
of the time value of money and, where appropriate, the risks specific 
to the liability.

(v) Pension plans and post retirement benefits
Defined benefit and defined contribution schemes have been established
for eligible employees of the Group with the assets held in separate
trustee administered funds.

For defined benefit schemes, pension costs are charged to the profit
and loss account so as to spread the related charges over the service
lives of employees and are determined by independent qualified
actuaries undertaking formal actuarial valuations at least every three
years. The effects of variations from regular cost are spread over the
expected average remaining service lives of members of the scheme.
Any difference between the amounts charged against profits and the
amounts contributed to schemes is included as a prepayment or
provision in the balance sheet.

Contributions in respect of defined contribution schemes are recognised
when incurred.

Certain Group companies make provision for post retirement medical 
and housing benefits for eligible employees. The expected costs of post
retirement benefits are charged over the expected working lives of
eligible employees.

(vi) Employee share ownership plans 
The Group offers share award and option plans to management and
certain key employees. The Group offers Save As You Earn plans for all
UK-based employees of participating Group companies. Further details
are provided in the Remuneration Report.

The assets, liabilities, income and expenses of employee share
ownership plans (ESOPs) are incorporated into the financial statements.
Own shares held in ESOP Trusts are shown as a deduction from
shareholders’ equity at cost.

72 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

2 FOREIGN CURRENCIES

The information contained in these financial statements is expressed in both Sterling and South African Rand. This is in order both to meet the legal
requirements of the UK Companies Act 1985 and to provide the users of the accounts in South Africa with illustrative information. 

The principal exchange rates used to translate the operating results, assets and liabilities of key foreign business segments to Sterling are: 

Profit and loss account (average rate for the year)
Balance sheet (closing rate, at 31 December)

2004

11.7986
10.8482

Rand

2003

12.3487
11.9367

2004

1.8327
1.9158

US$

2003

1.6354
1.7833

Foreign currency transactions are translated at average exchange rates for the year. Foreign currency assets and liabilities are translated at year-end
exchange rates. Exchange differences arising from the translation of net investments in foreign subsidiary undertakings are taken to the consolidated
statement of total recognised gains and losses. Exchange differences arising on the translation of foreign integrated operations are taken through the
non-technical profit and loss account. Exchange differences on trading activities are included in the profit and loss account.

3 EARNINGS AND EARNINGS PER SHARE

Basic earnings per share is calculated based upon the profit after tax attributable to equity shareholders. 

The directors’ view is that adjusted operating earnings per share, derived from adjusted operating profit or loss after tax and minority interests, provides 
a better indication of the underlying performance of the Group. For life assurance and general insurance businesses, adjusted operating profit is 
based on a long term investment return and includes investment return on own shares held in policyholders’ funds. For banking business, adjusted
operating profit excludes the loss on disposal of investment in Dimension Data Holdings plc, restructuring and integration costs and the transitional
impact of the change in credit provisioning methodology. For all businesses, adjusted operating profit excludes goodwill amortisation and impairment,
and fines and penalties.

Adjusted operating earnings per share is similarly based, but is stated after tax and minority interests, with the calculation of the weighted average
number of shares including own shares held in policyholders’ funds.

A table reconciling operating profit on ordinary activities after tax and minority interests to adjusted operating profit after tax and minority interests 
is set out below:

Profit on ordinary activities after tax and minority interests
Goodwill amortisation and impairment net of minority interests 
Loss on disposal of investment in Dimension Data Holdings plc 
net of tax and minority interests
Restructuring and integration costs net of tax and minority interests
Change in credit provisioning methodology net of tax and minority interests
Fines and penalties net of tax 
Short term fluctuations in investment returns net of tax and minority interests 
Investment return adjustment for own shares held in policyholders’ funds
Non-operating items net of tax and minority interests

Adjusted operating profit after tax and minority interests

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

Notes

484 
83 

–
8
–
41 
(162)
94 
26

574 

273
128

3
13
31
–
(95)
(12)
32

5,704
971

–
92
–
499
(1,907) 
1,115
312

373

6,786

3,381
1,581

30
160
376
–
(1,170)
(148)
404

4,614

5(d)(ii )

5(d)(iii )

11

5(b)(iv)

17(b)

Notes to the Financial Statements | 73

3 EARNINGS AND EARNINGS PER SHARE continued

Basic earnings per share after tax and minority interests
Impact of inclusion of own shares held in policyholders’ funds in 
weighted average number of shares

Goodwill amortisation and impairment net of minority interests 
Loss on disposal of investment in Dimension Data Holdings plc 
net of tax and minority interests 
Restructuring and integration costs net of tax and minority interests 
Change in credit provisioning methodology net of tax and minority interests 
Fines and penalties net of tax
Short term fluctuations in investment return net of tax and minority interests
Investment return adjustment for own shares held in policyholders’ funds
Non-operating items net of tax and minority interests

p

c

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

14.1

8.0

166.2

99.1

(1.2) 

12.9 
2.2 

– 
0.2
–
1.1
(4.3)
2.5
0.7 

(0.7)

7.3
3.4

0.1
0.3
0.8
–
(2.5)
(0.3)
0.9

(14.0) 

152.2
26.0

–
2.5
–
13.3
(50.9)
29.7
8.3

(8.4) 

90.7
42.4

0.8
4.3
10.1
–
(31.3)
(4.0) 
10.8

Adjusted operating earnings per share after tax and minority interests

15.3

10.0

181.1

123.8

Basic earnings per share is calculated by reference to the profit on ordinary activities after tax and minority interests of £484 million (R5,704 million)
for the year ended 31 December 2004 (2003: £273 million (R3,381 million)) and a weighted average number of shares in issue of 3,432 million
(2003: 3,411 million). The weighted average number of shares is calculated as follows:

Total weighted average number of shares in issue
Shares held in ESOP Trusts

Adjusted weighted average number of shares
Shares held in policyholders’ funds

Weighted average number of shares

millions

At
31 December
2004

At
31 December
2003

3,844 
(96) 

3,748
(316)

3,432

3,824
(97)

3,727
(316)

3,411

In accordance with UITF Abstract 37 “Purchases and Sales of Own Shares”, shares in the Company held in policyholders’ funds are not included 
in the weighted average number of shares used in basic earnings per share calculations. No adjustment is required in respect of UITF Abstract 38
“Accounting for ESOP Trusts” as the shares in the Company held in ESOP Trusts have already been excluded from the calculation as, in the majority 
of cases, the ESOP Trusts have waived their rights to dividends on these shares.

The diluted earnings per share calculation reflects the issue of shares in respect of the ESOP Trusts and the US Dollar Guaranteed Convertible Bond.

74 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

4 DIVIDENDS

Group 
Final dividend proposed: 3.5p (38.0c*) (2003: 3.1p (36.5c)) per 10p share 
Interim dividend paid: 1.75p (20.5c) (2003: 1.7p (19.5c)) per 10p share 

Company 
Final dividend proposed: 3.5p (38.0c*) (2003: 3.1p (36.5c)) per 10p share 
Interim dividend paid: 1.75p (20.5c) (2003: 1.7p (19.5c)) per 10p share 

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

Notes

122 
60

182 

56 
28 

84

106
60

166

49 
26

75

1,323
678

2,001

607
316 

923 

1,265
741 

2,006

585 
321 

906

Provision has been made in the Group financial statements for a final dividend of 3.5p (38.0c*) per share calculated using the number of shares 
in issue at 31 December 2004 of 3,854 million (2003: 3,837 million) less 92 million (2003: 97 million) shares in Employee Share Ownership Plans,
which have waived their rights to dividends and 291 million (2003: 316 million) shares held in policyholders’ funds of Group companies. The dividend
will be paid on 31 May 2005 to shareholders on the register at the close of business on 22 April 2005, being the record date for the dividend.

As a consequence of the exchange control arrangements in place in South Africa and other relevant African territories, dividends to shareholders on
the branch registers in those countries (or in the case of Namibia, the Namibian section of the principal register) are settled through dividend access
trusts established for that purpose. The dividend payable by the Company represents only the proportion of the Group dividend payable to shareholders
on the principal register (other than its Namibian section) and is calculated based on the directors’ estimate of the number of shares that will be on 
that register on the record date for the dividend.

* Indicative only – the actual amount of the dividend per share in Rand will be determined by reference to the exchange rate prevailing on 31 March 2005 and announced by the Company

on 1 April 2005.

Notes to the Financial Statements | 75

South
Africa

United
States

UK and
Rest of
World

£m

Total

South
Africa

United
States

UK and
Rest of
World

Rm

Total

480
(3)

96
12

477

108

53
(10)

89
(11)

43

78

5(d)(i)

5(e)

5(f)

7

18

5(d)(ii)

11

8(a)

5(b)(iv)

177
6

183

89
–
(3)

789
(57)
(21)
–
134

(94)

–
–

–

–
–
–

186
(50)
–
(49)
85

18
2

20

10
4

14

14
–

14

–
(33)
(34)

(19)
(3)
–
–
7

594
11

5,671
(32)

1,126
137

206
25

7,003
130

605

5,639

1,263

231

7,133

152
(17)

639
(120)

1,050
(130)

117
47

1,806
(203)

135

519

920

164

1,603

191
6

2,099
73

197

2,172

89
(33)
(37)

956
(110)
(21)
(49)
226

1,057
– 
(35) 

9,352

(672) 
(246) 

–
1,582 

–
–

–

– 
– 
– 

2,183

(583) 
– 
(596) 
1,003 

158
–

2,257
73

158

2,330

–
(390)
(402)

(293)
(35)
–
–
77

1,057
(390)
(437)

11,296
(1,290)
(246)
(596)
2,662

–

–

(94)

(1,115) 

– 

–

(1,115)

751

172

(15)

908

8,901

2,007

(197)

10,711

479
43
107
125
–
(3)

189
(17)
–
–
–
–

27
11
14
–
(33)
(34)

695
37
121
125
(33)
(37)

5,657
519
1,278
1,482
– 
(35) 

2,219
(212)
– 
– 
– 
– 

308
129
158
–
(390)
(402)

8,184
436
1,436
1,482
(390)
(437)

751

172

(15)

908

8,901

2,007

(197)

10,711

5 SEGMENTAL ANALYSIS

5(a) Summary of operating profit

on ordinary activities before tax

Year to 31 December 2004 
Life assurance

Adjusted operating profit
Inter-segment (revenue)/expenses

Adjusted operating profit,
net of inter-segment transactions

Notes

5(b)(iii)

Asset management

5(c)(i)

Adjusted operating profit
Inter-segment (revenue)/expenses

Adjusted operating profit,
net of inter-segment transactions

Banking

Adjusted operating profit
Inter-segment (revenue)/expenses

Adjusted operating profit,
net of inter-segment transactions

General insurance business 
Other shareholders’ income/expenses
Debt service costs

Adjusted operating profit/(loss), 
net of inter-segment transactions
Goodwill amortisation and impairment
Restructuring and integration costs
Fines and penalties
Short term fluctuations in investment return
Investment return adjustment for 
own shares held in policyholders’ funds

Operating profit/(loss) on ordinary activities 
before tax 

Analysed as:
Life assurance
Asset management 
Banking 
General insurance business 
Other shareholders’ income/expenses
Debt service costs

Operating profit/(loss) on ordinary activities 
before tax

76 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

South
Africa

United
States

UK and
Rest of
World

Notes

5(b)(iii)

438
(7)

431

55
(2)

53

(10)
–

(10)

73
–
(4)

543
(140)

(5)
(32)
(87)
(37)

12

85
11

96

81
(10)

71

–
–

–

–
–
–

167
(57)

–
–
–
196

–

20
4

24

(8)
4

(4)

4
–

4

–
(40)
(44)

(60)
(9)

–
–
–
(16)

5 SEGMENTAL ANALYSIS continued

5(a) Summary of operating profit

on ordinary activities before tax

Year to 31 December 2003 (restated) 
Life assurance

Adjusted operating profit
Inter-segment (revenue)/expenses

Adjusted operating profit,
net of inter-segment transactions

Asset management

5(c)(i)

5(d)(i)

5(e)

5(f)

7

18

5(d)(ii)

5(d)(iii)

8(a)

5(b)(iv)

Adjusted operating profit
Inter-segment (revenue)/expenses

Adjusted operating profit,
net of inter-segment transactions

Banking

Adjusted operating profit
Inter-segment (revenue)/expenses

Adjusted operating profit,
net of inter-segment transactions

General insurance business 
Other shareholders’ income/expenses
Debt service costs

Adjusted operating profit/(loss), 
net of inter-segment transactions
Goodwill amortisation
Loss on disposal of investment 
in Dimension Data Holdings plc
Restructuring and integration costs
Change in credit provisioning methodology
Short term fluctuations in investment return
Investment return adjustment for 
own shares held in policyholders’ funds

Operating profit/(loss) on ordinary activities 
before tax 

Analysed as:
Life assurance
Asset management 
Banking 
General insurance business 
Other shareholders’ income/expenses
Debt service costs

Operating profit/(loss) on ordinary activities 
before tax

–

12

148

– 

–

148

254

306

(85)

475

3,154

3,779

(1,049)

5,884

402
53
(272)
75
–
(4)

254

288
18
–
–
–
–

306

12
(13)
4
–
(44)
(44)

702
58
(268)
75
(44)
(48)

4,964
656
(3,350)
933
– 
(49) 

3,556
223
– 
– 
– 
– 

149
(159)
48
–
(543)
(544)

8,669
720
(3,302)
933
(543)
(593)

(85)

475

3,154

3,779

(1,049)

5,884

The 2004 segmental analysis has been prepared on a gross of inter-segment transactions basis. 2003 comparatives have been restated to be
consistent with the current year presentation.

£m

Total

543
8

South
Africa

United
States

UK and
Rest of
World

Rm

Total

5,408
(86)

1,050
135

248
49

6,706
98

551

5,322

1,185

297

6,804

128
(8)

678
(22)

1,000
(123)

(95)
47

1,583
(98)

120

656

877

(48)

1,485

(6)
–

(6)

73
(40)
(48)

(118)
–

(118)

909
– 
(49) 

–
–

–

– 
– 
– 

650
(206)

6,720
(1,730) 

2,062
(703) 

(5)
(32)
(87)
143

(60) 
(394) 
(1,074)
(456) 

–
– 
–
2,420 

48
–

48

–
(494)
(544)

(741)
(111)

–
–
–
(197)

(70)
–

(70)

909
(494)
(593)

8,041
(2,544)

(60)
(394) 
(1,074) 
1,767

Notes to the Financial Statements | 77

South
Africa

United
States

UK and
Rest of
World

£m

Total

South
Africa

United
States

UK and
Rest of
World

Rm

Total

633
940

2,169
205

1,573

2,374

434
299

733

–
–

–

135
46

181

18
22

40

2,937
1,191

7,467
11,088

25,594
2,415

1,597
544

34,658
14,047

4,128

18,555

28,009

2,141

48,705

452
321

773

5,116
3,532

8,648

–
–

–

213
252

465

5,329
3,784

9,113

2,306

2,374

221

4,901

27,203

28,009

2,606

57,818

563
833

1,396

715
294

1,009

2,405

1,815
186

2,001

–
–

–

87
51

2,465
1,070

6,952
10,286

22,413
2,297

1,074
630

30,439
13,213

138

3,535

17,238

24,710

1,704

43,652

20
13

33

735
307

8,829
3,631 

1,042

12,460

– 
– 

–

247
161 

9,076
3,792

408

12,868

2,001

171

4,577

29,698

24,710

2,112

56,520

633 
157 

790

434 
15 

449 

2,169
58

2,227

– 
– 

– 

135
8

143

18
2

20

2,937
223

7,467
1,858

25,594
679

1,597
97

34,658
2,634

3,160

9,325

26,273

1,694

37,292

452
17

469

5,116
182

5,298

–
–

–

213
21

234

5,329
203

5,532

5 SEGMENTAL ANALYSIS continued

5(b) Life assurance

(i) Gross premiums written 
Year to 31 December 2004 
Individual business 

Single
Recurring

Group business 

Single
Recurring

Total gross premiums 

Year to 31 December 2003 
Individual business 

Single
Recurring

Group business 

Single
Recurring

Total gross premiums 

(ii) Gross new business premiums written 
Year to 31 December 2004 
Individual business 

Single
Recurring

Group business 

Single
Recurring

Total gross new business premiums written

1,239 

2,227

163

3,629

14,623

26,273

1,928

42,824

Annual premium equivalent

279 

275

25

579

3,298

3,238

299

6,835

78 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

5 SEGMENTAL ANALYSIS continued

5(b) Life assurance continued

(ii) Gross new business premiums 

written continued

Year to 31 December 2003 
Individual business 

Single
Recurring

Group business 

Single
Recurring

South
Africa

United
States

UK and
Rest of
World

563 
158 

721

715 
18

733 

1,815
76

1,891

– 
– 

– 

87
7

94

20
3

23

117

21

£m

Total

2,465
241

2,706

735
21

756

South
Africa

United
States

UK and
Rest of
World

Rm

Total

6,952
1,951

8,903

8,829
222

9,051

22,413
939

23,352

1,074
86

1,160

30,439
2,976

33,415

–
–

–

247
37

284

9,076
259

9,335

3,462

17,954

23,352

1,444

42,750

583

3,751

3,180

255

7,186

Total gross new business premiums written

1,454 

1,891

Annual premium equivalent

304

258

Annual premium equivalent is defined as one-tenth of single premiums plus recurring premiums.

(iii) Life assurance adjusted operating profit 
Year to 31 December 2004 
Individual business
Group business

Life assurance technical result
Long term investment return

Adjusted operating profit
Inter-segment (revenue)/expenses

Adjusted operating profit, net 
of inter-segment transactions

Year to 31 December 2003 
Individual business
Group business

Life assurance technical result
Long term investment return

Adjusted operating profit
Inter-segment (revenue)/expenses

Adjusted operating profit, net 
of inter-segment transactions

South
Africa

United
States

UK and
Rest of
World

224 
89

313
167

480
(3)

96
– 

96
– 

96
12

477

108

190
70

260
178

438
(7)

431

85
– 

85
– 

85
11

96

11
2

13
5

18
2

20

13
2

15
5

20
4

24

£m

Total

331
91

422
172

594
11

South
Africa

United
States

UK and
Rest of
World

2,643
1,054

3,697
1,974

5,671
(32)

1,126
– 

1,126
– 

1,126
137

123
32

155
51

206
25

Rm

Total

3,892
1,086

4,978
2,025

7,003
130

605

5,639

1,263

231

7,133

288
72

360
183

543
8

2,346
864

3,210
2,198

5,408
(86)

1,050
– 

1,050
– 

1,050
135

161
25

186
62

248
49

3,557
889

4,446
2,260

6,706
98

551

5,322

1,185

297

6,804

Inter-segment (revenue)/expenses represents investment management fees paid to the Group’s asset management companies and administration fees
(received from)/paid to Group life assurance companies.

Notes to the Financial Statements | 79

5 SEGMENTAL ANALYSIS continued

5(b) Life assurance continued

(iv) Investment return adjustment for own shares held in policyholders’ funds 
Dividend income
Realised gains on investment in own shares
Unrealised gains/(losses) on investment in own shares

Net investment gain/(loss) on own shares

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

16
2
76

94

14
–
(26)

(12)

190
28
897 

1,115

173
– 
(321) 

(148) 

(v) Other technical income
Other technical income of £84 million (R991 million) (2003: £94 million (R1,161 million)) principally consists of fees earned in respect of South African
policyholders’ funds and fees earned for healthcare administration.

5(c)(i) Asset management

Year to 31 December 2004
South Africa 
Fund management
Old Mutual Asset Managers 
Old Mutual Unit Trusts 
Other 

Other financial services
Nedcor Unit Trusts and Portfolio Management

Note

Revenue

Adjusted
Expenses operating profit

Revenue

Adjusted
Expenses operating profit

£m

Rm

42
23
52

117
16
32

165

(24)
(19)
(42)

(85)
(3)
(24)

(112)

18 
4 
10 

32
13 
8 

53 

497
273 
619 

1,389 
192
378 

(282) 
(220) 
(495) 

(997) 
(40) 
(283) 

1,959 

(1,320) 

215
53
124

392
152
95

639

US asset management

5(c)(ii)

367

(278)

89

4,330

(3,280) 

1,050

UK & Rest of World
Fund management
Selestia investment platform
Other financial services
Nedcor Unit Trusts and Portfolio Management

48
7
18
34

107

(31)
(12)
(26)
(28)

(97)

17
(5) 
(8) 
6 

10 

566
83
212 
401 

(366) 
(142) 
(307) 
(330) 

1,262 

(1,145) 

200
(59)
(95)
71

117

Adjusted operating profit

639

(487)

152 

7,551 

(5,745) 

1,806

Inter-segment (revenue)/expenses
South Africa
US asset management
UK & Rest of World

Adjusted operating profit, 
net of inter-segment transactions
South Africa
US asset management
UK & Rest of World

(19)
(11)
–

(30)

146
356
107

609

9
–
4

13

(103)
(278)
(93)

(474)

(10) 
(11)
4 

(17) 

(224) 
(130) 

–

(354)

104
–
47

151 

43
78 
14 

1,735 
4,200
1,262

(1,216) 
(3,280) 
(1,098) 

(120)
(130)
47

(203)

519
920
164

135 

7,197 

(5,594) 

1,603

80 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

5 SEGMENTAL ANALYSIS continued

5(c)(i) Asset management continued

Note

Revenue

Expenses

£m

Adjusted
operating profit

Revenue

Expenses

Rm

Adjusted
operating profit

Year to 31 December 2003
South Africa 
Fund management
Old Mutual Asset Managers 
Old Mutual Unit Trusts 
Other 

Other financial services
Nedcor Unit Trusts and Portfolio Management

US asset management

5(c)(ii)

UK & Rest of World
Fund management 
Private client – Gerrard 
Selestia investment platform 
Other financial services
Nedcor Unit Trusts and Portfolio Management

Adjusted operating profit

Inter-segment (revenue)/expenses
South Africa
US asset management
UK & Rest of World

Adjusted operating profit, 
net of inter-segment transactions
South Africa
US asset management
UK & Rest of World

37
21
16

74
42
36

152

347

43
91
3
10
42

189

688

(4)
(10)
–

(14)

148
337
189

674

(20)
(15)
(12)

(47)
(24)
(26)

(97)

(266)

(37)
(83)
(12)
(24)
(41)

(197)

(560)

2
–
4

6

(95)
(266)
(193)

(554)

17
6
4

27
18
10 

55 

81 

6
8 
(9) 
(14)
1

(8) 

128

(2)
(10)
4

(8) 

53
71
(4)

120

458
259
200 

917 
519 
445 

(247) 
(185) 
(148) 

(580) 
(302) 
(321) 

1,881 

(1,203) 

211
74
52

337 
217 
124 

678 

4,285 

(3,285) 

1,000

531 
1,124
37
123 
519 

2,334 

8,500

(52) 
(123) 
–

(175)

1,829 
4,162
2,334

8,325 

(454) 
(1,025) 
(148) 
(296) 
(506) 

(2,429) 

(6,917) 

30
–
47

77 

(1,173) 
(3,285) 
(2,382) 

77 
99
(111)
(173)
13 

(95)

1,583

(22)
(123) 
47

(98)

656
877
(48)

(6,840) 

1,485

Adjusted operating profit includes £6 million (R73 million) (2003: nil) in relation to interest received on short-term funding provided to the Group’s
banking subsidiary. The remainder of the inter-segment (revenue)/expenses represents, investment management fees (received from)/paid to the
Group’s life assurance companies and other asset management companies.

5(c)(ii) US asset management

Revenue 
Investment management fees
Transaction, performance and other fees

Expenses 
Remuneration expenses
Other expenses

Adjusted operating profit

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

311 
56

367

121
157

278 

89

304
43

347

117
149

266

81

3,669 
661

4,330

1,428
1,852

3,280

1,050

3,754 
531 

4,285

1,445
1,840

3,285

1,000

5 SEGMENTAL ANALYSIS continued

5(d) Banking

(i) Banking adjusted operating profit 
Year to 31 December 2004
Interest receivable 
Interest payable

Net interest income
Dividend income 
Fees and commissions receivable 
Fees and commissions payable 
Net other operating income 

Total operating income 
Specific and general provisions charge

Net income
Operating expenses 

Share of associated undertakings’ profit 

Adjusted operating profit
Inter-segment (revenue)/expenses

Adjusted operating profit, 
net of inter-segment transactions

Year to 31 December 2003 
Interest receivable 
Interest payable 

Net interest income 
Dividend income 
Fees and commissions receivable 
Fees and commissions payable 
Net other operating income 

Notes to the Financial Statements | 81

Notes

South
Africa

UK and
Rest of
World

£m

Total

South
Africa

UK and
Rest of
World

Rm

Total

26(d)

1,917
(1,320) 

597
12 
504
(59) 
176 

1,230 
(116) 

1,114

(942) 

172
5 

177
6

183

2,156
(1,643) 

513
12
396
(36)
157

1,042
(232)

810
(824) 

(14) 
4 

(10)

112
(71) 

41
–
11
(2) 
–

50
(4) 

46
(38) 

8
6 

14
–

14

114
(80) 

34
–
19
(2)
14

65
(2) 

63
(65) 

(2)
6

4

2,029
(1,391) 

22,619
(15,576)

1,325
(839)

23,944
(16,415)

638
12 
515
(61) 
176

1,280

(120) 

1,160

(980) 

180
11 

191
6

7,043
143
5,940 
(694) 

2,082

14,514
(1,370) 

13,144
(11,108) 

2,036
63 

2,099
73

486
–
133
(21) 
(3)

595
(45) 

550
(454) 

96
62 

158
–

7,529
143
6,073
(715)
2,078

15,109
(1,415)

13,694
(11,562)

2,132
125 

2,257
73

197

2,172

158

2,330

2,270
(1,723)

26,619
(20,295)

1,411
(981)

28,030
(21,276)

547
12
415
(38)
171

1,107
(234)

873
(889)

(16)
10

(6)

6,324
150
4,891
(445)
1,946

12,866
(2,868)

9,998
(10,169)

(171)
53

(118)

430
2
229
(28)
172

805
(18)

787
(807)

(20)
68

48

6,754
152
5,120
(473)
2,118

13,671
(2,886)

10,785
(10,976)

(191)
121

(70)

Total operating income
Specific and general provisions charge

5(d)(iii),26(d)

Net income 
Operating expenses

Share of associated undertakings’ profit 

Adjusted operating (loss)/profit

Operating expenses include translation losses of £32 million (R372 million) (2003: £110 million (R1,356 million)). Adjusted operating profit includes
£6 million (R73 million) in relation to inter-company interest payable for short term funding now repaid.

