liberty holdings inside - sharedata · for the year ended 31 december 2006. contents liberty...

L I B E RT Y H O L D I N G S L I M I T E D A N N U A L R E P O RT 2 0 0 6

Liberty Holdings Limited(Registration number 1968/002095/06)

ANNUAL FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2006

Contents


Directors 1

Report to Shareholders 2

Corporate Governance 3

Annual Financial Statements

Approval of the Annual Financial Statements 8

Certificate by the Company Secretary 8

Independent Auditors Report 9

Directors’ Report 10

Accounting Policies 12

Balance Sheets 28

Income Statements 29

Statement of Changes in Group Shareholders’ Funds 30

Statement of Changes in Company Shareholders’ Funds 31

Cash Flow Statements 32

Notes to the Annual Financial Statements 33

Notice to Members 108

Brief Curriculum Vitae of Retiring Directors 112

Shareholders’ Diary 113

Proxy Form Attached

Notes to Proxy Attached

General

Contact Information Inside back cover

Directors

L I B E RT Y H O L D I N G S L I M I T E D A N N U A L R E P O RT 2 0 0 6 1

Independent non-executive directors

D E Cooper (Chairman) (66) CA(SA)

Appointed to the board – 1999

Chairman: Standard Bank Group Limited

D A Hawton (69) FCIS


Chairman: Kersaf Limited

A Romanis (67) CA#


Director of companies

M J Shaw (68) CA(SA)#


Director of companies

Non-executive directors

J H Maree (51) BCom, MA (Oxon)


Chief Executive: Standard Bank Group Limited

S J Macozoma (49) BA, BHons (Boston)#


Chairman: STANLIB Limited

# Member of the audit committee

Report to Shareholders


Performance highlights

Liberty Holdings Limited’s (Liberty Holdings) sole investment is a 51,99% interest in Liberty Group Limited (Liberty Life), who delivered a

strong performance in 2006. Liberty Life’s net cash inflows from insurance operations decreased from R5,7 billion in 2005 to R3,6 billion in

2006. Recurring expense increases were maintained within the actuarial assumption at a normalised increase of only 1%. BEE normalised

embedded value per share grew by 12% to R82,55 per share and the capital adequacy requirement ratio remained strong at 2,3 times cover.

Liberty Life’s BEE normalised headline earnings grew by 34% to 930,2 cents, despite the negative impact of a R321 million charge relating to

the statement of intent signed in 2005 between National Treasury and the life offices. Liberty Life declared a final dividend of 230 cents per

share, bringing its total dividend for the year to 370 cents per share, representing an increase of 6% on the total dividend for 2005 of 350 cents

per share. In addition, Liberty Life paid a capital reduction of R3,60 per share on 12 June 2006.

Liberty Holdings’ total earnings amounted to R3,0 billion, compared with the restated R1,7 billion for 2005. Headline earnings after preference

dividends amounted to 2 561,7 cents per share, representing a 30% increase on the headline earnings per share of 1 965,3 cents for 2005.

Dividends

Liberty Holdings declared a final dividend of 670 cents per share, effectively distributing its receipts from the Liberty Life final dividend.

The interim dividend in respect of the 2006 financial year amounted to 414 cents per share, bringing total normal dividends for the year to

1 084 cents per share. In addition, Liberty Holdings distributed its share of the Liberty Life capital reduction to Liberty Holdings shareholders

by way of an extraordinary dividend of 946 cents per share in June 2006.

Prospects

Liberty Life’s earnings are strongly correlated to the performance of local investment markets. Liberty Life remains optimistic about South

African economic conditions and expects reasonable investment performance in 2007. If Liberty Life’s actuarial assumptions are met, Liberty

Life is confident that it will achieve real growth in BEE normalised embedded value in line with its medium-term growth expectations.

The board has again considered Liberty Holdings’ investment in Liberty Life and is of the opinion that Liberty Holdings should for the

foreseeable future retain its status quo.

Derek Cooper

Chairman

5 March 2007

Corporate Governance


Introduction

Liberty Holdings Limited (Liberty Holdings) complies with the Code of Corporate Practices and Conduct of the second King Report onCorporate Governance for South Africa.

Board of directors

Composition of the board of directors

The current composition of the board is featured on page 1 of this report. Liberty Holdings’ board consists of six non-executive directorswho are drawn from diverse backgrounds and bring a wide range of experience, insight and professional skills to the board.

Role, mandate and function of the board of directors

The board is responsible for overall corporate governance and the ultimate control of the business of Liberty Holdings.The board operatesin terms of a mandate, which sets out its roles and responsibilities.

The board meets half yearly under the chairmanship of Derek Cooper. Additional meetings are arranged as and when necessary.

Independence of the board of directors

All six directors are non-executive, with four of the six non-executive directors being independent.

• The audit committee is chaired by an independent non-executive director;

• Non-executive directors do not hold service contracts with Liberty Holdings and their remuneration is not tied to the group’s financialperformance; and

• All directors have access to the advice and services of the company secretary and are entitled, at the expense of Liberty Holdings andafter consultation with the chairman, to seek independent professional advice on the affairs of Liberty Holdings. No director obtainedindependent professional advice on the affairs of Liberty Holdings during 2006.

Board mandate

Membership and attendance

The number of directors’ meetings and number of meetings attended by each of the directors during the year were:

Board of Auditdirectors committee

Liberty Holdings Limited A B A B

D E Cooper 2 2D A Hawton 2 2S J Macozoma 2 2 2 2J H Maree 2 2A Romanis 2 2 2 2M J Shaw 2 2 2 2

Column A indicates the number of meetings held during the year while the director was a member of the board or committee.

Column B indicates the number of meetings attended by the director during the year while the director was a member of the board or committee.

Share dealing by directors

Liberty Holdings has implemented a code relating to share dealing by directors who, by virtue of the positions they hold, have comprehensiveknowledge of the company’s affairs. The code imposes closed periods to prohibit dealing in Liberty Holdings Limited securities before theannouncement of mid-year and year-end financial results or in any other period considered price sensitive, in compliance with the requirementsof the Insider Trading Act and the JSE Limited (JSE) in respect of dealings by directors.

Appointment and re-election of directors

In accordance with the articles of association of Liberty Holdings, non-executive directors are subject to retirement by rotation and re-electionby shareholders at least once every three years.

The appointment of new directors is approved directly by the board and re-appointment is subject to shareholder confirmation at thefollowing annual general meeting.

Corporate Governance(continued)


Board committees

The audit committee was the only standing committee of the board during 2006, following dispensation by the JSE not to appoint aremuneration committee, in view of the fact that the company does not employ any personnel.

The board has therefore assumed responsibility for the overall purpose of the remuneration committee which was in place during 2005,namely to formulate remuneration policies for the non-executive directors for approval by shareholders.

The board assesses the board members’ effectiveness annually. When determining the fees for non-executive directors, the board reviewsdata on directors’ fees for the financial services sector and companies of a similar size outside of the industry and submits the recommendedfees for approval by shareholders at the annual general meeting.

Non-executive directors receive fixed fees for their service on the board and board committees.

The board has delegated certain of its functions to the audit committee, which operates according to written terms of reference stipulatedby the board. Details of this committee follow.

Audit committee

Members

Messrs M J Shaw (chairman) and A Romanis, both of whom are independent non-executive directors, and Mr S J Macozoma,a non-executive director.

The members of the audit committee review the audit plans, budgets and scope of the external audit function and determine the scope ofany non-audit services performed by the external auditors. The external auditors and company secretary have unrestricted access to thechairman of the audit committee at all times.

Meetings

Audit committee meetings are held at least twice a year and are attended by the company’s external auditors.

Shares under option

Liberty Holdings operates the Liberty Holdings Senior Executive Share Option Scheme (1988).

No share options have been granted since 3 April 2001 and the options outstanding at 31 December 2005 were implemented on 31 March2006.There are currently no outstanding share options. In relation to share options previously granted:

• The specific grant was not subject to prior shareholder approval, as the share option scheme had been approved by shareholders ingeneral meeting.

• No options were issued at a pricing discount.

• The directors have the discretion to vary the vesting periods.Typically, the options were granted with vesting of 25% of the total grant inyears 5, 6, 7 and 8, respectively.

• Option holders are not entitled to dividends and do not have voting rights.

Shares under option at 31 December 2006

SharesPrice under option Options Shares under

payable Vesting at beginning implemented option atDate granted per share expiry date of year during year end of year

3 April 2001 R135,00 31 March 2006 9 321 9 321 0

Closing price for a Liberty Holdings Limited ordinary share on 31 December 2006: R210,00 (31 December 2005: R189,00)

Terms of service

In terms of the articles of association of Liberty Holdings, directors are required to retire at the age of 70. Shareholders have the power toappoint directors at the annual general meeting.The board of directors has the power to fill casual vacancies, subject to the confirmation ofsuch appointments at the first annual general meeting following the date of appointment.

In terms of the articles of association of Liberty Holdings, one third of the non-executive directors are required to retire annually by rotation,but may offer themselves for re-election.



Remuneration for 2006

The remuneration and fees received by the directors for 2006 are as follows:

Group

2006 2005R'000 R'000

Chairman’s and non-executive directors’ fees 2 553 2 491Non-executive share options (1) 664Executive director 11 658

Basic salaries 3 041Performance related payments 6 000Retirement and medical benefits 302Expense allowances 41Other benefits 264Share options (1) 2 010

Total emoluments 2 553 14 813

Comprising:Paid by the company 231 276Paid by the subsidiary 2 322 14 537

Executive director 11 658Chairman’s and non-executive directors’ total emoluments 2 322 2 879

Group Company

2006 2005 2006 2005R'000 R'000 R'000 R'000

Chairman’s and non-executive directors’ total emoluments comprise:

D E Cooper 1 293 1 086 68 66A W B Band 120 30D A Hawton 297 245 32 30S J Macozoma 355 285 41 30L Patel 467 30

– fees 135 30– share options (1) 332

A Romanis 230 185 40 30M J Shaw 378 290 50 30S P Sibisi 477 30

– fees 145 30– share options (1) 332

2 553 3 155 231 276

Executive directors’ total emoluments comprise:

Bonuses and Retirement Otherperformance and incentives Total

Basic related medical Expense and Share emolu-salaries payments benefits allowances benefits options (1) ments

R’000 R’000 R’000 R’000 R’000 R’000 R’000

2005Paid by the subsidiaryM J D Ruck 3 041 6 000 302 41 264 2 010 11 658

(1) The share option amount represents the year’s allocated expense as calculated under International Financial Reporting Standards.



Interest of directors, including their families, in share capital of Liberty Holdings Limited

Direct interests

No director, including their families, held any beneficial or non-beneficial direct interests.

Indirect interests

By virtue of either directorships in or material shareholdings held directly or indirectly by Standard Bank Group Limited 58,5% (2005: 56,0%)

in the issued ordinary share capital of Liberty Holdings Limited, Messrs D E Cooper, D A Hawton, S J Macozoma, J H Maree and M J Shaw

(2005: Messrs D E Cooper, D A Hawton, S J Macozoma, J H Maree and M J Shaw), all being directors of Liberty Holdings Limited and Standard

Bank Group Limited, had in aggregate an indirect beneficial and non-beneficial interest in 28 715 717 (2005: 27 504 302) ordinary shares in

Liberty Holdings Limited at 31 December 2006.

Internal, financial and operating controls

Liberty Holdings maintains internal, financial and operating controls that are designed to provide reasonable assurance regarding:

• the safeguarding of assets against unauthorised use or dispossession;

• compliance with applicable laws and regulations; and

• the maintenance of proper accounting records and the adequacy and reliability of financial information.

The external audit function assists in providing the board and executive management with monitoring mechanisms for identifying risks and

assessing controls appropriate to managing such risks.

The board has not been made aware of any issue that would constitute a material breakdown in the functioning of these controls up to the

date of this report.

External audit function

PricewaterhouseCoopers Inc. is the company’s appointed firm of external auditors.

Company secretarial function

The company secretary is required to provide the directors of the company, collectively and individually, with guidance on their duties,

responsibilities and powers. He is also required to ensure that the directors are aware of legislation relevant to, or affecting, the company and

to report at any meetings of the shareholders of the company or of the company’s directors any failure to comply with such legislation,

including the JSE Listings Requirements.

The company secretary is required to ensure that minutes of all shareholders’ meetings, directors’ meetings and the meetings of any

committees of the directors are properly recorded and that all required returns are lodged in accordance with the requirements of the

Companies Act.The administration of closed periods for dealing in listed securities of Liberty Holdings and the induction of new directors are

also responsibilities of the company secretary.

Shareholders

As at 31 December 2006, Liberty Holdings Limited had 7 239 (2005: 7 155) shareholders, consisting of individuals, corporate investors and

financial institutions.

Number of Number of

shareholders % shares %

Shareholder spread

1 – 1 000 shares 6 427 88,78 1 286 458 2,62

1 001 – 10 000 shares 635 8,77 1 802 988 3,67

10 001 – 100 000 shares 141 1,95 4 172 052 8,50

100 001 – 1 000 000 shares 33 0,46 6 904 010 14,06

1 000 001 shares and over 3 0,04 34 925 214 71,15

Total 7 239 100,00 49 090 722 100,00



Distribution of shareholders Number of Number of

shareholders % shares %

Banks 63 0,87 1 510 710 3,08

Close corporations 46 0,64 24 250 0,05

Endowment funds 38 0,52 142 572 0,29

Individuals 5 567 76,91 2 486 063 5,06

Insurance companies 22 0,30 479 802 0,98

Investment companies 32 0,44 2 060 263 4,20

Medical aid schemes 6 0,08 21 097 0,04

Mutual funds 101 1,40 3 094 296 6,30

Nominees and trusts 1 020 14,10 1 336 222 2,72

Other corporations 38 0,52 78 044 0,16

Pension funds 139 1,92 6 138 197 12,50

Private companies 158 2,18 276 726 0,56

Public companies 9 0,12 31 442 480 64,06

Total 7 239 100,00 49 090 722 100,00

Composition of shareholders

Non-public shareholders 5 0,06 31 913 926 65,02

Standard Bank Group Limited 1 0,01 28 715 717 58,50

Standard Bank Group Retirement Fund 1 0,01 420 934 0,86

Own holdings (Liberty Group Limited) 2 0,03 2 724 275 5,55

Liberty Pension Fund 1 0,01 53 000 0,11

Public shareholders 7 234 99,94 17 176 796 34,98

Total 7 239 100,00 49 090 722 100,00

Beneficial shareholders’ holding of 5% or more

Standard Bank Group Limited 28 715 717 58,50

Public Investment Corporation 4 390 901 8,94

Liberty Group Limited 2 724 275 5,55

Approval of the Annual Financial Statements


In accordance with Companies Act requirements, the directors are responsible for the preparation of the annual financial statements whichconform with International Financial Reporting Standards (IFRS) and in accordance with IFRS, fairly present the state of affairs of the companyand the group as at the end of the financial year, and the net income and cash flows for that period.

It is the responsibility of the independent auditors to report on the fair presentation of the financial statements.

The directors are ultimately responsible for the internal controls. Standards and systems of internal control are designed and implemented toprovide reasonable assurance as to the integrity and reliability of the financial statements in terms of IFRS and to adequately safeguard, verifyand maintain accountability for group assets. Accounting policies supported by judgements, estimates, and assumptions which comply withIFRS are applied on a consistent and going concern basis. Systems and controls include the proper delegation of responsibilities within a clearlydefined framework, effective accounting procedures and adequate segregation of duties.

Systems and controls are monitored throughout the group. Greater detail of such is provided in the corporate governance section of thereport on page 6.

Based on the information and explanations given by management and the internal and external auditors, the directors are of the opinion thatthe accounting controls are adequate and that the financial records may be relied upon for preparing the financial statements in accordance withIFRS and maintaining accountability for the group’s assets and liabilities. Nothing has come to the attention of the directors to indicate that anymaterial breakdown in the functioning of these controls, resulting in material loss to the group, has occurred during the year and up to the dateof this report. The directors have a reasonable expectation that the company and the group have adequate resources to continue in operationalexistence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

The financial statements for the year ended 31 December 2006, prepared in accordance with IFRS, which are set out on pages 10 to 107were approved by the board of directors on 5 March 2007 and signed on its behalf by

D E CooperChairman

S J MacozomaDirector

Johannesburg5 March 2007

Certificate by the Company Secretary

Compliance with Companies Act 61 of 1973

In terms of Section 268g(d) of the Companies Act, 1973, as amended, I certify that the company has lodged with the Registrar of Companiesall such returns as are required by the Companies Act, 1973, as amended, and that all such returns are true, correct and up to date.

V E Barnard BComCompany secretary

Johannesburg5 March 2007

Independent Auditors Report


To the members of Liberty Holdings Limited

We have audited the annual financial statements and group annual financial statements of Liberty Holdings Limited, which comprise the

directors’ report, the balance sheet and the consolidated balance sheet as at 31 December 2006, the income statement and the consolidated

income statement, the statement of changes in equity and the consolidated statement of changes in equity, the cash flow statement and the

consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes, as

set out on pages 10 to 107.

Directors’ responsibility for the financial statements

The group’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International

Financial Reporting Standards, and in the manner required by the Companies Act of South Africa. This responsibility includes: designing,

implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements in terms of International

Financial Reporting Standards that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate

accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with

International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to

obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.

The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial

statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s

preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but

not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the

appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the

overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of the company and of the group as of

31 December 2006, and of their financial performance and their cash flows for the year then ended in accordance with International Financial

Reporting Standards, and in the manner required by the Companies Act of South Africa.

PricewaterhouseCoopers Inc.

Director : S Masuku

Registered Auditor

Johannesburg

5 March 2007

Directors’ Report


The directors of Liberty Holdings Limited (Liberty Holdings) have pleasure in presenting their report, which forms part of the audited annual

financial statements of the group for the year ended 31 December 2006.

Main business activities

Liberty Holdings is the holding company of Liberty Group Limited (Liberty Life). Liberty Holdings has no other investments and carries on no

business other than that related to its investment in Liberty Life. At 31 December 2006 Liberty Holdings held a 51,99% (31 December 2005:

52,22%) interest in Liberty Life.

Shareholders are consequently referred to the annual report published by Liberty Life for details of its operations (the results of which are

consolidated into Liberty Holdings) and prospects of Liberty Life.

Further details of the group’s operations and activities are set out in this annual report.

Review of results

Headline earnings after the preference dividend for the group have increased from R917 million (1 965,3 cents per share) in 2005 to

R1 194 million (2 561,7 cents per share) in 2006.

Share capital

There were no changes in the authorised share capital of the company during the financial year.

During the year 9 321 (2005: 34 823) ordinary shares were issued at an average premium of R134,75 per share (2005: R92,53 per share) in

terms of the Senior Executive Share Option Scheme (1988). Following this issue of shares, there are no further shares under option in terms

of the scheme.

Dividends paid and declared

The board’s intention is to declare two dividends (interim and final) per annum, matching dividend receipts from Liberty Life. During 2006 an

additional extraordinary dividend was paid in order to distribute Liberty Holdings’ receipts from Liberty Life’s capital reduction to Liberty

Holdings shareholders.

Extraordinary

On 23 May 2006, an extraordinary dividend of 946 cents was declared to shareholders recorded at the close of business on 16 June 2006

and was paid on 19 June 2006.

Interim

On 11 August 2006, an interim dividend of 414 cents (2005: 370 cents) was declared to shareholders recorded at the close of business on

9 September 2006 and was paid on 11 September 2006.

Final

On 5 March 2007, a final dividend of 670 cents per share (2005: 650 cents per share) was declared to shareholders recorded at the close of

business on 30 March 2007, to be paid on 2 April 2007.

The important dates pertaining to this dividend are:

Last day to trade cum dividend on the JSE Friday, 23 March 2007

First trading day ex dividend on the JSE Monday, 26 March 2007

Record date Friday, 30 March 2007

Payment date Monday, 2 April 2007

Directorate and secretary

Particulars of directors are contained on page 1 of this annual report.

Vincent Barnard was appointed as the company secretary with effect from 9 March 2006 in place of Dumisani Mtshali. The address of the

company secretary is that of the registered office as stated in this annual report.

Directors’ Report(continued)


Direct and indirect interest of directors, including their families, in share capital

At year end, the directors held indirect interests in the company’s ordinary issued share capital as reflected on page 6 in this annual report.

No directors of the company held any direct interests in the company’s ordinary issued share capital.

There have been no changes to the interests of directors, including their families, in the share capital as disclosed above to date of approval

of the annual financial statements, namely 5 March 2007.

Shares under option

Liberty Holdings operates the Liberty Holdings Senior Executive Share Option Scheme (1988). Liberty Holdings share options were granted

to executive directors and permanent employees only. No share options have been granted since 3 April 2001. The 9 321 outstanding shares

under option at 31 December 2005 were issued on 31 March 2006 and there are currently no shares under option in terms of the scheme.

An analysis of the movements in Liberty Holdings Limited’s ordinary shares under option during 2006 is included on page 4 of this

annual report.

No directors had shares under option at 31 December 2006.

Contracts

No new material contracts involving directors or any of their associates were entered into in the year under review. Shareholders are referred

to the related party disclosure in note 42 to the financial statements for disclosure pertaining to contracts relating to directors.

Holding company

Standard Bank Group Limited holds 58,50% (2005: 56,04%) of Liberty Holdings Limited.

Subsidiaries

Interests in subsidiary companies and joint ventures are detailed in note 11 and 12 to the financial statements, respectively.

Shareholders

At 31 December 2006, Liberty Holdings Limited had 7 239 (2005: 7 155) shareholders, consisting of individuals, corporate investors and

financial institutions.

An analysis of Liberty Holdings Limited’s ordinary shares at 31 December 2006 is included on pages 6 and 7.

Borrowing powers

In terms of the company’s articles of association the amount which the group may borrow is unlimited.

Events after balance sheet date

On 29 January 2007, Liberty Life shareholders approved the acquisition of the 62,6% of the issued shares in STANLIB Limited which it did not

already own, from Standard Bank Group Limited and Quantum Leap Investments 740 (Proprietary) Limited for a consideration in the order

of R1,6 billion.

Accounting Policies


Summary of significant accounting policies

Statement of compliance

The 2006 consolidated financial statements of Liberty Holdings Limited have been prepared in accordance with International FinancialReporting Standards (IFRS), incorporating the guidelines in the relevant Professional Guidance notes issued by the Actuarial Society ofSouth Africa.

1. Basis of preparation

IFRS comprise International Financial Reporting Standards, International Accounting Standards and Interpretations originated by theInternational Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC).The standards referred to are set by the International Accounting Standards Board (IASB).

The financial statements have been prepared in compliance with the IFRS and interpretations for year-ends commencing on or after1 January 2006.

The financial statements have been prepared on a historical cost basis, except for the following:

Carried at fair value:

• Derivative financial instruments;

• Financial instruments held for trading or designated at fair value through profit or loss;

• Investment properties and owner-occupied properties;

• Interests in mutual funds in which are included interests in associates;

• Policyholder investment contract liabilities; and

• Third party liabilities arising on consolidation of mutual funds.

Carried at a different measurement basis:

• Policyholder insurance contract liabilities, and related reinsurance assets that are measured in terms of the Financial SoundnessValuation (FSV) basis as set out in note 15 to the accounting policies; and

• Retirement benefit obligations which are measured in terms of the projected unit credit method.

The accounting policies have been consistently applied to all years presented and all amounts are shown in rand millions unlessotherwise stated.

Standards and interpretations not yet effective

The following new standards and interpretations are not yet effective for the current financial year. The group will comply with the newstatements and interpretations from the effective date.

• IFRS 7 Financial Instruments: Disclosures.This standard should be applied to all annual periods commencing on or after 1 January 2007.The standard deals mainly with the disclosure of financial instruments and the related qualitative and quantitative risks.The statementwill therefore not impact the results of the group but will impact the format and extent of disclosure of financial instruments.This standard supersedes the disclosure requirements in IAS 32 Financial Instruments: Disclosure and Presentation.

• Amendment to IAS 1 Presentation of Financial Statements regarding capital disclosures.This disclosure requirement should be appliedto all annual periods commencing on or after 1 January 2007.This amendment deals with the disclosures of an entity’s objectives,policies and processes for managing capital.The statement will therefore not impact the results of the group but will likely result incertain additional disclosures.

• IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies.This interpretation shouldbe applied to all annual periods commencing on or after 1 March 2006. This interpretation relates to the restatement of comparativeamounts when an entity identifies for the first time that it is operating in a hyperinflationary environment. This statement is notapplicable to the business of the group.

• IFRIC 9 Reassessment of Embedded Derivatives.This interpretation should be applied to annual periods commencing on or after 1 June2006.The interpretation addresses that an entity must assess whether an embedded derivative is required to be separated from thehost contract and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent reassessment isprohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would berequired under the contract, in which case the reassessment is required.The group has embedded derivatives in insurance contractliabilities. They are, however, measured in terms of IFRS 4 and are unaffected by this interpretation. The embedded derivatives ininvestment contracts are not required to be separated and are included in the fair value of the host contract.

• IFRIC 10 Interim Financial Reporting and Impairment.This interpretation should be applied to annual periods commencing on or after1 November 2006.This interpretation addresses an apparent conflict between the requirements of IAS 34 Interim Financial Reportingand those in other standards on the recognition and reversal in financial statements of impairment losses on goodwill and certainfinancial assets. IFRIC 10 concludes that an entity shall not reverse an impairment loss recognised in a previous interim period inrespect of goodwill or an investment in either an equity instrument or a financial asset carried at cost. The group will apply theamendment to future financial periods.There is no impact on the group’s results.

Accounting Policies(continued)


1. Basis of preparation (continued)

Standards and interpretations not yet effective (continued)

• IFRIC 12 Service Concession Arrangements. This interpretation should be applied to all annual periods commencing on or after1 January 2008. Service concession arrangements are arrangements whereby a government or other body grants contracts for thesupply of public services such as roads, energy distribution, prisons or hospitals to private operators.The objective of this IFRIC is toclarify how certain aspects of existing IASB literature are to be applied to service concession arrangements. This statement is notapplicable to the business of the group.

• IFRS 8 Operating Segments.This standard should be applied to all annual periods commencing or or after 1 January 2009.The standardrequires an entity to report financial and descriptive information about its reportable segments. Reportable segments are operatingsegments or aggregations of operating segments based on information provided to key management. The statement will thereforenot impact the results of the group but may impact the identification and measurement of segment results.

Interpretations early adopted

The following interpretations have been early adopted in accordance with the transitional provisions of the interpretations.

• IFRIC 8 Scope of IFRS 2. This interpretation should be applied to all annual periods commencing on or after 1 May 2006. Theinterpretation clarifies that IFRS 2 applies to transactions in which the entity cannot specifically identify the goods or services receivedin return for a share-based payment, but where other circumstances indicate that goods or services have been received. Thisinterpretation is consistent with the group’s application of IFRS 2 to the BEE transaction (refer to accounting policy 24), therefore thegroup has effectively chosen to early adopt this IFRIC.

• IFRIC 11, IFRS 2 Group and Treasury Share Transactions.This interpretation should be applied to annual periods commencing on or after 1 March 2007. IFRIC 11 provides guidance onapplying IFRS 2 in three circumstances:

° Share-based payments involving an entity’s own equity instruments in which the entity chooses or is required to buy its ownequity instruments (treasury shares) to settle the share-based payment obligation should always be accounted for as equity-settled share-based payment transactions under IFRS 2.

° If a parent grants rights to its equity instruments to employees of its subsidiary and assuming the transaction is accounted for asequity-settled in the consolidated financial statements, the subsidiary must measure the services received using the requirementsfor equity-settled transactions in IFRS 2, and must recognise a corresponding increase in equity as a contribution from the parent.

° If a subsidiary grants rights to equity instruments of its parent to its employees, the subsidiary accounts for the transaction as acash-settled share-based payment transaction.

The group has chosen to early adopt IFRIC 11, and subsidiaries will account for the equity compensation plan as equity-settled.

There is no impact on the group’s consolidated results, as the scheme was already classified as equity-settled on consolidation(refer to accounting policy 24).

Amendments to published standards effective in 2006

The following amendments to published standards are mandatory for the group’s accounting periods beginning on or after1 January 2006 and have been adopted in accordance with the transitional provisions in the Standards:

• IAS 19 (amendment): Employee Benefits.This amendment introduces the option of an alternative recognition approach for actuarialgains and losses.The group does not intend to change the accounting policy adopted for recognition of actuarial gains and losses anddoes not participate in any multi-employer plans. This amendment therefore only impacts the format and extent of disclosurespresented in the accounts.

• IAS 39 (amendment): The Fair Value Option.This amendment further clarifies when financial instruments can be designated at fair valuethrough profit or loss.The designation of an instrument to be at fair value through profit or loss is now only possible when it removesor significantly reduces accounting mismatches in measurement or presentation, or where financial instruments are managed and theirperformance is evaluated on a fair value basis.There has been no impact to the group as all financial instruments that it had previouslydesignated at fair value through profit or loss still meet the new conditions for that designation.

• The following standards, amendments and interpretations to published standards are mandatory for accounting periods beginning onor after 1 January 2006 but they have no impact to the group’s current accounting policies or disclosure:

° IAS 21 (amendment): Net investment in a foreign operation

° IAS 39 (amendment): Cash flow hedge accounting of forecast intragroup hedge transactions

° IAS 39 and IFRS 4 (amendment): Financial guarantee contracts

° IFRS 1 (amendment): Amendment relating to IFRS 6

° IFRS 6: Exploration for and Evaluation of Mineral Resources

° IFRIC 4: Determining whether an Arrangement Contains a Lease

° IFRIC 5: Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds

° IFRIC 6: Liabilities Arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment.



2. Basis of consolidation

The group financial statements consolidate the financial statements of the company and its subsidiaries (including direct and indirect,

special purpose entities).

Interests in subsidiaries

Subsidiaries are entities in which the group has the power to govern their financial and operating policies and/or in which the group

has more than 50% of the voting rights or economic interest. The existence and effect of potential voting rights that are currently

exercisable are considered when assessing whether the group controls another entity. The results of the subsidiaries are included from

the date on which control is transferred to the group (effective date of acquisition) and are no longer included from the date that

control ceases (effective date of disposal). Gains and losses on disposal of subsidiaries are included in the income statement.

Interests in subsidiary companies in the company financial statements are shown at cost less any required impairment (which is assessed

annually as set out in note 7 to the accounting policies). The group uses the purchase method of accounting to account for the

acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and

liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and

liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date,

irrespective of the extent of any minority interest.The excess of the cost of acquisition over the fair value of the group’s share of the

identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the

subsidiary acquired, the difference is recognised directly in the income statement.

The accounting policies for subsidiaries are consistent, in all material respects, with the policies adopted by the group. Inter-group

transactions, balances and unrealised gains and losses are eliminated on consolidation.

Interests in joint ventures

Joint ventures are contractual arrangements whereby the group and one or more parties undertake an economic activity, involving a

corporation, partnership or entity, that is subject to joint control. Investments in joint ventures are accounted for using equity accounting

principles for the duration in which the group has the ability to exercise joint control.

The group’s interests in joint ventures are carried initially at cost. The group’s share of post-acquisition profit or losses is recognised in

the income statement and its share of post-acquisition movements in reserves is recognised in reserves. Any goodwill in respect of joint

ventures acquired is recognised as part of interests in joint ventures in the balance sheet.The group discontinues equity accounting when

the group’s share of losses exceeds or equals its interests in the joint venture, unless it has incurred obligations or guaranteed obligations

in favour of the joint venture. Where the accounting policies for joint ventures are not consistent, in all material respects, with policies

adopted by the group, adjustments are made to ensure consistency with the group policies.

Mutual funds

Mutual funds, in which the group has greater than 50% economic interest resulting in effective control, are consolidated.The consolidation

principles as described in interests in subsidiaries above are applied.

Those mutual funds in which the group has between 20%-50% economic interest, therefore providing significant influence, are deemed

to be interests in associates and are, on initial recognition, designated as at fair value through profit or loss, based on the scope exemption

in IAS 28 Investments in Associates for investment-linked insurance funds.

Initial measurement is at fair value on trade date with subsequent measurement at fair value based on quoted repurchase prices at the

close of business on the last trading day on or before the balance sheet date.

Fair value adjustments on mutual funds are recognised in the income statement.

3. Foreign currencies

Foreign currency translation

The group’s presentation currency is South African Rands (ZAR).The functional currency of the group’s operations is the currency of

the primary economic environment where each operation physically has its main activities.



3. Foreign currencies (continued)

Transactions and balances

Transactions in foreign currencies are translated into the functional currency at the foreign exchange rate ruling at the date of thetransaction. Monetary assets and liabilities denominated in foreign currencies different to the functional currency at the balancesheet date are translated into the functional currency at the ruling rate at that date. Non-monetary items that are measured interms of historical cost in a foreign currency are translated using the exchange rate at the date of transaction, and those measuredat fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Foreignexchange gains or losses are recognised as part of fair value adjustments on financial instruments in the income statement.

Group foreign companies

Assets and liabilities of companies whose functional currency is different to the presentation currency are translated from their respectivefunctional currency into the group’s presentation currency at closing rates ruling at balance sheet date. The income and expenditure andequity movements are translated into the group’s presentation currency at rates approximating the foreign exchange rates ruling at thedate of the various transactions.

All resulting translation differences arising from the consolidation and translation of foreign companies are recognised directly in equityas a foreign currency translation reserve.

On the disposal of a foreign operation, the cumulative amount of the exchange differences deferred in the separate component of equityrelating to that foreign operation is recognised in profit or loss when the gain or loss on disposal is recognised.

4. Equipment and properties under development

Equipment

Equipment is stated at cost less accumulated depreciation and impairment losses. The cost of an item comprises its purchase price,including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates. Maintenance and repairs, whichneither add to the value of assets nor appreciably prolong their useful lives, are recognised in the income statement. Profits or losses ondisposal are included within general marketing and administration expenses in the income statement.

When significant components of equipment have different useful lives, those components are accounted for and depreciated asseparate items.

Properties under development

Properties under development are properties not yet available to earn investment returns or for use. Properties under developmentare carried at cost less any required impairment and form part of the carrying value of equipment and properties under developmenton the balance sheet.This asset is impaired if the recoverable amount is less than the cost.The asset is reviewed for impairment whenevents or changes in circumstances that indicate the carrying amount may not be recoverable. Once development is complete, theproperties are transferred to investment properties or owner-occupied properties as appropriate.

Depreciation

Depreciation is recognised in the income statement on a straight-line basis at rates appropriate to the expected useful lives of the assets.Depreciation is calculated on the cost less any impairment and expected residual value. No depreciation is charged on properties underdevelopment. The estimated useful lives applied are as follows:

• Computer equipment 5 years• Purchased computer software 5 years• Fixtures, furniture and fittings 10 years• Office equipment and office machines 5 – 7 years• Motor vehicles 5 years

There has been no change to useful lives from those applied in the previous financial year. The residual values and useful lives arereassessed on an annual basis.

5. Properties

Owner-occupied properties

Owner-occupied properties are held by the group for use in the supply of services or for its own administration purposes.

Investment properties

Investment properties are held to earn rental income and capital appreciation.



5. Properties (continued)

Measurement

Investment properties are reflected at valuation based on open-market fair value at the balance sheet date. Owner-occupied propertiesare stated at revalued amounts, being fair value at the date of valuation less subsequent accumulated depreciation for buildings andaccumulated impairment losses. If the open-market valuation information cannot be reliably determined, the group uses alternative valuationmethods such as discounted cash flow projections or recent prices on active markets.The fair values are the estimated amounts for whicha property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction.

The open-market fair value is determined annually by independent professional valuators.

The fair value adjustments on investment properties are included in the income statement as investment gains in the period in whichthese gains or losses arise and are adjusted for any double counting arising from the recognition of lease income on the straight-line basiscompared to the accrual basis normally assumed in the fair value determination.

The fair value adjustments on owner-occupied properties are taken directly to equity to the extent that the accumulated adjustment is asurplus. Any accumulated deficits are recorded in the income statement. On disposal or transfer (change in use) of owner-occupiedproperties to investment properties, the amounts included in the revaluation reserve are transferred directly to retained surplus.

The deemed cost for any re-classification (between investment properties and owner-occupied properties) is at fair value, at the date ofreclassification.

Depreciation in respect of owner-occupied properties

Depreciation will be accounted for in the income statement at rates appropriate to the expected useful lives of owner-occupied buildings(normally 40 years) and any significant component part. Land is not depreciated. Depreciation is calculated on the opening open-marketfair value less any expected residual value. If the expected residual value is greater than or equal to the carrying value, no depreciationis provided for. On the date of the revaluation, any accumulated depreciation is eliminated against the gross carrying amount of theproperty and the net amount restated to the revalued amount. Subsequent depreciation charges are adjusted based on the revaluedamount for each property. Any difference between the depreciation charge on the revalued amount and that which would have beencharged under historic cost is directly transferred net of any related deferred taxation, between the revaluation reserve and retainedearnings as the property is utilised.

6. Intangible assets

Goodwill

All business combinations are accounted for by applying the purchase method.The cost of a business combination is the fair value of thepurchase consideration due at the date of acquisition plus any directly attributable acquisition costs.

Goodwill represents the excess of the purchase price consideration of an acquisition over the fair value attributable to the net identifiableassets, liabilities and contingent liabilities at the date of acquisition.

Goodwill on acquisition of subsidiaries is included in intangible assets and goodwill on acquisitions of associates and joint ventures isincluded in interests in associates and interests in joint ventures respectively.

With effect from 1 January 2004, goodwill is capitalised at opening net carrying value for business combinations prior to that date, orcost in respect of subsequent acquisitions. Goodwill is allocated to the applicable cash-generating units for the purposes of impairmenttesting. Goodwill is tested annually for impairment and carried at capitalised value less accumulated impairment losses. Any impairmentcalculated is expensed to the income statement. Gains and losses on disposal of an entity include the carrying amount of goodwill relatingto the entity sold.

Computer software development costs

Costs associated with maintaining computer software programs are recognised as an expense as incurred. However, costs that areclearly associated with an identifiable system, which will be controlled by the group and has a probable benefit exceeding the costbeyond one year, are recognised as an asset. These costs comprise all directly attributable costs necessary to create, produce andprepare the asset for its intended use, such as costs of materials and employee services used or consumed in generating the intangibleasset. Computer software development costs recognised as assets are amortised in the income statement on a straight-line basis atrates appropriate to the expected useful life of the asset. As the software is proprietary and specific to the group operations, noresidual value is estimated.



6. Intangible assets (continued)

Present value of acquired in-force policyholder contracts

Where a portfolio of policyholder contracts are acquired either directly from another insurer or through the acquisition of asubsidiary, the present value of acquired in-force (PVIF) business on the portfolio, being the net present value of estimated futurecash flows of the existing contracts, is recognised as an intangible asset and amortised on a basis consistent with the settlement ofthe relevant liability in respect of the purchased contracts. The estimated life is re-evaluated annually. These cash flows ignore theeffects of taxation as this is separately adjusted for on application of the deferred taxation accounting policy. The PVIF is carried inthe balance sheet at cost less any accumulated amortisation.

Amortisation of intangibles

Amortisation of intangibles is charged to the income statement.The expected useful lives are as follows:

• Computer software development costs 2 – 5 years

• PVIF business 5 – 15 years

7. Impairment

The carrying amounts of the group’s assets are reviewed on an annual basis to determine whether there is any indication of impairment,other than of a temporary nature. If any such indication exists, the assets’ recoverable amounts are estimated.

Financial assets carried at amortised cost

The group assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets isimpaired. A financial asset or group of financial assets is impaired and impairment losses are incurred only if there is objective evidenceof impairment as a result of one or more events that have occurred after the initial recognition of the asset (a loss event) and that lossevent (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliablyestimated. Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attentionof the group about the following events:

(i) significant financial difficulty of the issuer or debtor;

(ii) a breach of contract, such as a default or delinquency in payments;

(iii) it becoming probable that the issuer or debtor will enter bankruptcy or other financial reorganisation;

(iv) the disappearance of an active market for that financial asset because of financial difficulties; or

(v) observable data indicating that there is a measurable decrease in the estimated future cash flow from a group of financial assetssince the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in thegroup, including:

• adverse changes in the payment status of issuers or debtors in the group; or• national or local economic conditions that correlate with defaults on the assets in the group.

The group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant. Ifthe group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant ornot, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment.Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not includedin a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred on loans and receivables or held-to-maturity investments carriedat amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value ofestimated future cash flows (excluding future credit losses that have been incurred) discounted at the financial asset’s original effectiveinterest rate.The carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement. If a loanhas a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined undercontract. As a practical expedient, the group may measure impairment on the basis of an instrument’s fair value using an observablemarket price.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics(i.e. on the basis of the group’s grading process that considers asset type, industry, geographical location, past-due status and otherrelevant factors). Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicativeof the issuer’s ability to pay all amounts due under the contractual terms of the debt instrument being evaluated.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurringafter the impairment was recognised (such as improved credit rating), the previously recognised impairment loss is reversed in theincome statement.



7. Impairment (continued)

Goodwill

Goodwill is allocated to cash-generating units (CGUs) being the smallest identifiable group of assets that generates cash inflows that arelargely independent of the cash inflows from other assets or group of assets. Each CGU containing goodwill is tested annually forimpairment. An impairment loss is recognised whenever the carrying amount of an asset or its CGU exceeds its recoverable amount.Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to a CGUand then to reduce the carrying amount of the other assets on a pro rata basis. Impairment losses relating to goodwill are not reversed.

Impairment of other non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subjectto amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may notbe recoverable. An impairment loss is recognised in the income statement immediately when incurred for the amount by which theasset’s carrying amount exceeds its recoverable amount.The recoverable amount is the higher of an asset’s fair value less costs to selland value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separatelyidentifiable cash flows (cash-generating units).

8. Financial assets

The group classifies its financial assets at initial recognition into categories, namely held at fair value through profit or loss, held-to-maturityinvestments and loans and receivables.The classification depends on the purpose when the asset was acquired and, with the exceptionof those held at fair value through profit or loss, is reassessed on an annual basis.

Financial assets comprise financial instruments, interests in associates to which the scope exemption in IAS 28 Investments in Associatesapplies and, in respect of the company, interests in mutual fund subsidiaries.

Initial measurement

Purchases and sales of financial assets are recognised on trade date, which is the date on which the group assumes or transferssubstantially all risks and rewards of ownership. Financial assets are initially recognised as follows:

• Fair value through profit or loss – at fair value on trade date.

• Held-to-maturity and loans and receivables – at fair value on trade date plus transaction costs that are directly attributable totheir acquisition.

Those mutual funds in which the group has between 20%-50% economic interest, providing significant influence are deemed to beinterests in associates and are, on initial recognition, designated as at fair value through profit or loss, based on the scope exemption inIAS 28 investment-linked insurance funds.

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or on trade date when theyhave been transferred and the group has also transferred substantially all risks and rewards of ownership.

Subsequent measurement

Financial assets classified as fair value through profit or loss

Financial assets are designated as fair value through profit or loss if they are:

(i) used to match investment contract liabilities held at fair value and/or insurance contract liabilities, and this designation eliminatesor significantly reduces measurement or recognition inconsistencies that would otherwise arise from measuring assets or liabilitiesor recognising gains or losses on a different basis; or

(ii) managed and performance is evaluated on a fair value basis. Information about these financial assets is provided internally on a fairvalue basis to the group executive committee. The group’s investment strategy is to invest in equity and debt securities and toevaluate them with reference to their fair value. Assets that are part of these portfolios are designated upon initial recognition atfair value through profit or loss.

These assets are subsequently measured at fair value and the fair value adjustments are recognised in the income statement withininvestment gains.

The fair value of financial assets with standard terms and conditions and traded on active liquid markets is based on regulated exchangequoted ruling bid prices at the close of business on the last trading day on or before the balance sheet date. If a quoted bid price isnot available for dated instruments the fair value is estimated using pricing models or discounted cash flow techniques.

Fair values for unquoted instruments are included in investment gains and losses and are determined as follows:



8. Financial assets (continued)

Subsequent measurement (continued)

Financial assets classified as fair value through profit or loss (continued)

Fixed and linked variable rate preference shares, bonds and fixed deposits

A market yield is determined by using appropriate yields of existing listed preference shares, bonds or fixed deposits that best fit theprofile of the instrument being measured. A credit spread is adjusted to the yield based on the issuer’s credit rating benchmarked torecent transactions of similar credit rated entities. A discounted cash flow model is then applied, using the determined yield, in orderto calculate the market value.

Inflation linked bonds

The market value is determined by present valuing future cash flows at the agreed real rate as per the contract. The present valuesare then adjusted for the current CPI index ratio.

Credit-linked notes

Cash flows form credit-linked notes are discounted at a rate interpolated from the Bond Exchange of South Africa (BESA) zero curveplus a credit spread that applies to the issuer of the instrument, factoring in the probability of default.

Equity-linked notes

The capital guarantee component is valued similar to a zero coupon bond and the equity upside participation component is valued asa call option on the index.

Swaps

Swaps are valued using the swap zero curve from BESA to discount fixed and variable rate cash flows, as well as to calculate impliedforward rates used to determine the floating interest rate amounts. Actual-in-advance reset rates are input manually.The net presentvalues of the two legs of the swap are offset to calculate the fair value of the swap.

Unlisted equities (including unlisted variable rate preference shares)

Valuations are determined by either utilising recognised independent qualified valuers or by applying appropriate valuation techniquessuch as discounted cash flow analysis or recent arm’s length market transactions in respect of the equity instrument.

Negotiable certificates of deposit

These instruments are valued using the appropriate rate from the quoted money market yield curve, based on the term tomaturity of the instrument. A discounted cash flow model is then applied, using the determined yield, in order to calculate themarket value.

Investment policies with other insurers

These are valued either at the declared policy value which is at fair value if issued by an independent credible party, or at the fair valuesof the underlying investments supporting the policy adjusting for applicable liquidity or credit risk.

Financial assets classified as held-to-maturity

Held-to-maturity investments are financial assets with fixed or determinable payments, other than loans and receivables, and fixedmaturity where management has both the intent and the ability to hold to maturity. They are carried at amortised cost using theeffective interest rate method less any required impairment.

Loans and receivables

Loans and receivables are non-derivative financial assets that are created by the entity for providing money, goods or services directly toa debtor, other than those that are originated with the intention of sale immediately or in the short term or designated at fair valuethrough profit or loss. They have fixed or determinable payments and are initially recognised at fair value and subsequently carried atamortised cost using the effective interest rate method less any required impairment.

9. Financial liabilities

Financial liabilities comprise callable capital bonds, redeemable non-participating preference shares, policyholders’ liabilities under investmentcontracts and third party liabilities arising on consolidation of mutual funds.

Financial liabilities are initially recognised at fair value, net of transaction costs that are directly attributable to the raising of the funds.

The callable capital bonds and redeemable non-participating preference shares are subsequently measured at amortised cost using theeffective interest rate method.

The measurement of policyholder liabilities under investment contracts is described in note 15 to the accounting policies.

Third party liabilities arising on consolidation of mutual funds are effectively demand deposits and are consequently measured atfair value which is the quoted unit values as derived by the fund administrator with reference to the rules of each particular fund.Fair value gains or losses are recognised in the income statement.



10. Derivative financial instruments

Derivative financial instruments are recognised initially at fair value on trade date which is the transaction price. Subsequent to initialrecognition, derivative financial instruments are measured at fair value. Fair values are obtained from regulated exchange quoted rulingprices, dealer price quotations or recognised option pricing models.

Derivative financial instruments are carried as financial assets when the fair value is positive and financial liabilities when the fair value isnegative. All gains or losses on measurement are recognised in the income statement within investment gains.

11. Cash and cash equivalents

Cash and cash equivalents comprise balances with bankers, highly liquid short-term funds on deposit and cash on hand, but do notinclude money market securities held for investment.

12. Share capital

Shares are classified as equity when there is no obligation to transfer cash or other assets to the holder. Incremental costs directlyattributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Treasury shares

Where any group company purchases the company’s equity share capital (treasury shares), the consideration paid, including any directlyattributable incremental costs (net of income taxes), is on consolidation deducted from equity attributable to the company’s equityholders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any considerationreceived, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity.

Any net income in relation to treasury shares (both fair value movements and dividends) is eliminated from group profit for the year.

The number of shares in the earnings per share calculation is reduced for treasury shares held during the period on a weightedaverage basis.

13. Black Economic Empowerment (BEE) transaction

Investments in BEE entities via equity instruments, the proceeds of which were used by the BEE entities to finance share purchases fromLiberty Group Limited shareholders to facilitate the 2004 BEE transaction, do not meet the IAS 39 definition of a financial asset and areconsidered to be a reduction of equity.

Cash flows arising from Liberty Group Limited’s dividends are used by the BEE entities to redeem these equity instruments and fulfildividend obligations, and are recognised directly in equity.

14. Dividend distribution

Dividend distribution to the company’s shareholders is recognised as a liability in the group’s financial statements in the period in whichthe dividends are approved by the company’s directors.

15. Policyholder insurance and investment contracts

Professional Guidance Notes (PGNs) issued by the Actuarial Society of South Africa (ASSA)

In terms of IFRS 4, defined insurance liabilities are measured under existing local practice. The group has, prior to the adoption of IFRS 4,adopted the PGNs to determine the liability in respect of insurance contracts issued in South Africa. The following PGNs are of relevanceto the determination of policyholder liabilities:

PGN 102: Life Offices – HIV/AIDS

PGN 103: Report by the Statutory Actuary in the Annual Financial Statements of South African Long-Term Insurers

PGN 104: Life Offices – Valuation of Long-Term Insurers

PGN 105: Recommended AIDS Extra Mortality Bases

PGN 106: Actuaries and Long-Term Insurance in South Africa

PGN 110: Reserving for Minimum Investment Return Guarantees

The PGNs are available on the ASSA website (www.assa.org.za).

Where applicable, the PGNs are referred to in the accounting policies and notes to the annual financial statements.



15. Policyholder insurance and investment contracts (continued)

Insurance and investment contract classification

The group issues contracts that transfer insurance risk or financial risk or, in some cases, both.

An insurance contract is a contract under which the group (insurer) accepts significant insurance risk from the policyholder by agreeingto compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. Such contractsmay also transfer financial risk.The group defines significant insurance risk as the possibility of having to pay benefits on the occurrenceof an insured event that are significantly more than the benefits payable if the insured event did not occur.

Investment contracts are those contracts that transfer financial risk with no significant insurance risk. Financial risk is the risk of a possiblefuture change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index ofprices or rates, credit rating or credit index or other variable.

Discretionary participation features (DPF)

A number of insurance and investment contracts contain a discretionary participation feature (DPF).This feature entitles the policyholderto receive, as a supplement to guaranteed benefits, additional benefits or bonuses:

(i) that are likely to be a significant portion of the total contractual benefits;

(ii) whose amount or timing is contractually at the discretion of the group; and

(iii) that are contractually based on:

• the performance of a specified pool of contracts or a specified type of contract; and/or• realised and/or unrealised investment returns on a specified pool of assets held by the group.