82 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

5 SEGMENTAL ANALYSIS continued

5(d) Banking continued

(ii) Restructuring and integration costs
Costs before tax and minority interests
Tax

Costs after tax and before minority interests
Minority interests

Costs after tax and minority interests

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

21
(6)

15
(7)

8

32
(6)

26
(13)

13

246
(71)

175
(83)

92

394
(74)

320
(160)

160

Restructuring and integration costs incurred in connection with the acquisition of BoE by Nedcor Limited have been excluded from adjusted operating profit.

(iii) Change in credit provisioning methodology
Costs before tax and minority interests
Tax

Costs after tax and before minority interests
Minority interests

Costs after tax and minority interests

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

–
–

–
–

–

87
(26)

61
(30)

31

–
–

–
–

–

1,074
(322)

752
(376)

376

During 2003, the Group’s banking subsidiary, Nedcor Limited, implemented a revised methodology for the calculation of credit provisions for loans 
and advances in accordance with changes to local reporting requirements (AC133: “Financial Instruments – Recognition and Measurement”). 
The revised methodology requiring the discounting of future cash flows on advances is acceptable under UK GAAP reporting and was therefore
adopted in preparation of the Group’s financial statements, resulting in a one-off increase in opening specific provisions due to the discounting effect. 

This adjustment has been taken to the profit and loss account in the Group’s financial statements, but excluded from adjusted operating profit.

5 SEGMENTAL ANALYSIS continued

5(e) General insurance result

Year to 31 December 2004
Commercial
Corporate
Personal lines
Risk financing

Long term investment return

Year to 31 December 2003
Commercial
Corporate
Personal lines
Risk financing

Long term investment return

Notes to the Financial Statements | 83

£m

Gross
premiums
written

Earned 
premiums
net of 
reinsurance

Claims
incurred
net of
reinsurance

Adjusted
operating
profit

Gross
premiums
written

Earned 
premiums
net of 
reinsurance

Claims
incurred
net of
reinsurance

235
45 
249
95 

624

201
54
212
59 

526

219
19
244
89

571

185
17
206
52

460

(133)
(10)
(173)
(53)

(369)

(123)
(13)
(150)
(36)

(322)

2,777
528
2,938
1,117

7,360

2,583
225
2,878
1,050

(1,579)
(118)
(2,039)
(607)

6,736

(4,343)

2,482
667
2,618
719

6,486

2,284
210
2,543
637

5,674

(1,516)
(156)
(1,853)
(442)

(3,967)

29
4
8
3

44

45

89

17
(1)
6
4

26

47

73

£m

Rm

Adjusted
operating
profit

329
49
100
49

527

530

1,057

216
(15)
75
53

329

580

909

Rm

5(f) Other shareholders’ income/expenses

Distribution from unclaimed share trust 
Provision for contributions to public benefit and charitable organisations
Interest receivable
Net corporate expenses
Net other expenses

Other shareholders’ income/(expenses)

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

16
(16)
8
(41)
–

(33)

–
–
6
(41)
(5)

(40)

190
(190)
94
(484)
–

(390)

–
–
74
(506)
(62)

(494)

In accordance with proposals announced by the Company on 23 February 2004, and approved by its shareholders on 14 May 2004, during the year
the Company received £16 million (R190 million) from the Old Mutual (South Africa) Unclaimed Shares Trust. This amount represents accumulated
dividends and interest accrued thereon in respect of shares of the Company unclaimed at 18 August 2004, being the expiry date for claims notified 
to the trustees of that trust following the fifth anniversary of the demutualisation of the South African Mutual Life Assurance Society. It is the firm
intention of the Board that all of this money will eventually be contributed to public benefit and charitable organisations and, therefore, full provision 
has been made for the cost of making such contributions. 

Net corporate expenses include £6 million (R71 million) (2003: £5 million (R62 million)) in connection with the International Financial Reporting
Standards conversion and Group-wide Economic Capital Projects.

84 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

5 SEGMENTAL ANALYSIS continued

5(g) Net assets

At 31 December 2004
Life assurance
Asset management
Banking
General insurance
Other

Debt
Preferred security

Net assets

At 31 December 2003
Life assurance
Asset management
Banking
General insurance
Other

Debt
Preferred securities

Net assets

South
Africa

United
States

UK and
Rest of
World

1,089
115
546 
257
– 

1,225
840
– 
– 
– 

2,007

2,065

1,063
145
224
115
– 

1,547

1,012
900
–
– 
–

1,912

93
20
215
– 
29

357

69
240
273
–
(127)

455

£m

Total

2,407
975
761
257
29

South
Africa

United
States

11,814
1,248
5,923
2,788
– 

13,289
9,112
– 
– 
– 

Rm

Total

26,112
10,577
8,255
2,788
314

UK and
Rest of
World

1,009
217
2,332
– 
314

4,429 

21,773

22,401

3,872

48,046

(799)
(385)

3,245

(8,668)
(4,177)

35,201 

2,144
1,285
497
115
(127) 

12,689
1,731
2,674
1,373
– 

12,080
10,743
–
–
–

823
2,865
3,259
– 
(1,516)

25,592
15,339
5,933
1,373
(1,516) 

3,914 

18,467

22,823

5,431

46,721

(749)
(411)

2,754

(8,941)
(4,906)

32,874

Preference shares issued by the Group’s banking subsidiary are included within banking net assets. US$750 million cumulative preferred securities
have been separately identified and shown net of unamortised issue costs and undistributed profits due to minority interests.

5(h) Banking business average assets

Nedbank Corporate
Imperial Bank
Nedbank Capital
Nedbank Retail and Wealth
Peoples Bank
Shared services
Capital management and central funding
Inter-segment eliminations and other adjustments

Average interest-earning assets

Net interest margin (based on average assets)

During 2004, the operations of Peoples Bank were integrated within the operations of Nedbank.

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

11,078
1,253
16,258
8,799
–
1,840
6,879
(22,326)

10,790
864
13,692
6,496
1,183
1,145
2,868
(13,472)

130,699
14,785
191,820 
103,812 
– 
21,708
81,161
(263,419)

133,245
10,674
169,080
80,220
14,612
14,145
35,412
(166,366) 

23,781

23,566 

280,566

291,022

21,302

18,515

251,339

228,637

3.00

% 

2.95

3.00

%

2.95

Notes to the Financial Statements | 85

5 SEGMENTAL ANALYSIS continued

5(i) Funds under management

At 31 December 2004
Investments including assets held
to cover linked liabilities

SA asset management
Fund management

Old Mutual Asset Managers
Old Mutual Unit Trusts

Nedcor Unit Trusts
Nedcor Portfolio Management
Other financial services

South
Africa

United
States

UK and
Rest of
World

£m

Total

South
Africa

United
States

UK and
Rest of
World

Rm

Total

21,938

9,857

2,795

34,590 237,987 106,931

30,321 375,239

8,011
288

8,299
1,428
3,113
1,016

13,856 

– 
– 

– 
– 
–
– 

–

– 
– 

– 
–
–
– 

–

8,011
288

8,299
1,428
3,113
1,016

86,905
3,124 

90,029
15,491
33,770
11,022

13,856  150,312

– 
– 

– 
– 
–
– 

–

– 
– 

– 
–
–
– 

86,905
3,124

90,029
15,491
33,770
11,022

– 150,312

US asset management

– 

80,289

6,561

86,850

– 870,991

71,175 942,166

UK and Rest of World asset management
Fund management
Selestia investment platform 
Nedcor Unit Trusts
Nedcor Portfolio Management
Other financial services

– 
– 
– 
– 
– 

– 

– 
– 
– 
– 
– 

– 

2,210
531
565
1,252
270 

4,828

2,210
531
565
1,252
270

4,828

– 
– 
– 
– 
– 

– 

– 
– 
– 
– 
– 

– 

23,975
5,760 
6,129
13,582
2,929

23,975
5,760
6,129
13,582
2,929

52,375

52,375

Total funds under management

35,794

90,146

14,184 140,124 388,299 977,922 153,871 1,520,092

86 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

5 SEGMENTAL ANALYSIS continued

5(i) Funds under management continued

At 31 December 2003
Investments including assets held
to cover linked liabilities (restated)

SA asset management
Fund management

Old Mutual Asset Managers
Old Mutual Unit Trusts

Nedcor Unit Trusts
Nedcor Portfolio Management
Other financial services

South
Africa

United
States

UK and
Rest of
World

£m

Total

South
Africa

United
States

UK and
Rest of
World

Rm

Total

19,437

8,317

1,539

29,293

232,012

99,278

18,371

349,661

5,378
293

5,671
865
2,771
697

10,004

– 
– 

– 
– 
–
– 

–

– 
– 

– 
–
–
– 

–

5,378
293

5,671
865
2,771
697

64,196
3,497 

67,693
10,325
33,770
8,320

10,004

119,415

– 
– 

– 
– 
–
– 

–

– 
– 

– 
–
–
– 

–

64,196
3,497 

67,693
10,325
33,770
8,320

119,415

US asset management

– 

72,532

5,895

78,427

–

865,793

70,367

936,160

UK and Rest of World asset management
Fund management
Selestia investment platform 
Nedcor Unit Trusts
Nedcor Portfolio Management
Other financial services

– 
– 
– 
– 
– 

– 

– 
– 
– 
– 
– 

– 

2,027
213
707
4,210
345

7,502

2,027
213
707
4,210
345

7,502

– 
– 
– 
– 
– 

– 

– 
– 
– 
– 
– 

– 

24,196
2,543
8,439
50,254
4,118

24,196
2,543
8,439
50,254
4,118

89,550

89,550

Total funds under management

29,441

80,849

14,936

125,226

351,427

965,071

178,288 1,494,786

6 INVESTMENT INCOME

Technical account – long term business
Income from investment properties
Income from other financial investments
Gains on the realisation of investments

Non-technical – insurance and asset management businesses
Income from other financial investments
Gains on the realisation of investments

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

53 
1,406 
1,088 

2,547 

40 
6 

46 

50 
1,345 
589 

1,984 

34 
7 

41 

625 
16,589 
12,837 

30,051 

472 
71 

543 

617 
16,609 
7,273 

24,499 

420 
86 

506 

7 INVESTMENT EXPENSES AND CHARGES

Technical account – long term business
Interest payable
Investment management expenses

Non-technical account – insurance and asset management businesses
Interest payable
Other finance costs

Notes to the Financial Statements | 87

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

4 
27 

31 

22 
15 

37 

7
17 

24 

33 
15 

48 

47 
319 

366 

260 
177 

437 

86 
210 

296 

408 
185 

593 

8 INSURANCE LONG TERM INVESTMENT RETURN ON SHAREHOLDERS’ FUNDS

As permitted by the ABI SORP, balances on the long term business and general business technical accounts are stated after allocating 
an investment return earned by the insurance businesses, based on a long term investment return, to/from the non-technical account. 

For the South African and Namibian long term business, the return is applied to an average value of investible shareholders’ assets. For general
insurance business, the return is an average value of investible assets supporting shareholders’ funds and insurance liabilities. For the US long term
business, the return earned by assets, mainly bonds, has been smoothed with reference to the actual yield earned by the portfolio. Short term
fluctuations in investment return represent the difference between actual return and long term investment return. 

The long term rates of investment return for equities and other investible assets are as follows:

South Africa and Namibian long term and general insurance businesses – weighted average return

Equities
Cash and other investible assets – Rand denominated
Cash and other investible assets – other currencies

United States

Year to
31 December
2004

Year to
31 December
2003

12.5%
14.0%
11.0%
8.0%

13.0%
14.0%
12.5%
9.0%

6.00%

6.04%

The long term rates of return are based on achieved real rates of return adjusted for current inflation expectations and consensus economic 
investment forecasts, and are reviewed annually for appropriateness. The directors are of the opinion that these rates of return are appropriate and
have been selected with a view to ensuring that returns credited to operating earnings are not inconsistent with the actual returns expected to be
earned over the long term.

88 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

8 INSURANCE LONG TERM INVESTMENT RETURN ON SHAREHOLDERS’ FUNDS continued

8(a) Analysis of short term fluctuations in investment return

Long term business
Actual investment return attributable to shareholders
Long term investment return credited to operating result

General insurance business
Actual investment return attributable to shareholders
Long term investment return credited to operating result

Other income
Actual investment return attributable to shareholders
Long term investment return credited to operating result

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

360 
172 

188

83
45 

38

–
–

–

326 
183 

143 

51 
47 

4

(3)
1 

(4)

4,238
2,025

2,213

979
530 

449

– 
–

– 

4,026 
2,260 

1,766 

630
580 

50

(37)
12 

(49)

Excess of actual return over longer term return

226

143

2,662

1,767 

8(b) Five year comparison of long term investment return with actual investment return

2000-2004

1999-2003

2000-2004

1999-2003

£m

Rm

Long term business
Actual investment return attributable to shareholders
Long term investment return credited to operating result

General insurance business
Actual investment return attributable to shareholders
Long term investment return credited to operating result

Other income
Actual investment return attributable to shareholders
Long term investment return credited to operating result

Excess of actual return over longer term return

1,030
862 

168 

1,400
877

523

12,655
10,634

2,021

15,614 
10,453 

5,161 

267 
212 

55 

31 
30 

1 

224 

414
223

191

113
51

62

776

3,130
2,635

495

481
340

141

2,657

4,419 
2,657 

1,762 

1,289 
547 

742 

7,665 

United States
The above table includes investment returns on the US life business since date of acquisition, 1 July 2001.

9 NET OPERATING EXPENSES

Long term business
Acquisition costs
Administration expenses

General insurance business
Acquisition costs
Administration expenses

10 PROFIT ON ORDINARY ACTIVITIES BEFORE TAX

Profit on ordinary activities before tax is stated
After crediting
Aggregate rentals receivable under

Finance leases
Operating leases

Income from listed investments
Gains on the disposal of investment securities – banking

After charging
Depreciation
Rental charges – operating leases and similar hire purchase
Auditors’ remuneration

10(a) Auditors’ remuneration

Total fees payable to the Group’s auditors
Statutory audit services
Other audit and assurance services

Tax services – advisory

– compliance

Other services

Notes to the Financial Statements | 89

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

181 
339 

520 

112 
46 

158 

2,136 
4,000 

6,136

1,316 
550 

1,866 

179 
319 

498 

78 
34 

112 

£m

2,210 
3,939 

6,149 

958 
420 

1,378 

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

93 
27 
1,379
1 

103 
65 
12 

1,097 
319 
16,270 
12 

1,216 
767 
145 

15 
14 
1,105 
18 

113 
53 
11 

£m

185 
173 
13,645 
222 

1,392 
654 
130 

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

5.2 
2.2 

7.4 
0.4 
0.1 
4.4 

4.5 
3.5

8.0 
0.4 
0.1 
2.0 

61
26 

87 
5 
1 
52 

56
43

99 
5 
1 
25

12.3 

10.5 

145 

130 

Included in the above are audit fees payable by the Company of £0.4 million (R4.7 million) (2003: £0.4 million (R4.9 million)). In addition to the above,
fees of £2.5 million (R30 million) (2003: £1.6 million (R20 million)) were payable to other auditors in respect of joint audit arrangements of certain
banking subsidiaries. “Other services” consists primarily of advisory work in connection with the International Financial Reporting Standards conversion.

90 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

11 FINES AND PENALTIES

On 21 June 2004, one of the Group’s US asset management affiliates, Liberty Ridge Capital Inc. (formerly known as Pilgrim Baxter & Associates, Ltd
(PBA)), reached agreements with the US Securities and Exchange Commission (SEC) and the office of the New York State Attorney General (NYAG)
which settle all charges brought by these authorities against PBA in relation to market timing in the US Mutual Fund business.

PBA agreed to pay US$40 million in disgorgement of past fees, as well as US$50 million in civil penalties. This has resulted in a charge of £49 million
(R596 million) for the year, which has been taken to the profit and loss account in the Group’s financial statements, but excluded from adjusted
operating profit. Tax deductions have been recognised on the disgorgement of past fees, resulting in a tax credit of £8 million (R97 million).

In addition PBA will reduce fees to investors by approximately US$10 million over the next five years.

There are several related private lawsuits arising from the conduct alleged in the civil suits filed by the SEC and NYAG. These class action lawsuits
were consolidated into a single lawsuit along with all other cases against US parties alleging market timing and late trading violations. Proceedings 
in this case are at a preliminary stage and it is not possible to say, at this time, whether or not the amount of the ultimate liability to be borne by the
Group will be material. As a result, no amount has been recognised for additional fines or other penalties that may arise, as significant uncertainty
remains over the quantum of any settlement.

12 DIRECTORS’ EMOLUMENTS AND INTERESTS

The remuneration payable to the directors of the Company for their services to the Group, including the estimated money value of benefits in kind,
share options, long term incentive plans and pension arrangements, for the year to 31 December 2004 is shown in the Remuneration Report on 
pages 44 to 52.

The interests of directors of the Company in shares of the Company and its quoted subsidiaries are shown in the Corporate Governance and 
Directors’ Report on page 27.

At 31 December 2004, one director of the Company had a loan advance outstanding of £0.1 million (R1 million) (2003: 1 director, £0.1 million 
(R1 million)) with banking subsidiaries of the Group. This loan has been provided on normal commercial terms.

13 REMUNERATION EXPENSES

The aggregate remuneration payable in respect of employees during the year was:
Wages and salaries
Social security costs
Pension costs

13(a) Particulars of staff

The average number of persons employed by the Group during the year was:
Life assurance
Asset management
Banking
General insurance
Other

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

893 
19 
45 

957 

840 
18 
38 

896 

10,536 
224 
531 

11,291

10,373 
222 
469 

11,064 

Year to
31 December
2004

Year to
31 December
2003

13,480 
3,173 
21,293 
3,252 
138 

41,336 

14,093 
3,942 
23,252 
3,292 
110 

44,689 

Notes to the Financial Statements | 91

14 EMPLOYEE BENEFITS

14(a) Employee pension plans
The Group operates a number of pension schemes around the world. These schemes have been designed and are administered in accordance 
with local conditions and practices in the countries concerned and include both defined contribution and defined benefit schemes. The assets of 
these schemes are held in separate trustee administered funds.

Pension costs and contributions relating to defined benefit schemes are assessed in accordance with the advice of qualified actuaries. Actuarial
advice confirms that the current level of contributions payable to each pension scheme, together with existing assets, are adequate to secure
members’ benefits over the remaining service lives of participating employees. The schemes are reviewed at least on a triennial basis or in
accordance with local practice and regulations. In the intervening years, the actuary reviews the continuing appropriateness of the assumptions
applied. The actuarial assumptions used to calculate the projected benefit obligations of the Group’s pension schemes vary according to the
economic conditions of the countries in which they operate.

The last full actuarial valuations were performed for the various schemes between 30 June 2002 and 31 December 2004 and, in accordance 
with the transitional arrangements of FRS 17, have been updated by either internal or external actuaries at 31 December 2004. The major
assumptions used in these valuations were:

Inflation assumption
Rate of increase in salaries
Rate of increase in pensions in payment
Discount rate

At 31 December 2004

At 31 December 2003

At 31 December 2002

South
African
schemes

UK
schemes

South
African
schemes

UK
schemes

South
African
schemes

UK
schemes

4.0% 2.75 –3.0%
5.5% 5.0 – 4.75%
4.0% 2.7 – 3.0%
8.5% 2.25 – 2.3%

5.0% 2.0– 2.5%
6.5% 1.8– 2.5%
6.5% 4.0– 4.5% 7.5– 8.0% 3.5– 4.5%
4.8% 2.0– 3.0%
11.0% 1.8– 3.1%
9.5% 5.3– 5.5% 11.0–11.5% 5.5– 6.5%

The assumptions used by the actuaries are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescale
covered, may not necessarily be borne out in practice.

The fair value of and expected return on the schemes’ assets, which are not intended to be realised in the short term and may be subject to 
significant change before they are realised, and the present value of the schemes’ liabilities, which are derived from cash flow projections over 
long periods and thus inherently uncertain, were:

At 31 December 2004
Equities
Bonds
Insurance policies and annuities
Cash

Total market value of assets
Present value of liabilities

Net pension surplus 
Associated deferred tax asset

Net pension surplus after deferred tax 

Expected long term
rate of return

£m

Rm

South
African
schemes

UK
schemes

Value of
assets

Value of
assets

11.5% 7.5– 8.3%
8.5% 4.5–5.3%
5.3%
6.5%
9.5% 4.75–4.8%

129 
91 
150 
12 

382
(364)

18
(1)

17

1,399 
987 
1,627 
130

4,143
(3,949)

194
(16)

178

92 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

14 EMPLOYEE BENEFITS continued

14(a) Employee pension plans continued

At 31 December 2003
Equities
Bonds
Insurance policies and annuities
Cash

Total market value of assets
Present value of liabilities

Net pension surplus

At 31 December 2002
Equities
Bonds
Insurance policies and annuities
Cash

Total market value of assets
Present value of liabilities

Net pension deficit

Expected long term
rate of return

£m

Rm

South
African
schemes

UK
schemes

Value of
assets

Value of
assets

12.5%

7.5%
9.5% 4.8– 5.5%
9.5% 4.8– 5.3%
7.5% 3.8– 4.8%

12.0–14.0%

7.5%
9.0–12.0% 4.5– 5.5%
12%
4.5–7.5%
10% 3.5– 4.5%

103 
67
155
4

329
(324)

5

103
50
123
20

296
(299)

(3)

1,229
797
1,850 
48

3,924
(3,867)

57

1,423
691
1,699
276

4,089
(4,130)

(41) 

Notes to the Financial Statements | 93

14 EMPLOYEE BENEFITS continued

14(a) Employee pension plans continued

Movement during the year
Net surplus/(deficit) in schemes at beginning of year
Disposed operations
Acquired operations
Contributions
Current service cost
Finance income

Expected return on pension scheme assets
Interest on pension scheme liabilities

Actuarial gain/loss*
Foreign exchange translation

Net surplus/(deficit) in schemes at end of year

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2002

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2002

£m

Rm

5
–
–
8
(2)

27
(25)
2
3

18

(3)
12
–
4
(4)

31
(28)
(13)
6

5

24
–
4
4
(3)

23
(18)
(46)
9

(3)

57
–
–
94
(24)

319
(295)
24
19

194

(41)
148
–
49
(49)

383
(346)
(161)
74

57

423
–
55
55
(41)

318
(249)
(635)
33

(41)

*The actuarial gain for the year to 31 December 2004 represents 0.6% (2003: actuarial loss, 4.0%; 2002: actuarial loss, 15.4%) of the total present value of scheme liabilities. The actual

return on pension scheme assets was £11 million (R130 million) more than the expected return (2003: £6 million (R75 million) less), representing 3.0% (2003: 1.8%) of the total
scheme assets. Experience gains arising on scheme liabilities were £0.2 million (R2 million) (2003: £2 million (R25 million)). Changes in the assumptions underlying the present value
of scheme liabilities resulted in an actuarial loss of £9 million (R106 million) (2003: £9 million (R111 million)).

At 31 December 2004, the provision for pension contributions included in other provisions and charges in the Group’s balance sheet amounted 
to £55 million (R597 million) (2003: £53 million (R632 million)). The charges to the technical and non-technical accounts represent the regular
pension cost, offset by the investment return on the surplus scheme assets, and variations from regular cost arising from the schemes’ surplus 
being amortised on a straight-line basis over the average expected remaining service lives of current employees. An analysis of the charge is 
presented below.

Regular cost
Variations from regular cost

Profit and loss charge

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

51 
(6)

45 

52
(14)

38 

602 
(71)

531 

642 
(173)

469 

94 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

14 EMPLOYEE BENEFITS continued

14(b) Post retirement benefits
Certain Group subsidiary undertakings provide medical and mortgage bond benefits to qualifying employees beyond the date of retirement. 
The charge and related liability included in the Group’s financial statements are presented below.

Profit and loss (credit)/charge

Provisions for other risks and charges

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

(1) 

20 

5 

21 

(12)

217 

62 

251 

14(c) Employee share ownership plans (ESOPs)
The ESOPs currently in use are described in the Remuneration Report on pages 44 to 52.

As described in note 1, in accordance with UITF38, shares held by ESOP Trusts are no longer recognised as current assets in the balance sheet, 
but are shown as a deduction from shareholders’ equity.

The number and market value of the Company’s ordinary shares held by ESOP Trusts at 31 December 2004 were 93 million (2003: 102 million) 
and £123 million (R1,333 million) (2003: £94 million (R1,122 million)), respectively. 

15 TAX ON PROFIT ON ORDINARY ACTIVITIES

15(a) Technical account – long term business

Current tax
South Africa
United States 
Rest of World 

Deferred tax

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

211
11
1

223
40

263

162
4 
3

169
58

227

2,490
130
12

2,632
472

3,104

2,000 
49 
37

i

2,086 
716 

i

2,802 

Notes to the Financial Statements | 95

15 TAX ON PROFIT ON ORDINARY ACTIVITIES continued

15(b) Non-technical account – 

insurance, asset management and banking businesses

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

United Kingdom tax
UK corporation tax
Double tax relief

Overseas tax
South Africa
United States
Rest of World 
Secondary tax on companies (STC)

Adjustment in respect of prior periods

Current tax for the year
Current tax attributable to shareholders’ profits on long term business

Total current tax on ordinary activities

Deferred tax – non-technical account
Deferred tax attributable to shareholders’ profits on long term business

Reported tax charge

The reported tax charge is analysed as follows:

Adjusted operating profit
Restructuring and integration costs
Change in credit provisioning methodology
Short term fluctuations in investment return
Fines and penalties

51 
(47)

4 

72 
– 
5
10 

87 

1

92
162 

254 

(8) 
40 

286 

240 
(6)
–
60 
(8) 

286 

34 
(24)

10 

33 
11 
4
14 

62 

(8)

64
127 

191 

602 
(555)

47 

849 
– 
59
118 

1,026 

12

1,085 
1,911 

2,996 

(8) 
58 

(94) 
472 

420 
(296)

124 

408 
136 
49
173 

766 

(99)

791 
1,568 

2,359

(99)
716 

241 

3,374 

2,976 

224 
(6)
(26)
49 
– 

241 

£m

2,834 
(71)
–
708 
(97) 

3,374 

2,763 
(74)
(332)
609 
– 

2,976 

Rm

15(c) Reconciliation of tax charge

Tax at UK rate of 30.0% (2003: 30.0%) on profit on ordinary activities before tax
Untaxed and low taxed income (including tax exempt investment return)
Disallowable expenditure
STC
Timing differences
Other

Current tax charge

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

262 
(83)
97 
10 
(32)
– 

254 

133 
(113)
179 
14 
(50)
28

191

3,088 
(979)
1,144 
118 
(378)
3 

2,996 

1,644 
(1,395)
2,210 
173 
(617)
344

2,359 

96 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

16 PROFIT/(LOSS) FOR THE FINANCIAL YEAR

The Company’s profit for the financial year before dividends payable was £241 million (R2,843 million) (2003: loss of £100 million (R1,235 million)).