The terms and conditions or practice of these contracts set out the bases for the determination of the amounts on which the additionaldiscretionary benefits are based (the DPF eligible surplus) and within which the group may exercise its discretion as to the quantum andtiming of their payment to policyholders. A proportion, as set out in the policy conditions, of the eligible surplus (usually 8/9ths of thesurplus) must be attributed to policyholders as a group (which can include future policyholders), while the amount and timing of thedistribution to individual policyholders is at the discretion of the group, subject to the advice of the statutory actuary. The termsreversionary bonus and smoothed bonus refer to the specific forms of DPF contracts underwritten by the group.

All components in respect of DPFs are included in the policyholder liabilities.

Insurance contracts and investment contracts with DPF

Measurement

These contracts are valued in terms of the Financial Soundness Valuation (FSV) basis, using a discounted cash flow methodology, describedin PGN 104 and the liability is reflected as policyholders’ liabilities under insurance contracts and investment contracts with DPF.

The discounted cash flow methodology allows for premiums and benefits payable in terms of the contract, future administration expensesand commission, investment return and tax and any expected losses in respect of options.

The liability is based on assumptions of the best estimate of future experience, plus compulsory margins for prudent liabilities as requiredin terms of PGN 104, plus additional discretionary margins.

Derivatives embedded in an insurance contract are not separated and measured at fair value if the embedded derivative itself qualifiesfor recognition as an insurance contract. As such , the group does not separately measure any embedded derivatives as they qualify forrecognition as an insurance contract and are measured as insurance contracts. The liability in respect of the investment guaranteesunderlying maturity and death benefits and annuities embedded derivatives are measured in accordance with PGN 110. Future assetreturns and costs arising from each embedded derivative are projected stochastically. The liability is then calculated based on theexpected present value of the cost of each embedded derivative.

Discretionary margins are held to ensure that the profit and risk margins in the premiums are not capitalised before it is probable thatfuture economic benefits will flow to the entity. These profits emerge over the lifetime of the contract in line with the risk borne by thecompany. These discretionary margins include an allowance for the shareholders’ participation in the reversionary and terminal bonusesexpected to be declared each year in respect of with-profit business, an allowance for the shareholders’ participation in the bonusexpected to be declared and a portion of the management fees levied under certain classes of market-related business. In addition tothe provision made in the basic policyholder liabilities, discretionary margins are held for further possible deviations in medical claimsexperience, in AIDS-related death claims and in respect of minimum investment guarantees.

Liabilities for individual market related policies where benefits in part are dependent on the performance of underlying investmentportfolios (including business with stabilised bonuses) are taken as the aggregate value of the policies’ investment in the investmentportfolio at the valuation date (the unit reserve element), reduced by the excess of the present value of the expected future risk andexpense charges over the present value of the expected future risk benefits and expenses on a policy-by-policy cash flow basis (the randreserve element).




Insurance contracts and investment contracts with DPF (continued)

Measurement (continued)

Reversionary bonus classes of policies, and policies with fixed and guaranteed benefits are valued by discounting the expected futurecash flows at a market-related rate of interest (and in the case of life and income protection annuities, at a rate of return yielded by thematching assets) reduced by an allowance for investment expenses and the relevant prescribed compulsory margins (the guaranteedelement). Future bonuses have been allowed for at the latest declared rates where appropriate (the non-guaranteed element).

The rand reserve element of market related policies and the guaranteed element in respect of other policies are collectively known asthe rand reserves.

In respect of group life and lumpsum disability business, no discounting of future cashflows is performed, however a provision will be heldif the expected guaranteed premiums under the current basis and investment returns in the short term are not sufficient to meetexpected future claims and expenses. For group investment contracts with DPF, in addition to the value of the policies’ investment in theinvestment portfolios held, and additional provision will be held if the expected fee recoveries in the short term are not sufficient tomeet expected expenses.

Within the group all investments invested in contracts smoothed bonus portfolios are classified as investment contracts with DPF. Inrespect of insurance and investment contracts with DPF where bonuses are smoothed, bonus stabilisation provisions are held arisingfrom the difference between the after taxation investment performance of the assets net of the relevant management fees and the valueof the bonuses declared (non-guaranteed element). In accordance with PGN 104, where the bonus stabilisation provision is negative,this provision is restricted to an amount that can reasonably be expected to be recovered through under-distribution of bonuses duringthe ensuing three years. All bonus stabilisation provisions are held as part of the liabilities under these contracts.

The liability estimates are reviewed annually. Any changes in estimates to the liability are reflected in the income statement as they occur.

Where policyholders, in respect of certain policies, are entitled to a part surrender, any part surrender is treated as a derecognitionof the policyholders’ liability.

Incurred but not reported claims

Provision is made in the policyholders’ liabilities under insurance contracts for the estimated cost at the end of the year of claims incurredbut not reported (IBNR) at that date. IBNR provisions are calculated using run-off triangle techniques or as a multiple, based on theaverage historical reporting delay, of the claims reported in the three weeks following the valuation date but where the claim eventoccurred prior to the valuation date.These liabilities are not discounted due to the short-term nature of outstanding claims. Outstandingclaims and benefit payments are stated gross of reinsurance.

Liability adequacy test

At each balance sheet date the adequacy of the insurance liabilities are assessed. If that assessment shows that the carrying amount ofits insurance liabilities (as measured under the FSV basis) net of any related intangible present value of acquired in-force business (PVIF)assets is inadequate in the light of the estimated future cash flows (based on the best estimate basis underlying the FSV basis, butexcluding compulsory margins as described in PGN 104 as well as any additional discretionary margins), the deficiency is recognised inprofit or loss.

Premium income

Premiums and annuity considerations on insurance contracts are recognised when due in terms of the contract, other than in respectof universally costed policies and recurring premium pure risk policies (collectively the Lifestyle series) and group schemes. Premiumsreceivable in respect of group schemes are recognised when there is reasonable assurance of collection in terms of the policy contract.Premiums in respect of the Lifestyle series of policies are recognised as premiums are received, as failure to pay a premium will resultin either a lapse of the policy or reduction of attributable fund value. Premium income on insurance contracts is shown gross ofreinsurance. Premiums are shown before deduction of commission. Premium income received in advance is included in insurance andother payables.

Reinsurance premiums

Reinsurance premiums are recognised when due for payment, in accordance with the terms of each reinsurance contract.

Claims

Claims on insurance contracts, which include death, disability, maturity, surrender and annuity payments, are charged to income whennotified of a claim based on the estimated liability for compensation owed to policyholders.They also include claims that arise from deathand disability events that have occurred up to the balance sheet date even if they have not been reported to the group. Unpaid disabilityclaims are estimated using the input of assessors for individual cases reported to the group and statistical analyses for the claims incurredbut not reported. Outstanding claims are recognised in insurance and other payables.

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




Insurance contracts and investment contracts with DPF (continued)

Acquisition costs

Acquisition costs for insurance contracts represent commission and other costs (including bonuses payable and company’s contributionto agents’ pension and medical aid funds) that relate to the securing of new contracts and the renewing of existing contracts. These costsare expensed as incurred.

The FSV method for valuing insurance contracts makes implicit allowance for the deferral of acquisition costs and hence no explicitdeferred acquisition cost asset is recognised in the balance sheet for insurance contracts.

Investment contracts without DPF

Measurement

The group issues investment contracts without fixed benefits (unit linked and structured products) and investment contracts with fixedand guaranteed benefits (term certain annuity).

Investment contracts without fixed benefits are financial liabilities whose fair value is dependent on the fair value of the underlying financialassets, derivatives and/or investment property (unit linked) and are designated at inception as at fair value through profit or loss.

The group’s valuation methodologies incorporate all factors that market participants would consider and are based on observablemarket data.The fair value of a unit linked financial liability is determined using the current unit price that reflects the fair values of thefinancial assets contained within the group’s unitised investment funds linked to the financial liability, multiplied by the number of unitsattributed to the policyholder at the balance sheet date.

If the investment contract is subject to a put or surrender option, the fair value of the financial liability is never less than the amountpayable on the put or surrender option.

For investment contracts with fixed and guaranteed terms, future benefit payments and premium receipts are discounted using the ratesimplied by the government zero-coupon yield curve at the relevant balance sheet date. No initial profit is recognised immediately asany profit on initial recognition is amortised over the life of the contract on a straight-line basis.

Service fees on investment management contracts and deferred revenue liability (DRL)

Service fee income on investment management contracts is recognised on an accrual basis as and when the services are rendered.

A DRL is recognised in respect of upfront fees, which are directly attributable to a contract, that are charged for securing the investmentmanagement service contract. The DRL is then released to revenue when the services are provided, over the expected duration of thecontract on a straight-line basis.

A DRL has been recognised for all applicable policies on transition to IFRS as at 1 January 2005.

Regular fees are charged to the customer periodically (monthly, quarterly or annually) either directly or by making a deduction frominvested funds. Regular charges billed in advance are recognised on a straight-line basis over the billing period, which is the period overwhich the service is rendered. Outstanding fees are accrued as a receivable in terms of the investment management contract.

Amounts received and claims incurred on investment contracts

Amounts received under investment contracts, such as premiums, are recorded as deposits on inflows to investment contract liabilities,whereas claims incurred are recorded as deductions from investment contract liabilities.

Deferred acquisition costs (DAC) in respect of investment contracts

Commissions paid and other incremental acquisition costs are incurred when new investment contracts are obtained or existinginvestment contracts are renewed.These costs, if specifically attributable to an investment contract with an investment managementservice element, are deferred and amortised over the expected life of the contract, taking into account all decrements, on a straight-line basis, as they represent the right to receive future management fees. Amortisation periods are as follows:

• Linked annuities 10 – 16 years• Other investment contracts 5 years

A DAC asset is recognised for all applicable policies with the amortisation being calculated on a portfolio basis.

An impairment test is conducted annually at reporting date on the DAC balance to ensure that the amount will be recovered fromfuture revenue generated by the applicable investment management contracts.

DAC have been recognised for all applicable policies on transition to IFRS as at 1 January 2005.




Investment contracts without DPF (continued)

Investment contracts with a DPF switching option

On certain investment contracts policyholders have an option to switch some or all of their investment from a DPF fund to a non-DPFfund (and vice versa).The value of the liability held with respect to these conracts is taken at the aggregate value of the policyholders’investment in the investment portfolio at the valuation date.

Receivables and payables related to insurance contracts and investment contracts

Receivables and payables are recognised when due.These include amounts due to and from agents, brokers and policyholders.

16. Reinsurance contracts held

Reinsurance contracts are contracts entered into by the group with reinsurers under which the group is compensated for the entire ora portion of losses arising on one or more of the insurance contracts issued by the group.

The expected benefits to which the group is entitled under its reinsurance contracts held are recognised as reinsurance assets. Theseassets consist of short-term balances due from reinsurers (classified within loans and receivables) as well as longer-term receivables(classified as reinsurance assets) that are dependent on the present value of expected claims and benefits arising net of expectedpremiums payable under the related reinsurance contracts. Amounts recoverable from or due to reinsurers are measured consistentlywith the amounts associated with the reinsured contracts and in accordance with the terms of each reinsurance contract.

Reinsurance assets are assessed for impairment at each balance sheet date. If there is reliable objective evidence, as a result of an eventthat occurred after its initial recognition, that amounts due may not be recoverable, the group reduces the carrying amount of thereinsurance asset to its recoverable amount and recognises the impairment loss in the income statement.

17. Offsetting

Assets and liabilities are offset and the net amount reported in the balance sheet only when there is a legally enforceable right to offsetthe recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.

18. Investment income

Investment income for the group comprises income from hotel operations, healthcare administration, general asset management,rental income from properties, interest and dividends. Dividends are recognised when the right to receive payment is established.Rental income is accounted for on a straight-line basis. Interest income is accounted for on the effective interest rate method. Allother investment income is recognised when earned. Rental income in respect of group owner-occupied properties is eliminated onconsolidation. Accrued investment income on instruments held at amortised cost is assessed for impairment in line with accountingpolicy 7. When a receivable is impaired, the group continues to unwind the discount as interest.

19. Scrip lending

Marketable securities under scrip lending arrangements are measured in accordance with the stated accounting policy and are reflectedon the balance sheet of the group. Scrip lending arrangements are entered into only with appropriate accredited institutions. Scrip lendingfees received are recognised on a straight-line basis and are included in the income statement as investment income.

20. Employee benefits

Leave pay provision

The group recognises in full employees’ rights to annual leave entitlement in respect of past service.

Incentive scheme

Incentive scheme bonuses are recognised as an expense as incurred when it is probable that the economic benefits will be paid andthe amount can be reliably measured.

Pension obligations

Group companies operate various pension schemes. The schemes are generally funded through payments to trustee-administered funds,determined by periodic actuarial calculations. The group has both defined benefit and defined contribution plans. A defined benefit planis a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one ormore factors such as age, years of service and compensation. A defined contribution plan is a pension plan under which the group paysfixed contributions into a separate entity. The group has no legal or constructive obligations to pay further contributions if the fund doesnot hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.



20. Employee benefits (continued)

Pension obligations (continued)

The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefitobligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains or lossesand past service costs. Plan assets exclude any insurance contracts issued by the group. The defined benefit obligation is calculatedannually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation isdetermined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that aredenominated in the currency in which the benefits will be paid and that have terms to maturity that approximate the terms of therelated pension liability.

The group’s current service costs to the defined benefit funds are recognised as expenses in the current year. Past service costs,experience adjustments and the effect of changes in actuarial assumptions are recognised as expenses or income in the current year tothe extent that they relate to retired employees or past service. For active employees, these items are recognised as expenses or incomesystematically over a period not exceeding the expected remaining service period of employees.

Past-service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the employeesremaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a straight-line basis over the vesting period.

For defined contribution plans, the group pays contributions to privately administered pension insurance plans on a mandatory,contractual or voluntary basis. The group has no further payment obligations once the contributions have been paid. The contributionsare recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that acash refund or a reduction in the future payments is available.

Other post-employment obligations

Some group companies provide post-retirement healthcare benefits to their retirees. The entitlement to these benefits is usuallyconditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expectedcosts of these benefits are accrued over the period of employment using an accounting methodology similar to that for defined benefitpension plans. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged orcredited to income over the expected average remaining working lives of the related employees. Independent qualified actuaries valuethese obligations annually.

21. Taxation

Income taxation on the profit or loss for the periods presented comprises current and deferred taxation.

Current taxation

Current taxation is the expected taxation payable, using taxation rates enacted at the balance sheet date, including any prior yearadjustments.

Deferred taxation

Deferred taxation is provided in full using the liability method. Provision is made for deferred taxation attributable to temporarydifferences in the accounting and taxation treatment of items in the financial statements. A deferred taxation liability is recognisedfor all temporary differences, at enacted or substantially enacted rates of taxation at the balance sheet date, except differencesrelating to goodwill, initial recognition of assets and liabilities which affect neither accounting nor taxable profits or losses andinvestments in subsidiaries and joint ventures (excluding mutual funds) where the group controls the timing of the reversal oftemporary differences and it is probable that these differences will not reverse in the foreseeable future. In respect of temporarydifferences arising on fair value adjustments on investment properties, deferred taxation is provided at the use rate if theproperty is considered to be a long-term strategic investment or at the capital gains effective rate if recovery is anticipated tobe mainly through disposal. A deferred taxation asset is recognised for the carry forward of unused taxation losses, unusedtaxation credits and deductible temporary differences to the extent that it is probable that future taxable profit will be availableagainst which they can be utilised. The major categories of assets and liabilities giving rise to a deferred taxation balance areinvestment properties revaluation surpluses, policyholder valuation basis, life fund special transfers, deferred acquisition costs,deferred revenue, unrealised gains on investments, intangible assets and provisions.

22. Provisions

Provisions for restructuring costs are recognised when the group has a present legal or constructive obligation of uncertain timing oramount, as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settlethe obligation and a reliable estimate of the amount of the obligation can be made. Provisions are discounted using a pre-tax discountrate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.



23. Operating leases

Leases of assets under which the lessor effectively retains all the risks and benefits of ownership are classified as operating leases.

The group as lessor

Receipts of operating leases from properties held as investment properties are accounted for as income on the straight-line basis overthe period of the lease.When an operating lease is terminated, any payment required by the lessee by way of penalty is recognised asincome in the period in which termination takes place.

The group as lessee

Lease payments arising from operating leases is recognised in the income statement on a straight-line basis over the lease term.

24. Share-based payment transactions

Equity compensation plans

Options are granted to permanent employees at the discretion of the directors in terms of which shares in Liberty Holdings Limitedand Liberty Group Limited may be acquired at prices prevailing at the dates of grant of the options. Delivery of the shares so acquiredis effected at future dates, which are determined at the time of granting the options. Shares acquired through the share option incentiveschemes have to be paid for by the employees at the subscription prices as determined in the option contracts. Shares under option,which have not yet been delivered to participants, carry no shareholder rights.

The fair value of share options granted after 7 November 2002 and not vested at 1 January 2005 is measured at grant date and expensedon a straight-line basis over the period during which the employees will become entitled to the options granted (vesting period).Thefair value of the options is measured using an appropriate model which takes into account the terms and conditions of the share optionsscheme as well as the historical share price movement.The expense recognised is adjusted to ultimately reflect the actual number ofshare options vested after which no further adjustments are made.The expense is credited to a share-based payments reserve. Whenthe options are exercised or cancelled after vesting date the relevant amount is transferred from the share-based payment reserve toretained surplus.

New equity compensation plan implemented during 2005

The new equity compensation scheme implemented during 2005 confers rights to employees to acquire Liberty Group Limited sharesequivalent to the value of the right at date of exercise.The fair value of the rights are measured at grant date using an appropriate modelwhich takes into account the terms and conditions of the scheme, as well as the historical share price movement. The fair value isexpensed over the vesting period on the same basis as the equity compensation plans.

Cash-settled share-based payments

For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fairvalue determined at each balance sheet date. Until the liability is settled, the fair value is re-measured at each reporting date and dateof settlement, with any changes in fair value recognised in the income statement for the period.

Black Economic Empowerment (BEE) transaction

Liberty Group Limited concluded its BEE transaction on 8 November 2004.The issue of equity-linked instruments to the Black Managers’Trust had not vested with the participants at 31 December 2004.These instruments have been accounted for as an equity-settled share-based payment transaction and the optionality, inherent in the transaction, has been valued at fair value at the date of the transaction.The fair value is recognised as an expense on a straight-line basis in the income statement over the vesting period, with a correspondingincrease in the share-based payments reserve within equity.The fair value of the options is measured using an appropriate model whichtakes into account the terms and conditions of the BEE transaction.

When the options are exercised or cancelled after vesting date the relevant amount is transferred from the share-based payment reserveto retained surplus.

25. Segment information

The group’s primary segments are business segments, with the secondary segment being geographic. A business segment is adistinguishable component group of assets and operations engaged in providing products or services that are subject to risks and returnsthat are different from those of other business segments.

A geographical segment is a distinguishable component of a group that is engaged in providing products or services within a particulareconomic environment and that is subject to risks and opportunities that are different from those components operating in othereconomic environments.



26. Non-current assets and disposal groups held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transactionrather than continuing use.This classification is only met if the sale is highly probable and the assets or disposal groups are available forimmediate sale.

In light of the group’s primary business being the provision of insurance and investment products, non-current assets held asinvestments are not classified as held for sale as the ongoing investment management implies regular purchases and sales in theordinary course of business.

Immediately before classification as held for sale, the measurement (carrying amount) of assets and liabilities in relation to a disposalgroup is recognised based upon the appropriate IFRS standards. On initial recognition as held for sale, the non-current assets and liabilitiesare recognised at the lower of carrying amount and fair value less costs to sell.

Any impairment losses on initial classification as held for sale are recognised in the income statement.

The non-current assets and disposal groups held for sale will be reclassified immediately when there is a change in intention to sell.Subsequent measurement of the asset or disposal group at that date, will be the lower of:

(i) its carrying amount before the asset or disposal group was classified as held for sale, adjusted for any depreciation, amortisation orrevaluations that would have been recognised had the asset or disposal group not been classified as held for sale and;

(ii) its recoverable amount at the date of the subsequent decision not to sell.

27. Key assumptions in applying accounting policies

Key assumptions derive estimates which require management’s most complex or subjective judgements.

The group’s management decide on assumptions that can materially affect the reported amounts of assets and liabilities within the nextfinancial year. These estimates and judgements are continually evaluated and are based on historical experience and other factors,including expectations of future events that are believed to be reasonable under the circumstances. The most significant assets andliabilities which typically require such assumptions are the following:

• Policyholders’ liabilities under insurance contracts are derived from actual claims submitted which are not settled at balance sheetdate, and estimates of the net present value of future claims and benefits under existing contracts, offset by probable future premiumsto be received (net of expected service costs).The key assumptions have been detailed in paragraph 15 of the accounting policiesand notes 3.3 and 17 to the financial statements.

• The group holds a number of financial assets that are designated at fair value through profit or loss.These are valued at quoted marketprices as far as possible, however if such prices are unavailable, fair value is based either on internal valuations or management’s bestestimates of realisable amounts. The group’s valuation methodologies for unquoted financial instruments have been set out inparagraph 8 of the accounting policies.

• Impairment tests are conducted on all assets included in the balance sheet. In determining the value in use, various estimates areused by management including deriving future cash flows and applicable discount rates.These estimates are most applicable to theimpairment tests on reinsurance assets (including goodwill), intangible assets, deferred acquisition costs and receivables. Further detailsare contained in paragraphs 6, 7 and 16 of the accounting policies.

• In deriving probable post-retirement employee benefit liabilities, various assumptions are required. Further details are containedin note 21.

• Allocation of specific investment properties to long-term strategic holdings thereby determining the deferred taxation rate to beapplied to fair value adjustments.

Balance Sheetsat 31 December 2006


Group Company

2006 2005 2006 2005

Notes Rm Rm Rm Rm

Assets

Equipment and properties under development 6 564 425Owner-occupied properties 7 867 848Investment properties 8 13 200 12 637Intangible assets 9 1 640 1 843Deferred acquisition costs 10 308 298Interests in subsidiaries 11 1 771 2 292Interests in joint ventures 12 736 654Interests in associates 13 7 157 5 369Reinsurance assets 17 1 065 946Operating leases – accrued income 8 1 164 991Financial instruments 14 165 567 128 149Deferred taxation 23 40 88Disposal groups held for sale 41 2 380Prepayments, insurance and other receivables 15 3 189 2 839Cash and cash equivalents 16 5 242 12 455 5 4

Total assets 200 739 169 922 1 776 2 296

Liabilities

Policyholders’ liabilities 168 898 140 835

Insurance contracts 17 122 875 102 439Investment contracts with DPF 17 1 719 1 540Investment contracts 18 44 304 36 856

Financial liabilities at amortised cost 19 2 261 2 260Derivative financial instruments 4 96 35

Third party liabilities arising on consolidation of mutual funds 20 8 559 7 079Employee benefits 21 388 338Deferred revenue 22 80 68Deferred taxation 23 3 262 2 454Provisions 24 72 39Operating leases – accrued expense 8 252 260Disposal groups held for sale 41 1 267Insurance and other payables 25 4 247 3 671 3 9Current taxation 394 484 1 3

Total liabilities 188 509 158 790 4 12

EquityOrdinary shareholders’ interests 5 556 4 967 1 772 2 284

Share capital 26 14 14 14 14Share premium 26 903 902 903 902Retained surplus 4 967 4 471 855 1 368Other reserves (328) (420)

Minority interests 6 674 6 165

Total equity 12 230 11 132 1 772 2 284

Total equity and liabilities 200 739 169 922 1 776 2 296

Income Statementsfor the year ended 31 December 2006


Group Company

As restated As restated

2006 2005 2006 2005

Notes Rm Rm Rm Rm

Revenue

Insurance premium revenue 20 843 20 003

Reinsurance premiums (777) (1 024)

Net insurance premiums 27 20 066 18 979

Service fee income from investment contracts 28 764 713

Investment income 29 9 762 7 752 536 409

Investment gains 30 28 570 25 049

Management fees on assets under management 18 365

Total revenue 59 180 52 858 536 409

Claims and policyholders’ benefits under insurance contracts 31 (17 059) (14 795)

Insurance claims recovered from reinsurers 31 578 775

Change in policyholder liabilities under insurance contracts (21 659) (18 796)

Transfer to life fund 17 (21 778) (18 958)

Applicable to reinsurers 119 162

Fair value adjustment to policyholders’ liabilities under

investment contracts 18 (8 276) (6 834)

Fair value adjustment on third party mutual fund interests (1 480) (1 879)

Acquisition costs associated with insurance and

investment contracts 32 (2 413) (3 594)

General marketing and administration expenses 33 (3 688) (3 888) (4) (6)

Finance costs 35 (215) (81)

Preference dividend in subsidiary (184) (138)

Goodwill impairment (397)

Profit/(loss) on sale of subsidiaries 41 374 (2)

Profit on dilution 4

Equity accounted earnings from joint ventures 12 150 91

Profit before taxation 5 312 3 320 532 403

Taxation 36 (2 307) (1 634) (58) (11)

Total earnings 3 005 1 686 474 392

Attributable to:

Equity holders 1 390 719

Minority interests 1 615 967

3 005 1 686

Cents Cents

Total earnings per share 40

Basic earnings 2 978,5 1 536,6

Fully diluted 2 977,6 1 536,2

Statement of Changes in Group Shareholders’ Fundsfor the year ended 31 December 2005


Sharecapital Empower- Share-based

and share Treasury Other ment payments Retained MinorityRm premium shares reserves (1) reserve (2) reserve surplus interests Total

Balance at 1 January 2005 as previously reported 962 (196) 156 (420) 11 4 078 4 021 8 612Minority interests in property partnerships 2 449 2 449

Restated balance at 1 January 2005 962 (196) 156 (420) 11 4 078 6 470 11 061

Acquisition of CAHL 161 161Total earnings 719 967 1 686Change in effective ownership (212) (212)Minority share of subsidiary dividend (378) (378)Ordinary dividends (383) (383)

2004 final dividend No. 71 of 430 cents (206) (206)2005 interim dividend No. 72 of 370 cents (177) (177)

Preference dividend (2) (2)Unincorporated property partnerships – minority movements (3) (1 003) (1 003)

Subscription for shares 3 3BEE preference share dividends 38 34 72Share-based payments 24 21 45Owner-occupied properties 49 45 94

Fair value adjustment 72 66 138Capital gains and transfer taxation (23) (21) (44)

Transfer to retained surplus (4) (14) 14 –Reversal of fair value adjustment on CAHL (8) (9) (17)Treasury shares adjustment (29) 15 5 (9)Foreign currency translation (1) (4) (5)Issue of shares in subsidiary 68 68Share buy-back transaction (49) (49)

Restated balance at 31 December 2005 916 (225) 190 (420) 35 4 471 6 165 11 132

Acquisition of minorities in Prefsure (166) (166) Capital reduction in subsidiary 48 (438) (390)Total earnings 1 390 1 615 3 005Minority share of subsidiary dividend (485) (485)Ordinary dividends (959) (959)

2005 final dividend No. 73 of 650 cents (310) (310)Extraordinary dividend No. 74 of 946 cents (452) (452)2006 interim dividend No. 75 of 414 cents (197) (197)

Preference dividend (2) (2)Unincorporated property partnerships – minority movements (3) (190) (190)

Subscriptions for shares 1 1BEE preference share dividends 47 42 89Share-based payments 27 26 53Payment on settlement of share options (1) (1) (2)Owner-occupied properties 18 17 35

Fair value adjustments 26 24 50Capital gains and transfer taxation (8) (7) (15)

Transfer to retained surplus (4) (4) (9) 13 –Treasury shares adjustment (13) 8 18 13Foreign currency translation 25 23 48Issue of shares in subsidiary 52 52Change in effective ownership (4) (4)

Shareholders’ funds at 31 December 2006 917 (238) 229 (372) 53 4 967 6 674 12 230

Statement of Changes in Company Shareholders’ Fundsfor the year ended 31 December 2006

L I B E R T Y H O L D I N G S L I M I T E D A N N U A L R E P O R T 2 0 0 6 31

Revaluation

Share and

capital available-

and share for-sale Retained

premium reserves surplus Total

Rm Rm Rm Rm

Balance as at 1 January 2005 962 389 983 2 334

Transfer of reserves (389) 389 –

Total earnings 392 392

Preference dividends (2) (2)

Ordinary dividends (394) (394)

2004 final dividend No. 71 of 430 cents (212) (212)

2005 interim dividend No. 72 of 370 cents (182) (182)

Subscriptions for shares 3 3

Share repurchase (49) (49)

Shareholders’ funds at 31 December 2005 916 – 1 368 2 284

Total earnings 474 474

Preference dividends (2) (2)

Ordinary dividends (985) (985)

2005 final dividend No. 73 of 650 cents (318) (318)

Extraordinary dividend No. 74 of 946 cents (464) (464)

2006 interim dividend No. 75 of 414 cents (203) (203)

Subscriptions for shares 1 1

Shareholders’ funds at 31 December 2006 917 – 855 1 772

(1) Other reserves comprise: foreign currency translation reserve R14 million (2005: (R11) million), owner-occupied properties revaluation R212 million(2005: R198 million) and capital redemption reserve fund R3 million (2005: R3 million).