17 ACQUISITIONS AND DISPOSALS

17(a) Acquisitions

Mutual & Federal Insurance Company Limited

During the period the Group acquired an additional 37.0% of the equity share capital of its general insurance subsidiary, Mutual & Federal Insurance
Company Limited, bringing its total holding to 87.6%. Cash consideration of £102 million (R1,343 million) was paid. At the year end the Group held
87.0% of the equity share capital.

The table below shows the fair value of the assets and liabilities acquired.

Goodwill
Investments
Technical assets
Insurance debtors
Other assets
Minority interests
Technical provisions
Insurance creditors
Provisions
Other liabilities

Total net assets of Mutual & Federal Insurance Company Limited

Additional share of net assets acquired by the Group

Cash consideration paid

Goodwill arising on acquisition

Book value on
acquisition

Fair value
adjustments

£m

Rm

Provisional
fair value
to Group

Provisional
fair value
to Group

10
304
73
28
115
(3)
(266)
(12)
(11)
(25)

213

(10)
–
–
–
–
–
–
–
–
–

(10)

–
304
73
28
115
(3)
(266)
(12)
(11)
(25)

203

75

102

27

–
4,214
1,006
394
1,589
(38)
(3,692)
(173)
(155)
(363)

2,782

1,029

1,343

314

In addition the Group’s banking business made a number of smaller acquisitions giving rise to a goodwill amount of £17 million (R205 million).

Fair value adjustments
In accordance with Financial Reporting Standard 7 “Fair Values in Acquisition Accounting”, the book value of goodwill has been deducted in
determining the fair value of the net assets acquired as it is not a separately identifiable asset. There were no other fair value adjustments.

Notes to the Financial Statements | 97

17 ACQUISITIONS AND DISPOSALS continued

17(b) Disposals (non-operating items)

The following gains and losses on the disposal of business operations have been disclosed as non-operating:

United States – asset management affiliates
South Africa – banking subsidiaries
South Africa – banking associates
United Kingdom – asset management subsidiaries

Loss on disposal before tax
Tax on non-operating items

Loss on disposal after tax
Minority interests – South Africa banking subsidiaries and associates

Loss on disposal after tax and minority interests

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

(5)
(5)
(13)
(12)

(35)
–

(35)
9

(26)

(15)
–
–
(17)

(32)
–

(32)
–

(32)

(59)
(64)
(153)
(142)

(418)
–

(418)
106

(312)

(194)
–
–
(210)

(404)
–

(404)
–

(404)

United States – asset management affiliates
During December, the Group discontinued the operations of Sirach Capital Management Inc. incurring a loss of £8 million (R94 million) including
goodwill disposed of £6 million (R71 million). In addition, credits totalling £3 million (R35 million) were booked in respect of provisions for contingent
payments on prior year disposals no longer required.

South Africa – banking subsidiaries
During the period the Group disposed of various non-core subsidiaries for cash consideration of £29 million (R343 million). The profit on disposal 
was £5 million (R64 million) after charging goodwill of £14 million (R164 million). No tax was payable and the minority interest attributable was 
£2 million (R31 million).

South Africa – banking associates
The non-operating charge for the period includes £13 million (R153 million) in respect of Group adjustments following disposals of certain banking
associates. The minority interest attributable was £7 million (R75 million).

United Kingdom – asset management subsidiaries
During 2004 additional costs relating to onerous lease provisions were incurred in connection with the sale of Gerrard Management Services Ltd 
and other disposals made in prior years.

98 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

18 GOODWILL

At beginning of year
Additions arising on acquisitions in the period
Adjustments in respect of prior year acquisitions*
Disposals
Amortisation and impairment for the year
Foreign exchange and other movements

At end of year

Represented by:
Cost less impairments
Accumulated amortisation

Analysed between:
Life assurance
Asset management
General insurance
Banking

Note

17(a)

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

1,264 
44 
(1) 
(20)
(105)
(30)

1,152 

1,432 
(280) 

1,152 

60 
745 
41 
306 

1,598 
– 
81 
(159)
(194)
(62)

1,264 

15,088 
519 
(12) 
(206)
(1,238)
(1,654)

12,497 

1,508 
(244) 

15,534 
(3,037) 

1,264 

12,497 

75 
863 
12 
314 

651 
8,082 
445 
3,319 

1,152

1,264 

12,497 

22,075 
– 
1,000 
(1,898)
(2,396)
(3,693)

15,088 

18,001 
(2,913)

15,088 

895 
10,031 
143 
3,749 

15,088 

*Adjustments in respect of prior year acquisitions reflect the latest estimate of the deferred consideration payable for the purchase of certain US affiliates under various agreements

which expire in 2007. As such the ultimate cost of purchase will remain uncertain, dependent on future events, and hence subject to further future adjustment.

Amortisation and impairment for the year
The total goodwill amortisation and impairment charge for the year of £110 million (R1,290 million) (2003: £206 million (R2,544 million)) comprises 
£55 million (R648 million) (2003: £146 million (R1,803 million)) attributable to banking businesses and £55 million (R642 million) (2003: £60 million
(R741 million)) attributable to insurance and other businesses. Of this total charge, £105 million (R1,238 million) (2003: £194 million (R2,396 million))
is disclosed above and £5 million (R52 million) (2003: £12 million (R148 million)) is disclosed within investments in associated undertakings (note 26(h)).
The charge for the period includes an impairment charge of £27 million (R319 million) in respect of Group adjustments associated with our banking
subsidiaries.

19 LAND AND BUILDINGS

Insurance and other assets
Market value
At beginning of year
Net disposals
Market value movements
Foreign exchange and other movements

At end of year

Notes to the Financial Statements | 99

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

677 
(24)
40
80 

773 

600 
(33) 
51 
59

677 

8,081 
(283)
472
116

8,386 

8,288 
(408) 
630 
(429)

8,081 

All land and buildings recognised under “insurance and other assets” are freehold. No land and buildings are occupied for own use.

Banking
Cost
At beginning of year
Net additions/(disposals)
Foreign exchange and other movements

At end of year

Accumulated depreciation
At beginning of year
Charge for year 
Foreign exchange and other movements

At end of year

Net book value
At end of year

Analysed between:
Freehold
Long and short leasehold

All land and buildings were occupied for own use.

Market value
Freehold
Long and short leasehold

Market value of land and buildings occupied for own use

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

164 
20
12 

196 

(23) 
(5) 
(8) 

(36) 

138 
(4)
30

164 

(7) 
(9)
(7)

(23) 

1,958 
236 
(68)

2,126 

(275) 
(59) 
(57)

(391) 

1,903 
(49) 
104

1,958 

(97) 
(111) 
(67)

(275) 

160 

141

1,735 

1,683 

156 
4 

160 

1,692 
46 

1,738 

134 
7

141 

£m

1,600 
83 

1,683 

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

202
4

206

150 
7

157 

2,191
43 

2,234

1,791 
84 

1,875 

100 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

20 INSURANCE AND OTHER ASSETS – OTHER FINANCIAL INVESTMENTS

Market value
Shares and other variable yield securities and units in unit trusts
Debt securities and other fixed income securities
Other loans
Deposits with credit institutions
Other investments

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

8,890
14,561
591
1,138
660

25,840

8,083
12,406
782
886
599

96,440
157,961
6,411
12,345
7,160

96,484 
148,087 
9,334 
10,576 
7,150 

22,756

280,317

271,631 

In 2004, zero-interest policy loans have been reclassified so as to treat loans granted as disinvestments of life assurance policies. The effect of this 
change has been a reduction in “other loans” above and policyholder liabilities, included within technical provisions, of £373 million (R4,405 million).
Comparative information has not been restated but the effect of this change on 2003 would have been a reduction in other assets and technical 
provisions of £314 million (R3,746 million). There is no impact on operating profit as a result of this reclassification.

Market value of other financial investments listed 
on recognised stock exchanges included above

Cost
Shares and other variable yield securities and units in unit trusts
Debt securities and other fixed income securities
Other loans
Deposits with credit institutions
Other investments

Assets held to cover linked liabilities
Market value

Cost

21 DEBTORS ARISING FROM DIRECT INSURANCE OPERATIONS

Amounts owed by policyholders
Amounts owed by intermediaries
Outstanding securities realised
Other

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

23,868

18,732

258,925

223,598 

7,141
15,206
243
1,161
464

24,215

7,977

6,389

5,534
11,420
770
855
470

77,467
164,958
2,636
12,595
5,034

66,058 
136,317 
9,191 
10,206 
5,610 

19,049

262,690

227,382 

5,860

5,584

86,536

69,949 

69,309

66,655 

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

59
13
19
82

173

99
10
18
98

640
141
206
890

225

1,877

1,182 
119 
215 
1,170 

2,686 

22 TANGIBLE FIXED ASSETS

Insurance and other assets
Computer and other equipment, fixtures and vehicles 
Cost
At beginning of year
Disposed operations
Additions
Disposals
Foreign exchange and other movements

At end of year

Accumulated depreciation
At beginning of year
Disposed operations
Charge for year
Disposals
Foreign exchange and other movements

At end of year

Net book value
At end of year

Banking
Computer and other equipment, fixtures and vehicles
Cost
At beginning of year
Additions
Disposals
Foreign exchange and other movements

At end of year

Accumulated depreciation
At beginning of year
Charge for year
Disposals
Foreign exchange and other movements

At end of year

Net book value
At end of year

Notes to the Financial Statements | 101

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

214
(1)
42
(28)
(3)

224

(133)
1
(31)
16
(3)

(150)

201
(27)
44
(59)
55

214

(104)
22
(32)
37
(56)

(133)

2,554
(12)
496
(330)
(278)

2,430

(1,588)
12
(366)
189
126

(1,627)

2,777 
(333) 
543 
(729)
296 

2,554 

(1,437)
272 
(395)
457 
(485)

(1,588)

74

81

803

966 

501
122
(79)
45

589

(280)
(67)
25
(44)

(366)

354
78
(31)
100

501

(196)
(72)
21
(33)

(280)

5,980
1,439
(932)
(97)

6,390

(3,342)
(791)
295
(129)

(3,967)

4,890 
963 
(383)
510 

5,980 

(2,708)
(889)
259 
(4)

(3,342)

223

221

2,423

2,638 

102 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

23 PRESENT VALUE OF ACQUIRED IN-FORCE BUSINESS

Cost
At beginning of year
Foreign exchange movements

At end of year

Amortisation for the year
At beginning of year
Amortisation for the year
Foreign exchange movements

At end of year

Net book value
At end of year

24 OTHER ASSETS

Insurance and other assets
Deferred tax asset
Other

Banking
Customer indebtedness for acceptances
Deferred tax asset
Derivative contracts – positive value
Other

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

279
(19)

260

(85)
(17)
6

(96)

307
(28)

279

(52)
(41)
8

(85)

3,330
(509)

2,821

(1,015)
(201)
175

(1,041)

4,241 
(911) 

3,330 

(718) 
(506)
209

(1,015)

164

194

1,780

2,315 

Notes

24(a)

24(c)

46(e)

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

309
116

425

139
109
1,742
466

2,456

253
79

332

70
256
1,720
350

2,396

3,352
1,258

4,610

1,508
1,182
18,893
5,055

26,638

3,020 
943 

3,963 

836
3,056 
20,531 
4,179 

28,602 

Other assets include £1,742 million (R18,893 million) (2003: £1,720 million (R20,531 million)) that reflects the positive value of on-balance sheet
trading derivative instruments. The negative value of these contracts is included within other liabilities.

24 OTHER ASSETS continued

24(a) Deferred tax asset – insurance and other assets

At beginning of year
Net credit for the year
Foreign exchange and other movements

At end of year

The deferred tax asset arises as a result of:
Insurance funds
Unrelieved tax losses
Accelerated capital allowances
Short term timing differences

Notes to the Financial Statements | 103

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

253
69
(13)

309

156
31
27
95

309

323
4
(74)

253

69
23
47
114

253

3,020
814
(482)

3,352

1,692
336
293
1,031

3,352

4,462 
49

(1,491) 

3,020 

824 
275 
561 
1,360 

3,020 

The recovery of £309 million (R3,352 million) (2003: £253 million (R3,020 million)) of the total deferred tax asset above is dependent upon future
taxable profits.

24(b) Deferred tax asset, unrecognised – insurance and other assets

Unrelieved tax losses
Accelerated capital allowances
Insurance funds
Short term timing differences

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

66
33
7
33

139

71
44
3
15

716
358
76
358

848 
525 
36 
179 

133

1,508

1,588 

The unrecognised deferred tax assets will be recognised when appropriate taxable profits are reasonably expected to arise in the relevant jurisdictions.

24(c) Deferred tax asset – banking

At beginning of year
Net (charge)/credit for the year
Foreign exchange and other movements

At end of year

The deferred tax asset arises as a result of:
Unrelieved tax losses
Short term timing differences
Other timing differences

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

256
(29)
(118)

109

235
(146)
190

109

50
7
199

256

189
7
60

256

3,056
(342)
(1,532)

1,182

2,549
(1,584)
217

1,182

691 
86
2,279 

3,056 

2,251 
80 
725 

3,056 

Other movements includes an adjustment of £169 million (R1,989 million) based on reclassification of deferred tax on structured finance 
transactions. There is a matching adjustment to the deferred tax liability accordingly.

There were unrecognised banking deferred tax assets at 31 December 2004 of £18 million (R198 million) relating to unrelieved tax losses (2003: nil).

104 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

25 DEFERRED ACQUISITION COSTS

At beginning of year
Arising on policies written during the year
Amortisation
Foreign exchange and other movements

At end of year

Analysed between:
Life assurance
General insurance

26 BANKING ASSETS

26(a) Treasury bills and other eligible bills

Investment securities
Treasury bills and similar securities
Other eligible bills

Other securities

The movement in the book value of Treasury bills and other eligible bills 
held for investment purposes was as follows:
At beginning of year
Additions
Disposals
Foreign exchange and other movements

At end of year

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

427
323
(44)
(41)

665

656
9

665

284
214
(30)
(41)

427

420
7

427

5,097
3,811
(519)
(1,175)

7,214

7,116
98

7,214

3,924 
2,643 
(370) 
(1,100) 

5,097 

5,013
84 

5,097

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

1,223
177

1,400
85

1,485

823
1,498
(1,023)
102

1,400

792
31

823
65

888

13,270
1,916

15,186
924

16,110

9,454 
370 

9,824 
776 

10,600 

923
1,173
(1,367)
94

9,824
17,680
(12,071)
(247)

12,750 
14,484 
(16,880) 
(530) 

823

15,186

9,824 

Investment securities are those intended for use on a continuing basis and not for dealing purposes. The market value of Treasury bills and other
eligible bills at 31 December 2004 was £1,485 million (R16,110 million) (2003: £857 million (R10,228 million)).

26(b) Loans and advances to banks

Remittances in transit
Other loans and advances to banks

Maturity profile
Repayable on demand
Repayable within one year but not on demand

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

37
2,485

2,522

1,016
1,056

2,522

18
2,074

2,092

1,711
381

2,092

406
26,952

27,358

11,023
16,335

27,358

215 
24,757 

24,972 

20,424 
4,548 

24,972 

Notes to the Financial Statements | 105

26 BANKING ASSETS continued

26(c) Loans and advances to customers

Advances secured on residential properties
Leases and instalment debtors
Factoring accounts
Preference shares and debentures
Other loans and overdrafts
Loans granted under resale agreements
Other

Total loans and advances before provisions
Provision for bad and doubtful debts

Loans and advances to customers after provisions

Maturity profile
Repayable on demand or at short notice
Three months or less but not repayable on demand or at short notice
One year or less but over three months
Five years or less but over one year
Over five years
Provision for bad and doubtful debts

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

Notes

26(e)

26(d)

5,699
2,682
53
532
8,165
1
648

17,780
(606)

17,174

1,436
1,739
1,486
5,725
7,394
(606)

4,738
2,967
54
511
6,324
9
1,132

61,827
29,100
579
5,768
88,573
16
7,031

56,556 
35,416 
645 
6,100 
75,488 
107 
13,512 

15,735
(599)

192,894
(6,578)

187,824 
(7,150)

15,136

186,316

180,674 

3,697
1,123
906
4,761
5,248
(599)

15,573
18,868
16,124
62,106
80,223
(6,578)

44,130 
13,409 
10,811 
56,826 
62,648 
(7,150)

Loans and advances to customers after provisions

17,174

15,136

186,316

180,674 

26(d) Loans and advances to customers – provision for bad and doubtful debts

Non-performing loans
Value of non-performing loans before specific provisions
Specific provisions

Value of non-performing loans after specific provisions

Specific provisions
At beginning of year
Charge to profit and loss account
Recoveries of advances written-off in previous years
Amounts written-off in year
Foreign exchange and other movements

At end of year

General provisions
At beginning of year
Charge to profit and loss account
Amounts written back in year
Foreign exchange and other movements

At end of year

Total provision for bad and doubtful debts

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

635
(515)

120

542
121
(19)
(210)
81

515

57
18
–
16

91

606

695
(542)

153

350
321
(8)
(185)
64

542

124
8
(96)
21

57

599

7,488
(5,590)

1,898

6,470
1,430
(227)
(2,474)
391

5,590

680
212
–
96

988

6,578

8,299 
(6,470)

1,829 

4,835 
3,956 
(98) 
(2,289) 
66 

6,470 

1,713 
102 
(1,181)
46

680 

7,150 

106 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

26 BANKING ASSETS continued

26(e) Loans and advances to customers – concentrations of exposure

Loans and advances before provisions
Individuals
Manufacturing
Asset management, insurance and real estate
Other industries

Loans and advances to customers before provisions

Specific provisions
Individuals
Manufacturing
Asset management, insurance and real estate
Other industries

Specific provisions against loans and other advances to customers

26(f) Debt securities

Book value
Investment securities
Government securities
Other public sector securities
Private sector securities

Other securities
Government securities
Other public sector securities
Private sector securities

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

8,738
637
4,063
4,342

7,236
591
3,930
3,978

94,790
6,906
44,076
47,122

86,374 
7,055 
46,911 
47,484 

17,780

15,735

192,894

187,824 

260
10
59
186

515

2,818
105
636
2,031

5,590

153
10
47
332

542

£m

1,826 
119 
561 
3,964 

6,470 

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

1,425
50
157

1,632

211
31
60

302

1,254
70
70

1,394

3
–
23

26

15,448
546
1,704

17,698

2,291
338
649

3,278

14,969 
836 
836

16,641 

36 
– 
275 

311 

1,934

1,420

20,976

16,952 

The market value of debt securities at 31 December 2004 was £1,941 million (R21,049 million) (2003: £1,437 million (R17,149 million)).

Maturity profile – book value
Due within one year
Due one year and over

Investment securities analysed by listing status
Listed
Unlisted

The movement in the book value of debt securities held 
for investment purposes was as follows:
At beginning of year
Additions
Disposals
Foreign exchange and other movements

At end of year

140
1,794

1,934

1,539
93

1,632

1,394
1,211
(1,209)
236

1,632

198
1,222

1,420

1,368
26

1,394

1,519
19,457

20,976

16,693
1,005

17,698

913
732
(331)
80

16,641
14,289
(14,267)
1,035

1,394

17,698

2,363 
14,589 

16,952 

16,329 
312 

16,641 

12,612 
9,039 
(4,087)
(923) 

16,641 

26 BANKING ASSETS continued

26(g) Equity securities and other variable yield securities

Book value
Investment securities
Listed on recognised investment exchanges
Unlisted

Market value
Investment securities
Listed on recognised investment exchanges
Unlisted

The movement in the book value of equity securities held 
for investment purposes was as follows:
At beginning of year
Additions
Disposals
Reclassification
Foreign exchange and other movements

At end of year

26(h) Investment in associated undertakings

At beginning of year
Share of associated undertakings’ retained profit
Net (disposal)/acquisition of interests
Goodwill amortisation
Foreign exchange and other movements

At end of year

Represented by:
Net asset valuation
Unamortised goodwill on acquisition

Notes to the Financial Statements | 107

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

61
198

259

71
248

319

317
66
(161)
–
37

259

665
2,146

2,811

774
2,686

3,460

3,784
784
(1,898)
–
141

2,811

52
265

317

43
263

306

965
23
(61)
(639)
29

317

£m

621 
3,163 

3,784 

514 
3,132 

3,646 

13,331 
285 
(754)
(7,891)
(1,187) 

3,784 

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

Note

18

144
5
(43)
(5)
(10)

91

71
20

91

124
14
19
(12)
(1)

144

117
27

144

1,719
56
(506)
(52)
(230)

987

770
217

987

1,713 
173 
235
(148)
(254) 

1,719 

1,396
323

1,719

108 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

27 EQUITY SHAREHOLDERS’ FUNDS

Authorised
6,000,000,000 ordinary shares of 10p each

£m

At
31 December
2004

At
31 December
2003

600

600

The movement in consolidated equity shareholders’ funds for the year is shown below:

Millions

Allotted, called up and fully paid shares of 10p each

Note

Number
of shares

Share
capital

Share
premium

Merger
reserve

Reserve in
respect of
own shares
held in
Profit policyholders’
funds*

and loss

Year to 31 December 2004
Opening equity shareholders’ funds
Prior year adjustment

1

Shares issued under share incentive schemes
Net sale of shares from ESOP Trusts and policyholders’ funds
Retained profit for the financial year
Foreign exchange and other movements

Closing equity shareholders’ funds

Year to 31 December 2003 (restated)
Opening equity shareholders’ funds
Issue of new capital
Shares issued under share incentive schemes
Net sale of shares from ESOP Trusts
Retained profit for the financial year
Foreign exchange and other movements

Closing equity shareholders’ funds

* Represents original cost of shares in the Company held by policyholders’ funds.

3,837
–

3,837
17
–
–
–

3,854

3,783
50
4
–
–
–

3,837

384
–

384
2
–
–
–

386

378
5
1
–
–
–

384

587
–

587
13
–
–
–

600

552
32
3
–
–
–

587

184
–

184
–
–
–
–

184

184
–
–
–
–
–

184

2,109
(109)

2,000
–
1
302
141

2,444

1,711
–
–
6
107
176

2,000

(401)
–

(401)
–
32
–
–

(369)

(401)
–
–
–
–
–

(401)

£m

Total

2,863
(109)

2,754
15
33
302
141

3,245

2,424 
37
4
6
107
176

2,754

27 EQUITY SHAREHOLDERS’ FUNDS continued

Millions

Note

Number
of shares

Share
capital

Share
premium

Merger
reserve

Notes to the Financial Statements | 109

Reserve in
respect of
own shares
held in
Profit policyholders’
funds*

and loss

Rm

Total

Year to 31 December 2004
Opening equity shareholders’ funds
Prior year adjustment

1

Shares issued under share incentive schemes
Net sale of shares from ESOP Trusts and policyholders’ funds
Retained profit for the financial year
Foreign exchange and other movements

Closing equity shareholders’ funds

Year to 31 December 2003 (restated)
Opening equity shareholders’ funds
Issue of new capital
Shares issued under share incentive schemes
Net sale of shares from ESOP Trusts
Retained profit for the financial year
Foreign exchange and other movements

Closing equity shareholders’ funds

* Represents original cost of shares in the Company held by policyholders’ funds.

3,837
–

3,837
17
–
–
–

3,854

3,783
50
4
–
–
–

3,837

4,584
–

4,584
24
–
–
(421)

7,007
–

7,007
153
–
–
(651)

2,196
–

2,196
–
–
–
(200)

24,296
(1,301)

22,995
–
12
3,703
(607)

(3,908)
–

(3,908)
–
315
–
–

34,175 
(1,301) 

32,874
177 
327
3,703
(1,879)

4,187

6,509

1,996

26,103

(3,593)

35,202 

5,222
62
12
–
–
(712)

4,584

7,625
395
37
–
–
(1,050)

2,542
–
–
–
–
(346)

22,010
–
–
76
1,375
(466)

(3,908)
–
–
–
–
–

33,491 
457 
49
76
1,375
(2,574) 

7,007

2,196

22,995

(3,908)

32,874

Restatement of equity shareholders’ funds
As described in note 1, in accordance with UITF Abstract 38 “Accounting for ESOP Trusts”, shares in the Company held in ESOP Trusts previously
included as an asset are now accounted for as a deduction from the profit and loss reserve in arriving at equity shareholders’ funds.

110 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

28 COMPANY RESERVES – PROFIT AND LOSS ACCOUNT

At beginning of year
Retained profit/(loss) for the year
Foreign exchange movements taken directly to reserves

At end of year

£m

Rm

At
31 December
2004

At
31 December
2003
(Restated)*

At
31 December
2004

At
31 December
2003
(Restated)*

239
157
–

396

414
(175)
–

239

2,853
1,852
(409)

4,296

5,727
(2,161)
(713) 

2,853

* Comparative figures have been restated to reflect the adoption of Urgent Issues Taskforce Abstract 38 “Accounting for ESOP Trusts” as described in note 1.

Distributable reserves of the Company at 31 December 2004 were £396 million (R4,296 million) (2003: £239 million (R2,853 million)).

29 MINORITY INTERESTS

29(a) Equity interests

At beginning of year
Minority interests’ share of profit/(loss)
Minority interests’ share of dividends paid
Net acquisition/(disposal) of interests
Foreign exchange and other movements

At end of year

Reconciliation of minority interests share of profit/(loss)

The minority interest charge/(credit) is analysed as follows:

Adjusted operating profit
Goodwill amortisation and impairment
Loss on disposal of investment in Dimension Data Holdings plc
Restructuring and integration costs
Change in credit provisioning methodology
Short term fluctuations in investment returns
Non-operating items

Reported charge/(credit)

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

652
44
(25)
121
77

869

783
(117)
(61)
(41)
88

652

£m

7,783
519
(295)
1,428
(8)

9,427

10,816
(1,445) 
(753)
(506)
(329)

7,783

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

Note

5(d)(ii)

17(b)

83
(27)
–
(7)
–
4
(9)

44

7
(78)
(2)
(13)
(30)
(1)
–

(117)

980
(319)
–
(83)
–
47
(106)

519

96
(963) 
(30) 
(160) 
(376) 
(12) 
–

(1,445) 

29 MINORITY INTERESTS continued

29(b) Non-equity interests
R2,000 million non-cumulative preference shares (banking subsidiary)1
R792 million non-cumulative preference shares (banking subsidiary)2
US$750 million cumulative preferred securities3
Other (general insurance subsidiary)4

Unamortised issue costs
Undistributed profits due to minority interests

Notes to the Financial Statements | 111

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2004

184
73
391
7

655
(9)
12

658

168
69
421
3

661
(12)
9

658

2,000
792
4,247
76

7,115
(98)
121

7,138

2,000 
825
5,020
36

7,881
(143) 
116 

7,854

Notes:
1 200 million R10 preference shares issued by Nedbank Limited (Nedbank), the Group’s banking subsidiary. These shares are non-redeemable

and non-cumulative and pay a cash dividend equivalent to 75% of the prime overdraft interest rate of Nedbank. Preference shareholders are only
entitled to vote during periods when a dividend or any part of it remains unpaid after the due date for payment and when resolutions are proposed
that directly affect any rights attaching to the shares or the rights of the holders. Preference shareholders will be entitled to receive their dividends
in priority to any payment of dividends made in respect of any other class of Nedbank’s shares.

2 77.3 million R10 preference shares issued at R10.68 per share by Nedbank on the same terms as the securities described in 1 above. Included 

in original proceeds were R33 million cumulative dividend paid during 2004.

3 US$750 million Guaranteed Cumulative Perpetual Preference Securities issued on 19 May 2003 by Old Mutual Capital Funding L.P., a subsidiary

of the Group. Subject to certain limitations, holders of these securities are entitled to receive preferential cash distributions at a fixed rate of
8.0% per annum payable quarterly in arrear. The Group may defer payment of distributions at its sole discretion, but such an act may restrict
Old Mutual plc from paying dividends on its ordinary shares for a period of 12 months. Arrears of distributions are payable cumulatively only on
redemption of the securities or at the Group’s option. The securities are perpetual, but may be redeemed at the discretion of the Group from 
22 December 2008. The costs of issue are being amortised over the period to 22 December 2008.

4 The Group has a general insurance subsidiary which offers clients a share of underwriting surpluses, in preference to ordinary shares, which

accrue in respect of certain policies.

112 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

30 SUBORDINATED LIABILITIES

Insurance and other liabilities
Insurance and other subordinated debt instruments of the Group are as follows:
US$27.1 million repaid during 2004

Banking
Subordinated debt instruments are repayable:
Within one year
Between two and five years
After five years

Comprising:
US$40 million repaid during 2004
US$18 million repaid during 2004
R500 million repaid during 2004
R502 million repayable 20 September 2005 (8.564 per cent.)
R515 million repayable 4 December 2008 (13.5 per cent.)
R2.0 billion repayable 20 September 2011 (11.3 per cent.)1
R4.0 billion repayable 9 July 2012 (13.2 per cent.)1
R200 million repayable 30 November 2029 (interest free)

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

–

15

–

179

46
50
582

678

–
–
–
46
50
190
392
–

678

–
67
581

648

22
10
42
–
45
173
356
–

648

502
536
6,320

7,358

–
–
–
502
536
2,064
4,254
2

7,358

–
806 
6,939

7,745 

265
119 
500 
– 
541 
2,064 
4,254 
2 

7,745 

Note:
1 These notes are subordinated to all unsecured unsubordinated claims against the issuer, Nedbank Limited, but rank equally with all other unsecured
subordinated obligations. Subject to prior approval by the South African Registrar of Banks, Nedbank Limited has the option to elect for early
redemption of these notes.

Notes to the Financial Statements | 113

Gross

Reinsurance

£m

Net

Gross

Reinsurance

Rm

Net

77
23,138
393
287

23,895

80
20,660
192
225

21,157

(14)
(269)
(10)
(60)

(353)

(19)
(301)
–
(54)

(374)

63
22,869
383
227

835
251,006
4,263
3,113

(152)
(2,918)
(108)
(651)

683
248,088
4,155
2,462 

23,542

259,217

(3,829)

255,388 

61
20,359
192
171

20,783

955
246,612
2,292
2,686

252,545

(227)
(3,593)
–
(645)

728 
243,019 
2,292
2,041 

(4,465)

248,080 

31 TECHNICAL PROVISIONS

At 31 December 2004
Provision for unearned premiums
Long term business technical provision
Claims outstanding – long term business
Claims outstanding – general business

At 31 December 2003
Provision for unearned premiums
Long term business technical provision
Claims outstanding – long term business
Claims outstanding – general business

SOUTH AFRICA

Valuation methods and assumptions
The valuation was performed using the “Financial Soundness Valuation” method, in keeping with the applicable professional guidance notes issued 
by the Actuarial Society of South Africa (ASSA). This means that the assumptions used for valuing liabilities are based on realistic expectations of
future experience, plus prescribed margins for prudence and further discretionary margins to ensure that profits are released appropriately over the
term of each policy. The assets and liabilities have been valued on bases that are consistent with each other.

Where applicable, liabilities include provisions to meet financial options and guarantees.

Certain individual life mortality assumptions were reduced to better reflect ongoing mortality experience. These were largely offset by an increase 
of £75 million (R819 million) in mortality discretionary margins so that profit continues to emerge over the terms of those policies.

Where applicable, allowance has been made for bonuses already declared, as well as future bonuses still to be declared at rates consistent with 
the assumed valuation interest rates. These bonuses include both vested bonuses and non-vested (terminal) bonuses.

The valuation is sensitive to the rate of interest used to discount the liabilities for non-participating policies, assumed future mortality experience 
of policyholders and the level of discretionary margins.

The principal assumptions used at 31 December 2004 and 31 December 2003 for the long term business are set out below:

Rates of interest (gross of tax and charges)

Mortality tables used

Non-profit annuities

Discounted on appropriate spot yield curve

RMV92 with a percentage of CMI improvements 
(adjusted for own experience)

With-profit annuities

Interest rate on which premiums were based

PA90 (adjusted in line with own experience) 

Assurances

11.0 per cent. per annum
(2003: 11.0 per cent. per annum)

Tables derived from own experience with allowance
for increasing AIDS claims

114 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

31 TECHNICAL PROVISIONS continued

The gross interest rates were reduced as follows, where applicable:

• to allow for tax;

• to allow for the minimum margin of 0.25 per cent. per annum, as prescribed by the ASSA; 

• in the case of smoothed bonus business, by an additional margin equal to the excess over the 0.25 per cent. of the capital charges applicable to 

the business. This second-tier margin is incorporated to ensure that the value of capital charges emerge as profit over the full duration of the policy;
and

• in the case of certain non-profit annuities to allow for imperfect matching of assets and liabilities.

For assurances, the above underlying mortality rates were further increased by the prescribed ASSA margin of 7.5 per cent. For annuities, the 
mortality rates were reduced by the prescribed ASSA margin of 7.5 per cent.

Renewal expenses
Renewal expense assumptions (including renewal commissions) have been based on recent experience, inflating at 8.0 per cent. per annum 
(2003: 8.0 per cent.).

In terms of the prescribed ASSA margins, the underlying expense assumption was increased by 10.0 per cent., and the expense inflation assumption was
increased to 8.8 per cent. (2003: 8.8 per cent.).

Surrenders/lapses
Where appropriate, allowance has been made for surrenders and lapses at rates consistent with past experience.

The underlying lapse rates were increased by the prescribed ASSA margin of 25 per cent. Surrender rates were increased or decreased by the
prescribed ASSA margin of 10 per cent., depending on which alternative gave rise to an increase in liabilities.

UNITED STATES

Valuation methods and assumptions
The valuation was performed using the applicable standards for US GAAP products in keeping with the applicable professional guidance notes 
issued by the American Academy of Actuaries. This means that the assumptions used for valuing liabilities are based on realistic expectations 
of future experience to ensure that profits are realised appropriately over the term of each policy. 

The valuation is sensitive to the rate of interest used to discount the liabilities, assumed future mortality experience of policyholders and assumed
policyholder lapse experience.

The principal assumptions used for long term business are set out below.

All products

Rates of interest (gross of tax and charges)

Mortality tables used

2004: 5.0 per cent. per annum
(2003: 6.4 per cent. per annum)

75-80 SU Table with appropriate modifiers

The gross interest rates were reduced for investment default assumptions and investment expenses.

Renewal expenses
Renewal expense assumptions (including renewal commissions) have been based on projected costs with assumed inflation rate of 3 per cent.

Surrenders/lapses
Where appropriate, allowance has been made for surrenders and lapses at rates consistent with past experience.

UK AND REST OF WORLD

Valuation methods and assumptions
Technical provisions have been calculated using generally accepted actuarial methods for the territory in question, and using interest rates and
actuarial tables appropriate to the territory in question.

Notes to the Financial Statements | 115

32 INSURANCE – PROVISIONS FOR OTHER RISKS AND CHARGES

Deferred tax
(note 32(a))

Pension and
retirement
obligations

Other
provisions

Deferred tax
(note 32(a))

Total

Pension and
retirement
obligations

Other
provisions

£m

Group
Year to 31 December 2004
At beginning of year
Charge to the profit and loss account
Utilised during the year
Released during the year
Foreign exchange and other movements

At end of year

Year to 31 December 2003
At beginning of year
Acquisition of subsidiaries
Charge to the profit and loss account
Utilised during the year
Foreign exchange and other movements

At end of year

295
87
–
–
(21)

361

231
89
–
–
(25)

295

74
8
(19)
–
12

75

81
33
(64)
–
24

74

182
56
(37)
(7)
9

203

174
74
(55)
(4)
(7)

182

551
151
(56)
(7)
–

639

486
196
(119)
(4)
(8)

551

3,521
1,026
–
–
(631)

3,916

3,191
1,099
–
–
(769)

3,521

883
94
(224)
–
61

2,172
661
(437)
(83)
(111)

814

2,202

1,119
408
(790)
–
146

2,404
2,420
(1,469)
(49)
(1,134)

Rm

Total

6,576 
1,781
(661)
(83)
(681)

6,932 

6,714
3,927
(2,259) 
(49)
(1,757) 

883

2,172

6,576

The provision for pension and other retirement obligations relates to £55 million (R597 million) (2003: £53 million (R632 million)) for pension
contributions referred to in note 14(a) and £20 million (R217 million) (2003: £21 million (R251 million)) for post retirement benefits referred 
to in note 14(b).

Other provisions relate to provisions for impairment of various life operations within the Group, warranty provisions in respect of businesses sold,
employee obligations, onerous property leases and obligations in respect of unclaimed share trusts (note 5(f)).

116 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

32 INSURANCE – PROVISIONS FOR OTHER RISKS AND CHARGES continued

32(a) Deferred tax liability

The deferred tax liability arises from:
Deferred acquisition costs
Other short term timing differences

There were no unrecognised deferred tax liabilities as at 31 December 2004 (2003: nil).

32(b) Provisions for liabilities and charges – Company

At beginning of year
Charge to the profit and loss account
Utilised during the year
Foreign exchange and other movements

At end of year

Provisions for liabilities and charges primarily relate to employee obligations.

33 CREDITORS

33(a) Creditors arising from direct insurance operations

Amounts owed to policyholders
Amounts owed to intermediaries
Outstanding securities purchased
Other

33(b) Other creditors including tax and social security

Falling due within one year
Current taxation
Dividends payable
Loans and advances from policyholders
Other creditors

Falling due after one year
Other creditors

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

244
117

361

2,647
1,269

3,916

183
112

295

£m

2,184
1,337

3,521

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

26
12
(17)
–

21

38
–
(12)
–

26

310
142
(201)
(23)

228

525
–
(148) 
(67)

310 

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

164
17
2
122

305

1,779
184
22
1,323

3,308

227
26
7
218

478

£m

2,710
310
84
2,602

5,706

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2004

152
122
1,057
404

1,735

48

1,783

118
106
736
843

1,803

1,649
1,323
11,467
4,386

18,825

1,409
1,265 
8,785
10,055

21,514

3

521

36

1,806

19,346

21,550

34 AMOUNTS OWED TO CREDIT INSTITUTIONS

Group
Bank and other loans
Repayable within one year:
Floating rate notes 1
Commercial paper

Repayable between one and two years:
Term loan4
Floating rate notes 2

Repayable between two and five years:
Floating rate notes 1
Term loan
Fixed rate notes5
Other 6

Repayable after five years:
Floating rate notes 3
Other 6

Notes to the Financial Statements | 117

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

5
–

5

24
24

48

5
–
182
52

239

167
8

175

467

11
17

28

–
–

–

6
25
196
48

275

68
6

74

377

54
–

54

260
260

520

54
–
1,974
564

2,592

1,812
87

1,899

5,065

131
203

334

–
–

–

72
298
2,340
573

3,283

812
72

884

4,501

118 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

34 AMOUNTS OWED TO CREDIT INSTITUTIONS continued

Company
Bank and other loans
Repayable within one year:
Floating rate notes 1
Commercial paper

Repayable between one and two years:
Term loan4
Floating rate notes 2

Repayable between two and five years:
Floating rate notes 1
Term loan
Fixed rate notes5

Repayable after five years:
Floating rate notes 3

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

5
–

5

24
24

48

5
–
182

187

167

407

11
17

28

–
–

–

6
25
196

227

68

323

54
–

54

260
260

520

54
–
1,974

2,028

1,812

4,414

131
203

334

–
–

–

72
298
2,340

2,710

812

3,856

Floating rate notes:
1 US$10.5 million repaid on 18 January 2005, and US$10 million repayable September 2009.
2 £24 million repayable November 2006.
3 £28 million note repayable on 31 December 2010, with the holders having the option to elect for early redemption every six months, €30 million
fixed rate bond due 2010 swapped into floating rate US Dollars, US$50 million note repayable September 2011, US$150 million note repayable
September 2014, €10 million fixed rate bond due in 2010 and €20 million fixed rate bond due in 2013 (issued during 2003 with the capital and
interest immediately swapped into floating rate US Dollars).

Term loan:
4 US$45 million term loan repayable on 30 June 2006.

Fixed rate notes:
5 €400 million Euro notes due 2007, capital and interest swapped into fixed rate US Dollars. 

Other:
6 Other amounts owed to credit institutions consist principally of preference shares issued by a Group subsidiary.

During the year, the Company entered into a new £1.1 billion 5-year multi-currency Revolving Credit Facility, which matures in May 2009, and
cancelled its existing £900 million, US$600 million and US$60 million Revolving Credit Facilities. The new facility was undrawn at 31 December 2004.

Notes to the Financial Statements | 119

34 AMOUNTS OWED TO CREDIT INSTITUTIONS continued

34(a) Convertible loan stock

(i) Insurance and other assets
At 31 December 2004, the Group had in issue US$636 million (£332 million (R3,602 million) (2003: £357 million (R4,261 million)) 3.625 per cent.
Convertible Bonds maturing on 2 May 2005, which are guaranteed by Old Mutual plc. Holders of the Bonds have the right to elect to convert the Bonds
into ordinary shares in Old Mutual plc at a conversion price of 190p per share and an exchange rate of one US dollar to 69.52p Sterling.

(ii) Banking

Compulsory convertible loan maturing 6 November 2005 (13.75 per cent.)
Compulsory convertible loan maturing 31 December 2005 (18.12 per cent.)

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

2
4

6

3
7

10

20
47

67

37
82 

119

These debt instruments are convertible into BoE Bank Ltd ordinary shares. The Group has the option to purchase these shares. 

35 DEPOSITS BY BANKS

Items in the course of transmission to other banks
Other deposits

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

59
2,762

2,821

17
4,364

4,381

643
29,694

30,607

203
52,092

52,295

All deposits by banks are repayable on demand other than other deposits of £23 million (R245 million) (2003: £13 million (R150 million)) which 
are due after more than one year.

36 CUSTOMER ACCOUNTS, MATURITY PROFILE

Repayable on demand
Agreed maturity dates or years of notice, by remaining maturity, of:

Three months or less, but not repayable on demand
One year or less, but over three months
Five years or less, but over one year
Over five years

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

7,905

8,676

85,759

103,563

6,965
1,824
748
66

3,196
1,544
504
56

75,554
19,784
8,115
721

38,150
18,430
6,016
668

17,508

13,976

189,933

166,827

120 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

37 DEBT SECURITIES IN ISSUE

Bonds and medium term notes
Other debt securities in issue

37(a) Bonds and medium term notes, maturity profile

Bonds and medium term notes repayable:
Within one year
Between one and two years
Between two and five years

37(b) Other debt securities, maturity profile

Other debt securities repayable:
Within one year
Between one and two years
Between two and five years

38 BANKING – OTHER LIABILITIES

Current tax
Liabilities under acceptances
Securities sold under agreements to repurchase
Derivative contracts – negative value
Trade creditors and other liabilities

Notes

37(a)

37(b)

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

1,563
–

1,563

16,956
–

16,956

173
295

468

£m

2,065
3,521

5,586

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

1,524
38
1

1,563

16,536
414
6

16,956

13
39
121

173

£m

155
466
1,444

2,065

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

–
–
–

–

262
4
29

295

–
–
–

–

3,127
48 
346 

3,521

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

Note

46(e)

18
139
351
1,837
883

3,228

13
70
281
1,742
1,094

3,200

196
1,511
3,811
19,924
9,583

35,025

150
836
3,350
20,796
13,067

38,199

Other liabilities include £1,837 million (R19,924 million) (2003: £1,742 million (R20,796 million)) which reflects the negative value of on-balance
sheet trading derivative instruments. The positive value of these contracts is included within other assets. All other liabilities are due within one year. 

39 BANKING – PROVISION FOR DEFERRED TAX

At beginning of year
Additions from acquired operations
Credit to profit and loss account
Foreign exchange and other movements

At end of year

Comprising:
Short term timing differences
Leasing transactions
Other

Notes to the Financial Statements | 121

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

229
–
(15)
(119)

95

18
–
77

95

105
49
(28)
103

229

16
137
76

229

2,732
3
(178)
(1,527)

1,030

200
–
830

1,030

1,450
583
(347) 
1,046

2,732

191
1,635
906 

2,732

Other movements includes an adjustment of £169 million (R1,989 million) based on reclassification of deferred tax on structured finance transactions.
There is a corresponding adjustment to the deferred tax asset accordingly.

There were no unrecognised banking deferred tax liabilities at 31 December 2004 (2003: nil).

40 INVESTMENTS – COMPANY

Year to 31 December 2004
At beginning of year
Acquisitions
Net amount advanced during year
Foreign exchange movements

At end of year

Year to 31 December 2003
At beginning of year
Acquisitions
Disposals
Net amount advanced during year
Foreign exchange movements

At end of year

Shares in
subsidiaries

Loans to
subsidiaries

722
9
–
–

731

1,183
10
(471)
–
–

722

2,014
–
276
–

2,290

1,859
–
–
155
–

2,014

£m

Total

2,736
9
276
–

3,021

3,042
10
(471)
155
–

2,736

Shares in
subsidiaries

Loans to
subsidiaries

Rm

Total

8,618
106
–
(794)

24,041
–
3,256
(2,454)

32,659
106 
3,256
(3,248)

7,930

24,843

32,773

16,342
123
(5,816)
–
(2,031)

25,680
–
–
1,914
(3,553)

42,022
123
(5,816)
1,914
(5,584) 

8,618

24,041

32,659

The Company’s principal subsidiaries at 31 December 2004 are set out in note 41.

122 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

41 PRINCIPAL SUBSIDIARIES AND GROUP UNDERTAKINGS

The following table lists the principal Group undertakings whose results are included in the consolidated financial statements. All shares held 
are ordinary shares and, except for OM Group (UK) Ltd and Kotak Mahindra Old Mutual Life Insurance Ltd, are held indirectly by the Company.

Name

Acadian Asset Management
Barrow, Hanley, Mewhinney & Strauss, Inc.
Clay Finlay, Inc.
Dwight Asset Management Company
First Pacific Advisors, Inc.
Heitman LLC
Liberty Ridge Capital Inc.
Old Mutual Asset Managers (Bermuda) Ltd
Old Mutual Asset Managers (Kenya) Ltd
Old Mutual Asset Managers (South Africa) (Pty) Ltd
Old Mutual Asset Managers (UK) Ltd
Old Mutual Fund Managers (Guernsey) Ltd
Old Mutual Group Ltd
Old Mutual Investment Administrators (Pty) Ltd
Old Mutual Investment Services (Pty) Ltd
Old Mutual Specialised Finance (Pty) Ltd
Old Mutual Unit Trust Management Company Namibia Ltd
Old Mutual Unit Trust Managers Ltd
Pacific Financial Research, Inc.
Palladyne Asset Management B.V.
Provident Investment Counsel, Inc.
Selestia Life & Pensions Ltd
Thompson, Horstmann & Bryant, Inc
Thompson, Siegel & Walmsley, Inc
Old Mutual Health Insurance Ltd
Old Mutual Healthcare (Pty) Ltd
Old Mutual (Netherlands) B.V.
Old Mutual (South Africa) Ltd
Old Mutual (US) Holdings, Inc.
Old Mutual U.S. Life Holdings, Inc.
OM Group (UK) Ltd
OM Portfolio Holdings (South Africa) (Pty) Ltd
Rodina Investments Ltd
BoE Life Ltd
Fidelity & Guaranty Life Insurance Company
Fidelity & Guaranty Life Insurance Company of New York
Kotak Mahindra Old Mutual Life Insurance Ltd
Ned Life Assurance Company Ltd
Old Mutual International (Guernsey) Ltd
Old Mutual Life Assurance Company (Bermuda) Ltd
Old Mutual Life Assurance Company (Malawi) Ltd
Old Mutual Life Assurance Company (Namibia) Ltd
Old Mutual Life Assurance Company (South Africa) Ltd
Old Mutual Life Assurance Company Ltd

Nature of business

Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Health insurance
Health insurance
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Life assurance
Life assurance
Life assurance
Life assurance
Life assurance
Life assurance
Life assurance
Life assurance
Life assurance
Life assurance
Life assurance

Percentage
holding*

Country of incorporation

100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
76
100
100
26
52
100
100
100
100
100
62

Massachusetts, United States of America
Nevada, United States of America
New York, United States of America
Delaware, United States of America
Massachusetts, United States of America
Delaware, United States of America
Delaware, United States of America
Bermuda
Kenya
Republic of South Africa
England and Wales
Guernsey
Bermuda
Republic of South Africa
Republic of South Africa
Republic of South Africa
Namibia
Republic of South Africa
Massachusetts, United States of America
Netherlands
Massachusetts, United States of America
England and Wales
New Jersey, United States of America
Virginia, United States of America
Republic of South Africa
Republic of South Africa
Netherlands
Republic of South Africa
Delaware, United States of America
Delaware, United States of America
England and Wales
Republic of South Africa
Republic of South Africa
Republic of South Africa
Maryland, United States of America
New York, United States of America
India
Republic of South Africa
Guernsey
Bermuda
Malawi
Namibia
Republic of South Africa
Kenya

Notes to the Financial Statements | 123

41 PRINCIPAL GROUP UNDERTAKINGS continued

Name

Old Mutual Life Assurance Company Zimbabwe Ltd
Old Mutual Reassurance (Ireland) Ltd
OMNIA (Bermuda) Ltd
Mutual & Federal Insurance Company Ltd
Nedinsurance Company Ltd
Old Mutual Property Investment Corporation (Pvt) Ltd
Old Mutual Properties (Pty) Ltd
Fairbairn Private Bank Ltd
Nedbank Ltd
Nedcor Investment Holdings 101 Ltd
Nedcor 
Peoples Bank Ltd

* Effective holding of issued ordinary shares at 31 December 2004.

Nature of business

Life assurance
Life assurance
Life assurance
General insurance
General insurance
Property holding
Property management
Banking
Banking
Banking
Banking
Banking

Percentage
holding*

100
100
100
87
52
100
100
67
52
52
52
52

Country of incorporation

Zimbabwe
Ireland
Bermuda
Republic of South Africa
Republic of South Africa
Zimbabwe
Republic of South Africa
Jersey
Republic of South Africa
Republic of South Africa
Republic of South Africa
Republic of South Africa

A complete list of subsidiaries is filed with the UK Registrar of Companies with the annual return. All the above companies have a year end of 
31 December, except for Kotak Mahindra Old Mutual Life Insurance Ltd, whose year end is 31 March.

42 RELATED PARTY TRANSACTIONS

The Group provides certain pension fund, insurance, banking and financial services to related parties as set out below. These are conducted on an
arm’s length basis and, other than US asset management fees payable in respect of insurance funds, are not material to the Group’s results.

In accordance with FRS 8, transactions or balances with Group entities that have been eliminated on consolidation are not reported. As set out in 
note 1, in order to represent the Group’s segmental results accurately, certain fees negotiated on an arm’s length basis between operationally and
functionally distinct segments of the Group have not been eliminated. The principal transactions not eliminated are insurance services provided 
by the Group’s general insurance operation, Mutual & Federal, and banking services provided by the Group’s banking operation, Nedcor.

No director had a material interest in any contract of significance with the Company or any of its subsidiaries during 2004, except for that described 
in note 12.

43 POST BALANCE SHEET EVENTS

There are no material post balance sheet date events.