(2) Represents the cost of preference shares acquired as part of the 2004 BEE share ownership transaction that do not meet the definition of a financial asset interms of International Financial Reporting Standards.

(3) Unincorporated property partnerships – minority movements comprise: capital contribution R4 million (2005: R2 million), capital reduction(R60) million (2005: Nil), distribution (R134) million (2005 (R149) million) and change in effective ownership Nil (2005: (R856) million).

(4) The transfer comprises the accumulated owner-occupied properties fair value adjustment relating to properties sold or transferred to investment properties and thetransfer of vested equity-settled options from the share-based payment reserve.

Cash Flow Statementsfor the year ended 31 December 2006

L I B E R T Y H O L D I N G S L I M I T E D A N N U A L R E P O R T 2 0 0 632

Group Company

2006 2005 2006 2005

Notes Rm Rm Rm Rm

Cash flows from operating activities 4 578 7 908 (521) 2

Cash generated from operations 37 192 3 343 (10) (3)

Cash receipts from policyholders 28 678 27 541Cash paid to policyholders, intermediaries, suppliers and employees (28 486) (24 198) (10) (3)

Interest received 5 036 3 962 8 13Interest paid (215) (81)Distribution of profits from subsidiary unincorporated property partnershipsDividends received 2 750 2 135 528 396Dividends paid 38 (1 495) (793) (987) (396)Distribution of profit to unincorporated property partnership minorities (134) (149)Taxation paid 39 (1 556) (509) (60) (8)

Cash flows from investing activities (11 398) (5 438) (412)

Net purchases of investment and owner-occupied properties 415 150Purchase of equipment (185) (202)Purchase of intangible assets (96)Proceeds on sale of equipment 15 8Net purchase of financial instruments (1) (12 977) (901)Acquisition of Wedelin Investments 1 (Pty) Limited 41 (169)Acquisition of Capital Alliance Holdings Limited 41 (3 047)Acquisition of minority share – unincorporated property partnership (856)Net movements in loans with joint venture companies 13 15Disposal of Liberty Ermitage Jersey Limited 41 943Disposal of Prefsure Holdings Limited 41 378Net disposal of reinsurance assets and other investments 74Disposal of Hightree Financial Services Limited 41 (2)Net purchase on disposal of shares in Liberty Group Limited (412) (412)

Cash flows from financing activities (393) 2 024 522 (45)

Proceeds from issue of share capital 1 3 1 3Repurchase of company shares (49) (49)Capital reduction in subsidiary 523Minority share of capital reduction in subsidiary (390)Proceeds from issue of share capital to minority shareholders in subsidiary 52 68Net capital (reduction)/contribution in unincorporated property partnerships (56) 2Issue of callable capital bonds 2 000Net movement in balances with group companies (2) 1

Net (decrease)/increase in cash and cash equivalents (7 213) 4 494 1 (455)Cash and cash equivalents at beginning of year 12 455 6 654 4 459Cash acquired on acquisition of Capital Alliance Holdings Limited 41 1 445Disposal of Hightree Financial Services Limited 41 (1)Reclassified to disposal groups held for sale 41 (137)Foreign exchange movements on cash balances

Cash and cash equivalents at end of year 5 242 12 455 5 4

(1) This includes the net purchases of mutual funds that are classified as associates.

Notes to the Financial Statementsfor the year ended 31 December 2006


1. Risk management framework and objectives

Liberty Holdings Limited is essentially an investment holding company with a single investment being an interest in its only subsidiary,

Liberty Group Limited (Liberty Life). However in light of the significance of Liberty Life’s operations, this section explains the risk

management framework and objectives undertaken in Liberty Life.

The Liberty Life board acknowledges its responsibility for establishing and communicating appropriate risk and control policies and

ensuring that adequate risk management processes are in place. The group has a number of committees which deal with the various

aspects on policies for accepting risks, including selection and approval of risks to be insured, use of limits and avoiding undue

concentrations of risk; underwriting strategies to ensure the appropriate risk classification and premium levels etc. as detailed below:

Responsibility for risk management

A group risk management committee, appointed by the Liberty Group Limited board, is in place to assist the board in discharging its

risk management obligations.

The principal objectives of the group’s risk management committee are to:

• Review the group’s risk philosophy, strategy, policies and processes recommended by executive management;

• Review compliance with risk policies and with the overall risk profile of the group;

• Review and assess the integrity of the process and procedures for identifying, assessing, recording and monitoring of risk;

• Review the adequacy and effectiveness of the group’s risk management function and its implementation by management;

• Ensure that material corporate risks have been identified, assessed and receive attention; and

• Provide the board with an assessment of the state of risk management within the group.

A significant part of Liberty Life’s business involves the acceptance and management of risk. Primary responsibility for risk management

at an operational level rests with the executive committee. The group’s risk management processes, of which the systems of internal,

financial and operating controls are an integral part, are designed to control and monitor risk throughout the group. For effectiveness,

these processes rely on regular communication, sound judgement and a thorough knowledge of the products and markets by the people

closest to them. Management and various specialist committees are tasked with integrating the management of risk into the day-to-day

activities of the group.

In particular :

• Group audit and actuarial committee

The group audit and actuarial committee’s principal objectives (pertaining to risk) are as follows:

• Act as an effective communication channel between the board on one hand and the external auditors and the head of internal

audit on the other;

• Satisfy the board that adequate internal, financial and operating controls are being identified, addressed and monitored by

management and that material corporate risks have been identified and are being contained and monitored through the group

risk committee; and

• Enhance the quality, effectiveness, relevance and communication value of the published financial statements and other public

documentation of a financial nature issued by Liberty Group Limited, with focus being placed on the actuarial assumptions,

parameters, valuations and reporting guidelines and practices adopted by the statutory actuary as appropriate to the group’s life

insurance activities.

• Capital management committee

The capital management committee is responsible for the management of the group ’s capital and investment thereof.

• Asset/liability management committee

This committee focuses on the matching of assets and policyholder liabilities. It also oversees the high-level mix parameters for

various products and portfolios and is tasked with agreeing benchmarks and mandates for performance of each investment portfolio

in conjunction with the asset managers.

Notes to the Financial Statementsfor the year ended 31 December 2006 (continued)


1. Risk management framework and objectives (continued)

• Product approval committee

The product approval committee meets monthly to assess whether all new products conform to Liberty Life’s predetermined

requirements and standards such as meeting policyholder needs, appropriate margins, investment backing, legal, underwriting, taxation

considerations and, where appropriate, currency risks, as well as Liberty Life’s administrative capabilities for managing these products.

• Underwriting committee

The underwriting committee reviews underwriting standards and claims experience as well as monitoring reinsurance retention limits

and stop loss limits.

2. Financial instruments and risk management

2.1 Fair value of financial instruments

The group’s financial instruments mainly consist of instruments held at fair value through profit or loss.

The methods for recognition and measurement of financial instruments are disclosed in the group’s accounting policies.

Financial instruments not held at fair value are summarised below, with their respective fair values at 31 December:

2006 2006 2005 2005

Carrying Fair Carrying Fair

Rm value value value value

Financial assets

Held-to-maturity investments within joint ventures 502 518 515 562

Mortgages and loans 809 809 2 028 2 044

Financial liabilities

Callable capital bond (2 054) (2 037) (2 054) (2 125)

Redeemable non-participating preference shares (207) (207) (206) (206)

The fair values have been calculated and measured consistently with methods described in the accounting policies for assets held

at fair value through profit or loss.

2.2 Risk management

Risks associated with policyholder investment contract liabilities (financial instruments as defined) are discussed in note 3 and have

been excluded from the analysis below.

The group has appointed qualified asset managers to manage the group’s financial instruments that support policyholder liabilities.

In the case of Liberty Group Limited and Liberty Active Limited the principal asset manager is STANLIB Limited while in the case

of Capital Alliance Holdings Limited (CAHL) the principal asset manager is Investec Limited. In addition, there are a number of

smaller asset managers and the group’s own management that assist in asset management, particularly surrounding offshore and

shareholder assets.

Exposure to outside financial institutions concerning financial instruments is monitored in accordance with parameters which have

been approved by the STANLIB Limited audit and risk committee, the STANLIB Limited board as mandated by the board of the

Liberty Group and CAHL. Liberty Life places emphasis on investing in quality growth shares that reflect a reasonable value

proposition. Identification and selection of quality growth shares is made through research and analysis.The group makes use of

derivative instruments for the purpose of adjusting portfolio exposures and smoothing the investment cycle.

The financial risks to which the group is exposed are described below:

Market risk

Market risk includes currency risk, interest rate risk and equity price risk. From time to time derivative financial instruments are

entered into to reduce this exposure to market risk (refer to note 4).



2. Financial instruments and risk management (continued)

Market risk (continued)

(i) Currency risk

Currency risk is the risk that the value of a financial instrument will fluctuate in rands due to changes in foreign exchange rates.

The following financial instruments denominated in foreign currencies are included in the group balance sheet as at 31 December

(the 2005 comparatives includes financial instruments owned by disposal groups held for sale):

Australian

Assets British Pound US Dollar Euro Japanese Yen Dollar Other

Rm 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005

Government,

municipal and

utility stocks 9 15 73 93 150 1 085 12 16 8 13

Debentures 11 15 21 20 6 6 24 689

Listed shares 244 134 10 506 9 612 2 391 554 168 196 8 22 136 123

Unlisted shares 52 43 87 158

Mutual funds 369 544 1 165 1 477 967 690 186 178

Deposits and

money market

securities 624 272 1 151 1 205 714 479 (3) 3 2

Policy loans 9

Net current

assets/

(liabilities) 58 (47) 19 (1) 120 100

Total 1 315 918 12 962 12 470 4 242 2 813 369 398 215 994 147 138

Directly

attributable to

shareholders (1) 253 255 391 191 22 14 120

Exchange rates 2006 2005 2004

R/£ closing rate 13,80 10,95 10,88

Average R/£ 12,49 11,57 11,75

R/$(US) closing rate 7,05 6,36 5,64

Average R/$(US) 6,77 6,36 6,41

R/i closing rate 9,29 7,52 7,67

Average R/i 8,51 7,91 7,98

R/Yen closing rate 0,06 0,05 0,06

Average R/Yen 0,06 0,06 0,06

R/Aus$ closing rate 5,55 4,69

Average R/Aus$ 5,12 4,91

(1) These amounts are in respect of assets specifically designated as shareholder assets. The remaining asset amounts are allocated to

match policyholders’ liabilities. Therefore shareholders are only exposed to the extent any remaining asset movements would impact

profit margins and management fees earned in respect of servicing policyholder contracts.

The group’s offshore asset managers’ current practice is to reduce material currency translation exposures by means of forward

exchange contracts where future revenues, assets and matching liabilities are in different currencies.





(i) Currency risk (continued)

All forward exchange contracts are valued at fair value on the balance sheet with the resultant gain or loss included in the incomestatement.

Foreign Rand carrying Forward exchange currency Settlement Settlement Average value atcontract summary amount currency value rate 31 December Maturity dates2006 ’m ’m Rm

Financial instruments

SellCanadian dollars 1,0 US dollars 0,8 1,15 –Euros 1,4 US dollars 1,8 0,76 –Japanese yen 85,8 New Zealand dollars 1,1 80,34 –New Zealand dollars 2,3 US dollars 1,6 1,45 –Norwegian krone 6,7 US dollars 1,1 6,20 – Various between 1 JanuaryUS dollars 1,8 Euros 1,4 1,32 – 2007 and 21 March 2007US dollars 5,3 Japanese yen 612,1 0,01 (1)US dollars 2,1 Norwegian krone 12,8 0,16 –US dollars 2,8 British pounds 1,4 1,96 –US dollars 1,2 Swedish krona 8,3 0,15 –

Total (1)

2005Disposal group held for sale(Ermitage)

Sell Various between 13 JanuaryUS dollars 46,6 British pounds 25,7 1,81 (15) 2006 and 30 June 2006

Various between 24 JanuaryEuros 0,6 British pounds 0,4 1,44 – 2006 and 30 June 2006

Sub-total (15)

Financial instruments

SellAustralian dollars 8,5 US dollars 6,3 1,36 –Euros 3,4 Japanese yen 467,7 0,01 –Euros 11,0 British pounds 7,5 1,47 (1)Euros 3,9 Swedish krona 36,7 0,11 –Euros 9,8 US dollars 11,6 0,85 (1)Japanese yen 1 357,3 US dollars 11,5 118,00 (2)British pounds 4,4 Euros 6,5 0,68 1 Various between 1 JanuaryBritish pounds 1,0 Japanese yen 201,5 0,00 – 2006 and 6 February 2006British pounds 8,5 US dollars 14,6 0,58 –Swedish krona 12,3 Euros 1,3 9,41 –US dollars 27,9 Euros 23,7 1,18 2US dollars 18,3 Japanese yen 2 162,7 1,01 3US dollars 1,4 Norwegian krone 9,4 0,15 –US dollars 11,2 British pounds 6,5 1,73 –

Total (13)





(ii) Interest rate risk

Interest rate risk is the risk that the value and cash flow of a financial instrument will fluctuate due to changes in market interest rates.

The following investments and liabilities, which are held at fair value, will be directly impacted by changes in market interest rates:

Accounts receivable and accounts payable where settlement is expected within 90 days are not included in the analysis below, since theeffect of interest rate risk on these balances is not considered material given the short-term duration of these underlying cash flows.

Exposed to Exposed toFinancial instrument investments cash flow fair value Effective

Carrying interest interest interestNote: this table for 2005 includes financial instruments value rate risk rate risk rate (1)

owned by disposal groups held for sale Rm Rm Rm %

2006Financial instrument investmentsHeld at fair valueGovernment, municipal and utility stocks 19 960 37 19 923 7,08Debentures 15 493 2 160 13 333 8,47Money market securities 11 948 447 11 501 6,71Investment policies 932 177 755 8,49Preference shares with dividend yield indexed to interest rate 2 825 1 626 1 199 6,73

Preference shares with fixed rate 1 291 1 054 237 7,57Cash and cash equivalents 5 237 3 534 1 703 6,81Held-to-maturity and loans and receivablesMortgages and loans 809 402 407 12,50

Total 58 495 9 437 49 058

Directly attributable to shareholders (2) 5 930 2 354 3 576

2005Financial instrument investmentsHeld at fair valueGovernment, municipal and utility stocks 20 432 4 20 428 7,12Debentures 10 580 1 411 9 169 7,67Money market securities 3 382 275 3 107 6,80Investment policies 888 167 721 7,05Preference shares with dividend yield indexed to interest rate 1 987 1 391 596 7,06

Preference shares with fixed rate 819 573 246 6,23Cash and cash equivalents 12 585 7 845 4 740 5,73Held-to-maturity and loans and receivablesMortgages and loans 2 028 (3) 253 1 775 (3)

Total 52 701 11 919 40 782

Directly attributable to shareholders (2) 3 759 3 211 548

(1) Effective interest rate is the rate applicable at 31 December on a nacm basis averaged on a weighted basis with reference tocarrying value.

(2) These amounts are in respect of assets specifically designated as shareholder assets. The remaining asset amounts are allocated tomatch policyholders’ liabilities. Therefore shareholders are only exposed to the extent any remaining asset movements would impactprofit margins and management fees earned in respect of servicing policyholder contracts.

(3) In 2005 these were mainly advances made to policyholders by cancellation of policyholders’ value of units held. In effect these assets earnthe same return as the unit portfolios in which they are invested. With effect from 1 January 2006, advances which result in a cancellationof policyholders’ value of units held, have been accounted for as partial surrenders and therefore a reduction in policyholder liabilities.





(ii) Interest rate risk (continued)

The maturity profile of the financial instrument investments is as follows:

2006 2006 2005 2005Carrying Contractual Carrying Contractualamount repricing (2) amount repricing (2)

Rm Rm Rm Rm

1 year 16 877 2 182 14 178 9661 – 2 years 5 450 1 138 2 814 5902 – 3 years 2 279 411 4 811 9273 – 4 years 5 813 980 2 145 1824 – 5 years 3 377 610 5 128 671More than 5 years 23 853 62 21 582 54Variable 846 2 043

Total 58 495 5 383 52 701 3 390

Exposed to Exposed tocash flow fair value Effective

Carrying interest interest interestvalue rate risk rate risk rate (1)

Financial instrument liabilities Rm Rm Rm %

2006Held to maturityCallable capital bond (3) 2 054 2 054 8,77Redeemable non-participating preference shares 207 207 9,21

2005Held-to-maturityCallable capital bond (3) 2 054 2 054 8,77Redeemable non-participating preference shares 206 206 7,45

(1) Effective interest rate is the rate applicable at 31 December on a nacm basis averaged on a weighted basis with reference to thecarrying value.

(2) The amounts represented are where there is a contractual repricing of the coupon interest rate prior to the maturing date.(3) Contractually repriced on 12 September 2012, at which date it is callable by Liberty Group Limited, with compulsory redemption on

12 September 2017.

(iii) Equity price risk

Equity price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices.

Investments in all equities, certain derivatives, investment policies and mutual funds are valued at fair value and are thereforesusceptible to market fluctuations. The group makes use of futures, options and other derivatives in order to reduce market riskin the equity portfolios.

Of the total investments subject to equity price risk being R120 970 million (2005: R95 462 million), R5 318 million (2005:R3 499 million) are designated shareholder specific assets not linked to policyholders’ liabilities and therefore, shareholders carry the fullrisk. Designated shareholder specific assets are managed by the group’s capital management committee where concentration andother risks are continuously evaluated.

The remaining investments are allocated to match policyholder liabilities. Investments that do not exactly match the policyholderliability determination and those that support unearned margins, expose shareholders to further price risk. Shareholders’management fees based on asset values will also be affected by price movements.This is expanded upon in note 3.

Investments in mutual fund associates are not specifically defined financial instruments, but are subject to price risk as describedabove, refer to note 13.




Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation and cause the group to incur afinancial loss.

Scrip lending counterparties are restricted to appropriately accredited institutions. During 2006 the highest level of equity scrip lendingactivity at any one time amounted to R4 112 million (2005: R2 380 million) and at 31 December 2006 R4 112 million (2005:R2 157 million). Scrip lending activities have resulted in R9 million (2005: R2 million) in scrip lending fees. Fees earned are split 10% toSTANLIB and 90% to Liberty Group Limited. The amount received by Liberty Group Limited is allocated 60% to policyholder benefitsand 40% to shareholder income.

With regard to credit risk contained in insurance and other receivables (including in 2005 receivables within disposal groups held forsale), the exposure is limited to R3 188 million (2005: R2 839 million), comprising balances with policyholders, agents, brokers andintermediaries and debtors arising from investment sales as follows.

2006 2005Rm Rm

Policyholder short-term debtors 1 193 1 074Agents, brokers and intermediaries 186 183Investment sale debtors 250 497Other 1 559 1 085

3 188 2 839

The majority of policyholders’ debts of R1 193 million (2005: R1 074 million) are recoverable through offset against their respective liabilities(policy benefits).

Agents, brokers and intermediaries totalling R186 million (2005: R183 million) are subject to a comprehensive relationship managementprogramme, including credit assessment. Exposure to any single agent, broker or intermediary is insignificant (less than R5 million (2005: R3 million)). The wide-spread nature of the individual amounts combined with the relationship programme reduces the credit risk.

Debt collection procedures are rigorously carried out on defaulters. Industry supported default lists help to prevent rogue agents,brokers and intermediaries from conducting business with Liberty Life. Full provision is made for non-recoverability as soon asmanagement is uncertain as to the recovery.

Investment sale debtors are protected by the security of the underlying investment not being transferred to the purchaser priorto payment. Established broker relationships and protection afforded through the rules and directives of the JSE Limited fur therreduces credit risk.

Derivative counterparties and cash transactions are limited to high credit quality financial institutions with minimum credit ratings of “A”determined by reputable credit rating agencies, unless specifically authorised by the appropriate investment committee. Cash transactionsare mainly entered into with the group’s holding company, Standard Bank Group Limited and its subsidiaries. The group has policies thatlimit the amount of the credit exposure to any one financial institution.

The group is exposed to tenant default and unlet space within its investment property portfolio of R14 112 million (2005: R13 368 million).This exposure risk is mainly attributable to the matching policyholder liability and the shareholder exposure is limited to management feesand profit margins. The managed diversity of the property portfolio and the existence of multi-tenanted buildings significantly reduces theexposure to this credit risk. At 31 December 2006 the value of unlet space in the property portfolio amounted to R11 million(2005: R83 million) proportionate value. If policyholders cease to pay their premiums, as contractually required, any insurance risk wouldlapse and any investment product would be subject to charges in order to recover outstanding costs (refer to note 3).

Liquidity risk

Liquidity risk is the risk that the group will encounter difficulty in raising funds to meet commitments associated with financial instruments.

Insurance companies are registered financial institutions and are required to hold minimum capital to inter alia reduce policyholderexposure to the entity’s liquidity risk. The Financial Services Board is the regulatory authority that regularly reviews compliance withthese minimum capital requirements. The statutory actuary and management continually manage and monitor liquidity and capitalrequirements – refer to notes 1 and 3 for further detail.

The Financial Services Board’s approval of the group issuance of subordinated debt (callable capital bonds) included a requirement tohold liquid assets equal to at least the amount of the outstanding debt, being R2 billion.

Liquidity risks arising out of contractual obligations to policyholders are discussed further in note 3.

Refer to the directors’ report for the company’s borrowing powers.




Legal risk

Legal risk is the risk that the group will be exposed to contractual obligations which have not been provided for.

The group has a policy of ensuring all contractual obligations are documented and appropriately evidenced to agreements with the

relevant parties to the contracts.

During the development stage of any new product and for any corporate transactions the legal resources of the group, and if required

external resources, monitor the drafting of the contract document to ensure that rights and obligations of all parties are clearly set

out. All significant contractual claims are reviewed by independent legal resources and amounts are immediately provided for if there

is consensus as to any possible group exposure. At 31 December 2006, the directors are not aware of any significant obligation not

provided for.

Operational risk

Operational risk is the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from

external events.