44 COMMITMENTS

Undrawn formal standby facilities, credit lines and other commitments to lend
Capital and other commitments

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

985
87

1,072

1,005
12

1,017

10,685
944

11,629

12,001
143

12,144

124 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

45 CONTINGENT LIABILITIES

Guarantees and assets pledged as collateral security
Irrevocable letters of credit
Secured lending
Other contingent liabilities

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

994
325
539
49

1,907

1,039
503
735
145

2,422

10,783
3,526
5,847
532

20,688

12,402
6,004
8,773
1,731

28,910

Contingent liabilities arise principally from the normal operating activities of the Group’s banking operations.

Group companies give indemnities and guarantees as a normal part of their operating activities or in relation to capital market transactions.

Various Group companies have given guarantees, indemnities and warranties in connection with disposals of subsidiaries to parties outside the 
Group in recent years. Provision has been made for certain of these where a realistic estimate of the obligation can be made. In all other cases, 
in the opinion of the directors, no material loss will arise as a result of these guarantees, indemnities and warranties.

On 21 June 2004, one of the Group’s US asset management affiliates, Liberty Ridge Capital Inc., (formerly known as Pilgrim Baxter & Associates, Ltd
(PBA)), reached agreements with the US Securities and Exchange Commission (SEC) and the Office of the New York State Attorney General (NYAG)
which settle all charges brought by these authorities against PBA in relation to market timing in the US mutual fund business. There are several 
related private lawsuits arising from the conduct alleged in the civil suits filed by the SEC and NYAG.

These class action lawsuits were consolidated into a single lawsuit along with all other cases against US parties alleging market timing and late 
trading violations. Proceedings in this case are at a preliminary stage and it is not possible to say, at this time, whether or not the amount of the
ultimate liability to be borne by the Group will be material. As a result, no amount has been recognised for additional fines or other penalties that 
may arise, as significant uncertainty remains over the quantum of any settlement.

Notes to the Financial Statements | 125

46 FINANCIAL INSTRUMENTS

Banking financial instruments
Notwithstanding the exemption available to insurance groups from the scope of FRS 13, the tables below set out details of derivative financial instruments
in respect of the banking activities of the Group.

The banking business uses off-balance sheet financial instruments (derivatives) to meet customers’ requirements for proprietary trading and to hedge
interest rate risk, foreign exchange risk and other market risks.

46(a) Derivatives held for trading purposes

Notional
principal

Positive
fair value

£m

Negative
fair value

Notional
principal

Positive
fair value

At 31 December 2004
Exchange rate contracts
Spot, forwards and futures
Currency swaps
Options purchased
Options written

Interest rate contracts
Interest rate swaps
Forward rate agreements
Caps, collars and floors
Options purchased
Options written
Futures

Equity contracts
Options purchased
Options written
Futures

1,637
529
21
13

2,200

30,236
17,835
564
43
66
1,007

49,751

474
2,748
132

3,354

131
72
9
–

212

1,130
40
1
4
–
–

1,175

295
–
60

355

77
33
–
4

114

1,469
43
1
–
–
–

1,513

–
210
–

210

17,763
5,744
226
138

23,871

328,005
193,482
6,121
470
720
10,928

539,726

5,142
29,806
1,430

36,378

1,425
785
95
–

2,305

12,250
437
10
37
–
2

12,736

3,198
–
654

3,852

Rm

Negative
fair value

832
358
–
38

1,228

15,947
463
6
–
4
2

16,422

–
2,274
–

2,274

Balances arising from off-balance sheet financial instruments

55,305

1,742

1,837

599,975

18,893

19,924

126 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

46 FINANCIAL INSTRUMENTS continued

46(a) Derivatives held for trading purposes continued

Notional
principal

Positive
fair value

£m

Negative
fair value

Notional
principal

Positive
fair value

At 31 December 2003
Exchange rate contracts
Spot, forwards and futures
Currency swaps
Options purchased
Options written

Interest rate contracts
Interest rate swaps
Credit derivatives
Forward rate agreements
Caps, collars and floors
Options purchased
Options written
Futures

Balances arising from off-balance sheet financial instruments

46(b) Derivatives held for non-trading purposes

At 31 December 2004
Exchange rate contracts
Spot, forwards and futures
Currency swaps

Interest rate contracts
Interest rate swaps
Options purchased
Options written

1,810
842
106
65

2,823

24,395
100
20,936
249
587
490
686

47,443

50,266

70
447
3
–

520

744
184
33
–
127
–
112

68
441
–
2

511

978
13
35
–
–
126
81

1,200

1,720

1,233

1,744

21,605
10,051
1,265
776

33,697

291,196
1,191
249,907
2,972
7,007
5,849
8,189

566,311

600,008

836
5,336
36
–

6,208

8,881
2,196
394
–
1,516
–
1,337

14,324

20,532

Notional
principal

Positive
value

£m

Negative
value

Notional
principal

Positive
value

1,032
9,607

10,639

738
11
20

769

75
698

773

25
1
–

26

36
668

704

42
–
3

45

11,198
104,218

115,416

8,006
124
214

8,344

814
7,574

8,388

267
11
–

278

Rm

Negative
fair value

812 
5,264 
– 
24 

6,100 

11,674 
155 
418 
– 
– 
1,504 
967 

14,718 

20,818 

Rm

Negative
value

394
7,243

7,637

458
–
31

489

Balances arising from off-balance sheet financial instruments

11,408

799

749

131,766

8,933

8,584

46 FINANCIAL INSTRUMENTS continued

46(b) Derivatives held for non-trading purposes continued

At 31 December 2003
Exchange rate contracts
Spot, forwards, futures and currency swaps

Interest rate contracts
Interest rate swaps
Credit derivatives

Notes to the Financial Statements | 127

Notional
principal

Positive
fair value

£m

Negative
fair value

Notional
principal

Positive
fair value

Rm

Negative
fair value

13,298

618

601

158,745

7,377

7,174

718
43

761

15
34

49

667

20
–

20

8,571
519

9,090

179
405

584

239 
– 

239

621

167,835

7,961

7,413

Balances arising from off-balance sheet financial instruments

14,059

These figures do not demonstrate the exposure of the Group to interest rate, foreign exchange or commodity market risks, since they include only 
off-balance sheet instruments. The market risk exposure arising from such instruments may be increased or offset by on-balance sheet transactions.

Maturity analysis of notional principal amounts of non-trading instruments
entered into with third parties:

Exchange rate contracts
Under one year
One to five years
Over five years

Interest rate contracts
Under one year
One to five years
Over five years

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

10,321
317
1

10,639

193
329
247

769

12,963
334
1

111,967
3,434
15

154,747 
3,987 
11 

13,298

115,416

158,745 

130
373
258

761

2,097
3,564
2,683

8,344

1,552 
4,452 
3,086 

9,090 

128 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

46 FINANCIAL INSTRUMENTS continued

46(c) Credit risk exposure on
derivative contracts

Exchange rate
contracts

Interest rate
contracts

Equity
contracts

Exchange rate
contracts

Total

Interest rate
contracts

Equity
contracts

£m

At 31 December 2004
Replacement cost of OTC derivatives –
trading book only:

Maturity analysis
Under one year
One to five years
Over five years

Counterparty analysis
Financial institutions
Non-financial institutions

141
46
25

212

190
22

212

106
599
470

1,175

1,061
114

1,175

169
186
–

355

340
15

355

416
831
495

1,742

1,591
151

1,742

1,533
502
270

2,305

2,066
239

2,305

1,147
6,495
5,094

12,736

11,507
1,229

12,736

1,834
2,018
–

3,852

3,692
160

3,852

Rm

Total

4,514
9,015
5,364

18,893

17,265
1,628

18,893

Replacement cost is defined as the cost of replacing transactions that have a positive fair value.

Notional principal of OTC derivatives –
trading book only:

Maturity analysis
Under one year
One to five years
Over five years

Counterparty analysis
Financial institutions
Non-financial institutions

1,797
321
83

2,201

2,165
36

2,201

25,436
16,967
7,350

49,753

39,156
10,597

49,753

534
819
2,001

3,354

3,257
97

3,354

27,767
18,107
9,434

19,494
3,477
900

275,931
184,059
79,736

5,789
8,887
21,702

301,214
196,423
102,338

55,308

23,871

539,726

36,378

599,975

44,578
10,730

23,489
382

424,775
114,951

35,332
1,046

483,596
116,379

55,308

23,871

539,726

36,378

599,975

Replacement cost of OTC derivatives – trading book only:
At 31 December 2003
Maturity analysis
Under one year
One to five years
Over five years

Counterparty analysis
Financial institutions
Non-financial institutions

94
219
207

520

457
63

520

Exchange rate
contracts

Interest rate
contracts

£m

Total

329
788
603

Exchange rate
contracts

Interest rate
contracts

Rm

Total

1,122
2,614
2,472

6,208

5,455
753

6,208

2,805
6,792
4,727

3,927 
9,406 
7,199 

14,324

20,532 

12,486
1,838

14,324

17,941 
2,591 

20,532 

235
569
396

1,200

1,720

1,046
154

1,200

1,503
217

1,720

Notes to the Financial Statements | 129

46 FINANCIAL INSTRUMENTS continued

46(c) Credit risk exposure on derivative contracts

Notional principal of OTC derivatives – trading book only:
Maturity analysis
Under one year
One to five years
Over five years

Counterparty analysis
Financial institutions
Non-financial institutions

Exchange rate
contracts

Interest rate
contracts

2,026
493
304

2,823

2,629
194

2,823

21,759
19,287
6,397

47,443

38,908
8,535

47,443

£m

Total

23,785
19,780
6,701

50,266

41,537
8,729

50,266

Exchange rate
contracts

Interest rate
contracts

Rm

Total

24,184
5,885
3,628

33,697

31,385
2,312

33,697

259,731
230,223
76,357

283,915 
236,108 
79,985 

566,311

600,008 

464,429
101,882

495,814 
104,194 

566,311

600,008 

The following analysis summarises the timing mismatch of interest receivable on assets and interest payable on liabilities by reference to the earliest date
on which repricing to market value can occur.

46(d) Non-trading book interest rate risk

Notes

Under
three
months

Three
to six
months

Six months
to one year

One to
five years

Trading
book and
Over non-interest
bearing

five years

At 31 December 2004
Assets
Cash and balances at central banks
Treasury bills and other eligible bills
Loans and advances to banks
Loans and advances to customers
Debt securities
Equity securities
Investments in associated undertakings
Tangible fixed assets
Land and buildings
Other assets
Prepayments and accrued income

Liabilities
Deposits by banks
Customer accounts
Debt securities in issue
Other liabilities
Provision for liabilities and charges
Subordinated liabilities
Convertible loan stock

Net position
Off-balance sheet items

Interest rate sensitivity gap

Cumulative gap

133
402
728
14,658
73
–
–
–
–
–
–

15,994

1,851
13,201
1,142
255
–
–
–

26(a)

26(b)

26(c)

26(f)

26(g)

26(h)

22

19

24

35

36

37

38

39

30

34(a)

–
77
–
60
–
–
–
–
–
–
–

137

159
795
251
–
–
–
–

–
1
–
126
–
–
–
–
–
–
–

127

83
878
130
–
–
46
6

–
–
–
1,446
1,156
–
–
–
–
–
–

2,602

22
734
35
–
–
601
–

16,449

1,205

1,143

1,392

–
–
–
866
94
–
–
–
–
–
–

960

–
27
–
19
–
–
–

46

£m

Total

926 
1,485
2,522
17,174
1,934
259
91
223
160
2,456
270

793
1,005
1,794
18
611
259
91
223
160
2,456
270

7,680

27,500

706
1,873
5
2,954
95
31
–

2,821
17,508
1,563
3,228
95
678
6

5,664

25,899

(455)
(1,404)

(1,859)

(1,068)
1,402

(1,016)
1,447

334

431

(1,859)

(1,525)

(1,094)

1,210
(867)

343

(751)

914
(578)

336

2,016
–

2,016

1,601
– 

–

(415)

1,601

1,601

130 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

46 FINANCIAL INSTRUMENTS continued

46(d) Non-trading book interest rate risk continued

Notes

Under
three
months

Three
to six
months

Six months
to one year

One to
five years

Over
five years

Trading
book and
non-interest
bearing

At 31 December 2003
Assets
Cash and balances at central banks
Treasury bills and other eligible bills
Loans and advances to banks
Loans and advances to customers
Debt securities
Equity securities
Investments in associated undertakings
Tangible fixed assets
Land and buildings
Other assets
Prepayments and accrued income

Liabilities
Deposits by banks
Customer accounts
Debt securities in issue
Other liabilities
Provision for liabilities and charges
Subordinated liabilities
Convertible loan stock

Net position
Off-balance sheet items

Interest rate sensitivity gap

Cumulative gap

26(a)

26(b)

26(c)

26(f)

26(g)

26(h)

22

19

24

35

36

37

38

39

30

34(a)

–
524
2,092
12,189
305
–
–
–
–
–
–

15,110

4,381
11,677
280
–
–
74
–

16,412

(1,302)
1,355

53

53

–
199
–
173
9
–
–
–
–
–
–

381

–
622
107
–
–
–
–

729

–
71
–
257
20
–
–
–
–
–
–

348

–
569
38
–
–
–
–

607

–
40
–
1,367
854
–
–
–
–
–
–

2,261

–
461
43
–
–
211
10

725

–
41
–
707
172
–
–
–
–
–
–

920

–
92
–
–
–
335
–

427

348
(33)

(381)

(328)

259
(22)

(281)

(609)

1,536
(669)

867

258

493
(631)

(138)

120

1,025
13
–
443
60
317
144
221
141
2,396
262

5,022

–
555
–
3,200
229
28
–

4,012

1,010
–

1,010

1,130

£m

Total

1,025
888
2,092
15,136
1,420
317 
144 
221 
141 
2,396
262 

24,042 

4,381
13,976
468
3,200
229
648
10

22,912

1,130
– 

–

1,130

Notes to the Financial Statements | 131

46 FINANCIAL INSTRUMENTS continued

46(d) Non-trading book interest rate risk

Notes

Under
three
months

Three
to six
months

Six months
to one year

One to
five years

Trading
book and
Over non-interest
bearing

five years

Rm

Total

At 31 December 2004
Assets
Cash and balances at central banks
Treasury bills and other eligible bills
Loans and advances to banks
Loans and advances to customers
Debt securities
Equity securities
Investments in associated undertakings
Tangible fixed assets
Land and buildings
Other assets
Prepayments and accrued income

Liabilities
Deposits by banks
Customer accounts
Debt securities in issue
Other liabilities
Provision for liabilities and charges
Subordinated liabilities
Convertible loan stock

Net position
Off-balance sheet items

Interest rate sensitivity gap

Cumulative gap

26(a)

1,439
4,365
7,893
26(b)
26(c) 159,014
795
26(f)
–
–
–
–
–
–

26(h)

26(g)

19

22

24

–
833
–
650
–
–
–
–
–
–
–

–
10
–
1,364
–
–
–
–
–
–
–

–
4
–
15,687
12,543
–
–
–
–
–
–

–
–
–
9,393
1,024
–
–
–
–
–
–

8,616
10,898
19,465

10,055
16,110
27,358
208 186,316
20,976
2,811
987
2,423
1,738
26,638
2,933

6,614
2,811
987
2,423
1,738
26,638
2,933

173,506

1,483

1,374

28,234

10,417

83,331 298,345

20,075
35
36 143,210
12,392
37
2,770
–
–
–

39

38

30

34(a)

1,728
8,620
2,718
–
–
–
–

900
9,520
1,415
–
–
500
67

243
7,961
383
1
–
6,515
–

178,447

13,066

12,402

15,103

2
294
3
211
–
–
–

510

7,569

30,607
20,328 189,933
16,956
35,025
1,030
7,358
67

45
32,043
1,030
343
–

61,448 280,976

(4,941)
(15,230)

(11,583)
15,209

(11,028)
15,698

13,131
(9,408)

9,907
(6,269)

21,883
–

17,369
–

(20,171)

3,626

4,670

3,723

3,638

21,883

– 

(20,171)

(16,545)

(11,875)

(8,152)

(4,514)

17,369

17,369

132 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

46 FINANCIAL INSTRUMENTS continued

46(d) Non-trading book interest rate risk

Notes

Under
three
months

Three
to six
months

Six months
to one year

One to
five years

Over
five years

Trading
book and
non-interest
bearing

Rm

Total

At 31 December 2003
Assets
Cash and balances at central banks
Treasury bills and other eligible bills
Loans and advances to banks
Loans and advances to customers
Debt securities
Equity securities
Investments in associated undertakings
Tangible fixed assets
Land and buildings
Other assets
Prepayments and accrued income

Liabilities
Deposits by banks
Customer accounts
Debt securities in issue
Other liabilities
Provision for liabilities and charges
Subordinated liabilities
Convertible loan stock

Net position
Off-balance sheet items

Interest rate sensitivity gap

Cumulative gap

26(a)

26(b)

26(c)

26(f)

26(g)

26(h)

22

19

24

35

36

37

38

39

30

34(a)

–
6,256
24,972
145,497
3,641
–
–
–
–
–
–

180,366

52,295
139,384
3,337
–
–
884
–

195,900

–
2,375
–
2,065
107
–
–
–
–
–
–

4,547

–
7,425
1,274
–
–
–
–

8,699

–
848
–
3,068
239
–
–
–
–
–
–

4,155

–
6,792
456
–
–
–
–

7,248

–
477
–
16,317
10,194
–
–
–
–
–
–

–
489
–
8,439
2,053
–
–
–
–
–
–

12,235
155
–
5,288
718
3,784
1,719
2,638
1,683
28,602
3,126

12,235
10,600
24,972
180,674
16,952
3,784
1,719 
2,638
1,683
28,602
3,126

26,988

10,981

59,948

286,985

–
5,503
519
–
–
2,515
119

8,656

–
1,098
–
–
–
4,000
–

5,098

–
6,625
–
38,199
2,732
346
–

52,295
166,827
5,586
38,199
2,732
7,745
119

47,902

273,503

(15,534)
16,175

(4,152)
(394)

(3,093)
(263)

18,332
(7,986)

5,883
(7,532)

12,046
–

13,482
– 

641

641

(4,546)

(3,356)

10,346

(1,649)

12,046

–

(3,905)

(7,261)

3,085

1,436

13,482

13,482

46 FINANCIAL INSTRUMENTS continued

46(e) Fair value disclosures

The fair value of the financial assets and liabilities of the Group’s banking subsidiaries comprises:
Trading book financial assets and liabilities
Assets
Treasury bills and other eligible bills
Debt securities
Derivative contracts – positive value

Liabilities
Derivative contracts – negative value

Non-trading book financial assets and liabilities

Assets
Treasury bills and other eligible bills
Debt securities
Equity securities

Liabilities
Debt securities in issue
Subordinated liabilities

Notes to the Financial Statements | 133

£m

Rm

Fair value
at
31 December
2004

Fair value
at
31 December
2003

Fair value
at
31 December
2004

Fair value
at
31 December
2003

797
250
1,742

–
26
1,720

8,650
2,709
18,893

– 
311
20,531

1,837

1,742

19,924

20,796

688
1,691
309

1,563
678

857
1,411
306

7,462
18,340
3,352

10,228 
16,838 
3,646

468
648

16,956
7,358

5,586 
7,745 

The fair value of all of the Group’s financial assets and liabilities is the same as the book value of those assets and liabilities in all instances except for
non-trading book debt securities with a book value of £1,691 million (R18,340 million) at 31 December 2004 (2003: £1,411 million (R16,838 million))
and non-trading book equity securities with a book value of £309 million (R3,352 million) at 31 December 2004 (2003: £306 million (R3,646 million)).

All financial assets and liabilities held or issued for trading purposes are carried in the financial statements at fair value. For those financial assets and
liabilities in the non-trading book, fair values have been determined by valuation against mid-market prices or by discounting forward cash flows.

134 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

46 FINANCIAL INSTRUMENTS continued

46(f) Market risk – historical value-at-risk (VaR) (99%, one day) by risk type
This risk measure estimates the potential loss in pre-tax profit over a given holding period for a specified confidence level. The VaR methodology is a
statistically defined, probability-based approach that takes account of market volatilities as well as risk diversification by recognising offsetting positions 
and correlations between products and markets.

The one day 99% VaR number represents the overnight loss that has less than a 1% chance of occurring under normal market conditions.

While VaR captures the banking business’s exposure under normal market conditions, scenario analysis and, in particular, stress testing are used 
to add insight to the possible outcomes under abnormal market conditions.

The banking business uses a number of stress scenarios to measure the impact on portfolio values of extreme moves in markets, based on historical
experience as well as hypothetical scenarios. The stress test methodology assumes that all market factors move adversely at the same time and that 
no actions are taken during the stress events to mitigate risk, thereby reflecting the decreased liquidity that frequently accompanies market shocks.

Key to the effectiveness of the scenario analysis programme is the timely review of the continued applicability of the scenarios, and this is built into 
the risk management process.

Total VaR

At 31 December
Highest
Lowest
Average

47 RECONCILIATION OF OPERATING PROFIT TO NET OPERATING CASH FLOWS

Profit from insurance and asset management activities before tax and
non-operating items
Depreciation and amortisation of intangible assets
Unrealised investment gains
Profits relating to long term business
Investment return in the life business
Cash received from long term business
Increase/(decrease) in provisions for other risks and charges
Increase in insurance technical provisions net of reinsurance
Other (including amounts reinvested in long term business operations)

Net cash inflow from insurance operating activities

Profit from banking activities before tax and non-operating items
Provision for bad and doubtful debts
Depreciation and goodwill amortisation and impairment 
Decrease in accrued income, prepayments and other trading adjustments

Net cash flow from banking trading activities
Net decrease in collections/transmissions
Net increase in loans and advances to banks and customers
Net increase in deposits by banks and customer accounts
Net (decrease)/increase in debt securities in issue
Net increase in other operating assets
Net decrease/(increase) in other operating liabilities

Net cash outflow from banking operating activities

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

2
3
1
1

2
2
1
1

£m

17
33
10
14

19 
26 
8 
16 

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

727
68
(35)
(511)
172
336
37
24
134

952

78
139
127
110

454
(16)
(859)
114
962
(788)
(279)

(412)

690
83
(161)
(541)
183
261
(29)
18
412

916

(144)
321
239
277

693
(17)
(997)
1,735
(2,081)
(135)
123

8,578
802
(413)
(6,018)
2,025
3,964
437
283
1,581

8,521 
1,025 
(1,988)
(6,681)
2,260 
3,223 
(358) 
222 
5,088 

11,239

11,312 

920
1,640
1,498
1,298

5,356
(189)
(10,135)
1,345
11,350
(9,297)
(3,293)

(1,778) 
3,960 
2,951
3,422

8,555 
(210) 
(12,305)
21,425 
(25,698) 
(1,663)
1,509

(679)

(4,863)

(8,387) 

47 RECONCILIATION OF OPERATING PROFIT TO NET OPERATING CASH FLOWS continued

47(a) Analysis of cash flows

Returns on investment and servicing of finance
Net interest paid
Dividends paid to minority interests
Bank charges and other finance costs

Net cash outflow from returns on investments and servicing of finance

(113)

(128)

(1,334)

Tax
United Kingdom corporation tax
Overseas tax

Total tax paid

Capital expenditure and financial investment
Net disposal of banking investment securities
Net purchase of tangible fixed assets

Net cash (outflow)/inflow from capital expenditure and financial investment

Acquisitions and disposals
Acquisition of interests in subsidiary undertakings and revenue share payments
Disposal of interests in subsidiary and associate undertakings
Net cash movement on acquisition and disposals of subsidiaries

Net cash (outflow)/inflow from acquisitions and disposals

Financing
Issue of ordinary share capital
Issue of ordinary share capital of subsidiary undertakings to minority interests
Net increase/(decrease) in amounts due to credit institutions
Net increase/(decrease) in subordinated liabilities
Repayment of convertible unsecured debt
Non-equity preference shares and preferred securities issued – net of issue costs

Net cash inflow from financing

47(b) Movement in portfolio investments, net of financing

Cash flow (excluding long term business):
Net cash inflow for the year
Portfolio investments

Movement arising from cash flow
Movement in long term business
Changes in market values and exchange rates

Total movement in portfolio investments, net of financing
Portfolio investments, net of financing at beginning of year

Portfolio investments, net of financing at end of year

Notes to the Financial Statements | 135

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

(22)
(80)
(11)

(30)
(95)
(3)

(260)
(944)
(130)

10
(303)

(293)

71
(73)

(2)

(110)
79
–

(31)

15
217
104
(48)
(4)
–

284

118
(3,575)

(3,457)

838
(861)

(23)

(1,298)
932
–

(366)

177
2,560
1,227
(566)
(52)
–

3,346

–
(174)

(174)

316
(89)

227

(67)
227
(77)

83

41
14
(365)
44
(14)
511

231

£m

(370)
(1,173)
(37)

(1,580)

–
(2,149)

(2,149)

3,903
(1,099)

2,804

(827)
2,803 
(951) 

1,025

506
173
(4,507)
544
(175) 
6,310 

2,851 

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

(157)
546

389
96
2,504

2,989
24,128

27,117

36
616

652
8
3,401

(1,852)
6,442

4,590
1,133
439

445 
7,605 

8,050 
99
2,652 

4,061
20,067

6,162
288,008

10,801 
277,207 

24,128

294,170

288,008 

136 | Notes to the Financial Statements

Notes to the Financial Statements
for the year ended 31 December 2004 continued

47 RECONCILIATION OF OPERATING PROFIT TO NET OPERATING CASH FLOWS continued

47(c) Movement in insurance and other cash, investments and financing

Movement in cash and insurance portfolio investments
Cash in hand and at bank
Land and buildings
Other financial investments

Movement in financing
Share capital
Share premium and merger reserve
Subordinated liabilities
Amounts owed to credit institutions
Convertible loan stock
Preferred securities (including undistributed profits)

Movement in cash and insurance portfolio investments
Cash in hand and at bank
Land and buildings
Other financial investments

Movement in financing
Share capital
Share premium and merger reserve
Subordinated liabilities
Amounts owed to credit institutions
Convertible loan stock
Preferred securities (including undistributed profits)

Changes in
long term
business

Changes to
market value,
currencies
and other

(42)
17
121

96

8
70
2,426

2,504

–
–
–
–
–
–

–

–
–
–
(14)
(25)
(19)

(58)

Cash
flow

(157)
9
537

389

2
13
(15)
104
–
–

104

Cash
flow

Changes in
long term
business

Changes to
market value,
currencies
and other

£m

At end
of year

504
773 
25,840 

27,117 

386 
784
–
467
332
392

2,361

Rm

At end
of year

(1,852)
106
6,336

4,590

24
153
(179)
1,227
–
–

1,225

(496)
201
1,428

1,133

(481)
(2)
922

5,467
8,386
280,317

439

294,170

–
–
–
–
–
–

–

(421)
(851)
–
(663)
(659)
(655)

4,187
8,805
– 
5,065
3,602 
4,251 

(3,249)

25,610

At start
of year

695
677
22,756

24,128

384
771
15
377
357
411

2,315

At start
of year

8,296 
8,081
271,631

288,008

4,584
9,203
179
4,501
4,261
4,906

27,634

47 RECONCILIATION OF OPERATING PROFIT TO NET OPERATING CASH FLOWS continued

47(d) Movement in banking cash and changes in financing during the period

Cash and balances at central banks

Movement in financing
Subordinated liabilities
Convertible loan stock
Non-equity preference shares (including undistributed profits)

Notes to the Financial Statements | 137

At start
of year

1,025 

648
10
244

902

Changes to
market value,
currencies
and other

86

63
–
22

85

Cash
flow

(185)

(33)
(4)
–

(37)

At start
of year

Cash
flow

Changes to
market value,
currencies
and other

£m

At end
of year

926

678
6
266

950

Rm

At end
of year

Cash and balances at central banks

12,235

(2,180)

–

10,055 

Movement in financing
Subordinated liabilities
Convertible loan stock
Non-equity preference shares (including undistributed profits)

7,745
119
2,912

10,776 

(387)
(52)
–

(439)

–
–
(25)

(25)

7,358 
67 
2,887

10,312

138 | Supplementary Disclosures

Supplementary Disclosures FRS 27 “Life Assurance”
for the year ended 31 December 2004

In December 2004, the UK Accounting Standards Board (ASB) released Financial Reporting Standard 27 “Life Assurance” (FRS 27) with implementation 
for years ending on or after 23 December 2005. In keeping with industry practice, and in recognition of the Memorandum of Understanding signed by 
UK listed insurance companies, the Association of British Insurers and the ASB, key components of FRS 27 disclosures are provided as supplementary
information for the year ended 31 December 2004. This information is not subject to audit and does not form part of the financial statements. The disclosures
will be incorporated into the financial statements prepared under International Financial Reporting Standards for the year ending 31 December 2005 
and subsequent years.