The initiation of all transactions and their administration is conducted on the foundation of segregation of duties that has been designed

to ensure materially the completeness, accuracy and validity of all transactions. These controls are augmented by management and

executive review of control accounts and systems, electronic and manual checks and controls, back-up facilities and contingency planning.

The internal control systems and procedures are also subjected to regular internal audit reviews.

Taxation risk

Taxation risk is the risk that the group will incur a financial loss due to an incorrect interpretation and application of taxation legislation or due

to the impact of new taxation legislation on existing structures.

During the development stage of any new product and prior to any corporate transactions the taxation resources of the group, and if

required external resources, identify and advise on any material potential taxation impact thereof.

Proposed new taxation legislation is researched fully by the legal and taxation resources to identify any potential impact to the group

and where appropriate representation is made to the relevant government minister, including lobby groups to assist in ensuring the

fairness of new taxation legislation.

Taxation risk is further mitigated through policy terms and conditions, which enable the risk to be passed back to policyholders. This is

the case on all classes of business other than non-participating annuity business.

Regulatory risk

Regulatory risk is the risk arising from a change in regulations pertaining to the business of the group. In order to manage this risk,

the group is an active participant in industry bodies, such as the Life Offices Association, that engage in discussions with policy makers

and regulators.

3. Management of insurance and financial risk on contractual obligations to policyholders

The Liberty Group issues contracts that result in the transfer of insurance risk and/or financial risk to the group. This note summarises

Liberty Group’s objectives in managing market, insurance, credit and liquidity risks arising from contractual obligations to policyholders

and its policies for mitigating those risks. Other risks are discussed in note 2.

Responsibility for risk management

3.1 The Capital Adequacy Requirement (CAR) as part of the risk management framework

The group is required to demonstrate solvency to the Registrar of Long-term Insurance, in accordance with the Long-term

Insurance Act (1998) as amended. This requires the group to demonstrate that it has sufficient assets to meet its liabilities

and CAR for statutory purposes. Statutory returns are submitted to the Registrar quarterly, and valuations performed

half-yearly.



3. Management of insurance and financial risk on contractual obligations to policyholders (continued)

3.1 The Capital Adequacy Requirement (CAR) as part of the risk management framework (continued)

The CAR is intended to approximate a risk based capital measure and gives guidance to the board concerning acceptable minimumgroup capital requirements. The CAR is calculated in accordance with the Long-term Insurance Act (1998) and PGN 104, as thegreater of the Termination Capital Adequacy Requirement (TCAR) and the Ordinary Capital Adequacy Requirement (OCAR). TheTCAR examines a highly selective scenario in which all policies, where the surrender value is greater than the policy liability, terminateimmediately. The OCAR is calculated based on a number of stress tests, which together with compulsory margins are intended toprovide approximately a 95% confidence level over the long term that the insurer will be able to meet all its obligations. It explicitlyincludes stress tests for the following risks:

– Financial risk arising from mismatches between assets and liabilities, including specific provision for mismatches between assetsbacking liabilities in respect of embedded derivatives and the liabilities themselves;

– Changes in lapse and withdrawal experience;– Fluctuations in experience for mortality, morbidity and expenses; and– The risk that assumptions for mortality and morbidity are not accurate estimates.

Statutory capital adequacy requirements were covered 2,3 times at 31 December 2006 (2005: 2,0 times).

Risk categories and risks within categories are discussed in approximately decreasing order of importance based on the group’sassessment of these risks after taking risk management procedures and mitigating factors into account. This ordering is broadlyconsistent with the contribution each risk makes to OCAR.

3.2 Market risk

The group is exposed to market risk through its financial assets, financial liabilities (investment contracts and borrowings), insuranceliabilities and in particular the risk that the proceeds from its financial assets are not sufficient to fund the obligations arising fromits insurance and investment contracts. The most important components of this risk are interest rate risk, market price risk, andcurrency risk. These risks arise from open positions in interest rate, currency and equity products, all of which are exposed togeneral and specific market movements.

The group manages these positions within an asset liability management (ALM) framework that aims to match assets to theliabilities arising from insurance and investment contracts by currency, nature and term. For each distinct category of liabilities interms of the ALM framework, a separate asset profile is maintained. For most categories of business, the ALM frameworkdetermines an asset class allocation. In certain classes, non-participating annuities and guaranteed capital bonds in particular, thespecific timing of cash flows is considered to determine the selection of asset within classes.

The following table provides a more detailed breakdown of policyholders’ liabilities to contextualise the discussion that follows:

Liabilities Proportion Liabilities Proportionas at of total as at of total

31 December policyholders’ 31 December policyholders’2006 liabilities 2005 liabilities

Rm % Rm %

Individual non-participating business: 17 482 10 17 400 12

– non-participating annuities 14 217 8 14 363 10– guaranteed capital bonds 4 295 3 3 860 3– other (1 030) (1) (823) (1)

Individual participating business: 117 276 69 94 504 67

– business with DPF 26 904 16 13 636 10– unit linked 88 892 52 80 326 57– other 1 480 1 542

Group risk 2 560 2 2 451 2Group non-risk 32 328 19 27 249 19

– business with DPF 5 791 3 5 096 3– other 26 537 16 22 153 16

Total 169 646 100 141 604 100

Total deferred taxation applicable to fair value adjustments (748) (769)

Total policyholders’ liabilities 168 898 140 835




Responsibility for risk management (continued)

3.2 Market risk (continued)

3.2.1 Interest rate and market price risk

These risks have very different impacts on the various categories of business used in the group’s ALM framework. Interest

rate and market price risk have been discussed together since they interact on certain types of liabilities.

(a) Guaranteed maturity values

Embedded derivatives in the form of guaranteed maturity values are attached to a significant portion of unit linked

business. Liabilities arising from these embedded derivatives are valued in accordance with valuation techniques

described in PGN 110.

These liabilities are essentially put options on the underlying unit linked liabilities and as such are sensitive to

movements in interest rates and equity prices and their volatilities. The group constantly monitors the exposure and

is investigating economically efficient ways in which the interest rate and market price risk exposure could be more

closely hedged than it is at present.

(b) Guaranteed annuity options

Guaranteed annuity options (GAOs) give the policyholder the option to convert the maturity proceeds of a

retirement annuity into an annuity at a pre-defined rate. GAOs are no longer sold on new business. As in the case

of guaranteed maturity values, liabilities arising from these embedded derivatives are valued in accordance with

valuation techniques described in PGN 110.

GAOs expose the group to significant interest rate risk. Falling interest rates increase the value of GAOs significantly.

In addition, since the GAO applies to the full proceeds of the underlying policy, which is typically an equity based

investment, they give rise to a market price risk – increasing equity prices generally increase the value of GAO

liabilities. To some extent the upside market price risk exposure on GAOs can be offset against the downside market

price risk exposure on guaranteed maturity values. In addition interest rate and equity volatilities affect the valuation

of these obligations.

The group constantly monitors the exposure and is investigating economically efficient ways in which the risks arising

from GAOs could be more closely hedged.

(c) Unit linked business

For unit linked contracts, the group holds the assets on which the unit prices are based. As a result, there is no

mismatch. For purposes of this matching exercise gross unit liabilities in respect of defined insurance contracts are

however reduced by the present value of future expenses and risk claims less the present value of future charges

less the present value of future expenses and risk claims. Some interest rate, market price, and currency risk is

consequently retained on this business to the extent that the present value of future expenses and risk claims less

future charges does not move in line with gross unit liabilities.

Management fees charged on this business are determined as a percentage of the fair value of the underlying assets

held in the linked funds, which are subject to interest rate and market price risk. As a result the management fees

are volatile, although always positive.

On a portion of business in this category, policyholders are entitled to only 90% of both the upside and downside

returns achieved on the underlying assets. This leaves shareholders’ earnings with exposure to the remaining 10%

thereby introducing earnings volatility due to the exposure to market price movements.

Within this category of business there are insurance contracts with minimum guaranteed death benefits and universal

life type contracts in terms of which the sum at risk depends on the fair value of the underlying investments. These

contract features mean that fluctuations in market prices affect the group’s exposure to mortality risk.





3.2 Market risk (continued)

3.2.1 Interest rate and equity price risk (continued)

(d) Non-participating annuities

Non-participating annuities provide benefit payments that are fixed and guaranteed at inception of the contract(although a small proportion of the business provides inflation related increases on annuities in payment). Theseliabilities are backed largely by fixed income securities, with other assets held only to support the longest datedcashflows arising from a portion of these liabilities. The group’s primary financial risk on these contracts is therisk that interest income and capital redemption from the financial assets backing the liabilities is insufficient tofund the guaranteed benefits payable.

The group monitors interest rate risk on this business by comparing the modified duration and convexity of theinvestment portfolio and the liabilities issued. The modified duration of the liabilities is determined by projectingexpected cash flows from the contracts using best estimates of future mortality. The modified duration is a linearmeasure of how the value of assets and liabilities change in response to interest rate changes. However, values do notchange linearly as interest rates change. So convexity, a measure of the curvature of the change in value of assets andliabilities with respect to changes in interest rates, is also monitored.

The portfolio mandate requires that the difference between the modified duration of the asset and liabilities is nevermore than one year. For a large proportion of the business, sensitivity to changes in the shape of the yield curveis also monitored and managed.

The table below describes the expected cashflow profile arising from these annuities (excluding some annuities inrespect of disability income business and certain corporate investment business):

Cashflows arising Cashflows arising Total cashflowsunder annuities under annuities arising on

classified as classified as non-participatingRm insurance business investment business annuities

2006Within 1 year 1 409 380 1 7892 – 5 years 5 494 530 6 0246 – 10 years 6 475 15 6 49011 – 15 years 10 683 4 10 687Over 15 years 15 269 15 269

Total 39 330 929 40 259

2005 (restated)Within 1 year 1 341 379 1 7202 – 5 years 5 150 615 5 7656 – 10 years 6 076 12 6 08811 – 15 years 10 483 4 10 487Over 15 years 13 935 13 935

Total 36 985 1 010 37 995

The 2005 figures have been restated to include annuities in payment in respect of Liberty Corporate disabilityincome business.

(e) Long-term insurance contracts with discretionary participating features (DPF)

The group has a number of books of long-term insurance contracts with DPFs, most of which have been acquiredfrom other insurers. Each book of business is backed by a distinct asset profile, often as a result of conditions includedin the Scheme of Transfer in terms of which the business was acquired. The assets backing these liabilities aregenerally segregated from the group’s other assets to ensure that the assets are used exclusively to provide benefitsfor the relevant policyholders.





3.3 Insurance risk (continued)

3.2.1 Interest rate and equity price risk (continued)

(e) Long-term insurance contracts with discretionary participating features (DPF) (continued)

Bonuses are declared on this business taking a number of factors into account, including: the previous bonus rates

declared, policyholders’ reasonable expectations, expenses, actual investment returns on the underlying assets,

expectations of future investment returns and the extent to which the value of assets exceeds the value of benefits

allowing for both the guaranteed benefits and projected future bonuses at the most recently declared rates, amongst

other factors. Once declared, a portion of the bonus, depending on the operation of the specific class of business in

accordance with the terms and conditions of the contract, forms part of the guaranteed benefits.

The group recognises the full value of the backing assets as a liability. The group however only bears interest rate risk

in relation to the guaranteed benefits under these contracts, and not in respect of the DPF component of the liability.

Furthermore the group is only exposed to equity price risk on this business to the extent that equities are held to

back the guaranteed portion of the liability. As at 31 December 2006, the value of assets backing this business

comfortably exceeded the liability in respect of guaranteed benefits.

(f) Guaranteed capital bonds and structured products

Guaranteed capital bonds have benefit payments that are fixed and guaranteed at inception of the contract. The ALM

framework dictates that assets are selected to provide a cashflow match to these liabilities. There is consequently no

exposure to interest rate risk or equity price risk on these products.

Structured products provide a guaranteed minimum maturity benefit together with pre-defined market related

upside. The ALM framework dictates that these obligations are matched exactly. This is done by holding a zero

coupon bond to match the guaranteed minimum maturity benefit and an equity option to provide the required

market related upside exposure. There is consequently no interest rate or equity price risk on these products.

On this business the risk of a change in tax laws is mitigated through policy terms and conditions which enable this

risk to be passed back to the policyholder.

(g) Investment business

Discussion of interest rate and equity price risk arising from contracts classified as investment business is provided in

the paragraphs above. For purposes of clarity and completeness a brief description of interest rate and equity price

risk arising on contracts classified as investment business is provided again below.

The majority of business classified as investment business is unit-linked in nature, including group investment contracts,

linked life annuities and matured endowment policies. As described in (c) above, the group holds the assets on which

the unit prices are based. There is therefore no interest rate or equity price risk on this business.

Similarly, structured products and guaranteed capital bonds classified as investment business are also backed by exactly

the assets required to provide the benefits promised, as discussed in (f) above. There is consequently no interest rate

or equity price risk on this business.

Annuities certain with fixed terms account for the balance of investment business. As described in (d) above annuities

are matched by interest bearing assets of the appropriate duration. This does not constitute an exact cashflow match,

so there is some residual interest rate risk on this business.

3.2.2 Currency risk

Offshore assets are held in policyholder assets to match the corresponding liabilities. As a result of this, the group is

exposed to currency risk through maturity guarantees issued on contracts invested in offshore portfolios. Maturity

guarantees are no longer offered on new business invested in offshore portfolios. The rand denominated value of

management fees derived from these contracts is also subject to currency risk. Strengthening of the rand against the

offshore currencies reduces the rand value of management fees on offshore portfolios and increases the liability in respect

of rand denominated guarantees on this business.





3.3 Insurance risk

Insurance risk is the risk that future claims and expenses will exceed the value placed on insurance liabilities. It occurs due to the

uncertainty of the timing and amount of future cashflows arising under insurance contracts. The timing is specifically influenced by

future mortality, morbidity, and withdrawal rates about which assumptions are made in order to place a value on the liabilities.

Deviations from assumptions will result in actual cashflows different from those projected in liability calculations. As such, each

assumption represents a source of uncertainty.

The larger the portfolio of uncorrelated insurance risks, the smaller the relative variability about the expected outcome will be.

In addition, a more diversified portfolio of risks is less likely to be affected across the board by a change in any subset of the risks.

3.3.1 Policyholder behaviour risk

Policyholders have the option to discontinue or reduce contributions or withdraw benefits prior to expiry of the contract

term. As a result policyholder behaviour contributes to insurance risk.

The main risk posed by this behaviour is the risk that expenses and commissions incurred early in the term of the contract,

but priced to be recovered by means of ongoing charges over a longer period, are not fully recovered due to the decision

by the policyholder to cease or reduce contributions.

On contracts where a withdrawal benefit is payable, this risk is mitigated by conditions built into policy contracts which

enable the group to recoup these unrecovered expenses by means of a lump sum charge. Charges of this sort have been

limited in terms of regulations giving effect to the Statement of Intent. This will increase the group’s exposure to the risks

associated with policyholder behaviour.

In addition, commission clawback provisions, included in contracts with intermediaries, enable the group to mitigate some

of the risk of early termination.

3.3.2 Mortality and morbidity risk

Procedures to control and manage the underwriting risks at a group level are in operation, of which the more significant

are as follows:

The statutory actuary reports annually on the actuarial soundness of the premium rates in use and the profitability of the

business taking into consideration the reasonable benefit expectation of policyholders. All new premium rates are approved

and authorised by the statutory actuary prior to being issued. New products and premium rates are also reviewed by the

product approval committee.

Catastrophe reinsurance has been consolidated across all of Liberty’s life licences. Cover is in place for single event disasters

leading to claims of more than R50 million up to a limit of R500 million in respect of a single event and R1 000 million in

aggregate over the treaty year.

Assumptions are made concerning the expected deaths and disabilities (including dread disease claims) that will occur in

each future time period. The risk posed by deviations from the assumptions depends on the type of business. The significant

classes of business most affected by mortality and morbidity risk are discussed below.

(a) Life annuity business

In terms of life annuity business, the insurer undertakes to pay a series of future payments contingent on the policyholder’s

survival. The most significant insurance risk on these liabilities is continued medical advances and improvement in social

conditions that will lead to increases in longevity. Annuitant mortality assumptions include allowance for future mortality

improvements. The CAR also includes an allowance for changes in mortality experience.

Claims in disability income business also give rise to life annuities. A proportion of both group and individual disability

income business is reinsured on a proportionate quota share basis, so a proportion of all annuities arising from

disability income claims are reinsured. No additional reinsurance is purchased in respect of life annuity business.






3.3.2 Mortality and morbidity risk (continued)

(a) Life annuity business (continued)

Undue concentration of life annuities in payment would leave cashflows and consequently liabilities heavily exposedto the mortality experience of a few lives. The profile of annuity amounts payable per life, in respect of non-participating life annuities, is as follows:

2006 2005Number Annual Number Annual

of life annuity of life annuityAnnuity amount per annuities amount annuities amountannum (R) in payment exposure (Rm) in payment exposure (Rm)

0 – 240 000 96 960 1 381 98 897 1 412240 000 – 480 000 240 76 234 74480 000 – 720 000 22 13 21 12720 000 and above 12 11 11 10

Total 97 234 1 481 99 163 1 508

Figures for 2005 have been rested to include group participating annuity business.

(b) Group risk business

The most significant factors that could increase the frequency of mortality claims are epidemics, such as AIDSand Asian bird flu, or lifestyle changes such as eating, drinking and exercise habits, resulting in earlier or moreclaims than expected. Morbidity claims experience would not only be affected by the factors mentioned above,but because disability is defined in terms of the ability to perform an occupation it could also be affected byeconomic conditions.

Group scheme pricing is based on past scheme experience, industry class and average income amongst other factors.The group monitors exposure per industry class in order to maintain a diversified portfolio of risks and manageconcentration exposure to a particular industry class.

The following table provides the split by industry class of annual premium income received on group risk business:

20052006 Restated

Industry class % %

Administrative/professional 21 21Retail 28 27Light manufacturing 32 30Heavy manufacturing 13 14Heavy industrial and other high risk 6 8

Total 100 100

The 2005 figures have been restated to include a block of business that had previously been excluded from this analysis.

Free cover limits are set for individual schemes based on the size of the scheme and the distribution of sums assured.Larger sums assured in excess of the free cover limit are medically underwritten. As a result, very few lives are testedfor HIV. However, policy terms and conditions provide for an annual review of premium rates, so premiums can beupdated to keep pace with emerging claims experience. The annual premium reviews take into account the expectedworsening of mortality and morbidity experience as a result of AIDS and other factors from one year to the next.

Large individual risks on group schemes are reinsured on a surplus risk premium basis.

(c) Individual assurance business

In order to eliminate cross-subsidies in the pricing basis, premiums are differentiated by gender, smoker status, andproxies to socio-economic class. Historic experience has shown that these factors are significant determinants ofmortality and morbidity experience.

The underwriting committee determines underwriting guidelines concerning authority limits and procedures to be followed.

The health condition and family medical history of applicants are assessed at inception of new contracts as part ofthe underwriting process and premiums and terms and conditions are varied accordingly. Special risks, such ashazardous pursuits and unusual medical conditions, are also assessed at underwriting stage. In addition, financialunderwriting is used where necessary to determine insurable interest.






3.3.2 Mortality and morbidity risk (continued)

(c) Individual assurance business (continued)

All applications for risk cover in excess of specified limits are reviewed by experienced underwriters and evaluatedagainst established standards. Specific testing for HIV is carried out in all cases where the applications for risk coverexceed set limits depending on the risk classification of the applicants.

The group analyses the progression of claims experience on a monthly basis. Given experience to date, thecomposition of the business written and the ability the group has to alter risk premiums in accordance with policyterms and conditions, deterioration in mortality and morbidity due to HIV and AIDS is currently considered to be arelatively small risk. Despite this, the group holds special AIDS provisions, calculated in accordance with PGN 102 andPGN 105. These provisions are held to provide for deterioration in mortality experience as a result of assured livesbecoming HIV infected after inception of the contract.

Charges for mortality and morbidity risk on unit-linked universal life business can be altered in accordance with theterms and conditions, thereby reducing the risk exposure. However, delays in implementing increases in charges andmarket or regulatory restraints over the extent of the increases may reduce its mitigating effect. Furthermore chargescan only be increased to the extent that they can be supported by gross premiums, although this is not relevant oncontracts where gross premiums can be reviewed.

Premiums on the majority of unit linked risk business and the non-participating Lifestyle Protector product, can bereviewed on expiry of a guarantee period which varies by policy type or age of the policyholder at inception. Thisgives the group the ability to mitigate against long-term changes in mortality and morbidity.

The product approval committee considers the risk associated with future premium updates. In general updatesfollow the terms and conditions of the original contract, as described above, thereby giving the group the ability tomitigate against this risk.

For Liberty Life business, mortality and morbidity benefits in excess of R8,0 million (2005: R7,5 million) are reinsuredunder an original terms surplus reinsurance arrangement. This retention limit is reviewed annually to keep pace withinflation and the group’s risk tolerance based on the results of a stochastic analysis of the inherent statistical risk.Business written in the past was reinsured at lower retention levels, which are fixed for the life of the contract. Specialrisks are reinsured at lower levels on a case-by-case basis. Reinsurance attaching at lower retention levels is in placeon the Liberty Life Group business and on the Capital Alliance and Liberty Active portfolios.

The following table provides a summary of the profile of amounts at risk per life in terms of mortality benefits beforeand after reinsurance:

2006 Before reinsurance After reinsuranceRetained sum at risk (R) Rm % Rm %

0 – 1 499 999 231 724 51 196 494 52 1 500 000 – 2 999 999 83 998 19 77 370 21 3 000 000 – 7 499 999 116 934 26 90 671 24 7 500 000 and above 17 081 4 9 766 3

Total 449 737 100 374 301 100

2005 restated Before reinsurance After reinsuranceRetained sum at risk (R) Rm % Rm %

0 – 1 499 999 246 257 58 202 828 571 500 000 – 2 999 999 78 487 18 72 430 203 000 000 – 7 499 999 99 813 23 79 607 227 500 000 and above 3 830 1 2 748 1

Total 428 387 100 357 613 100

The 2005 figures have been restated to include Liberty Active.





3.4 Credit risk

Provisions of the Long-term Insurance Act 1998 have the effect of limiting exposure to individual issuers due to the inadmissibilityof assets for regulatory purposes if specified limits are breached.

In addition, each policyholder portfolio has specific mandates which include guidelines concerning the credit rating of issuers.Compliance with mandates is monitored by the asset managers in accordance with guidelines established by the asset liabilitymanagement committee. Furthermore the statutory actuary would need to be satisfied with the credit risk of counterparties.

Credit ratings of reinsurers are taken into account in reinsurance placement decisions. Credit exposure to reinsurers is also limitedthrough the use of several reinsurers.

Refer to note 2 for additional information on credit risk.

3.5 Liquidity risk

Net cashflows are closely monitored. Over the last few years the Liberty group has experienced positive net cashflows. In addition,the group has significant credit lines over and above the liquid assets held to meet cash demands. Liquidity requirements and cashresources are reviewed on a monthly basis by the assets liability matching and capital management committees.

Since the majority of the business is unit linked (or market related), liquidity risk arising as a result of changes in lapse and withdrawalexperience is limited through policy terms and conditions that restrict claims to the value at which assets are realised. In the caseof property-backed contracts, it is not possible to realise the assets as claim payments arise due to the “lumpiness” and illiquidityof the assets. For this reason property exposures are afforded specific attention by the capital management committee. The riskarising out of the property-backed business is mitigated through the maintenance of a portfolio of high quality properties that thegroup believes will be easier to dispose of if required.

The following two tables give an indication of liquidity needs in respect of cashflows required to meet obligations arising underinsurance contracts and investment contracts with DPF (as defined in IFRS 4).The amounts in the unit cashflow table representthe estimated cashflows (in present value terms) arising from the current value of units.The cashflows make no allowance for futurenew business or future allocations of premiums under recurring premium business.The amounts in the rand reserve cashflow tablerepresent the estimated cashflows from the rand reserve consistent with the valuation methodology followed by the calculationof the rand reserve on the published reporting basis. All the cashflows are shown gross of reinsurance. The cashflows for theguaranteed element and the non-guaranteed element of insurance contracts with DPF have been combined and are included inthe unit cashflow table. Annually renewable business, namely lump sum group risk business, group disability income business andcredit life business, has been excluded from the table (but group annuities and disability income claims in payment have beenincluded). Cashflows from investment contracts (as defined under IFRS 4) have also been excluded, however a table with anestimate of the maturity profile in respect of this class of business has been included in note 18.

Amount payable

Period when unit reserve cashflows become due (insurance contracts and 2006 2005investment contracts with DPF) Rm Rm

Within 1 year 17 510 13 7442 – 5 years 45 781 37 7946 – 10 years 28 118 23 40411 – 20 years 18 984 15 599Over 20 years 5 344 4 335

Total 115 737 94 876

Total deferred taxation applicable to fair value adjustments on investment properties (602) (619)

Total policyholders’ liabilities under insurance contracts and investment contracts with DPF 115 135 94 257

Amount payable

Period when rand reserve cashflows become due (insurance contracts and 2006 2005investment contracts with DPF) Rm Rm

Within 1 year 2 003 1 1882 – 5 years 2 090 3 5166 – 10 years 1 076 1 62411 – 20 years 5 626 6 211Over 20 years 14 722 13 956Effect of discounting cash flows (16 058) (16 773)

Total 9 459 9 722



4. Derivative financial instruments

The group is party to derivative financial instruments. These instruments are used to limit or reduce risk, and comprise futures, options,swaps and forward exchange contracts.

Derivative financial instruments are either traded on a regulated exchange (South African Futures Exchange, SAFEX) or negotiated over-the-counter (OTC) as a direct arrangement between two counterparties. Instruments traded on SAFEX are margined and SAFEX is thecounterparty to each and every trade. OTC instruments are only entered into with appropriately accredited counterparties and areentered into in terms of signed International Swap and Derivative Agreements with each counterparty.