CAPITAL POSITION STATEMENT
The capital position of the Group’s significant life businesses, based on latest estimates, can be summarised as follows:

Equity shareholders’ funds
Adjustments on to regulatory basis:

Inadmissible assets
Other adjustments

Total available capital resources

Total capital requirements – local regulatory basis

South Africa United States

Rest of World

South Africa United States

Rest of World

3,357

1,228

85

36,418

13,318

922

£m

Rm

(33)
(677)

2,647

1,013

(55)
(716)

457

160

–
(19)

66

26

(354)
(7,340)

28,724

10,993

(600)
(7,769)

4,949

1,738

– 
(206) 

716

282

Overall capital excess

1,634

297

40

17,731

3,211

434

Long term business provision (net of reinsurance)
Technical provisions for linked liabilities

14,168
6,599

20,767

8,331
147

8,478

370
817

153,697
71,587

90,376
1,595

4,015
8,863

1,187

225,284

91,971

12,878

Technical provisions for linked liabilities exclude £414 million (R4,491 million) in respect of other life businesses not included in the above analysis.

South Africa
The amounts disclosed above represent the capital position of Old Mutual Life Assurance Company (South Africa) Limited (OMLAC(SA)). 
The calculations have been determined in accordance with the requirements of the South African Financial Services Board, with estimates of the
regulatory adjustments, as regulatory returns have yet to be completed. At 31 December 2004, OMLAC(SA)’s statutory capital cover was 2.6 times
the statutory capital adequacy requirement (SCAR), after allowing for statutory limitations on the value of certain assets.

The equity shareholders’ funds include OMLAC(SA)’s investments in Nedcor Limited (£928 million (R10,066 million)) and Mutual & Federal Insurance
Company Limited (£486 million (R5,274 million)). In addition, £261 million (R2,831 million) is invested in the Group’s loan notes and £198 million
(R2,153 million) is held in intercompany loans. There are no formal intra-Group arrangements that exist to provide capital to other subsidiaries. 
All intercompany loans are immediately repayable and subject to commercial terms and conditions, with the exception that interest may be waived 
in certain circumstances.

The amount of the surplus available to be distributed as dividends to the ultimate parent, Old Mutual plc, is subject to available distributable reserves
within the shareholders’ fund, maintaining the minimum statutory capital adequacy requirement and foreign exchange controls, as determined by the
South African Reserve Bank.

United States
The amounts disclosed above represent the consolidated capital position of the US Life group of companies, including Fidelity & Guaranty Life
Assurance Company, Fidelity & Guaranty Life Insurance Company of New York, Life Insurance Company of New York, OMNIA (Bermuda) Limited and
Old Mutual Reassurance (Ireland) Limited. The calculations have been determined on the basis of local regulatory requirements for the United States,
Bermuda and Ireland accordingly.

There are no formal intra-Group arrangements that exist to provide capital to other subsidiaries.

The amount of the surplus available to be distributed as dividends to the ultimate parent, Old Mutual plc, is subject to available distributable reserves
within the entities and the requirement to maintain the minimum statutory capital requirements, being 100% of the risk-based capital (referred to as 
the Company Action Level).

Supplementary Disclosures | 139

Rest of World
The amounts disclosed above represent the capital position of the life business in Namibia and Old Mutual International, based in Guernsey. The
statutory solvency requirement for Namibia is N$4 million (£0.4 million (R4 million)). The calculations have been determined on the South African
statutory basis, which is more prudent. Old Mutual International has been included on the basis of the Guernsey regulatory requirements.

There are no formal intra-Group arrangements that exist to provide capital to other subsidiaries.

The amount of the surplus available to be distributed as dividends to the ultimate parent, Old Mutual plc, is subject to available distributable reserves
within the shareholders’ fund, maintaining the minimum statutory capital adequacy requirement and foreign exchange controls.

Capital management policies
Capital is actively managed to ensure that the Group is properly capitalised and funded at all times, having regard to its regulatory needs, prudent
management and the needs of all stakeholders.

The Group has a business planning process that runs on an annual cycle with regular updates to projections. It is through this process, which includes
risk and sensitivity analyses of forecasts, and the operations of the Group Capital Management Committee (GCMC) that the operating businesses gain
approval from the Old Mutual plc Board for their requests for capital.

The GCMC is a sub-committee of the Executive Committee of the Board, established to set an appropriate framework and guidelines to ensure the
appropriate management of capital, allocation of capital to the various businesses, and monitoring of the return on allocated capital for each business
relative to the agreed hurdle. The GCMC comprises the Executive Directors of Old Mutual plc together with certain executives drawn from Old Mutual plc
and/or one or more subsidiaries. Meetings are held as regularly as circumstances require and in any event not less than half-yearly and approve
requests for capital that are outside the business plans.

Specifically, the Group has adopted the following capital management policies:

Each regulated business is required to hold, as a minimum, capital sufficient to meet the requirements of any applicable regulator in respect of its
business in the jurisdictions in which it operates and such additional capital as management believes is necessary to ensure that obligations to
policyholders and/or clients can be met on a timely basis.

Each business ensures that it maintains an appropriate level of liquidity at all times. Old Mutual plc further ensures that it can meet its expected 
capital and financing needs at all times, having regard to the Group’s business plans, forecasts and any strategic initiatives.

The Group will always ensure it maintains adequate capital resources to ensure it satisfies its regulatory requirements.

From 1 January 2005, the Group is subject to the UK Financial Services Authority’s Group capital adequacy requirements established following
introduction of the EU Financial Groups Directive. Management regularly monitors the capital requirements of the Group, taking account of future
balance sheet growth, profitability, projected dividend payments and any anticipated regulatory changes, in order to ensure that the Group is at all
times able to meet the forecast future minimum capital requirements.

Sensitivities
The Group has both qualitative and quantitative risk management procedures to monitor, at the individual company and Group levels, the key risks 
and sensitivities of the business. This is achieved through stress tests, scenario analyses and individual risk assessments by the operating businesses.
From an understanding of the principal risks, the Group defines appropriate risk limits and controls.

The key risks affecting the surplus capital of the Group are:

Market Risk – the risk of loss due to fluctuations in the financial markets (equity investment returns, interest rates or exchange rates).

Credit Risk – the risk of a major counterparty no longer being able to pay its debt, including amounts due as a result of investment activities.

Underwriting Risks – arise from higher claims being experienced than anticipated when premium, bonus rates and surrender value 
levels were set.

Business Risks – arise from changes in structural, regulatory and/or competitive environments.

For further details of the management of specific risks, refer to the Corporate Governance and Directors’ Report on pages 26 to 41.

140 | Statement of Directors’ Responsibilities

Statement of Directors’ Responsibilities
in respect of the preparation of the Achieved Profits Basis Supplementary Information

The Guidance issued in December 2001 by the Association of British
Insurers entitled “Supplementary Reporting for Long Term Insurance
Business (the Achieved Profits Method)” (“the Guidance”) requires 
the directors to prepare supplementary information presented under 
the Achieved Profits Method.

In preparing the Achieved Profits Supplementary Information, 
the directors are required to:

• select suitable methodologies and then apply them consistently;

• determine assumptions on a realistic basis, having regard to past,

current and expected future experience and to any relevant external
data, and then apply them consistently;

• state whether applicable accounting standards have been followed
in relation to the residual assets, subject to any material departures
disclosed and explained in the supplementary information; and

• prepare the supplementary information on the going concern basis
unless it is inappropriate to presume that the Company will continue
in business.

Independent Auditors’ Report | 141

Independent Auditors’ Report to Old Mutual plc 
on the Achieved Profits Basis Supplementary Information
for the year ended 31 December 2004
We have audited the supplementary information on pages 142 to 155 
in respect of the year ended 31 December 2004. The supplementary
information has been prepared in accordance with the guidance issued
in December 2001 by the Association of British Insurers entitled
“Supplementary Reporting for Long Term Insurance Business (the
Achieved Profits Method)” (“the Guidance”) using the methodology
and assumptions set out on pages 142 to 155. The supplementary
information should be read in conjunction with the primary financial
statements which are on pages 57 to 137.

BASIS OF AUDIT OPINION
We conducted our audit in accordance with Auditing Standards 
issued by the Auditing Practices Board. An audit includes examination, 
on a test basis, of evidence relevant to the amounts and disclosures 
in the supplementary information. It also includes an assessment of 
the significant estimates and judgements made by the directors in 
the preparation of the supplementary information, and of whether 
the accounting policies are appropriate to the Group’s circumstances,
consistently applied and adequately disclosed.

This report is made solely to the Company in accordance with the terms
of our engagement. Our audit work has been undertaken so that we might
state to the Company those matters we have been engaged to state 
in this report and for no other purpose. To the fullest extent permitted 
by law, we do not accept or assume responsibility to anyone other than 
the Company for our audit work, for this report, or for the opinions we
have formed. 

We planned and performed our audit so as to obtain all the information
and explanations which we considered necessary in order to provide 
us with sufficient evidence to give reasonable assurance that the
supplementary information stated on the achieved profits basis is free
from material misstatement, whether caused by fraud or other irregularity
or error. In forming our opinion, we also evaluated the overall adequacy
of the presentation of the supplementary information.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 140, the directors’ responsibilities include
preparing the supplementary information on the achieved profits basis
in accordance with the Guidance issued by the Association of British
Insurers. Our responsibilities, as independent auditors, in relation to
the supplementary information are established in the United Kingdom
by the Auditing Practices Board, by our profession’s ethical guidance
and the terms of our engagement.

Under the terms of engagement we are required to report to the
Company our opinion as to whether the supplementary information 
has been properly prepared in accordance with the Guidance using the
methodology and assumptions set out on pages 142 to 155. We also
report if we have not received all the information and explanations we
require for this audit.

OPINION
In our opinion, the achieved profits supplementary information for the
year ended 31 December 2004 has been properly prepared in accordance
with the Guidance using the methodology and assumptions set out on
pages 142 to 155.

KPMG Audit Plc
Chartered Accountants
8 Salisbury Square
London EC4Y 8BB

28 February 2005

142 | Achieved Profits Basis Supplementary Information

Achieved Profits Basis Supplementary Information
for the year ended 31 December 2004

1 CONSOLIDATED PROFIT AND LOSS ACCOUNT ON AN ACHIEVED PROFITS BASIS

South Africa

Life assurance
Asset management
Banking
General insurance

United States

Life assurance
Asset management

United Kingdom and Rest of World

Life assurance
Asset management
Banking

Other shareholders’ income/(expenses)
Debt service costs

Adjusted operating profit*
Goodwill amortisation and impairment
Loss on disposal of investment in Dimension Data Holdings plc
Restructuring and integration costs
Change in credit provisioning methodology
Fines and penalties
Short term fluctuations in investment return (including economic assumption changes)

Life assurance
Other

Investment return adjustment for own shares held in policyholders’ funds
Other life assurance changes**

Operating profit on ordinary activities before tax
Non-operating items

Profit on ordinary activities before tax
Tax on profit on ordinary activities

Profit on ordinary activities after tax
Minority interests – equity

– non-equity

Profit for the financial year
Dividends paid and proposed

Retained profit for the financial year

£m

Rm

Year to
31 December
2004

Year to
31 December
2003
(Restated)***

Year to
31 December
2004

Year to
31 December
2003
(Restated)***

623
53
177
89

942

104
89

193

22
10
14

46

1,181
(33)
(37)

1,111
(110)
–
(21)
–
(49)

256
38
(94)
(119)

1,012
(35)

977
(327)

650
(44)
(59)

547
(182)

365

475
55
(10)
73

593

127
81

208

(2)
(8)
4

(6)

795
(40)
(48)

707
(206)
(5)
(32)
(87)
–

71
–
12
(86)

374
(32)

342
(211)

131
115
(46)

200
(166)

34

7,350
639
2,099
1,057

11,145

1,227
1,050

2,277

259
117
158

534

13,956
(390)
(437)

13,129
(1,290)
–
(248)
–
(596)

3,020
449
(1,115)
(1,404)

11,945
(418)

11,527
(3,859)

7,668
(518)
(696)

6,454
(2,001)

4,453

5,872
678
(118)
909

7,341

1,569
1,000

2,569

(24)
(95)
48

(71)

9,839
(494)
(593)

8,752
(2,544)
(60)
(394)
(1,074)
–

872
–
148
(1,065)

4,635
(404)

4,231
(2,605)

1,626
1,420
(568)

2,478
(2,006)

472

Achieved Profits Basis Supplementary Information | 143

1 CONSOLIDATED PROFIT AND LOSS ACCOUNT ON AN ACHIEVED PROFITS BASIS continued

The adjusted operating profit on an after-tax and minority interests basis is determined as follows:

Adjusted operating profit*
Tax on adjusted operating profit

Minority interests – equity

– non-equity

Adjusted operating profit after tax and minority interests

Earnings per share – achieved profits basis

Adjusted operating earnings per share* 
Basic earnings per share

Adjusted weighted average number of shares – millions
Weighted average number of shares – millions

£m

Rm

Year to
31 December
2004

Year to
31 December
2003
(Restated)***

Year to
31 December
2004

Year to
31 December
2003
(Restated)***

1,111
(254)

857
(83)
(59)

715

19.1
15.9

3,748
3,432

707
(250)

457
(9)
(46)

402

p

10.8
5.9

3,727
3,411

13,129
(2,999)

10,130
(979)
(696)

8,455

225.6
188.1

3,748
3,432

8,752
(3,087)

5,665
(111)
(568)

4,986

c

133.8
72.6

3,727
3,411

* For life assurance and general insurance businesses, the adjusted operating profit is based on a long term investment return and includes investment returns on own shares held within 

the policyholders’ funds. For banking business, adjusted operating profit excludes the loss on disposal of investment in Dimension Data Holdings plc, restructuring and integration costs and
the transitional impact of the change of credit provisioning methodology. For all businesses, adjusted operating profit excludes goodwill amortisation and impairment and fines and penalties.

Adjusted operating earnings per share is similarly based, but is stated after tax and minority interests, with the calculation of the weighted average number of shares including own shares held
in policyholders’ funds. The segmental analysis within the achieved profits consolidated profit and loss account has been prepared on a gross of inter-segment transactions basis.

** Refer to segmental analysis of results in section 7.

***2003 comparatives have been restated to be consistent with the current year segmental presentation.

2 CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES ON AN ACHIEVED PROFITS BASIS

Profit for the financial year
Foreign exchange movements

Total recognised gains and losses for the year

£m

Rm

Year to
31 December
2004

Year to
31 December
2003
(Restated)****

Year to
31 December
2004

Year to
31 December
2003
(Restated)***
*

547
250

797

200
307

507

6,454
(1,583)

4,871

2,478
(2,186)

292

****Comparative figures have been restated to reflect the adoption of Urgent Issues Taskforce Abstract 38 “Accounting for ESOP Trusts”. The effect of this restatement is that consolidated

achieved profits equity shareholders’ funds of £3,561 million (R42,503 million) before prior year adjustments have been decreased by £109 million (R1,301 million).

144 | Achieved Profits Basis Supplementary Information

Achieved Profits Basis Supplementary Information
for the year ended 31 December 2004 continued

3 RECONCILIATION OF MOVEMENTS IN CONSOLIDATED ACHIEVED PROFITS EQUITY SHAREHOLDERS’ FUNDS

Total recognised gains and losses for the year
Dividends paid and proposed

Issue of new capital
Shares issued under share incentive schemes
Net sales of shares held in ESOP Trusts and policyholders’ funds

Net increase/(decrease) in achieved profits equity shareholders’ funds
Achieved profits equity shareholders’ funds at the beginning of the year

Achieved profits equity shareholders’ funds at the end of the year

4 CONSOLIDATED BALANCE SHEET ON AN ACHIEVED PROFITS BASIS

Assets

Goodwill
Insurance and other assets
Banking assets
Total long term in-force business asset

Total assets

Liabilities

Achieved profits equity shareholders’ funds
Minority interests
Subordinated liabilities
Insurance and other liabilities
Banking liabilities

Total liabilities

Reconciliation of total long term in-force business asset

Value of in-force business
OMUSL statutory solvency adjustment
OMI life subsidiaries statutory solvency adjustment
Adjustment for discounting CGT

Total long term in-force business asset

£m

Rm

Year to
31 December
2004

Year to
31 December
2003
(Restated)*

Year to
31 December
2004

Year to
31 December
2003
(Restated)*

797
(182)

615
–
15
33

663
3,452

4,115

507
(166)

341
37
4
6

388
3,064

3,452

4,871
(2,001)

2,870
–
177
389

3,436
41,202

44,638

292
(2,006)

(1,714)
457
49
76

(1,132)
42,334

41,202

£m

Rm

At
31 December
2004

At
31 December
2003
(Restated)*

At
31 December
2004

At
31 December
2003
(Restated)*

1,152
37,608
27,500
872

67,132

4,115
1,529
–
35,589
25,899

67,132

1,592
(716)
(19)
15

872

1,264
32,409
24,042
700

12,497
407,979
298,345
9,460

15,088
386,855
286,985
8,353

58,415

728,281

697,281

3,452
1,312
15
30,724
22,912

44,638
16,589
–
386,078
280,976

41,202
15,662
179
366,735
273,503

58,415

728,281

697,281

1,276
(566)
(17)
7

700

17,271
(7,767)
(206)
162

9,460

15,227
(6,756)
(203)
85

8,353

* Comparative figures have been restated to reflect the adoption of Urgent Issues Taskforce Abstract 38 “Accounting for ESOP Trusts” (UITF38). The effect of this restatement is that
consolidated achieved profits equity shareholders’ funds of £3,561 million (R42,503 million) before prior year adjustments have been decreased by £109 million (R1,301 million).

This supplementary information has been approved by the Board and signed on its behalf by:

Julian V F Roberts
Group Finance Director
28 February 2005

Achieved Profits Basis Supplementary Information | 145

5 BASIS OF PREPARATION

This supplementary information has been prepared in accordance with the methodology for supplementary reporting for long term insurance business
(the Achieved Profits Method) issued in December 2001 by the Association of British Insurers.

The objective of the Achieved Profits Method is to recognise profit as it is earned arising from contracts of long term assurance business. 
The methodology is based on an attribution of the assets of a life assurance company between those backing long term assurance contracts 
(backing assets) and the residual assets representing unencumbered capital.

The backing assets cover:
(i)
(ii) the solvency capital requirements in each country (or equivalent where there is no local requirement).

the long term liabilities calculated in accordance with local supervisory requirements; and

Under the Achieved Profits Method the profits of the long term assurance business comprise:
(i)
(ii) the movement over the accounting period in the present value of the expected future cash flows to the residual assets from contracts in-force 

the cash transfers to the residual assets from the backing assets as determined following the statutory valuation;

at the balance sheet date and their backing assets; and

(iii) the return on the residual assets.

Shareholder profit arises fundamentally from:
(i)

the difference between (a) the amounts charged to policyholders for guarantees, expenses and insurance and (b) the actual experience of 
these items; and

(ii) the investment return earned on capital.

In addition for the United States business, the guarantees for interest credited to policyholders’ funds are reset periodically. The assumed future
credited interest rates are consistent with investment earnings made and in line with recent Company policy.

The treatment within this supplementary information of all business other than life assurance business is unchanged from the statutory
financial statements.

146 | Achieved Profits Basis Supplementary Information

Achieved Profits Basis Supplementary Information
for the year ended 31 December 2004 continued

6 COMPONENTS OF ACHIEVED PROFITS EQUITY SHAREHOLDERS’ FUNDS

Shareholders’ adjusted net worth

Equity shareholders’ funds
Adjustment to include OMUSL on a statutory solvency basis
Adjustment to include OMI life subsidiaries on a statutory solvency basis
Adjustment for discounting CGT

Value of in-force business

Value of in-force business before cost of solvency capital
Cost of solvency capital

Minority interest in value of in-force business

Achieved profits equity shareholders’ funds

Pro-forma adjustment to bring Group investments to market value
Achieved profits equity shareholders’ funds
Adjustment to bring listed subsidiaries to market value
Adjustment to market value of own shares held in policyholders’ funds

Adjusted embedded value

£m

Rm

At
31 December
2004

At
31 December
2003
(Restated)*

At
31 December
2004

At
31 December
2003
(Restated)*

2,525

3,245
(716)
(19)
15

1,592

1,871
(279)

(2)

2,178

2,754
(566)
(17)
7

1,276

1,450
(174)

(2)

27,391

35,202
(7,767)
(206)
162

17,271

20,297
(3,026)

(24)

26,000

32,874
(6,756)
(203)
85

15,227

17,304
(2,077)

(25)

4,115

3,452

44,638

41,202

4,115
876
368

5,359

44,638
9,502
3,994

58,134

3,452
288
275

4,015

p

41,202
3,444
3,283

47,929

c

1,249

Adjusted embedded value per share

139.1

104.6

1,508

Number of shares in issue at the end of the period including own shares held in
policyholders’ funds – millions

3,854

3,837

3,854

3,837

* Comparative figures have been restated to reflect the adoption of Urgent Issues Taskforce Abstract 38 “Accounting for ESOP Trusts”. The effect of this restatement is that consolidated

achieved profits equity shareholders’ funds of £3,561 million (R42,503 million) before prior year adjustments have been decreased by £109 million (R1,301 million).

Shareholders’ adjusted net worth includes goodwill relating to OMUSL of £56 million (R608 million) (December 2003: £63 million (R752 million)). 

The table below sets out a geographical analysis of the value of in-force business.

South Africa

Individual business
Group business

United States
United Kingdom and Rest of World

Value of in-force business

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

1,005

698
307

512
75

824

507
317

393
59

10,903

7,577
3,326

5,554
814

9,832

6,053
3,779

4,691
704

1,592

1,276

17,271

15,227

Achieved Profits Basis Supplementary Information | 147

6 COMPONENTS OF ACHIEVED PROFITS EQUITY SHAREHOLDERS’ FUNDS continued

The encumbered and unencumbered capital for South Africa and United States is shown in the table below.

South Africa

Encumbered capital
Unencumbered capital

United States

Encumbered capital
Unencumbered capital

£m

Rm

At
31 December
2004

At
31 December
2003

At
31 December
2004

At
31 December
2003

1,692

1,016
676

456

160
296

1,551

1,021
530

391

153
238

18,350

11,020
7,330

4,948

1,736
3,212

18,513

12,186
6,327

4,666

1,822
2,844

For South Africa the average unencumbered capital applicable was £306 million (R3,606 million) (December 2003: £196 million (R2,419 million)). These
average figures were used to determine the expected return on unencumbered capital.

7 SEGMENTAL ANALYSIS OF RESULTS

Year to 31 December 2004
New business contribution
Profits from existing business:

Expected return on in-force business
Expected return on encumbered capital
Experience variances
Operating assumption changes

Expected return on unencumbered capital

Life assurance adjusted operating profit before tax
Investment return variances:

On value of in-force
On capital

Effect of economic assumption changes
Effect of changes in and cost of solvency capital

Life assurance achieved profits before tax
Attributed tax

Life assurance achieved profits after tax

South
Africa

United
States

UK and
Rest of 
World

£m

Total

South
Africa

United
States

UK and
Rest of
World

Rm

Total

98

193
114
74
106
38

623

43
111
71
(117)

731
(206)

525

88

45
9
(24)
(28)
14

4

6
5
(2)
9
–

104

22

26
(9)
–
–

121
(36)

85

4
7
3
(2)

34
–

34

190

1,156

1,038

47

2,241

244
128
48
87
52

749

73
109
74
(119)

886
(242)

2,277
1,345
873
1,251
448

7,350

507
1,310
838
(1,380)

8,625
(2,431)

531
106
(283)
(330)
165

1,227

307
(106)
–
–

1,428
(425)

644

6,194

1,003

71
59
(24)
106
–

259

47
82
35
(24)

399
–

399

2,879
1,510
566
1,027
613

8,836

861
1,286
873
(1,404)

10,452
(2,856)

7,596

148 | Achieved Profits Basis Supplementary Information

Achieved Profits Basis Supplementary Information
for the year ended 31 December 2004 continued

7 SEGMENTAL ANALYSIS OF RESULTS continued

Year to 31 December 2003 (Restated)*
New business contribution
Profits from existing business:

Expected return on in-force business
Expected return on encumbered capital
Experience variances
Operating assumption changes

Expected return on unencumbered capital

Life assurance adjusted operating profit before tax
Investment return variances:

On value of in-force business
On capital

Effect of economic assumption changes
Effect of changes in and costs of solvency capital
Effect of FSV economic assumption changes
Effect of BoE Life

Life assurance achieved profits before tax
Attributed tax

Life assurance achieved profits after tax

South
Africa

United
States

UK and
Rest of 
World

£m

Total

South
Africa

United
States

UK and
Rest of
World

Rm

Total

108

188
147
29
(23)
26

475

27
(36)
79
(59)
(32)
5

459
(127)

322

57

39
11
(9)
15
14

127

20
(1)
(11)
–
–
–

135
(34)

101

2

6
5
(9)
(6)
–

(2)

3
(12)
2
–
–
–

(9)
–

(9)

167

1,334

704

25

2,063

233
163
11
(14)
40

600

50
(49)
70
(59)
(32)
5

585
(161)

424

2,322
1,818
358
(284)
324

5,872

333
(450)
976
(729)
(395)
59

5,666
(1,568)

4,098

482
136
(111)
185
173

74
62
(111)
(74)
–

2,878
2,016
136
(173)
497

1,569

(24)

7,417

247
(12)
(136)
–
–
–

1,668
(420)

1,248

37
(148)
25
–
–
–

(110)
–

(110)

617
(610)
865
(729)
(395)
59

7,224
(1,988)

5,236

* 2003 comparatives have been restated to be consistent with the current year segmental presentation.

Expected return on the unencumbered capital for South Africa and the United States is 12.5% p.a. (2003: 13.4%) and 6.0% p.a. (2003: 7.0%) respectively.
For South Africa the expected return is applied to the average unencumbered capital given in section 6.

The South African operating assumption changes of £106 million (R1,251 million) for 2004 include: (a) £60 million (R708 million) before tax increase in 
the value of in-force business in respect of an increase in discretionary mortality margins in the Financial Soundness Valuation (FSV), which arose as a result
of a reduction in Individual Business mortality assumptions, reflecting positive experience variances, (b) £62 million (R732 million) before tax increase in the
value of in-force business in respect of sources of profit that have not previously been valued, and (c) other changes to valuation methodology and assumptions. 

The segmental results of the United States include the operating profit generated by Old Mutual Reassurance (Ireland) Limited (OMRe), which provides
reinsurance to the United States life companies, and OMNIA Life (Bermuda) Limited. During 2004, all the deferred annuity business reinsured with OMRe
was recaptured by the United States life companies. The effect of this recapture was to reduce the life assurance achieved profit for 2004 by £31 million
(R366 million) before tax which is included within experience variances. 

The effect of changes in and cost of solvency capital for South Africa reflects changes in the amount of solvency capital required and in the mix of assets
backing the solvency capital.

The effect of FSV economic assumption changes in 2003 reflects the impact of reducing the economic assumptions for the South African actuarial liability
valuation by 3% p.a.

The effect of BoE Life in 2003 reflects the recognition of the initial value of the in-force business on acquisition.

The difference between the total tax charge shown in the above segmental analysis and the total tax charge shown in the profit and loss account 
in section 1, represents the tax charge on the non-life businesses.

7 SEGMENTAL ANALYSIS OF RESULTS continued

Tax on life assurance achieved profits
South Africa – value of in-force

– capital 

United States
United Kingdom and Rest of World

Tax on other businesses

Tax on profit on ordinary activities

Achieved Profits Basis Supplementary Information | 149

£m

Rm

Year to
31 December
2004

Year to
31 December
2003

Year to
31 December
2004

Year to
31 December
2003

163
43
36
–

242
85

327

119
8
34
–

161
50

211

1,923
508
425
–

2,856
1,003

3,859

1,469
99
420
–

1,988
617

2,605

150 | Achieved Profits Basis Supplementary Information

Achieved Profits Basis Supplementary Information
for the year ended 31 December 2004 continued

8 VALUE OF NEW BUSINESS

The tables below set out a geographical analysis of the value of new business (VNB) for the year to 31 December 2004 and the year to 
31 December 2003. Annual Premium Equivalent (APE) is calculated as recurring premiums plus 10% of single premiums. New business profitability, 
as measured by the ratio of the VNB to the APE, is also shown under “Margin” below.

The value of new business is disclosed both on a gross and after tax basis. The assumptions and tax rates used to calculate the value of new business
are set out in section 9.

Year to 31 December 2004
£m

Recurring premiums
Single premiums
Annual Premium Equivalent

Value of new business before tax
Value of new business after tax

Margin before tax
Margin after tax

Rm

Recurring premiums
Single premiums
Annual Premium Equivalent

Value of new business before tax
Value of new business after tax

Year to 31 December 2003
£m

Recurring premiums
Single premiums
Annual Premium Equivalent

Value of new business before tax
Value of new business after tax

Margin before tax
Margin after tax

Rm

Recurring premiums
Single premiums
Annual Premium Equivalent

Value of new business before tax
Value of new business after tax

Individual
business

Group
business

South
Africa

United UK and Rest
of World
States

Total

157
546
212

84
52

39%
24%

1,858
6,442
2,502

983
612

157
475
205

68
42

33%
21%

1,933
5,867
2,520

840
519

15
203
35

14
9

41%
25%

182
2,399
422

173
107

18
472
65

40
25

61%
38%

227
5,823
809

494
309

172
749
247

98
61

40%
25%

58
2,157
274

88
62

32%
23%

10
146
25

4
4

16%
16%

240
3,052
546

190
127

35%
23%

2,040
8,841
2,924

1,156
719

679
25,455
3,225

1,038
732

118
1,728
291

2,837
36,024
6,440

47
47

2,241
1,498

175
947
270

108
67

40%
25%

67
1,715
238

49
36

21%
15%

2,160
11,690
3,329

1,334
828

827
21,178
2,945

605
445

11
100
21

2
2

10%
15%

134
1,242
258

25
25

253
2,762
529

159
105

30%
20%

3,121
34,110
6,532

1,964
1,298

The new business shown above for 31 December 2004 for South African Group recurring premium business includes bulk new business into existing
schemes, with value of new business of £1 million (R10 million) after tax and APE of £3 million (R33 million).

The new business shown above for the United States for 31 December 2003 excludes the value of OMNIA Life (Bermuda) business that was acquired
during 2003, and which is included within the value of new business shown in section 7.

The value of new individual unit trust and some group market-linked business written by the life companies is excluded, as the profits on this business arise 
in the asset management subsidiaries. The value of new business also excludes premium increases arising from indexation arrangements in respect of existing
business, as these are already included in the value of in-force business. The premiums shown for the United States exclude reinsurance ceded externally.

Achieved Profits Basis Supplementary Information | 151

8 VALUE OF NEW BUSINESS continued

A reconciliation of the new business premiums shown in the notes to the financial statements to those shown above, for the year to 31 December 2004,
is set out below.

New business premiums as stated in the notes to the financial statements
Less:

United States reinsurance ceded externally
Group market-linked business not valued
Unit trust business not valued

Recurring
premiums

£m

Single
premiums

Recurring
premiums

Rm

Single
premiums

240

3,389

2,837

39,987

–
–
–

(12)
(238)
(87)

–
–
–

(139)
(2,799)
(1,025)

New business premiums as per achieved profits supplementary information

240

3,052

2,837

36,024

152 | Achieved Profits Basis Supplementary Information

Achieved Profits Basis Supplementary Information
for the year ended 31 December 2004 continued

9 ASSUMPTIONS

The principal assumptions used in the calculation of the value of in-force business and the value of new business are set out below.

• The pre-tax investment and economic assumptions used for South African and United States businesses were as follows:

South Africa
Fixed interest return
Cash return
Equity return
Property return
Inflation
Risk discount rate

United States
Treasury yield
Inflation
New money yield assumed
Net portfolio earned rate
Risk discount rate

At
31 December
2004

At
31 December
2003

8.3%
7.0%
10.3%
9.3%
5.3%
10.8%

4.3%
3.0%
5.1%
5.9%
8.3%

9.4%
–
11.4%
10.4%
6.4%
11.9%

4.3%
3.0%
6.0%
6.4%
8.3%

• For the other operations, appropriate investment and economic assumptions were chosen on bases consistent with those adopted in South Africa.

Where applicable, rates of future bonuses have been set at levels consistent with the investment return assumptions. Projected company taxation is
based on the current tax basis that applies in each country.

• For the South African business, full allowance has been made for STC that may be payable in South Africa. Account has been taken of the impact 
of CGT in South Africa. It has been assumed that 10% of the equity portfolio (excluding group subsidiaries) will be traded each year. For the United
States business full allowance has been made for existing tax attributes of the companies, including the use of existing carry forwards and preferred tax
credit investments. Achieved profits results are initially calculated on an after tax basis and are then grossed up to the pre-tax level for presentation in
the profit and loss account and the segmental analysis of results. The tax rates used were the effective corporation tax rates of 37.8% for South Africa
(2003: 37.8%), 30% for the United States (2003: 25%) and 0% for the United Kingdom and the Rest of World (2003: 0%) except for the investment
return on South African capital, for which the attributed tax was derived from the primary accounts.

• The assumed future mortality, morbidity and voluntary discontinuance rates have been based as far as possible on analyses of recent operating

experience. Allowance has been made where appropriate for the effect of expected AIDS-related claims.

• The management expenses attributable to life assurance business have been analysed between expenses relating to the acquisition of new

business and the maintenance of business in-force. The future expenses attributable to life assurance business do not include Group holding
company expenses.

Achieved Profits Basis Supplementary Information | 153

9 ASSUMPTIONS continued

• No material allowance has been made for future development costs.

• Future investment expenses are based on the current scales of fees payable by the life assurance companies to the asset management subsidiaries.
To the extent that these fees include profit margins for the asset management subsidiaries, these margins have not been included in the value of 
in-force business or the value of new business.

• The effect of increases in premiums over the period for policies in-force has been included in the value of in-force business only where such increases

are associated with indexation arrangements. Other increases in premiums of existing policies are included in the value of new business.

• New schemes written on which recurring single premiums are expected to be received on a regular basis are treated as new business. The annualised
premium is recognised as recurring premium new business at inception of the scheme and is determined by annualising the actual premiums received
during the year in question. Subsequent recurring single premiums received in future years are not treated as new business, as these have already
been provided for in calculating the value of in-force business.

• The sensitivity of the value of in-force and value of new business to changes in key assumptions are set out in section 10.

The principal exchange rates used to translate the operating results of key foreign business segments to Sterling are:

Profit and loss account (average rate for the year)
Balance sheet (closing rate at 31 December)

2004

11.7986
10.8482

Rand

2003

12.3487
11.9367

2004

1.8327
1.9158

US$

2003

1.6354
1.7833

154 | Achieved Profits Basis Supplementary Information

Achieved Profits Basis Supplementary Information
for the year ended 31 December 2004 continued

10 ALTERNATIVE ASSUMPTIONS

The tables below for South Africa and the United States show the sensitivity of the value of in-force at 31 December 2004 and the value of new
business for the year to 31 December 2004 to changes in key assumptions. For each sensitivity illustrated, all other assumptions have been left
unchanged. The value of new business is shown before tax.

The sensitivity of the adjustment for discounting CGT, which is included in the shareholders’ adjusted net worth, to changes in the central discount 
rate is not material and is not included in the table below.

South Africa

Central assumptions

Value before cost of solvency capital
Cost of solvency capital

Effect of:
Central discount rate +1%

Value before cost of solvency capital
Cost of solvency capital

Central discount rate –1%

Value before cost of solvency capital
Cost of solvency capital

Pre-tax investment return assumptions –1%,
with bonus rates changing commensurately

Value before cost of solvency capital
Cost of solvency capital

£m

Rm

Value of
in-force
business at
31 December
2004

Value of
new life
business at
31 December
2004

Value of
in-force
business at
31 December
2004

Value of
new life
business at
31 December
2004

1,005

1,248
(243)

878

1,178
(300)

1,149

1,327
(178)

919

1,210
(291)

98

111
(13)

87

102
(15)

111

120
(9)

92

106
(14)

10,903

13,543
(2,640)

9,525

12,777
(3,252)

12,462

14,393
(1,931)

9,969

13,126
(3,157)

1,156

1,310
(154)

1,025

1,203
(178)

1,310

1,415
(105)

1,086

1,251
(165)

Voluntary discontinuance rates +10%

984

90

10,675

1,062

Maintenance expense levels +10%, with no corresponding 
increase in policy charges

Inflation assumption +1%, with no corresponding 
increase in policy charges

Mortality and morbidity assumptions for assurances +10%, 
and mortality assumptions for annuities –10%, 
with no corresponding increase in policy charges

For value of new business, acquisition expenses other than 
commission and commission-related expenses +10%, 
with no corresponding increase in policy charges

944

92

10,241

1,085

970 

93

10,523 

1,097 

906 

82

9,828 

967 

–

92

–

1,085

10 ALTERNATIVE ASSUMPTIONS continued

United States

Central assumptions

Value before cost of solvency capital
Cost of solvency capital

Effect of:
Central discount rate +1%

Value before cost of solvency capital
Cost of solvency capital

Central discount rate –1%

Value before cost of solvency capital
Cost of solvency capital

Pre-tax investment return assumptions –1%, 
with credited rates changing commensurately

Value before cost of solvency capital
Cost of solvency capital

Voluntary discontinuance rates +10%

Maintenance expense levels +10%, with no corresponding 
increase in policy charges

Inflation assumption +1%, with no corresponding 
increase in policy charges

Mortality and morbidity assumptions for assurances +10%,
and mortality assumptions for annuities –10%, with no
corresponding increase in policy charges

Increasing Risk Based Capital to 200%, with 1% reduction in 
central discount rate

Value before cost of solvency capital
Cost of solvency capital

For value of new business, acquisition expenses other than 
commission and commission-related expenses +10%, 
with no corresponding increase in policy charges

Achieved Profits Basis Supplementary Information | 155

£m

Rm

Value of
in-force
business at
31 December
2004

Value of
new life
business at
31 December
2004

Value of
in-force
business at
31 December
2004

Value of
new life
business at
31 December
2004

512

543
(31)

489

525
(36)

537

562
(25)

481

515
(34)

479

88

102
(14)

83

98
(15)

94

105
(11)

81

96
(15)

5,554

5,891
(337)

5,305

5,695
(390)

5,825

6,097
(272)

5,222

5,586
(364)

1,038

1,203
(165)

979

1,156
(177)

1,109

1,239
(130)

956

1,133
(177)

82

5,194

967

491

85

5,321

1,003

510

86

5,531

1,015

508

88

5,509

1,038

512

562
(50)

83

105
(22)

5,553

6,097
(544)

979

1,239
(260)

–

85

–

1,003

156 | Financial History

Financial History
Sterling

Life assurance new business premiums
Single
Recurring
Annual premium equivalent

Summary consolidated profit and loss account
South Africa

Life assurance
– Technical result
– Long term investment return

Asset management
Banking
General insurance

United States 

Life assurance
Asset management

United Kingdom and Rest of World 

Life assurance
Asset management
Banking

Other shareholders’ income/expenses
Debt service costs
Write-down of strategic investments

Adjusted operating profit
Goodwill amortisation and impairment
Loss on disposal/write-down of investment in Dimension Data Holdings plc
Restructuring and integration costs
Change in credit provisioning methodology
Fines and penalties
Short term fluctuations in investment return
Investment return adjustment for own shares held in policyholders’ funds

Operating profit on ordinary activities before tax
Non-operating items

Profit on ordinary activities before tax
Tax on profit on ordinary activities

Profit/(loss) on ordinary activities after tax
Minority interests (equity and non-equity)

Profit/(loss) for the financial year
Dividends paid and proposed

Retained profit/(loss) for the financial year

2004

2003
(Restated)

2002
(Restated)

2001
(Restated)

2000
(Restated)

£m

3,389
240
579

3,200
262
583

4,003
219
619

2,140
217
431

1,902
248
438

313
167

480
53
177
89

799

96
89

185

18
10
14

42

1,026
(33)
(37)
–

956
(110)
–
(21)
–
(49)
226
(94)

908
(35)

873
(286)

587
(103)

484
(182)

302

260
178

438
55
(10)
73

556

85
81

166

20
(8)
4

16

738
(40)
(48)
–

650
(206)
(5)
(32)
(87)
–
143
12

475
(32)

443
(241)

202
71

273
(166)

107

208
135

343
28
165
35

571

83
95

178

(3)
2
56

55

804
(22)
(58)
–

724
(120)
(68)
(14)
–
–
(91)
42

473
(6)

467
(224)

243
(44)

199
(161)

38

249
148

397
37
290
46

770

13
116

129

(2)
(3)
79

74

973
(29)
(67)
(21)

856
(632)
(269)
–
–
–
126
76

157
–

157
(319)

(162)
(26)

(188)
(158)

(346)

250
215

465
46
269
44

824

–
44

44

13
34
58

105

973
(34)
(28)
–

911
(54)
–
–
–
–
(180)
(73)

604
356

960
(138)

822
(341)

481
(152)

329

Earnings and dividend per share

Adjusted operating earnings per share
Basic earnings per share
Dividend per share

Financial History | 157

p

2004

15.3
14.1
5.25

2003
(Restated)

2002
(Restated)

2001
(Restated)

2000
(Restated)

10.0
8.0
4.8

11.3
5.9
4.8

12.1
(5.8)
4.8

18.4
15.7
4.7

Adjusted weighted average number of shares – millions
Weighted average number of shares – millions

3,748
3,432

3,727
3,411

3,670
3,354

3,550
3,234

3,373
3,057

Consolidated balance sheet

Assets
Intangible assets (goodwill)
Insurance and other assets
Banking assets

Liabilities
Equity shareholders’ funds
Minority interests
Subordinated liabilities
Insurance and other liabilities
Banking liabilities

Funds under management

Adjusted embedded value

Exchange rates

Sterling/Rand
Average rate
Closing rate
Sterling/US Dollar
Average rate
Closing rate

2004

2003
(Restated)

2002
(Restated)

2001
(Restated)

2000
(Restated)

£m

1,152
37,608
27,500

1,264
32,409
24,042

1,598
26,231
21,377

1,580
31,553
11,309

2,279
26,288
17,287

66,260

57,715

49,206

44,442

45,854

3,245
1,527
–
35,589
25,899

2,754
1,310
15
30,724
22,912

2,424
927
18
25,602
20,235

2,108
565
22
31,292
10,455

3,046
1,013
39
26,355
15,401

66,260

57,715

49,206

44,442

45,854

140,124

125,226

123,334

142,819

168,223

5,359

4,015

3,828

3,437

5,465

2004

2003

2002

2001

2000

11.7986
10.8482

12.3487
11.9367

15.7878
13.8141

12.3923
17.4286

10.5213
11.3148

1.8327
1.9158

1.6354
1.7833

1.5030
1.6105

1.4405
1.4542

1.5159
1.4937

The information contained in the above financial history is extracted from published accounts. Comparative years have been restated for the
implementation of FRS 19 “Deferred Tax”, UITF Abstract 37 “Purchases and Sales of Own Shares” and UITF Abstract 38 “Accounting for
ESOP Trusts”.

158 | Financial History

Financial History
Rand

Life assurance new business premiums
Single
Recurring
Annual premium equivalent

Summary consolidated profit and loss account
South Africa

Life assurance
– Technical result
– Long term investment return

Asset management
Banking
General insurance

United States

Life assurance
Asset management

United Kingdom and Rest of World 

Life assurance
Asset management
Banking

Other shareholders’ income/expenses
Debt service costs
Write-down of strategic investments

Adjusted operating profit
Goodwill amortisation and impairment
Loss on disposal/write-down of investment in Dimension Data Holdings plc
Restructuring and integration costs
Change in credit provisioning methodology
Fines and penalties
Short term fluctuations in investment return
Investment return adjustment for own shares held in policyholders’ funds

Operating profit on ordinary activities before tax
Non-operating items

Profit on ordinary activities before tax
Tax on profit on ordinary activities

Profit/(loss) on ordinary activities after tax
Minority interests (equity and non-equity)

Profit/(loss) for the financial year
Dividends paid and proposed

Retained profit/(loss) for the financial year

2004

2003
(Restated)

2002
(Restated)

2001
(Restated)

2000
(Restated)

Rm

39,987
2,837
6,835

39,515
3,235
7,186

63,187
3,444
9,763

26,520
2,688
5,339

20,010
2,609
4,610

3,697
1,974

5,671
639
2,099
1,057

9,466

1,126
1,050

2,176

206
117
158

481

12,123
(390)
(437)
–

11,296
(1,290)
–
(246)
–
(596)
2,662
(1,115)

10,711
(418)

10,293
(3,374)

6,919
(1,215)

5,704
(2,001)

3,210
2,198

5,408
678
(118)
909

6,877

1,050
1,000

2,050

248
(95)
48

201

9,128
(494)
(593)
–

8,041
(2,544)
(60)
(394)
(1,074)
–
1,767
148

5,884
(404)

5,480
(2,976)

2,504
877

3,381
(2,006)

3,283
2,131

5,414
441
2,605
556

9,016

1,310
1,500

2,810

(47)
31
884

868

12,694
(347)
(916)
–

11,431
(1,895)
(1,080)
(227)
–
–
(1,439)
663

7,453
(88)

7,365
(3,535)

3,830
(695)

3,135
(2,319)

3,085
1,830

4,915
458
3,593
570

9,536

161
1,437

1,598

(25)
(38)
979

916

12,050
(359)
(830)
(260)

10,601
(7,832)
(3,334)
–
–
–
1,561
943

1,939
–

1,939
(3,948)

(2,009)
(322)

(2,331)
(2,433)

2,630
2,262

4,892
484
2,829
463

8,668

–
462

462

137
359
611

1,107

10,237
(357)
(295)
–

9,585
(568)
–
–
–
–
(1,894)
(763)

6,360
3,746

10,106
(1,455)

8,651
(3,588)

5,063
(1,595)

3,703

1,375

816

(4,764)

3,468

Financial History | 159

2004

2003
(Restated)

2002
(Restated)

2001
(Restated)

2000
(Restated)

c

181.1
166.2
58.5*

3,748
3,432

123.8
99.1
56.0

3,727
3,411

179.0
93.5
66.0

3,670
3,354

149.1
(72.1)
72.3

3,550
3,234

194.3
165.6
49.5

3,373
3,057

Rm

2004

2003
(Restated)

2002
(Restated)

2001
(Restated)

2000
(Restated)

12,497
407,979
298,345

15,088
386,855
286,985

22,075
362,363
295,291

27,537
549,932
197,099

25,786
297,484
195,597

718,821

688,928

679,729

774,568

518,867

35,202
16,565
–
386,078
280,976

32,874
15,637
179
366,735
273,503

33,491
12,808
249
353,666
279,515

36,745
9,847
383
545,377
182,216

34,505
11,458
442
298,203
174,259

718,821

688,928

679,729

774,568

518,867

1,520,092 1,494,786 1,703,747 2,489,141 1,903,414

58,134

47,929

52,890

59,883

61,831

Earnings and dividend per share

Adjusted operating earnings per share
Basic earnings per share
Dividend per share

Adjusted weighted average number of shares – millions
Weighted average number of shares – millions

Consolidated balance sheet

Assets
Intangible assets (goodwill)
Insurance and other assets
Banking assets

Liabilities
Equity shareholders’ funds
Minority interests
Subordinated liabilities
Insurance and other liabilities
Banking liabilities

Funds under management

Adjusted embedded value

* The dividend recommended (final 3.5p per share, making 5.25p per share for the year) will be converted, for payment to shareholders on the branch registers and the Namibian

section of the principal register, into local currencies at exchange rates ruling at the close of business on 31 March 2005 (or 30 March 2005 in the case of Zimbabwe).

160 | Notice of Annual General Meeting

Notice of Annual General Meeting

The Annual General Meeting of Old Mutual plc (the “Company”) 
will be held in the Presentation Suite, 2nd Floor, Old Mutual Place, 
2 Lambeth Hill, London EC4V 4GG on Wednesday 11 May 2005 
at 11.00 a.m. for the following purposes:

1 To receive and adopt the directors’ report and audited financial

statements of the Group for the year ended 31 December 2004.

2 To declare a final dividend of 3.5p per ordinary share.

3 (i) To elect Mr R P Edey as a director of the Company;

(ii) To elect Professor W L Nkuhlu as a director of the Company;
(iii) To re-elect Mr C D Collins as a director of the Company;
(iv) To re-elect Mr J H Sutcliffe as a director of the Company.

SPECIAL RESOLUTIONS
8 That, subject to the passing of the immediately preceding resolution,

the directors be and they are hereby authorised to allot equity
securities, within the meaning of section 94 of the Companies Act
1985, up to a maximum nominal aggregate amount of £19,272,000
for cash and/or where such allotment constitutes an allotment of
equity securities by virtue of section 94 (3A) of that Act, as if section
89 (1) of that Act did not apply to any such allotment. This authority
shall expire at the end of the next Annual General Meeting of the
Company, save that the Company may before such expiry make one
or more offers or agreements which would or might require securities
to be allotted after such expiry and the directors may allot equity
securities in pursuance of such offers or agreements as if the 
power conferred hereby had not expired.

4 To re-appoint KPMG Audit Plc as auditors to the Company.

9 That the Company be and is hereby authorised in accordance with

5 To authorise the Audit Committee to settle the remuneration 

of the auditors.

As special business, to consider and, if thought fit, pass the following
resolutions, those numbered 6 and 7 as Ordinary Resolutions and 
those numbered 8, 9 and 10 (i) to (iv) as Special Resolutions:

ORDINARY RESOLUTIONS
6 To approve the Remuneration Report in the Company’s report and

accounts for the year ended 31 December 2004.