Group

2006 2005Rm Rm

Equity contracts 77 113Forward exchange contracts (1) (13)Reclassified as disposal groups held for sale 15

Total derivative financial instruments 76 115

Disclosed as:Assets included in financial instruments (refer to note 14) 172 150Financial liabilities (96) (35)

Total 76 115

4.1 Equity contracts summaryTotal

Group equity contracts

Bought SoldRm Rm

Open derivative positions at 31 December are:

2006Notional or underlying principal amount by term to maturity (1)

Exchange tradedLess than 1 year 21

Over the counterLess than 1 year 1 945 (2 492)1 to 5 years 249 (126)

Total 2 215 (2 618)

Fair value 168 (96)

Maximum credit risk (2) 168

2005Notional or underlying principal amount by term to maturity (1)

Exchange tradedLess than 1 year 13 (431)

Over the counterLess than 1 year 155 (272)1 to 5 years 170 (108)

Total 338 (811)

Fair value 148 (35)

Maximum credit risk (2) 148(1) Notional or underlying principal amount reflects the volume of the group’s or company’s investment in derivative financial instruments.

It represents the amount to which a rate or price is applied to calculate the exchange of cash flows. The amount at risk inherent in thesecontracts is significantly less than the notional amount.

(2) Maximum credit risk represents the cost of replacing, at current fair values, all contracts which have a positive fair value, should thecounterparty default. Since no loss related to credit risk is incurred for contracts with a negative fair value, only positive fair values areconsidered to be at risk.

4.2 Forward exchange contracts

Refer to note 2(i) for full details of the group’s forward exchange contracts in existence at 31 December.



5. Segment information

(a) Primary reporting segment – business segments

At 31 December 2006, the principal business of the group is the provision of long-term insurance and investments, which is

managed using the following segments:

Group

Group benefits administer packaged solutions to the retirement funding and insured benefit needs of mostly small-to-medium sized

companies although it does include larger corporate funds.

(1) Group – Risk

Any scheme benefit where the claim proceeds payable under the benefit are not in any way linked to the performance of

any asset.

(2) Group – Non-risk

Any scheme benefit where the claim proceeds payable under the benefit are in some way dependent on the performance

of applicable investment assets.

Individual

Individual business administers a wide range of investment, retirement, health and risk products and services to individuals and

their families.

(3) Individual – Participating (excluding Prudential participating business)

Any benefit on an individual policy that is not non-participating, i.e. the premium charged for and/or the claim proceeds

payable, other than on early termination, under the benefit are in some way dependent on the performance of applicable

investment assets after the inception of the policy.

(4) Individual – Non-participating

Any benefit on an individual policy where the premium charged for and the claims proceeds payable, other than on early

termination, are in no way linked to the performance of any asset after the inception of the policy.

(5) Prudential participating business

Represents a portion of the insurance contracts acquired from a previous business acquisition. This portion of business

operates as a segregated business with-profits fund. As such it is discretionary participating in nature.

Non-insurance business

(6) Asset management

Comprises STANLIB, a joint venture of the Liberty group that offers a local and international investment product mix that

includes all asset classes and aims to meet the wealth creation needs of both institutional and retail investors; and Liberty

Group Properties, which leases, manages and administers prime retail, office and industrial properties.

(7) Shareholder operations

Shareholders’ income and expenses and other activities not directly related to the business segments identified are included

in other operations.This also includes segments that are not separated due to their immateriality.

(8) Mutual funds

IFRS requires the consolidation of certain mutual funds where the group is considered to have control of such funds through

the size of its investment, voting control and related management contracts. The consolidation of mutual funds has no effect

on net equity. While the consolidation of such funds is still subject to international debate and resolution, we have shown

the portion relating to third party liabilities as a separate segment.

(9) Disposal groups held for sale in 2005

Comprises Liberty Ermitage Jersey Limited, an offshore asset management and hedge fund specialist operation and

Prefsure Holdings Limited, an Australian based long-term insurer.These entities were disposed of in 2006.



5. Segment information (continued)

The segment results for the year ended 31 December 2006 are as follows:

Group Individual Other

Pru- Total Share-

dential life Share-

Non- parti- fund Asset holder

Partici- partici- cipating opera- manage- opera- Mutual

Rm Risk Non-risk pating pating business tions ment tions funds Total

Net insurance premiums 1 614 126 14 071 4 241 14 20 066 20 066

Service fee income from

investment contracts 562 150 52 764 764

Investment returns 162 6 742 24 000 1 224 2 617 34 745 35 1 849 1 703 38 332

Management fees on

assets under management 52 (34) 18

Inter-segmental revenue (37) 37

Segment revenue 1 776 7 430 38 184 5 554 2 631 55 575 87 1 815 1 703 59 180

Claims and policyholder

benefits under insurance

contracts (1 619) (610) (11 753) (2 689) (388) (17 059) (17 059)

Insurance claims recovered

from reinsurers 335 163 80 578 578

Change in policyholder

liabilities under insurance

contracts (19) (699) (18 583) (376) (1 982) (21 659) (21 659)

Fair value adjustment to

policyholders’ liabilities

under investment contracts (5 360) (2 848) (68) (8 276) (8 276)

Fair value adjustment on

third party mutual fund interests (1 480) (1 480)

Acquisition costs associated

with insurance and

investment contracts (68) (138) (1 055) (1 152) (2 413) (2 413)

General marketing and

administration expenses (143) (486) (1 874) (667) (54) (3 224) (3) (238) (223) (3 688)

Segment result 262 137 2 234 682 207 3 522 84 1 577 5 183

Finance costs (2) (8) (2) (12) (203) (215)

Preference dividend (184) (184) (184)

Profit on sale of subsidiaries 374 374

Profit on dilution 4 4

Equity accounted earnings

from joint ventures 49 49 101 150

Profit before taxation 262 135 2 275 496 207 3 375 185 1 752 5 312

Taxation (77) (73) (1 504) (176) (150) (1 980) (15) (312) (2 307)

Total earnings 185 62 771 320 57 1 395 170 1 440 3 005




The restated segment results for the year ended 31 December 2005 are as follows:

Group Individual Other

Pru- Total

dential life Share-

Non- parti- fund Asset holder

Partici- partici- cipating opera- manage- opera- Mutual Disposal

Rm Risk Non-risk pating pating business tions ment tions funds groups Total

Net insurance premiums 1 336 259 13 412 3 391 14 18 412 567 18 979

Service fee income from

investment contracts 490 180 39 709 4 713

Investment returns 227 5 644 18 514 2 683 2 138 29 206 27 1 459 2 084 25 32 801

Management fees on

assets under management 1 1 87 (49) 326 365

Inter-segmental revenue 56 (56)

Segment revenue 1 563 6 393 32 163 6 057 2 152 48 328 114 1 410 2 084 922 52 858

Claims and policyholder

benefits under insurance

contracts (1 344) (490) (9 339) (2 935) (288) (14 396) (399) (14 795)

Insurance claims recovered

from reinsurers 296 186 33 515 260 775

Change in policyholder

liabilities under insurance

contracts (46) (836) (15 715) (484) (1 659) (18 740) (56) (18 796)

Fair value adjustment to

policyholders’ liabilities

under investment contracts (4 273) (2 402) (150) (6 825) (9) (6 834)

Fair value adjustment on

third party mutual fund interests (1 879) (1 879)

Acquisition costs associated

with insurance and

investment contracts (62) (135) (2 235) (972) (3 404) (190) (3 594)

General marketing and

administration expenses (121) (547) (1 823) (499) (28) (3 018) (27) (270) (205) (368) (3 888)

Segment result 286 112 835 1 050 177 2 460 87 1 140 – 160 3 847

Finance costs (2) (10) (1) (1) (14) (65) (2) (81)

Preference dividend (1) (137) (138) (138)

Goodwill impairment (397) (397)

Loss on sale of subsidiary (2) (2)

Equity accounted earnings

from joint ventures 14 14 77 91

Profit before taxation 285 110 839 912 176 2 322 164 676 – 158 3 320

Taxation (96) (104) (678) (376) (154) (1 408) (14) (185) (27) (1 634)

Total earnings 189 6 161 536 22 914 150 491 – 131 1 686




Other segment items included in the income statement and the segment assets and liabilities and capital expenditure for the year then ended are as follows:

Group Individual OtherPru-

dential Share- DisposalNon- partici- Asset holder groups

Partici- participating manage- opera- Mutual heldRm Risk Non-risk pating pating business ment tions funds for sale Total

2006

Depreciation (1) (106) (107) Amortisation of PVIF (8) (22) (86) (47) (163) Amortisation of computer software internally generated (40) (40) Impairment of goodwillImpairment of PVIFAmortisation of deferred acquisition costs (13) (151) (164) Release of deferred revenue 7 7

2005

Depreciation (1) (122) (5) (128)Amortisation of PVIF (17) (21) (73) (19) (4) (134)Amortisation of computer software internally generated (41) (41)Impairment of goodwill (397) (397)Impairment of PVIF (20) (20)Amortisation and impairment of deferred acquisition costs (93) (23) (5) (121)Release of deferred revenue 9 9

2006Investments (1) 1 601 32 088 105 375 16 932 10 331 465 18 544 8 597 193 933 Intangible assets 67 143 690 378 362 1 640 Deferred acquisition costs 76 232 308Reinsurance assets 892 (56) 229 1 065 Other assets (2) 75 3 595 123 3 793

Segment assets 2 560 32 307 106 241 17 539 10 331 540 22 501 8 720 200 739

Policyholders’ liabilities 2 560 32 328 106 945 17 482 10 331 169 646 Deferred taxation on investment properties (21) (784) 57 (748)Deferred revenue 80 80 Other liabilities (3) 46 10 765 8 720 19 531

Segment liabilities 2 560 32 307 106 241 17 539 10 331 46 10 765 8 720 188 509

Capital expenditure (4) 78 245 311 634

2005Investments (1) 1 562 26 938 84 371 16 475 8 242 416 15 875 7 224 1 289 162 392Intangible assets 75 165 776 425 402 162 2 005Deferred acquisition costs 70 204 24 298Reinsurance assets 766 8 172 501 1 447Other assets (2) 420 210 31 2 596 95 428 3 780

Segment assets 2 403 27 173 85 779 17 306 8 242 447 18 873 7 319 2 380 169 922

Policyholders’ liabilities 2 451 27 249 86 153 17 400 8 351 827 142 431Deferred taxation on investment properties (48) (76) (439) (97) (109) (769)Deferred revenue 65 3 68Other liabilities (3) 30 9 271 7 319 440 17 060

Segment liabilities 2 403 27 173 85 779 17 306 8 242 30 9 271 7 319 1 267 158 790

Capital expenditure (4) 215 67 984 261 509 6 2 042

Inter-segmental transactions are entered into under normal commercial terms and conditions that would also be available to unrelated third parties.(1) Includes financial instruments, associates, joint ventures, owner-occupied and investment properties and cash and cash equivalents.(2) Other assets consist of deferred tax assets, equipment and prepayments, insurance and other receivables.(3) Other liabilities consist of the balance of the liabilities.(4) Capital expenditure comprises additions to equipment, owner-occupied and investment properties, intangible assets and deferred acquisition costs.



5. Segment information (continued)(b) Secondary reporting segment – geographical segmentsThe group’s main business segments mainly operate in Southern Africa.The segment information for the years ended 31 December are as follows:

Southern Africa Rest of World Total

Rm 2006 2005 2006 2005 2006 2005

Segment revenue 59 180 51 936 922 59 180 52 858Total assets 200 739 167 542 2 380 200 739 169 922Capital expenditure 634 2 036 6 634 2 042

Revenue is allocated based on the country in which the insurance or investment contract is issued or service fee income and investmentreturns are earned.Total assets are allocated based on where the matching insurance or investment is issued or, if not matched, where the business owning theasset is situated.Capital expenditure is based on where the business owning the asset is situated.

Group

2006 2005Rm Rm

6. Equipment and properties under developmentCost at beginning of year 1 231 1 085Additions through business acquisition 24Additions 185 103Additions – capitalised subsequent expenditure 126 97Disposals (86) (39)Disposals through business disposal (4)Foreign exchange movements (1)Disclosed as disposal groups held for sale (42)Transfers (to)/from investment properties (46) 8Transfers to owner-occupied properties (1)

Cost at end of year 1 409 1 231

Accumulated depreciation and impairment at beginning of year (806) (731)Additions through business acquisitionsDepreciation (107) (128)Disposals 68 31Disposal through business disposal 2Impairments (6)Foreign exchange movementsDisclosed as disposal groups held for sale 26

Accumulated depreciation and impairment at end of year (845) (806)

Net carrying amount at end of year 564 425

Balance at Balance Netbeginning Depre- Transfers at end book

of year Additions Disposals ciation out of year valueRm Rm Rm Rm Rm Rm Rm

Cost – movementGroupProperties under development (1) 105 126 (47) 184 184Computer equipment 567 65 (5) 627 121Purchased computer software 40 12 52 24Fixtures, furniture and fittings 391 85 (68) 408 165Office equipment and office machines 71 10 (3) 78 38Motor vehicles 57 13 (10) 60 32

1 231 311 (86) (47) 1 409 564

Accumulated depreciation and impairment – movementGroupComputer equipment (465) 8 (49) (506)Purchased computer software (20) (8) (28)Fixtures, furniture and fittings (254) 45 (34) (243)Office equipment and office machines (42) 7 (5) (40)Motor vehicles (25) 8 (11) (28)

(806) 68 (107) (845)(1) No depreciation is provided for on properties under development.



Group

2006 2005

Rm Rm

7. Owner-occupied properties

Fair value at beginning of year 848 757Additions – capitalised subsequent expenditure 17 6Additions through business acquisition 19Disposals (26) (16)Revaluations 50 138Transfers from properties under development 1Reclassifications to investment properties (23) (56)

Fair value at end of year 867 848

2005 2006Fair Transfer Reclassi- Fair

value Additions Disposals Revaluations in fication valueRm Rm Rm Rm Rm Rm Rm

Movement

Group

Land and buildings 826 14 (26) 56 1 (23) 848Appurtenances– Electrical and mechanical 20 3 (6) 17– Access control equipment 1 1– Soft furnishings 1 1

848 17 (26) 50 1 (23) 867

The original cost less accumulated depreciation of the owner-occupied properties is provided below.The allowed alternative method asdescribed in IAS 16 is fair value, which has been adopted by the group.

Group

2006 2005Rm Rm

Original cost at beginning of year 285 294Additions – capitalised subsequent expenditure 16 6Additions through business acquisition 19Disposals (16) (6)Reclassifications to investment properties (21) (28)Transfer from properties under development 1

Cost at end of year 265 285

Accumulated depreciation at beginning of year as restated (55) (47)Depreciation (6) (8)Reclassifications to investment properties 4

Accumulated depreciation at end of year (57) (55)

Original cost less accumulated depreciation 208 230

The valuation of owner-occupied properties and investment properties has been carried out by Ian Mitchell Investment Property ConsultantsCC (Chartered Valuation Surveyor – Professional Valuer) and Dijalo Valuation Services Management (Pty) Limited (Professional Associate Valuer).

The valuation is prepared in accordance with the guidelines of the South African Institute of Valuers for valuation reports and inaccordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors, adapted for South African law andconditions.The valuation assumes that there will be no change in the social, economic or political circumstances between the date of thevaluation and the financial year end of the company.

The basis of value is “Market Value” which is defined as an opinion of the best price at which the sale of an interest in property wouldhave been completed unconditionally or a cash consideration on the date of valuation assuming:

• a willing seller ;

• that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, thesame as the date of valuation;

• that no account is taken of any additional bid by a prospective purchaser with a special interest; and

• that both parties to the transaction had acted knowledgeably, prudently and without compulsion.



7. Owner-occupied properties (continued)

The properties have been valued on a discounted cash flow basis. In the majority of cases, discounted cash flows have been used andsummed together with the capitalised and discounted value of the projected income to give present value as at 31 December 2006. Inorder to determine the reversionary rental income on lease expiry, renewal or review a market gross rental income (basic rental plusoperating cost rental) has been applied to give a market related rental value for each property as at 31 December 2006. Market rentalgrowth has been determined based on the individual property, property market trends and economic forecasts. Vacancies have beenconsidered based on historic and current vacancy factors as well as the nature, location, size and popularity of each building.

Appropriate discount rates have been applied to cash flows for each property to reflect the relative investment risk associated with theparticular building, tenant, covenant and the projected income flow. Extensive market research has been conducted to ascertain the mostappropriate market related discount rate to apply. Regard to the current long-term bond yield (R153 risk free rate) and the relativeattractiveness that an investor may place on property as an asset class.

Primary discount rates range from 8% to 11,5% on a property by property basis. Exit capitalisation rates generally range from 8% to 11,5%.

On the basis that turnover or profit rental income has a greater degree of uncertainty and risk than the contractual base rental, a riskpremium of between 1% and 6% has been added to the discount rate and to the exit capitalisation rate, to reflect the greater investmentrisk associated with the variable rental element on a property by property basis.

Group

2006 2005Rm Rm

8. Investment properties

Details of property investments are recorded in registers, which may be inspected by members or their duly authorised agents, at the company’s registered office.

Fair value at beginning of year 12 637 11 569Revaluations net of lease straight-lining 1 207 849

Revaluations 1 388 950Net movement on straight-lining operating leases (181) (101)

Additions – property acquired 23Additions – capitalised subsequent expenditure 132 24Additions through business acquisition 258Disposals (845) (134)Reclassifications from owner-occupied properties 23 56Transfers from/(to) properties under development 46 (8)

Fair value at end of year 13 200 12 637

At the end of the year investment propertiescomprised the following property types:Office buildings 864 1 339Shopping malls 11 254 10 213Hotels 1 460 1 338Other 534 478

Total investment properties presentation value 14 112 13 368

Investment properties at fair value 13 200 12 637Operating leases – accrued income 1 164 991Operating leases – accrued expense (252) (260)

The investment properties were independently valued as at 31 December 2006 by Mr I Mitchell and Dijalo Valuation Services, whoare both registered as professional valuers with the South African Council for the Property Valuers Profession as well as members ofthe Institute of Valuers of South Africa.The method of valuation is more fully described in note 7, owner-occupied properties.

At 31 December 2006 the value of unlet investment properties for the group amounted to R11 million (2005: R83 million)proportionate fair value.

The property rental income earned by the group from its investment property, all of which is leased out under operating leases,amounted to R1 416 million (2005: R1 185 million). Direct operating expenses arising on the investment property amounted toR239 million (2005: R256 million).



Group

2006 2005

Rm Rm

9. Intangible assets

Cost at beginning of year 2 633 733

Foreign exchange movements (3)

Additions 311

Additions through business acquisition 1 864

Disposals/scrapping (68) (68)

Disclosed as disposal groups held for sale (204)

Cost at end of year 2 565 2 633

Accumulated amortisation and impairment at beginning of year (790) (308)

Amortisation (203) (175)

Impairment charge (417)

Disposals/scrapping 68 68

Disclosed as disposal groups held for sale 42

Accumulated amortisation at end of year (925) (790)

Net carrying amount at end of year 1 640 1 843

Summary of net carrying valueGoodwill 309 309

Computer software – internally generated 53 93

Present value of in-force policyholder contracts 1 278 1 441

Balance at Balancebeginning Disposals/ Amorti- at end Amortisation

of year scrapping sation of year period

Rm Rm Rm Rm

Cost – movementGroupGoodwill (2) 706 706Computer software –

internally generated 303 (68) 235Present value of in-force

Policyholder contracts (1) 1 624 1 624

2 633 (68) 2 565

Accumulated amortisation and impairment –movementGroupGoodwill (2) (397) (397) No amortisation

Computer software –

internally generated (210) 68 (40) (182) Up to 5 years

Present value of in-force

Policyholder contracts (1) (183) (163) (346) Up to 12 years

(790) 68 (203) (925)

(1) Represents the pre-taxation present value (at acquisition date) less amortisation of future profits on policyholder contracts acquired from business

combinations. No internally generated value of in-force has been recognised, since it does not meet the recognition criteria in IAS 38.



9. Intangible assets (continued)

Accumulated Net carrying

Goodwill impairment amount

Rm Rm Rm

(2) Goodwill comprises:

Capital Alliance Holdings Limited 397 (397) –

Liberty Group Limited 309 309

Total 706 (397) 309

Group

2006 2005

Rm Rm

10. Deferred acquisition costs

Unamortised cost on adoption of IFRS as at 1 January 2005 (1) 99

Balance at 1 January 298

Transfer from prepayments, insurance and other receivables at 1 January 2005 50

Cost of new business acquired 174 147

Additions through business acquisition 123

Amortisation realised through the income statement (164) (120)

Impairment realised through the income statement (1)


Current 121 110

Non-current 187 188

(1) The adjustment to opening retained surplus as at 1 January 2005 was as a result of the implementation of the amendment to IAS 18

Revenue Recognition, relating to investment management costs.

Company

2006 2005

Rm Rm

11. Interests in subsidiary

Liberty Group Limited

Balance at beginning of the year 145 156 072 (2005: 138 755 686) ordinary shares 2 294 1 882

Acquisition Nil (2005: 6 400 386) ordinary shares 412

Capital reduction of R3,60 per share (523)

145 156 072 ordinary shares at cost, representing 51,9% (2005: 52,2%) of the total issued

share capital of Liberty Group Limited at end of year 1 771 2 294

Amounts owing to Liberty Group Limited (2)

Total interests in subsidiary 1 771 2 292

The interest of the company for the year in the aggregate taxed profits of its subsidiary was R2 875 million (2005: R1 442 million).

Liberty Holdings Limited, indirectly through Liberty Group Limited, has interests in a number of other subsidiaries. Further details can be

obtained from Liberty Group Limited annual financial statements. A register containing full information on all the group subsidiaries will

be available for inspection at the annual general meeting.



Group

2006 2005Rm Rm

12. Interests in joint venturesOrdinary shares at cost 129 129Loans receivable (1) 502 515Share of post-acquisition reserves 311 216Unrealised profit (2) (206) (206)

Total interests in joint ventures 736 654

Analysis of post-acquisition reserve amounts

Balance at beginning of year 216 206Earnings recognised in the income statement 150 91Ordinary dividends received (55) (81)

Balance at end of year 311 216

(1) Loans receivable are defined as held-to-maturity investments and comprise:

R440 million (2005: R440 million) of non-convertible cumulative redeemable preference shares in STANLIB Limited at cost. Interest accruesmonthly at a rate of 66% of the Standard Bank prime rate.

R39 million (2005: R33 million) which represents the cost of an option on a 50% share in a convertible debenture issued by The CullinanHotel (Pty) Limited.The debenture is redeemable on 13 February 2008 at an attributable R47 million or convertible into ordinary shares ona date at the option of the holders. The debenture is remeasured using the amortisation method to redeemable value with an effectivemonthly compound interest rate of 16,62%.

R3 million (2005: R3 million) demand interest free loan receivable extended to The Financial Services Exchange (Proprietary) Limited.

R20 million (2005: R39 million) demand loan receivable extended to Capital Alliance Finance (Proprietary) Limited.The loan is interest free.(2) Represents unrealised profit on disposal of the Liberty Asset Management Business which was sold to STANLIB Limited at the inception of

the joint venture.

Held-to- Share ofShares maturity post- Equity

Percentage held at Unrealised financial acquisition Total accountedownership cost profit instruments reserves interest earnings

2006and

2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005% Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm

Principal joint ventures – unlistedSTANLIB Limited 37,4 112 112 (206) (206) 440 440 113 60 459 406 101 76(Asset and fund management)The Financial Services Exchange (Proprietary) Limited 33,3 – – 3 3 (3) (3) – –(Financial verification and technology service provider)The Cullinan Hotel(Proprietary) Limited (3) 50,0 17 17 39 33 201 159 257 209 49 15(Hotel developer and manager)Capital Alliance Finance (Proprietary) Limited (3) 50,0 20 39 20 39(Finance services company)

Total 129 129 (206) (206) 502 515 311 216 736 654 150 91

(3) These entities have 31 March year-ends and therefore management accounts as at 31 December are used to equity account these jointventures.



Interest held in joint

ventures

2006 2005

Rm Rm

12. Interests in joint ventures (continued)

Balance sheet extracts (1)

Non-current assets 3 095 553

Current assets 338 1 838

Long-term liabilities – interest bearing (397) (423)

Long-term liabilities – non-interest bearing (2 388) (1 546)

Current liabilities (193) (195)

Income statement extracts (1)

Income 984 734

Expenses (834) (643)

Commitments (1)

Capital commitments – authorised by directors but not contracted 16 1

Operating lease commitments 44 49

Within 1 year 6 6

1 to 5 years 29 26

6 to 10 years 9 17

(1) Represents the group’s proportionate share in the joint ventures.

Group

2006 2005

Rm Rm

13. Interest in associates – mutual funds

Fair value of associates 7 157 5 369

Summarised financial information of associates

Investments 15 886 14 278

Current assets 553 404

Current liabilities (241) (244)

Total revenue (1) 2 846 1 275

Increase in net assets as a result of operations (2) 2 660 1 092

(1) Total revenue is defined as increase in net assets as a result of operations plus expenses.(2) Units or shares held in mutual funds are by their nature demand deposits and are held at fair value for the group.The net income or loss is

capitalised to unit values within each fund. Increase in net assets as a result of operations represents total income less expenses before any

distributions or capitalisation.



13. Interest in associates – mutual funds

As at 31 December, the group’s associates and percentages held were as follows:

Percentage of

participation rights

Name in total issued units Fair value

2006 2005 2006 2005

% % Rm Rm

Liberty Ermitage Institutional Money Market Funds 40 40 2 283 1 687

Liberty Ermitage Asset Selection Fund 48 38 1 214 998

Liberty Ermitage Global Wealth Management

Strategies Limited 43 39 655 486

STANLIB Multi-Manager Low Equity Fund of Funds 38 38 479 301

STANLIB Managed Flexible Fund 26 375

STANLIB Resources Fund 37 40 281 233

STANLIB Aggressive Income Fund 21 21 256 102

STANLIB Stability Fund (2) 44 48 367 337

STANLIB Multi-Manager Medium Equity Fund of Funds (3) 36 37 247 158

STANLIB Quants Fund (4) 49 53 153 117

STANLIB Institutional Property Fund 20 148

STANLIB Multi-Manager Real Return Feeder Fund 33 133

STANLIB Capital Growth Fund 21 39 130 176

STANLIB Moderately Conservative Fund of Funds 33 101

STANLIB Flexible income 21 99

STANLIB Dynamics Return Fund 24 91

Liberty Ermitage Global Strategy Fund (1) 28 147

Japan Absolute Fund 37 105

STANLIB Industrial Fund 28 105

STANLIB European Fund of Funds 35 41 145 109

STANLIB International Equity Fund of Funds 29 308

Total 7 157 5 369

(1) This interest has been disclosed as an associate as the percentage ownership during the year fluctuated at or below what is considered a

controlling interest.



Group

2006 2005Rm Rm

14. Financial instrumentsMovement analysis:Balance at beginning of year 128 149 89 010Additions through business acquisition 16 371Net additions 5 810 1 728Fair value adjustments 31 226 21 022Movement on mutual fund associates and subsidiaries (430) 828Reclassifications from cash and cash equivalents 812 342Disclosed as disposal groups held for sale (1 152)

Balance at end of year 165 567 128 149

Held at fair value through profit or loss 164 758 126 121Loans and receivables 809 2 028

Financial instruments comprise:Financial assets held at fair value through profit or loss 165 567 128 149

Quoted in an active market

– Listed 84 453 65 012

Equities 82 292 63 928Preference shares 2 161 1 084

– Unlisted 76 626 57 802

Debentures 15 493 9 924Derivatives (refer to note 4) 172 150Mutual funds 29 053 23 933Government, municipal and utility stocks 19 960 20 413Money market securities 11 948 3 382

Unquoted and unlisted 3 679 3 307

Equities 762 706Preference shares 1 955 1 722Investment policies with external insurers 962 879

Loans and receivables

Mortgages and loans (3) 809 2 028

Total financial instruments 165 567 128 149

Maturity profile of government, municipal and utility stocks and debentures:Less than 1 year 995 3 6681 – 5 years 12 594 12 2535 – 10 years 9 799 4 752Greater than 10 years 12 027 9 618Variable (1) 846 2 074

Total 36 261 32 365

Details of listed and unlisted investments are recorded in registers, which may be inspected by members or their duly authorised agents,at the company’s registered office.(1) Instruments in this category are loans secured against policyholder contracts and the maturity profile is not determinable as the holder has

the option to settle at any time prior to the contract maturity date, as well as R37 million (2005: R46 million) included in debentures withvariable maturity dates.

(2) There is no maturity profile for listed and unlisted equities and other non-term instruments as management are unable to provide a reliableestimate given the volatility of equity markets and policyholder behaviour.

(3) R1 256 million of mortgages and loans in a subsidiary were reclassified to policyholder liabilities as in substance they were determined to bepartial surrenders.



Group Company

2006 2005 2006 2005

Rm Rm Rm Rm

15. Prepayments, insurance and other receivables

Current balances related to insurance contracts

Outstanding premium receivables 1 082 992

Current balances related to investment contracts

Outstanding premium receivables 111 82

Current balances related to insurance and investment

contracts 1 193 1 074

Accrued income 697 605

Investment debtors 250 497

Other debtors 1 049 663

Total prepayments, insurance and other

receivables (1) 3 189 2 839

(1) All inflows of economic benefits are expected to occur

within one year.

16. Cash and cash equivalents

Cash at bank and at hand 612 9 230 5 4

Short-term cash deposits 4 630 3 225

Total cash and cash equivalents 5 242 12 455 5 4

The weighted average effective interest rate on short-term cash deposits was 6,81% (2005: 9,61% p.a.).



Group

2006 2005

Investment Reinsu- Investment Reinsu-Insurance contracts rance Insurance contracts rancecontracts with DPF assets contracts with DPF assets

Rm Rm Rm Rm Rm Rm

17. Policyholders’ liabilitiesBalance at beginning of year 102 439 1 540 (946) 69 055 1500 (493)Additions through business acquisition 15 211 (866)Reclassification of mortgages and loans (1 163)Inflows 46 646 548 (786) 41 915 477 (1 175)Insurance premiums 20 763 80 (777) 19 942 61 (1 024)Investment returns 25 834 468 (9) 21 935 416 (151)Unwinding of discount rate (251) 56 7 23Investments 26 085 468 (65) 21 928 416 (174)

Equity accounted earnings from joint ventures 49 14Management fees on assets under management 24

Outflows (23 760) (335) 594 (22 166) (400) 1 099Claims and policyholders’ benefits (16 767) (292) 578 (14 442) (353) 775Claims and policyholders’ benefits under insurance contracts (16 767) (119) 578 (14 442) (200) 775Switches from investment with DPF to investment without DPF (173) (153)Acquisition costs associated with insurance contracts (2 195) (7) (3 404) (7)General marketing and administration expenses (2 712) (20) (2 643) (22)Preference dividend (184) (138)Finance costs (10) (16)Taxation (1 892) (16) 16 (1 269) (18) (1)Recapture of reinsurance contract (254) 325

Net income from insurance operations (1 287) (34) 73 (831) (37) (12)Changes in estimates 399 431Variances (2 077) (48) 93 (1 208) (52) (7)Amortisation of acquired PVIF on acquisition of CAHL 97 73New business (345) (524)Shareholder taxation on transfer of net income 639 14 (20) 397 15 (5)

Other movements (745) 501Disclosed as disposal groups held for sale (745) 501

Balance at end of year 122 875 1 719 (1 065) 102 439 1 540 (946)

Current 19 196 317 (299) 14 646 307 (230)Non-current 104 281 1 402 (766) 88 412 1 233 (716)Total deferred taxation applicable to fair value adjustment on investment properties (602) (619)

Insurance contracts with DPF – non-guaranteed element 13 816 10 944Insurance contracts without DPF – unit reserve 93 464 75 664Investment contracts with DPF – non-guaranteed element 850 793– guaranteed element 869 747Insurance contracts with DPF – guaranteed element 6 761 6 687Insurance contracts without DPF – rand reserve 8 781 9 268IBNR 655 495Total deferred taxation applicable to fair value adjustments on investment properties (1) (602) (619)

122 875 1 719 102 439 1 540(1) In compliance with IAS 12 Income Taxes, deferred taxation has been provided at the use rate in respect of revaluation surpluses on investment

properties held as long-term strategic investments.The additional deferred taxation liability, which has been debited to policyholders’ liabilities foraccounting purposes, does not reflect economic reality as the fair (open market) values of the investment properties already discount the incometax consequences in respect of rental income. The additional deferred taxation liability does therefore not affect policyholders’ values and isreversed for statutory reporting purposes to the Financial Services Board.



17. Policyholders’ liabilities (continued)

17.1 Policyholders’ liabilities under insurance contracts (continued)

Long-term insurance contracts – process used to decide on assumptions, changes in assumptions andsensitivity analysis

The value of insurance liabilities is based on best estimate assumptions of future experience plus compulsory margins as required interms of PGN 104, plus additional discretionary margins determined by the statutory actuary.

The process of deriving the best estimate assumptions relating to future mortality, morbidity, medical, withdrawals, investment returns,maintenance expenses, expense inflation and tax are described below.

Mortality

An appropriate base table of standard mortality is chosen depending on the type of contract and class of business. Industry standardtables are used for smaller classes of business, while company specific tables, based on graduated industry standard tables to reflectcompany specific experience, are used for larger classes.

Investigations into mortality experience are performed annually. The period of investigation extends over the latest three full years forlarger classes of business. Investigations relating to smaller classes usually extend over five years in order to gain sufficient credibilityfrom the data.

The results of the investigation are used to set the valuation assumptions, which are applied as an adjustment to the respectivestandard table.

In setting the assumptions, provision is made for the expected increase in AIDS-related claims. In general,ASSA models are used to allowfor AIDS-related claims. The practice differs by class of business, however for the major classes of business, a basic allowance forAIDS-related deaths is included in the base mortality rates against which annual mortality investigations are conducted. A furtherdiscretionary margin is then held using the ASSA2000lite model.

For contracts insuring survivorship, an allowance is made for future mortality improvements based on trends identified in the data andin the continuous mortality investigations performed by independent actuarial bodies.

Morbidity

The incidence of disability claims is derived from industry experience studies, adjusted where appropriate for the group’s ownexperience. The assumptions to be used are reviewed on an annual basis based on claims experience. The same is true for the incidenceof recovery from disability.

Medical

The incidence of medical claims is derived from the risk premium rates determined from annual investigations. The incidence rates arereviewed on an annual basis, based on medical claims experience. The adjusted rates are intended to reflect future expected experience.

Withdrawal

The withdrawal assumptions are based on the most recent withdrawal investigations taking into account past as well as expectedfuture trends. The withdrawal investigation is performed each year and incorporates a full year’s experience . The withdrawal ratesare analysed by product type and policy duration. These withdrawal rates vary considerably by duration, policy term and company.Typically the rates are higher for risk type products versus investment type products, and are higher at early durations.

Investment return

Future investment returns are set for the main asset classes as follows:

• Gilt rate – Effective 10 year yield curve rate at the balance sheet date rounded to nearest 0,25 percentage point (8,0%) (2005: 7,5%).• Equity rate – Gilt rate plus 2 percentage points as an adjustment for risk (10,0%) (2005: 9,5%).• Property rate – Gilt rate plus 1 percentage point as an adjustment for risk (9,0%) (2005: 8,5%).• Cash – Gilt rate less 1,5 percentage points (6,5%) (2005: 6,0%).

The overall investment return for a block of business is based on the investment return assumptions allowing for the current mix ofassets supporting the liabilities.

The pre-taxation discount rate is set at the same rate. For the major classes of business the rate used is 9,5% per annum in 2006 (2005:9,0% per annum). Where appropriate the investment return assumption will be adjusted to make allowance for investment expenses,taxation and the relevant prescribed margins as per PGN 104 issued by the Actuarial Society of South Africa.

For annuity and guaranteed capital bond business, discount rates are set at the rates consistent with the returns implied by the assetsmatching the respective business, reduced by an allowance for investment expenses and the relevant prescribed margin.



17. Policyholders’ liabilities


Expenses

An expense analysis is performed on the actual expenses incurred in the calendar year preceding the balance sheet date.

Implementation of group cost per policy

In 2005 and prior years, Liberty Life and its subsidiary life companies each conducted an independent expense analysis. Subsequentto the functional integration of Liberty Active Limited and the Capital Alliance Group into Liberty Life, a group wide expense analysishas been conducted for the 2006 year. The resulting group wide cost per policy is used as a basis of allocation of management expensesto subsidiaries on a shared services basis.

Individual policyholder expenses are split between acquisition, maintenance and non-recurring expenses at a cost centre level, basedon interviews with line management or headcount apportionment where applicable. Maintenance expenses are divided by the grouptotal weighted number of in-force policies, resulting in a per policy maintenance cost. Policies are categorised as complex, simple orannuities. Each policy category is weighted by a factor reflecting management’s best estimate of the relative cost of maintenance ofsuch a policy – based on established historical trends across the group.

The resulting individual maintenance cost per policy:

Policy category 2006

Complex (1) R270Simple (2) R135Annuity (3) R135(1) Complex business refers to individual risk, retirement and investment products.These policies are individually issued and administered and

historically incur the greatest cost of administration due to their complexity, and the range of services and options available to policyholder.(2) Simple business refers to individual funeral policies written.(3) Annuity business includes all annuity policies that are in payment.

The expenses derived from this analysis are adjusted by an expense inflation assumption to obtain an appropriate expense baseassumption to be used in the calculation of the insurance liabilities.The policyholders’ liability under insurance contracts calculated inthis way includes an allowance for the expected non-recurring integration expenses in 2007 and 2008, offset by the expectedcapitalised expense savings likely to emerge in 2007 and 2008 only.

The policyholders’ liability under insurance contracts at the balance sheet date has been calculated on the group cost per policy basis.The net of tax impact of the basis change on 2006 to the liability and profit after tax was:

GroupRm

Basis change: normal expense variance (24)Basis change: new methodology (18)Top-up of stabilisation reserves at 31 December 2006 (1) (12)

Total decrease in profit after tax (54)

(1) Policies with discretionary participation features have been compensated for any effects of moving to a group expense per policy basis.

The impact of the change in estimate cannot be accurately determined for future periods as it is dependent on actual expenses andthe number of policies in the relevant period.

Expense inflation

The inflation rate is set at 3,5 percentage points below the gilt rate investment return assumption prevailing at the balance sheetdate, resulting in a best estimate expense inflation assumption of 4,5% at 31 December 2006.The expense inflation assumption is settaking into consideration the expected future development of the number of in-force policies, as well as the expected future profileof group maintenance expenses.

Taxation

Future taxation and taxation relief are allowed for at the rates and on the bases applicable to Section 29A of the Income Tax Act atthe balance sheet date. Each company’s current tax position is taken into account, and taxation rates, consistent with that position andthe likely future changes in that position, are allowed for. In respect of capital gains taxation (CGT), taxation is allowed for at the fullCGT rate. Deferred taxation liabilities include a provision for CGT on unrealised gains/(losses), at the valuation date, at the fullundiscounted value.

Correlations

No correlations between assumptions are allowed for.

Contribution increases

In the valuation of the liabilities, voluntary premium increases that give rise to expected profits, are not allowed for. However,compulsory increases and increases that give rise to expected losses are allowed for. This is consistent with requirements of PGN 104.



17. Policyholders’ liabilities


Embedded investment derivative assumptions

The assumptions used to value embedded derivatives, in respect of policyholder contracts, are set in accordance with PGN 110.Account

is taken of the yield curve at the valuation date. Both implied market volatility and historical volatility are taken into account when setting

volatility assumptions. Long-term volatility assumptions are set based on market information where available, otherwise a measure of

subjectivity is required. Correlations between asset classes are set based on historical evidence. At least one thousand simulations are

performed in calculating the liability.

The total reserves held (including the discretionary margin in respect of the investment guarantees) for embedded investment derivatives

are approximate to a market consistent methodology, however an area of possible refinement relates to the long-term volatility

assumptions.

Changes in assumptions

Modelling and other changes were made to the valuation to realign valuation assumptions with expected future experience.

These changes resulted in a net increase in policyholders’ liabilities of R399 million in 2006.

The primary items were:

• A move to a group cost per policy methodology, amounting to an increase in liabilities of R43 million and an updating of the expense

assumption increased liabilities by R34 million.

• A move in anticipation of the adoption of a market consistent model for the calculation of the liabilities in respect of minimum

investment guarantees, increasing the liability by R148 million.

• A change in the economic valuation assumptions to realign the economic assumptions with expected future experience, resulting in

an increase of R85 million. It should be noted that the majority of this change is offset by a corresponding change in the value of the

relevant matching assets.

• The demographic experience assumptions were adjusted to reflect expected future experience, amounting to a decrease in liabilities

of R116 million.

• Other experience assumptions were adjusted to reflect expected future experience, amounting to a R77 million increase in the

liabilities.

• The balance of modelling changes amounted to an increase in liabilities of R128 million.

In addition, an allowance has been made for the adjustment to early termination values in terms of the statement of intent.

Sensitivity analysis

Shown in the table below are the sensitivities of the value of insurance liabilities disclosed in this note to various changes in

assumptions used in the estimation of the insurance liabilities. Each value is shown with only the indicated assumption being

changed and keeping all other assumptions constant. In practice, this is unlikely to occur, as changes in some of the assumptions

may be correlated.

Change in liability at31 December 2006

2006 2005

Variable Rm Rm

Future investment returns reduced by a 15% relative reduction in the

valuation rate, with bonus rate changing commensurately 2 233 2 265

Assurance mortality and morbidity increased by 10%, annuity mortality

decreased by 10% 1 928 1 900

Withdrawal rates increased by 10% 150 172

Maintenance expenses (other than commission) increased by 10% 375 339

Expense inflation rate increased by 1% 241 268

It should be noted that the sensitivities ignore any changes in matching assets and are prior to any transfer taxation consequences which

typically would be shareholder taxation of 29%. This is particularly relevant to the sensitivity to changes in future investment returns.



Group

2006 2005

Rm Rm

18. Policyholders’ liabilities on investment contracts

Balance at beginning of year 36 856 27 451Additions through business acquisition 2 606Reclassification of mortgages and loans (93)

Inflows 16 290 15 348

Fund inflows from investment contracts (excluding switches) 7 835 8 312Investment returns 8 455 7 036

Fair value adjustment prior to deferred taxation on investment properties (1) 8 272 6 877Policyholder taxation on investment returns 40 65Expenses applied to investment returns 143 94

Outflows (8 602) (8 391)

Fund outflows from investment contracts (7 794) (7 545)

Payments under investment contracts (excluding switches) (7 967) (7 698)Switches between investment with DPF to investment without DPF 173 153

Expenses (707) (699)

General marketing and administration expenses (494) (516)Acquisition costs associated with investment contracts (211) (183)Finance costs (2)

Taxation (90) (140)Movement in deferred revenue liability (11) (7)

Net income from investment contracts (147) (76)

Service fee income (764) (713)Expenses 707 699Expenses applied to investment returns (143) (94)Shareholder taxation on transfer of net income 53 32

Other movements (82)

Disclosed as disposal groups held for sale (82)

Balance at end of year 44 304 36 856

Investment contracts 44 450 37 006Total deferred taxation applicable to fair value adjustment on investment properties (2) (146) (150)

Current 8 720 7 759Non-current 35 730 29 247Total deferred taxation applicable to fair value adjustment on investment properties (146) (150)

Total 44 304 36 856

(1) Fair value adjustment prior to deferred taxation on investment properties 8 272 6 877Movement in deferred taxation applicable to fair value adjustment on investment properties 4 (43)

Fair value adjustment per income statement 8 276 6 834

(2) In compliance with IAS 12 Income Taxes, deferred taxation has been provided at the use rate in respect of revaluation surpluses on investmentproperties held as long-term strategic investments. The additional deferred taxation, which has been debited to policyholders’ liabilities foraccounting purposes, does not reflect economic reality as the fair (open market) values of the investment properties already discount theincome tax consequence in respect of rental income.The additional deferred taxation liability does therefore not affect policyholders’ valuesand is reversed for statutory reporting purposes to the Financial Services Board.



18.1 Maturity profile of policyholders’ liabilities under investment contracts

The maturity profile of policyholders’ liabilities under investment contracts is set out in the table below. Estimates have been used basedon when claim cashflows are expected to arise under this business and the liability apportioned accordingly.

Group

Period when cashflow becomes due 2006 2005Rm Rm

Less than 1 year 8 720 7 5951 – 5 years 19 838 16 9965 – 10 years 9 671 7 61310 – 20 years 5 252 4 047Greater than 20 years 969 755

Total 44 450 37 006

Total deferred taxation applicable to fair value adjustments on investment properties (146) (150)Total policyholders’ liabilities under investment contracts 44 304 36 856

Group

2006 2005Rm Rm

19. Financial liabilities at amortised cost

Callable capital bonds (1) 2 054 2 054Redeemable non-participating preference shares (2) 207 206

Total financial liabilities at amortised cost 2 261 2 260

Current 261 60Non-current 2 000 2 200(1) On 12 September 2005, Liberty Group Limited issued R2 billion subordinated unsecured secondary callable capital bonds redeemable on

12 September 2017 and callable by Liberty Group Limited on 12 September 2012. The bond was launched at a spread of 120 bps overthe benchmark R153 bond to yield a fixed bi-annual interest coupon of 8,93%.

The coupon rate is fixed at 8,93% and payable bi-annually in arrears on 12 March and 12 September of each year until 12 September2012, thereafter floating at three-month JIBAR plus 186 bps and payable quarterly on 12 December, 12 March, 12 June and 12 Septemberuntil maturity date.

The financial liability is measured at amortised cost using the effective interest rate method.(2) Capital Alliance Special Finance (Pty) Limited, a subsidiary of Capital Alliance Holdings Limited, issued 200 000 redeemable

non-participating preference shares of 1 cent each, at a share premium of R999,99 per share. The interest on these shares is calculatedat 72% of the prevailing prime rate, payable bi-annually in arrears on 1 June and 1 December. They were redeemable after three yearsafter the issue date of 1 September 2001, or such extended date as may be mutually agreed upon between the parties concerned,currently 1 August 2007.

Group

2006 2005Rm Rm

20. Third party liabilities arising on consolidation of mutual funds 8 559 7 079

Certain mutual funds have been classified as investments in subsidiaries. Consequently fund interests not held by the group are classifiedas third party liabilities as they represent demand deposit liabilities measured at fair value.

Group

2006 2005Rm Rm

21. Employee benefits

21.1 Summary of provided obligation

Short-term employee benefits 115 119Defined benefit pension fund 12 23Post-retirement medical aid 261 196

Total employee benefits obligation 388 338



Leave Incentive

pay scheme Total

2006 2005 2006 2005 2006 2005

Rm Rm Rm Rm Rm Rm


21.2 Short-term employee benefits

Group

At beginning of year 42 28 77 54 119 82

Additional provision raised 54 51 74 71 128 122

Additions through business acquisition 18 6 24

Utilised during the year (56) (50) (76) (48) (132) (98)

Disclosed as disposal group held for sale (5) (6) (11)

At end of year 40 42 75 77 115 119

All outflows in economic benefits in respect of the short-term employee benefits are expected to occur within one year.

Leave pay

In terms of the group policy, employees are entitled to accumulate a maximum of 15 days compulsory leave and 20 days

discretionary leave. Compulsory leave has to be taken within 12 months of earning it, failing which it is forfeited. Discretionary

leave can be sold back to the company while compulsory leave cannot be sold back to the company.

Incentive scheme

In terms of the group policy, selected employees at the discretion of directors receive an incentive bonus.The incentive bonus

relates to employee, corporate and divisional performance and is approved by the remuneration committee.

21.3 Details of funds

The group operates the following retirement and post-retirement medical schemes for the benefit of its employees.

Liberty Group Defined Benefit Pension Fund

The group operates a funded defined benefit pension scheme in terms of section 1 of the Income Tax Act, 1962. With effect

from 1 March 2001 the majority of employees accepted an offer to convert their retirement plans from defined benefit to defined

contribution. Employees joining after 1 March 2001 automatically become members of the defined contribution schemes.

The defined benefit pension scheme is now closed to new employees from 1 March 2001. Employer companies contribute the

total cost of benefits provided taking account of the recommendation of the actuaries.

ACA Defined Benefit Fund

Capital Alliance Life Limited, a subsidiary of CAHL operates the ACA funded, paid up, defined benefit pension scheme.

Rentmeester Defined Benefit Fund

Rentmeester Limited, a subsidiary of CAHL, operates a funded, paid up, defined benefit pension scheme.

Alnet Defined Benefit Fund

Alnet Limited, a subsidiary of CAHL, operates a funded defined benefit pension scheme. Employer companies contribute the

total cost of benefits provided taking account of the recommendation of the actuaries.

Liberty Defined Contribution Pension Fund (1)

Liberty Group Limited operates a funded defined contribution pension scheme in terms of section 1 of the Income Tax Act,

1962. The Liberty Defined Contribution Pension Fund offers a benefit to Liberty Life employees based on the accumulated

contributions and investment returns at retirement.




21.3 Details of funds (continued)

Liberty Provident Fund (1)

The Liberty Provident Fund offers a benefit to Liberty Life employees, based on the accumulated contributions and investment

returns at retirement.The group contributes to the scheme for the benefit of employees in terms of the rules of the fund.

Liberty Agency Fund (1)

The Liberty Agency Fund offers a benefit to the group’s qualifying agents based on the accumulated contributions and

investment returns at retirement. The employer makes a predetermined rate of contribution per month as stipulated in the

rules of the fund.

Liberty Active Provident Fund (1)

The Liberty Active Provident Fund came into effect on 1 February 2005. The fund offers a benefit to Liberty Active employees,

based on the accumulated contributions and investment returns at retirement. The employer makes a predetermined rate of

contribution per month as stipulated in the rules of the fund.

Liberty Franchise Umbrella Fund (1)

The Liberty Franchise Umbrella Fund offers a benefit to registered qualifying franchises, on the accumulated contributions and

investment returns at retirement. The employer makes a predetermined rate of contribution per month as stipulated in the rules

of the fund.

Alnet Defined Contribution Pension Fund (1)

Alnet Limited, a subsidiary of CAHL operates a funded defined contribution pension scheme in terms of section 1 of the Income

Tax Act, 1962. The Alnet Defined Contribution Pension Fund offers a benefit to Alnet employees based on the accumulated


Alnet Provident Fund (1)

The Alnet Provident Fund offers a benefit to Alnet Limited employees based on the accumulated contributions and investment

returns at retirement. The group contributes to the scheme for the benefit of employees in terms of the rules of the fund.

Rentmeester Defined Contribution Pension Fund (1)

Rentmeester Limited, a subsidiary of CAHL, operates a funded paid up defined contribution pension scheme in terms of

section 1 of the Income Tax Act, 1962.The Rentmeester Defined Contribution Pension Fund offers a benefit to Rentmeester

employees based on the accumulated contributions and investment returns at retirement.