7 That, pursuant to section 80 of the Companies Act 1985, and in

substitution for any previously existing authority under that section
insofar as not already used, the directors be and they are hereby
authorised generally and unconditionally to allot relevant securities
(as defined in the said section 80) up to an aggregate nominal
amount of £38,544,000 provided that:

(i)

this authority shall expire at the end of the next Annual General
Meeting of the Company; and

(ii) the Company may before such expiry make one or more offers or
agreements which would or might require securities to be allotted
after such expiry and the directors may allot relevant securities in
pursuance of such offers or agreements as if the authority hereby
conferred had not expired.

section 166 of the Companies Act 1985 to purchase Ordinary Shares
of 10p each in the Company (“Ordinary Shares”) by way of market
purchase (as defined in section 163 (3) of the Companies Act 1985)
upon and subject to the following conditions:

(i)

the maximum number of such Ordinary Shares which may be
purchased pursuant to this authority (when aggregated with any
purchases made pursuant to any of the contingent purchase
contracts referred to in Resolutions 10 (i) to (iv) below) shall 
be 385,442,000;

(ii) the minimum price which may be paid for any Ordinary Share 

is 10p and the maximum price (exclusive of expenses) which
may be paid for such Ordinary Share is not more than 5% above
the average of the middle market values taken from the London
Stock Exchange Daily Official List for the five business days
before the date on which such Ordinary Share is contracted 
to be purchased;

(iii) such authority shall continue for a period of 12 months from 

the date hereof (or until the conclusion of the Company’s Annual
General Meeting in 2006, whichever is the earlier), provided that
any contract for the purchase of any such Ordinary Shares which
is concluded before the expiry of the said authority may be
executed wholly or partly after the said authority expires; and

(iv) all Ordinary Shares purchased pursuant to the said authority

shall either:

(a) be cancelled immediately upon completion of the purchase;

or

(b) be held, sold, transferred or otherwise dealt with as treasury
shares in accordance with the provisions of the Companies
Act 1985.

Notice of Annual General Meeting | 161

10 That the following contingent purchase contracts, in the respective

forms produced to the meeting (or with any non-material amendments
thereto which the directors may consider to be necessary or desirable),
each be and is hereby approved in accordance with section 164 
of the Companies Act 1985 and that the Company be and is hereby
authorised to make off-market purchases of its shares pursuant to
each such contract for a period of 12 months from the date hereof
(or until the conclusion of the Company’s Annual General Meeting 
in 2006, whichever is the earlier):

(i) contract between the Company and Merrill Lynch South Africa (Pty)
Limited pursuant to which the Company may make off-market
purchases from Merrill Lynch South Africa (Pty) Limited of up to 
a maximum of 385,442,000 Ordinary Shares of 10p each in the
Company (“Ordinary Shares”) in aggregate (such maximum number
to be reduced by any purchases made pursuant to the authority
in Resolution 9 above or any of the other contingent purchase
contracts referred to in Resolutions 10 (ii), (iii) and (iv));

(ii) contract between the Company and Investment House Namibia

(Pty) Limited pursuant to which the Company may make off-market
purchases from Investment House Namibia (Pty) Limited of up 
to a maximum of 385,442,000 Ordinary Shares in aggregate
(such maximum number to be reduced by any purchases made
pursuant to the authority in Resolution 9 above or any of the
other contingent purchase contracts referred to in Resolutions 
10 (i), (iii) and (iv));

(iii) contract between the Company and Imara Edwards Securities
(Private) Limited pursuant to which the Company may make 
off-market purchases from Imara Edwards Securities (Private)
Limited of up to a maximum of 385,442,000 Ordinary Shares 
in aggregate (such maximum number to be reduced by any
purchases made pursuant to the authority in Resolution 9 above
or any of the other contingent purchase contracts referred to in
Resolutions 10 (i), (ii) and (iv));

(iv) contract between the Company and Stockbrokers Malawi Limited
pursuant to which the Company may make off-market purchases 
from Stockbrokers Malawi Limited of up to a maximum of
385,442,000 Ordinary Shares in aggregate (such maximum
number to be reduced by any purchases made pursuant to the
authority in Resolution 9 above or any of the other contingent
purchase contracts referred to in Resolutions 10 (i), (ii) and (iii)).

By order of the Board

Martin C Murray
Group Company Secretary
28 February 2005

Registered Office:
5th Floor
Old Mutual Place
2 Lambeth Hill
London EC4V 4GG

162 | Notice of Annual General Meeting

Notice of Annual General Meeting
Continued

Notes:
1 A member of the Company entitled to attend and vote at the meeting
may appoint (a) proxy(ies) to attend and, on a poll, vote on his or her
behalf. A proxy need not be a member of the Company. A member
who holds shares through Old Mutual Nominees may instruct the
nominee company to vote on his or her behalf or request such nominee
company to appoint him or her as proxy to enable him or her to
attend the meeting in person (Old Mutual Nominees is Old Mutual
(South Africa) Nominees (Pty) Limited, Old Mutual (Namibia)
Nominees (Pty) Limited, Old Mutual Zimbabwe Nominees (Private)
Limited or Old Mutual (Blantyre) Nominees Limited, if shares are
held through the Group’s nominee on the South African, Namibian,
Zimbabwe or Malawi register respectively). Beneficial shareholders
who have dematerialised or immobilised their shareholdings in
STRATE, other than through Old Mutual Nominees, may provide 
their CSDP or broker with voting instructions in accordance with 
the applicable custody agreement or may apply to that CSDP or
broker for a letter of representation from the registered shareholder
to enable them to attend the meeting in person.

CREST members who wish to appoint a proxy or proxies for the
Meeting and any adjournment(s) of the Meeting may do so by
utilising the procedures in the CREST manual. In order for a proxy
appointment or instruction made using the CREST service to be
valid, the appropriate CREST message (a “CREST Proxy Instruction”)
must be properly authenticated in accordance with CRESTCo’s
specifications and must contain the information required for such
instructions, as described in the CREST manual. CREST personal
members or other CREST sponsored members, and those CREST
members who have appointed (a) voting service provider(s), should
refer to their CREST sponsor or voting service provider(s), who will 
be able to take the appropriate action on their behalf.

2 Pursuant to Regulation 41 of the Uncertificated Securities

Regulations 2001, the Company gives notice that only those
shareholders entered on the register of members of the Company 
at 6.00 p.m. (UK time) on 9 May 2005 will be entitled to attend and
to vote at the Annual General Meeting in respect of the number of
shares registered in their name at that time. Changes to the entries
on the register after that time will be disregarded in determining the
rights of any person to attend or vote at the meeting.

3 To be effective, the form of proxy or, as the case may be, the voting

instruction form in favour of Old Mutual Nominees (see note 1 above)
and the power of attorney or other authority (if any) under which it is
signed, or a notarially certified copy of such power or authority, must
be received at the return address specified on the envelope enclosed
with the form of proxy or voting instruction form or by the Company’s
Registrar, Computershare Investor Services PLC, The Pavilions,
Bridgwater Road, Bristol BS99 7NH by not later than 11.00 a.m.
(UK time) on 9 May 2005. If no return envelope is enclosed with the

voting instruction form, this will be because the records available to
the Company show your shareholding to have been dematerialised
in the context of STRATE through a CSDP or broker other than under
the Issuer-Sponsored Nominee Programme. In that case, you should
contact your CSDP or broker to ascertain the return address for it to
process your voting instructions. It is recommended that, because 
of the requirement for votes in relation to shares dematerialised or
immobilised in the context of STRATE to be collated through CSDPs
and brokers and then reconciled through PLC Nominees (Pty) Limited,
voting instructions by beneficial owners of such shares be submitted
so as to arrive at least 72 hours before the time of the meeting.

The message appointing or instructing a proxy making use of 
the CREST service must be transmitted so as to be received by
Computershare ID R009 not later than 48 hours before the time
fixed for the meeting. For this purpose, the time of receipt will be
taken to be the time (as determined by the timestamp applied to 
the message by the CREST applications host) from which the issuer’s
agent is able to retrieve the message by enquiry to CREST in the
manner prescribed by CREST. No messages received through the
CREST network after this time will be accepted. 

CREST members and, where applicable, their CREST sponsors or
voting service providers should note that CRESTCo does not make
available any special procedures in CREST for any particular
messages. Normal system timings and limitations will therefore 
apply in relation to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to take (or, if the
CREST member is a CREST personal member or sponsored member
or has appointed (a) voting service provider(s), to procure that his
CREST sponsor or voting service provider(s) take(s)) such action as
shall be necessary to ensure that a message is transmitted by means
of the CREST system by any particular time. In this connection,
CREST members and, where applicable, their CREST sponsors or
voting service providers are referred, in particular, to those sections
of the CREST Manual concerning practical limitations of the CREST
system and timings.

The Company may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.

4 The completion and return of a form of proxy or voting instruction
form will not preclude a member entitled to attend and vote at the
meeting from doing so if he or she wishes.

Notice of Annual General Meeting | 163

Mr Collins and Mr Sutcliffe retire by rotation in accordance with Articles
95 and 96 of the Company’s Articles of Association and will be seeking
re-election at the meeting.

Mr Levett retires at the Annual General Meeting and will not be seeking
re-election.

Biographical details of each of the directors who are standing for
election or re-election accompany their photographs on pages 42 
and 43 of this Report.

Each of the retiring non-executive directors is considered by the Board
to be independent in character and free from any business or other
relationship which could interfere with the exercise of his objective,
unfettered and independent judgement. The Nomination Committee of
the Company has also conducted an assessment of the performance of
each of the retiring candidates and has reviewed the skills, knowledge,
experience and diversity represented on the Board. Having received the
results of that assessment and review, the Board recommends to
shareholders the election or re-election of each of the retiring directors
referred to in Resolutions 3 (i) to (iv). 

The election or re-election of directors is considered a significant matter,
and approval of the elections and re-elections will therefore be carried
out by separate ordinary resolutions.

Subject to their being elected, Mr Edey’s and Professor Nkuhlu’s
appointments are expected to last for an initial term of three years 
from their respective dates of appointment (i.e. until 23 June 2007 for
Mr Edey and 29 February 2008 for Professor Nkuhlu) and will then be
considered for renewal.

Mr Collins has been chosen to stand for re-election in recognition of 
his prospective change of role from senior independent non-executive
director to Chairman at the end of the Annual General Meeting.
Further details of his current and prospective terms are contained 
in the Remuneration Report on pages 44 to 52.

Details of Mr Sutcliffe’s employment contract are also contained in the
Remuneration Report.

DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the directors’ service contracts, the register of directors’
interests and the contingent purchase contracts referred to in
Resolutions 10 (i) to (iv) are available for inspection at the registered
office of the Company in London; at Mutualpark, Jan Smuts Drive,
Pinelands 7405, South Africa; at Management Suite, 93 Grayston Drive,
Sandton 2196, South Africa; at Old Mutual Building, Glyn Jones Road,
Blantyre, Malawi; at Mutual Platz, 5th Floor, Post Street Mall, Windhoek,
Namibia; at Mutual Gardens, 100 The Chase (West), Emerald Hill,
Harare, Zimbabwe; and at the offices of Slaughter and May, One Bunhill
Row, London EC1Y 8YY during normal business hours on each business
day from the date of this notice until the Annual General Meeting and 
in the Presentation Suite, 2nd Floor, Old Mutual Place, 2 Lambeth Hill,
London EC4V 4GG from at least 15 minutes prior to the Annual General
Meeting until the conclusion of that meeting. These documents will also
all be available in the AGM section of the Company’s website,
www.oldmutual.com, until the conclusion of that meeting.

ANNUAL GENERAL MEETING – EXPLANATORY NOTES

Resolution 2 – Dividend
A final dividend of 3.5p per Ordinary Share is being recommended 
by the Board. Subject to the dividend being approved at the Annual
General Meeting, it is expected that the relevant subsidiaries of the
Company will declare to the trustees of the dividend access trusts,
which have been established in each of South Africa, Zimbabwe, 
Namibia and Malawi, an equivalent amount of dividend in relation to the
estimated number of shares on those territories’ respective registers in
the respective local currencies of those territories (by reference to the
exchange rate prevailing at the close of business on 31 March 2005 
(or 30 March 2005 in the case of Zimbabwe), as determined by 
the Company).

Shareholders on the branch registers (or, in the case of Namibia, 
the relevant section of the principal register) in those territories will 
then receive their dividend, in accordance with the provisions of the
Company’s Articles of Association, from the dividend access trust
concerned, rather than from the Company.

The equivalent amounts of the recommended dividend in each of the
four other currencies will be notified by the Company to each of the stock
exchanges on which the Company’s shares are listed on 1 April 2005.

Resolutions 3 (i) to (iv) – Election and re-election of directors
Mr Edey and Professor Nkuhlu, who have been appointed as directors
since the last Annual General Meeting, automatically retire in accordance
with Article 94 of the Company’s Articles of Association and will seek
election at the meeting.

164 | Notice of Annual General Meeting

Notice of Annual General Meeting
Continued

Resolutions 4 and 5 – Auditors
KPMG Audit Plc has indicated its willingness to continue in office and
Resolution 4 proposes the re-appointment of that firm as the Company’s
auditors. Resolution 5 proposes that the Audit Committee be authorised
to determine the auditors’ remuneration.

Resolution 6 – Approval of the Remuneration Report
In accordance with the Directors’ Remuneration Report Regulations
2002, an advisory resolution will be proposed to approve the
Remuneration Report on pages 44 to 52. A summary of that Report 
is set out in the Annual Review and Summary Financial Statements. 
The Remuneration Report includes details of the members of the
Remuneration Committee and the Company’s policy on directors’
remuneration, and reports on the remuneration arrangements
in place for the executive directors and non-executive directors.
The full version of the Remuneration Report can also be accessed
on the Company’s website, www.oldmutual.com.

Resolution 6 is of an advisory nature only, and failure to pass the
Resolution will therefore not have any legal consequences relating 
to existing arrangements. However, the Board will take into
consideration the outcome of the vote when considering the 
Company’s remuneration policy.

Resolutions 7 and 8 – Authority to allot shares
In accordance with section 80 of the UK Companies Act 1985 (the
“Companies Act”), it is proposed to renew the authority for the directors
to allot relevant securities up to an amount not exceeding 10% (rounded
down to the nearest £1,000 nominal) of the current issued ordinary
share capital at 28 February 2005 without having to obtain prior
approval from shareholders.

In accordance with section 95 of the Companies Act, it is proposed 
to renew the authority of the directors to allot equity securities for cash
without first being required to offer such securities pro rata to existing
shareholders in accordance with the provisions of the Companies Act.
This authority relates to up to 192,720,000 ordinary shares, being 5%
(rounded down to the nearest £1,000 nominal) of the issued ordinary
share capital of the Company at 28 February 2005.

Resolutions 9 and 10 (i) to (iv) – Purchase of own shares
Under Resolution 9, the Board is seeking to renew the standard general
authority from shareholders to make market purchases of up to 10% 
of the Company’s issued ordinary shares (rounded down to the nearest
1,000 shares). In addition, it is seeking shareholders’ approval (under
Resolutions 10 (i) to (iv)) to renew for a further year four contingent
purchase contracts, the effect of which would be to enable the
Company to repurchase its shares on the JSE Securities Exchange
South Africa and the Namibian, Zimbabwe and Malawi Stock Exchanges
respectively. These authorities, if renewed, would run in parallel with 
the general authority (under Resolution 9) to purchase shares on the
London Stock Exchange and any purchases under any such authority
would be aggregated for the purposes of monitoring the overall 
10% limit on purchases.

The purchase price for any shares cannot be more than 5% above the
average of the middle market quotations taken from the London Stock
Exchange Daily Official List for the five business days preceding such
purchase (translated, for the purposes of any purchases under any 
of the contingent purchase contracts described in Resolutions 10 (i) to
(iv), into the applicable local currency at the then prevailing exchange
rate). Any shares purchased under the authority granted by Resolution
9 or pursuant to any of the contingent purchase contracts to be
approved under Resolutions 10 (i) to (iv) will either be cancelled 
or may be held as treasury shares (see the following paragraph).

In accordance with the Companies (Acquisition of Own Shares) (Treasury
Shares) Regulations 2003, companies may now retain any of their own
shares that they have purchased as treasury stock with a view to possible
re-issue at a future date, rather than cancelling them. If the Company
were to purchase any of its own shares pursuant to the authorities
sought in Resolutions 9 and 10 (i) to (iv), it would consider holding
them as treasury stock, provided that the number did not at any one
time exceed 10% of Old Mutual plc’s issued share capital. This would
give the Company the ability to re-issue treasury shares quickly and
cost-effectively, and would provide the Company with additional flexibility
in the management of its capital base.

The authorities under Resolutions 9 and 10 (i) to (iv), if approved, 
will only be exercised if market conditions make it advantageous for 
the Company to do so and the Board considers this to be in the best
interests of shareholders generally.

Shareholder Information

Shareholder Information | 165

LISTINGS AND SHARE ANALYSIS
The Company’s shares are listed on the London, Malawi, Namibian and Zimbabwe Stock Exchanges and on the JSE Securities Exchange South Africa.
The primary listing is on the London Stock Exchange and the other listings are all secondary listings. The ISIN number of the Company’s shares is
GB0007389926.

The high and low prices at which the Company’s shares are recorded as having traded on the London Stock Exchange and the JSE Securities Exchange
South Africa during 2004 and 2003 were as follows:

London Stock Exchange
JSE Securities Exchange South Africa

High
136.0p
R15.30

2004

Low
90.25p
R10.80

High
108p
R13.30

2003

Low
70p 
R9.10

At 31 December 2004, the geographical analysis and shareholder profile of the Company’s share register were as follows:

Register

UK
South Africa
Malawi
Namibia
Zimbabwe

Total

Range

1-1,000
1,001-10,000
10,001-100,000
100,001-250,000
250,001 +

Total

Total shares

% of whole

1,594,326,285
2,170,353,709
5,922,856
9,905,340
73,434,800

41.37
56.32
0.15
0.26
1.90

Number
of holders

12,468
52,1231
5,2851
9,1741
33,5281

3,853,942,990

100

112,578

Total shares

% of whole

25,699,630
31,383,702
29,162,801
32,164,026
3,735,532,831

0.67
0.81
0.76
0.83
96.93

Number
of holders

88,148
21,252
2,105
353
720

3,853,942,990

100.00

112,578

Note:
1 The registered shareholdings on the South African branch register included PLC Nominees (Pty) Limited, which held a total of 1,603,352,606 

shares, including 525,137,062 shares held for the Company’s sponsored nominee, Old Mutual (South Africa) Nominees (Pty) Limited, for the benefit 
of 527,793 underlying beneficial owners. The registered shareholdings on the Malawi branch register included Old Mutual (Blantyre) Nominees
Limited, which held a total of 43,400 shares as nominee for 150 underlying beneficial owners. The registered shareholdings on the Namibian section
of the principal register included Old Mutual (Namibia) Nominees (Pty) Limited, which held a total of 6,072,500 shares as nominee for 8,436
underlying beneficial owners. The registered shareholdings on the Zimbabwe branch register included Old Mutual Zimbabwe Nominees (Pvt)
Limited, which held a total of 783,700 shares as nominee for 3,521 underlying beneficial owners.

166 | Shareholder Information

Shareholder Information
Continued

REGISTRARS
The Company’s share register is administered by Computershare
Investor Services in conjunction with local representatives in
various jurisdictions. The following are the contact details:

UK
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS99 7NH
(PO Box 82, Bristol BS99 7NH)
Tel: +44 (0)870 702 0000
e-mail: web.queries@computershare.co.uk

South Africa
Computershare Investor Services 2004 (Pty) Ltd
70 Marshall Street, Johannesburg 2001
(PO Box 61051, Marshalltown 2107)
Tel: +27 (0)11 370 5000

Malawi
Trust Finance Limited
Michiru House, Ground Floor
Victoria Avenue, Blantyre
(PO Box 1396, Blantyre)
Tel: +265 (0)623 856

Namibia
Transfer Secretaries (Pty) Limited
Kaiserkrone Centre
Shop No. 12, Windhoek
(PO Box 2401, Windhoek)
Tel: +264 (0)61 227 647

Zimbabwe
Corpserve (Private) Limited
4th Floor, Intermarket Centre
Corner 1st Street and 
Kwame Nkrumah Avenue, Harare
(PO Box 2208, Harare)
Tel: +263 (0)4 758393/750711
e-mail: corpserve@corpserve.co.zw

The Company’s South African Registrars, Computershare Investor
Services, administer a telephone and postal sales service for shares 
held through Old Mutual (South Africa) Nominees (Pty) Limited on 
the South African branch register and shares held through Old Mutual
(Namibia) Nominees (Pty) Limited on the Namibian section of the
principal register. If you hold your shares in this way and wish to 
sell your shares by telephone, Computershare may be contacted on
0861 60 9000 (a South African number) between 8.00 a.m. and 4.30 p.m.
(local time) on Mondays to Fridays, excluding public holidays. A service
fee is payable based on the value of the shares sold.

UNCLAIMED SHARES
The shares of policyholders who qualified for free shares when the
Company demutualised, but who have not yet claimed their shares 
by confirming their personal details, are being kept on their behalf 
in Unclaimed Shares Trusts. In order to claim such shares, persons
entitled should contact the Trust Administration and Confirmation
Department on 0861 61 9061 (a South African number) or on
+27 (0)21 509 8383 between 8.30 a.m. and 4.30 p.m. (South African
time) on Mondays to Fridays, excluding public holidays.

STRATE
Since 21 January 2002, all transactions in the Company’s shares 
on the JSE Securities Exchange South Africa have been required to 
be settled electronically through STRATE. Share certificates have no 
longer been good for delivery in respect of transactions entered into 
on the JSE Securities Exchange South Africa since 14 January 2002.

The Company wrote to certificated shareholders on its South African
branch register in October 2001 to inform them of these changes and 
of the courses of action available to them. The Company also wrote
separately to certificated shareholders on the Namibian section of its
principal register in January 2002 to explain the impact of STRATE.
These included participating in Issuer-Sponsored Nominee Programmes 
to dematerialise (in the case of South Africa) or immobilise (in the case
of Namibia) their previously certificated shareholdings in the Company.
Shareholders who have any enquiries about these programmes or 
about the effect of STRATE on their holding in the Company should
contact Computershare Investor Services in Johannesburg on 
+27 (0)861 10 0933.

CHECKING YOUR HOLDING ONLINE
An online service is situated at the Investor Centre option within the
website address www.computershare.com which gives shareholders
access to their account to confirm registered details, dividend mandate
instructions, dividend enquiries and a real-time shareholding balance. 
A simple calculator function places a market quote against each holding
and allows shareholders to estimate its value. There are also a number
of downloadable forms from this site such as change of address,
dividend mandate instructions and stock transfer forms. Finally there 
is an extensive list of frequently asked questions and the facility to
contact Computershare Investor Services by e-mail.

Shareholder Information | 167

ELECTRONIC COMMUNICATIONS/ELECTRONIC PROXY
APPOINTMENT
If you would like to receive future communications from the Company
by e-mail, please log on to our website, www.oldmutual.com, select the
“Shareholder Information” section, click on “Electronic Communications”
and then follow the instructions for registration of your details. In order
to register, you will need your shareholder reference number, which 
can be found on the payment advice notice or tax voucher accompanying
your last dividend payment or notification. The number is also printed
on forms of proxy (but not voting instruction forms) for the Annual
General Meeting.

Before you register, you will be asked to agree to the Terms and
Conditions for Electronic Communication with Shareholders. It is
important that you read these Terms and Conditions carefully, as
they set out the basis on which electronic communications will be
sent to you.

You should bear in mind that, in accessing documents electronically,
you will incur the cost of online time. Any election to receive documents
electronically will generally remain in force until you contact the
Company’s Registrars (via the online address set out earlier in this
section of the Report or otherwise) to terminate or change such election.

The use of the electronic communications facility described above is
entirely voluntary. If you wish to continue to receive communications
from the Company by post, then you do not need to take any action.

Electronic proxy appointment is available for this year’s Annual General
Meeting. This enables proxy votes to be submitted electronically, as an
alternative to filling out and posting a form of proxy. Further details are
set out on the form of proxy. Electronic submission is not, however,
available for voting instruction forms.

FINANCIAL CALENDAR
The Company’s financial calendar for the forthcoming year is as follows:

Currency conversion date for the final
dividend (Zimbabwe) 

Currency conversion date for the final dividend
(Malawi, Namibia and South Africa)

Announcement of currency equivalents
of the final dividend

Ex-dividend date in Zimbabwe

Ex-dividend date in Malawi, Namibia 
and South Africa 

Ex-dividend date on the London
Stock Exchange

Record date for the final dividend

Annual General Meeting 

Final dividend payment date

Interim results

Interim dividend payment date

Final results for 2005

30 March 2005

31 March 2005

1 April 2005

opening of business on 
15 April 2005

opening of business on
18 April 2005 

opening of business on
20 April 2005 

close of business on 
22 April 2005

11 May 2005

31 May 2005

August 2005

30 November 2005

February 2006

Note:
No dematerialisation or rematerialisation within STRATE and no transfers
between registers may take place in the period 18 to 22 April 2005 
(15 to 22 April 2005 in the case of Zimbabwe), both dates inclusive.

RULE 144A ADRs
The Company has a Rule 144A American Depositary Receipt (Rule 144A
ADR) facility through The Bank of New York. Each Rule 144A ADR
represents 10 ordinary shares in the Company. At 31 December 2004,
none of the Company’s shares were held in the form of Rule 144A ADRs.
Any enquiries about the Company’s Rule 144A ADR facility should be
addressed to The Bank of New York, 101 Barclay Street, New York,
NY 10286, USA.

WEBSITES
Further information on the Company can be found at the following
websites:
www.oldmutual.com
www.oldmutual.co.za

168 | 

Designed and produced by 35, London, UK
Printed by Ince (Pty) Ltd, Western Cape, SA

OLD MUTUAL PLC
Registered in England and Wales No. 3591559
and as an external company in each of 
South Africa (No. 1999/004855/10), Malawi (No. 5282), 
Namibia (No. F/3591559) and Zimbabwe (No. E1/99)

Registered Office:
5th Floor
Old Mutual Place
2 Lambeth Hill
London EC4V 4GG

www.oldmutual.com