Capital Alliance Holdings (CAH) Defined Contribution Pension Fund (1)

Capital Alliance Holdings Limited operates a funded defined contribution scheme in terms of section 1 of the Income Tax

Act, 1962. The CAH defined contribution fund offers a benefit to Capital Alliance employees based on the accumulated


(1) All these schemes are defined contribution schemes, therefore, there can be no future obligation against Liberty Group Limited for

unfunded benefits.

Post-retirement medical benefit

The group operates an unfunded post-retirement medical aid benefit for employees who joined the group prior to 1 July 1998.

Medical aid costs are included in the income statement within general marketing and administration expenses in the period

during which the employees render services to the group. For past service of employees the group recognises and provides for

the actuarially determined present value of post-retirement medical aid employer contributions on an accrual basis using the

projected unit credit method.

In all cases employer companies’ contributions are charged to the income statement when incurred. All retirement schemes are

governed by the Pension Fund Act, 1956 as amended.



Rent-ACA meester Alnet

defined defined definedLiberty benefit benefit benefit

pension fund fund (1) fund (1) fund (1)

2006 2005 2004 2003 2002 2006 2005 2006 2005 2006 2005Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm


21.4 Retirement benefit obligation(a) Change in defined benefit funded

obligationIn the opinion of the pension fund valuator, after the most recent statutory actuarial valuation as at 1 January 2006, the defined benefit plan was financially sound.

Present value of funded obligation at beginning of year 637 561 513 472 406 7 3 32Additions through business acquisition 6 13 32Adjustments (2) 13Service cost benefits earned during the year 18 16 16 15 22 1 1Interest cost on projected benefit obligation 40 42 30 64 58 1 5Actuarial (gain)/loss (53) 59 48 (29) 5 1 (14) 1Benefits paid (59) (41) (59) (9) (5) (11) (2) (2)Transfer to STANLIB group (14)

Present value of funded obligation at end of year 583 637 561 513 472 7 7 3 3 22 32

Change in plan assetsFair value of plan assets at beginning of year 1 332 1 093 901 800 894 10 3 9Additions through business acquisition 8 9 10Expected return on plan assets 88 77 74 111 112 1 1 1 1Actuarial gain/(loss) 238 188 163 (11) (187) 2 1 (1)Employer contribution (5) 14 15 14 10 9 4 2 1Benefits paid (59) (41) (59) (9) (5) (11) (2) (2)Transfer to STANLIB group (23)

Fair value of plan assets at end of year (3) 1 613 1 332 1 093 901 800 12 10 3 3 10 9

Excess not recognised (4) 1 030 695 532 388 328 5 3 – –

Fund deficit recognised in balance sheet (12) (23)

Analysis of the defined benefit pension fund obligation movementAdjustment for change in valuation basis 13Current service cost 18 16 16 15 22 1 1Interest cost 40 42 30 64 58 1 5Expected return on plan assets (88) (77) (74) (111) (112) (1) (1) (1)Net actuarial (gain)/loss recognised in year (291) (129) (115) (18) 192 (1) (14) 2Employer contributions (14) (15) (14) (10) (9) (4) (2) (1)Transfer to STANLIB group 10

Total (335) (163) (144) (60) 161 (1) (4) (11) 1

(1) The ACA Defined Benefit Fund, Rentmeester Defined Benefit Fund and Alnet Defined Benefit Fund form part of the Capital Alliance Holdings Group, whichwas acquired on 1 April 2005.

(2) The statutory valuation basis of Liberty Pension Fund changed from a long-term stable basis to a market related valuation basis in 2004. Liabilities arenow valued using market interest rates.The adjustment represents the impact on the liability due to the change in valuation methodology.

(3) The fair value of the plan assets constitute 19,47% cash, 12,20% bonds, 56,23% equities and 12,10% international funds.(4) No asset is recognised in respect of the surplus, as the apportionment of the surplus between the respective company and members still needs to be

approved by the Registrar of Pension Funds in terms of the Pension Fund Second Amendment Act, 39 of 2001.The application submitted, if approved, willresult in approximately R112 million being recognised as an employer surplus amount. An additional surplus of approximately R340 million has arisensubsequent to the surplus apportionment date 1 January 2003.The trustees will decide on how to utilise or apportion this surplus once the initial surplusapportionment is finally approved.

(5) The employer’s best estimate of contributions expected to be paid to the Liberty Pension Fund during 2007 is R12 million.



Group

2006 2005

Rm Rm


21.4 Retirement benefit obligation (continued)

(b) Change in post-retirement medical aid obligation

Present value of unfunded obligation at beginning of year 196 160Service cost benefits earned during the year 5 6Interest cost on projected benefit obligation 17 23Actuarial loss 43 7

Present value of unfunded obligation at end of year 261 196

Net liability recognised in balance sheet 261 196

Current 72 54Non-current 189 142

21.5 Assumptions used in the valuation of obligations (1)

Post-

Liberty Alnet retirement

pension fund benefit fund medical aid

2006 2005 2006 2005 2006 2005

The valuation was based on the following principal actuarial assumptions:

Anticipated after taxation returns on investments 8% 7% 9% 7% 8% 7%Discount rate 8% 7% 7% 7% 8% 7%Future salary increases (excluding increases on promotion) 6% 5% 7% 5% 6% 5%Medical cost trend rate 6%Retirement age – executives 63 63 63 63 63 63

– others 65 65 65 65 65 65Investments in excess of 5% of plan assetsAnglo American plc (Rm) 52

Investments in employer and holding companies Rm Rm

Standard Bank Group Limited 38 49Liberty Holdings Limited 11 10Liberty Group Limited 12

(1) The ACA defined benefit fund and Rentmeester defined benefit fund are paid up funds and therefore, assumptions are not applicable.

21.6 Sensitivity analysis

Shown in the table below are sensitivities of the value of the post-retirement medical aid to changes in the medical inflationrates:

Decrease/(increase) in

liability at31 December

2006Variable Rm

1% decrease in medical inflation rate– active members 161– pensioners 71

1% increase in medical inflation rate– active members (237)– pensioners (87)




21.7 Transactions between group companies and the funds

21.7.1 The contributions which the group companies have made on behalf of the employees during the year are as follows:

Group

2006 2005Rm Rm

RetirementDefined benefit funds 14 15Defined contribution funds 139 139

MedicalPost-retirement medical benefit paid 5 5

21.7.2 Certain defined benefit funds have various banking relationships with Standard Bank Group Limited and their subsidiaries.The summary of balances deposited and fees and bank charges paid are as follows:

Balance deposited Fees and bank charges Interest received

2006 2005 2006 2005 2006 2005R’000 R’000 R’000 R’000 R’000 R’000

Defined benefit fundsBalance at 1 January 467 2 770Balance at 31 December 513 467 96 58 39 15

21.7.3 Certain defined benefit funds have outsourced their management to Liberty Group Limited. The summary of fees paid isas follows:

2006 2005R’000 R’000

Defined benefit funds 229 247

21.7.4 Alnet Defined Benefit Fund

During 2005, the trustees of the Alnet Defined Benefit Fund,Alnet Defined Contribution Pension Fund and Alnet ProvidentFund withdrew insurance policies valued at R21 million. These policies were held with Rentmeester Versekeraars Beperk, agroup subsidiary. Proceeds were invested in Liberty Group Limited insurance policies on the same day.

22.7.5 The Liberty Pension Fund has investments in certain mutual fund subsidiaries and in Standard Bank Group Limited as follows:

2006 2005Rm Rm

STANLIB Funds Limited (formerly Liberty Ermitage Funds Limited) 192 124Standard Bank bonds and deposits 114 3

21.7.6 The following retirement benefit funds have insurance policies with Liberty Group Limited and its subsidiaries, held asinvestment policies in the funds. A summary of the transactions for each policy with each fund follows:

Liberty Defined Contribution Pension Fund

Fund value

2006 2005Rm Rm

Balance at 1 January 141 102Premiums 20 17Fair value adjustments 40 34Withdrawals (19) (12)

Balance at 31 December 182 141




21.7 Transactions between group companies and the funds (continued)

Liberty Provident Fund

Fund value

2006 2005

Rm Rm

Balance at 1 January 1 132 923

Premiums 109 100

Fair value adjustments 321 275

Withdrawals (182) (166)

Balance at 31 December 1 380 1 132

Liberty Agency Fund

Fund value

2006 2005

Rm Rm

Balance at 1 January 789 691

Premiums 42 42


Withdrawals (139) (107)


Liberty Active Provident Fund

Fund value

2006 2005

R’000 R’000


Premiums 2 129 1 669


Withdrawals (1 335) (484)


Liberty Franchise Umbrella Fund

Fund value

2006 2005

Rm Rm


Premiums 8 6


Withdrawals (5) (3)





21.7 Transactions between group companies and the funds (continued)

21.7.6 The following retirement benefit funds have insurance policies with Liberty Group Limited and its subsidiaries held asinvestment policies in the funds. A summary of the transactions for each policy within each fund follows (continued):

Alnet Defined Benefit Pension Fund

Fund value

2006 2005Rm Rm

Balance at 1 January 10Additions through business acquisition 9Premiums 4 1Withdrawals (1) (2)Fair value adjustments 2 2


Alnet Provident Fund

Fund value

2006 2005Rm Rm

Balance at 1 January 9Additions through business acquisition 7Premiums 2 1Withdrawals (3)Fair value adjustments 2 1


Alnet Defined Contribution Pension Fund

Fund value

2006 2005Rm Rm

Balance at 1 January 4Additions through business acquisition 7Premiums 2Withdrawals (1) (3)Fair value adjustments 1


Capital Alliance Holdings Defined Contribution Pension Fund

Fund value

2006 2005Rm Rm

Balance at 1 January 104Additions through business acquisition 67Premiums 12Withdrawals (6) (1)Fair value adjustments 14 26


Rentmeester Defined Contribution Pension Fund

Fund value

2006 2005Rm Rm

Balance at 1 January 3Additions through business acquisition 6Premiums 1Withdrawals (4)Fair value adjustments 1




Group

2006 2005

Rm Rm

22. Deferred revenue

Adoption of IFRS as at 1 January 2005 (1) 58

Balance at 1 January 68

Additions through business acquisition 3

Realised through the income statement (7) (9)

Deferred income relating to new business 19 16


Current 10 7

Non-current 70 61

Deferred revenue is upfront fees received from investment contract holders as a prepayment for asset management and related services.

These amounts are non-refundable and released to income as the services are rendered.

(1) The adjustment to opening retained surplus as at 1 January 2005 was as a result of the implementation of the amendment to IAS 18 Revenue

Recognition, relating to investment management fees

Group

Asset/ Asset/

(liability) at (Provision)/ (liability)

beginning of release for at end of

the year the year the year

Rm Rm Rm

23. Deferred taxation

Group

Normal taxation (1 337) (287) (1 624)

Investment properties revaluation surpluses (806) 21 (785)

Policyholder liabilities difference between

statutory and accounting basis (416) (110) (526)

Special transfer to life fund 361 (250) 111

Intangible assets – PVIF (421) 48 (373)

Deferred acquisition costs (82) (4) (86)

Deferred revenue liability 18 3 21

Provisions 9 5 14

Capital gains taxation (1 029) (569) (1 598)

Total (2 366) (856) (3 222)

Disclosed as:

Deferred taxation asset 88 40

Deferred taxation liability (2 454) (3 262)

(2 366) (3 222)



Group

2006 2005

Rm Rm

23. Deferred taxation (continued)

Movement summary

Balance at beginning of year (2 366) (1 232)

Additions through business acquisition (291)

Additions arising from reinsurance recapture (10)

Change in taxation rate 9

Charge through the income statement (856) (858)

Release directly to equity 1

Disclosed as disposal groups held for sale 15

Balance at end of year (3 222) (2 366)

Deferred tax assets

Non-current 40 88

Deferred tax liabilities

Current (35)

Non-current (3 262) (2 419)

(3 262) (2 454)

Restructuring Possible claims Total

2006 2005 2006 2005 2006 2005

Rm Rm Rm Rm Rm Rm

24. Provisions

Group

Balance at beginning of year 39 39

Additional provision raised 39 60 60 39

Utilised during the year (27) (27)

Balance at end of year 12 39 60 72 39

Restructuring

This relates to the restructuring of Liberty Group Limited’s operations, after the acquisition of Capital Alliance Holdings Limited. The

remaining amounts provided will be incurred during 2007.

Possible claims

Provision has been made for possible claims arising from new business acquisition costs. Due to the nature of the provisions, the timing

of the expected cashflows is uncertain but likely to be within the 2007 financial year.



Group Company

2006 2005 2006 2005

Rm Rm Rm Rm

25. Insurance and other payables

Current balances related to insurance contracts 1 211 1 081

Outstanding claims and surrenders 873 906

Commission creditors 222 87

Statement of intent accrual for out-of-force contracts 116 88

Current balances related to investment contracts 311 220

Outstanding claims and surrenders 146 157

Other 165 63

Total current balances related to insurance and

investment contracts 1 522 1 301

Total other payables 2 725 2 370 3 9

Sundry payables 1 668 1 873 3 9

Collateral deposit 537

Preference share dividend 184 138

Investment creditors 336 359

Total insurance and other payables 4 247 3 671 3 9

Current 3 657 3 265 2

Non-current 590 406 3 7



Group and Company

2006 2005Rm Rm

26. Share capital and share premiumShare capitalAuthorised share capital75 000 000 ordinary shares of 25 cents each 19 1915 000 000 cumulative preference shares of 10 cents each 2 230 000 000 redeemable cumulative preference shares of 10 cents each 3 36 000 000 convertible redeemable cumulative preference shares of 25 cents each 1 1

25 25

Unissued shares excluding unissued shares reserved25 432 573 ordinary shares of 25 cents each 6 630 000 000 redeemable cumulative preference shares of 10 cents each 3 36 000 000 convertible redeemable cumulative preference shares of 25 cents each 2 2

Unissued shares reservedFor the purpose of the Senior Executive Share Option Scheme (1988)476 705 (2005: 486 026) ordinary shares of 25 cents each – –

11 11

Issued share capital49 090 722 (2005: 49 081 401) ordinary shares of 25 cents each 12 1215 000 000 (2005: 15 000 000) cumulative preference shares of 10 cents each 2 2

Total issued share capital 14 14

Share premium 903 902

Total issued share capital and share premium 917 916

Number ofOrdinary share movement analysis: ordinary Share Share

shares capital premium TotalRm Rm Rm

Balance at 1 January 2005 49 341 253 12 948 960Ordinary shares issued at an average premium of R92,53 per share in terms of the Senior Executive Share Option Scheme (1988) 34 823 3 3

Ordinary shares repurchased at an average premium of R166,70 per share and cancelled in terms of the general authority granted to the directors at the annual general meeting held on 23 May 2005 (294 675) (49) (49)

Balance at 31 December 2005 49 081 401 12 902 914Ordinary shares issued at an average premium of R134,75 per share in terms of the Senior Executive Share Option Scheme (1988) 9 321 – 1 1

Balance at 31 December 2006 49 090 722 12 903 915

49 090 722 12 903 915

Preference share movement analysis:Balance at 31 December 2006 15 000 000 2 2

Total 14 903 917

Share ownership analysis: Number of shares

2006 2005

Shares held by Standard Bank Group Limited 28 715 717 27 504 302Treasury shares held by Liberty Group Limited for the benefit of policyholders (1) 2 724 275 2 629 234Shares held by other shareholders 17 650 730 18 947 865

49 090 722 49 081 401(1) These shares are accounted for as treasury shares on consolidation.

The 15 000 000 cumulative preference shares are not redeemable and carry dividends at the rate of 11 cents per share per annum.

The preference shares confer the right, on a winding up of the company, to receive a return of R1 per share together with any arrearsin preference dividends in priority to any payment in respect of any other class of share in the capital of the company then issued.

The following unissued shares are all under the general authority and control of the directors, which expires at the annual generalmeeting to be held on 25 May 2007: 4 908 140 (2005: 4 934 125) ordinary shares of 25 cents each; 30 000 000 (2005: 30 000 000)redeemable cumulative preference shares of 10 cents each and 6 000 000 (2005: 6 000 000) non-redeemable cumulative preferenceshares of 25 cents each.



Group

2006 2005

Rm Rm

27. Premiums

Insurance premiums 20 843 20 003

Reinsurance premiums (777) (1 024)

Net insurance premiums 20 066 18 979

Fund inflows from investment contracts 7 835 8 312

Net premium income from insurance contracts and inflows from


Individual 19 020 18 263

Group (1) 6 092 6 499

Immediate annuities 2 789 2 529

Comprising:

Recurring premium 14 756 13 896


Group 4 203 4 134

Single premium 13 145 13 395


Group (1) 1 889 2 365

Immediate annuities 2 789 2 529

Net premium income from insurance contracts and inflows from


(1) Group premium income is stated net of inter-company transactions between group companies.

28. Service fee income

Service fee income from investment contracts 776 720

Realised through the income statement 7 9

Deferred income relating to new business (19) (16)

Recognised in the income statement 764 713



Group Company

2006 2005 2006 2005

Rm Rm Rm Rm

29. Investment income

Financial assets held at fair value through profit

or loss

Interest income 4 996 3 891 8 13

Dividends received 2 750 2 135

Listed shares 2 455 1 935

Unlisted instruments 295 200

Investment properties

Rental income from investment properties 1 416 1 185

Hotel operations sales (1) 506 447

Financial instruments held-to-maturity

Interest income 40 71

Dividends received from subsidiaries 528 396

Scrip lending fees 8 2

Sundry income 46 21

Total investment income 9 762 7 752 536 409

(1) Hotel operations sales includes room, food and beverage and miscellaneous charges

Group

2006 2005

Rm Rm

30. Investment gains/(losses)

Investment properties 1 207 1 080

Financial instruments held at fair value through profit

or loss 25 850 22 150

Cash and cash equivalents 362 48

Foreign exchange differences on subsidiaries 10 2

Mutual funds 1 141 1 769

Total investment gains 28 570 25 049

Fair value gains and losses on financial instruments held at fair value

through profit or loss

Quoted instruments 25 425 21 788

Unquoted instruments 425 362

25 850 22 150



Group

2006 2005

Rm Rm

31. Claims and policyholders’ benefits

Claims and policyholders' benefits under insurance

contracts 17 059 14 795

Payments under investment contracts 7 794 7 545

24 853 22 340

Insurance claims recovered from reinsurers (578) (775)

Net claims and policyholders' benefits 24 275 21 565

Comprising:


Death and disability claims 2 709 2 522

Policy maturity claims 4 662 4 706

Policy surrender claims 8 467 6 516

Annuity payments 2 364 2 100

Group (1) 6 073 5 721

Death and disability claims 1 386 1 187

Scheme terminations 399 261

Scheme member withdrawals 2 530 1 985

Annuity payments 302 269

Investment only terminations and withdrawals 1 456 2 019

Total claims and policyholders' benefits 24 275 21 565

(1) Group claims and policyholders’ benefits are stated net of inter-company transactions

between group companies.

32. Acquisition costs associated with insurance and investment contracts

Insurance contracts 2 202 3 411

Investment contracts 47 62

Amortisation and impairment of deferred acquisition costs 164 121

Total acquisition costs associated with insurance and investment contracts 2 413 3 594

Incurred during the year (1) (2 423) (3 620)

Deferred acquisition costs 174 147

Amortisation and impairment of deferred acquisition costs (164) (121)

(1) Prepaid commission of R1 096 million previously included in prepayments, insurance and other receivables was, with effect from 1 January

2005, included in policyholders’ liabilities in respect of insurance contracts.



Group

2006 2005Rm Rm

33. General marketing and administration expenses

General marketing and administration expenses include the following:Amortisation of intangible assets 203 175Auditors' remuneration 32 25

Audit fees – Current year 22 24Audit fees – Prior year underprovision 6Other services 4 1

Consulting fees 128 91Depreciation 107 128

Computer equipment 49 63Purchased computer software 8 10Fixtures, furniture and fittings 34 37Office equipment and office machines 5 7Motor vehicles 11 11

Direct operating expenses – on investment properties 239 256– on owner-occupied properties 25 32– on hotel operations 339 342

Equipment impairment 6Intangible assets impairment 20Loss on disposal of equipment 3 2Asset management fees 301 231Operating lease charges – equipment 65 82

– property 34 45Other related South African taxes 236 213

Financial services levy 10 8Non-recoverable value added taxation 216 187Regional services council levies 10 18

Restructuring expense 112 184

Retrenchment and other staff related costs 20 85Infrastructure and office costs 8 42Systems and processes 76 55Consolidation of marketing and distribution 8 2

Staff costs 1 133 1 131

Salaries and wages 803 796Defined benefit pension fund contributions 12 13Medical aid contributions 64 79Staff and management incentives 88 85Share-based payment expenses – equity-settled schemes 50 40

– cash-settled schemes 2Other post-retirement benefits 60 70Other 54 48

Directors’ emolumentsChairman’s and non-executive directors’ fees 2 553 2 491Non-executive share options 664Executive directors 11 658

Basic salaries 3 041Performance related payments 6 000Retirement and medical benefits 302Expense allowances 41Other benefits 264Share options 2 010

Total emoluments 2 553 14 813

Full details of the directors’ emoluments are contained in the Corporate Governance Report on page 5.



34. Share-based payments

Staff options

Liberty Life has a number of share incentive schemes, which entitles key management personnel and senior employees to purchase

Liberty Group Limited shares. These share incentive schemes are the Liberty Group Senior Executive Share Options Scheme, the Liberty

Life Association of Africa Limited Share Trust, the Liberty Group Share Incentive Scheme and the Liberty Life Equity Growth Scheme.

During 2005, the Liberty Life Equity Growth Scheme was implemented, which confers rights to employees to acquire Liberty Group

Limited ordinary shares equivalent to the value of the right at date of exercise. Both the previous equity compensation plans and the

new equity rights scheme are classified as equity-settled share option plans in accordance with the requirements of IFRS 2.

The following is a summary of the movements of the rights and share options granted:

Shares

under Options/ Options/ Options/ Shares

Price Final option at rights rights rights under option/

payable vesting beginning granted implemented cancelled rights at

Date granted per share date of year during year during year during year end of year

14/03/2003 R46,15 14/03/2008 1 354 800 325 049 78 646 951 105

02/06/2003 R44,90 02/06/2008 166 000 83 000 83 000 –

12/09/2003 R46,40 12/09/2008 30 000 30 000

24/11/2003 R46,25 24/11/2008 86 300 18 950 – 67 350

15/03/2004 R50,65 15/03/2009 1 100 300 44 783 281 617 773 900

02/08/2004 R47,70 02/08/2009 125 000 125 000

01/09/2004 R51,40 01/09/2009 120 000 120 000

15/11/2004 R59,95 15/11/2009 121 000 9 700 25 300 86 000

02/12/2004 R60,39 02/12/2009 100 000 100 000

03/01/2005 R63,00 03/01/2010 50 000 50 000

21/04/2005 R58,40 21/04/2010 1 155 000 14 980 404 842 735 178

20/06/2005 R55,15 20/06/2010 50 000 50 000

06/10/2005 R59,40 06/10/2010 80 000 80 000

01/11/2005 R60,90 01/11/2010 10 000 10 000

21/11/2005 R65,10 21/11/2010 30 000 30 000

01/12/2005 R69,10 01/12/2010 20 000 20 000

03/01/2006 R71,90 03/01/2011 50 000 50 000

03/03/2006 R81,61 03/03/2011 1 288 100 46 800 1 241 300

18/04/2006 R77,28 18/04/2011 60 000 60 000

02/05/2008 R79,38 02/05/2001 50 000 5 000 45 000

01/06/2006 R73,40 01/06/2011 20 000 20 000

03/07/2006 R72,00 03/07/2011 60 000 60 000

10/08/2006 R72,00 10/08/2011 60 000 60 000

23/10/2006 R74,00 23/10/2011 20 000 20 000

22/11/2006 R75,50 22/11/2011 10 000 10 000

The weighted average share price for the year was R78,49 (2005: R65,34). 50% of the options vest in year three, 25% in year fours

and five.Typically, the employee must remain in the employment of the company in order to exercise options.

The weighted average fair value per share option granted in 2006 is R27,52.



34. Share-based payments (continued)

Staff options (continued)

A binominal tree model and a modified binominal tree model (new equity compensation plan) were used in order to value the

share options and share rights respectively. The fair value of the share options granted during the year and the assumptions used

are as follows:

Exercise price R71,90 – R81,61

Expected volatility (%) 31,11% – 31,53%

Option life 5 years

Dividend yield (%) 3,70% – 4,86%

Share-based payment expense recognised during 2006 relating to the share options was R26 million (2005: R17 million). The share

options have been classified as an equity-settled scheme, and therefore, a share-based payment reserve has been recognised.

Black Economic Empowerment (BEE) transaction and IFRS 2

Liberty Life entered into a BEE transaction during 2004, which resulted in the recognition of a share-based payment expense, based

on guidance from the IASB and the South African Institute of Chartered Accountants (SAICA). The guidance states that IFRS 2

should be applied to all transactions in which the entity receives non-financial assets, including services, and therefore, the BEE

transaction was deemed to fall within the scope of IFRS 2.

The Katleho Managers Trust has acquired 10,3 million shares in Liberty Group Limited. The acquisition was financed by the trust issuing

redeemable preference shares to Liberty Life. All dividends received in respect of Liberty Group Limited shares will service the

preference share obligation. It is envisaged that the trust will terminate one year after the earlier of the preference shares being

redeemed in full, or 2024.

Approximately 97% of the share options have been allocated since inception of the transaction in 2004.These options have been valued

using an appropriate model, as described below. This expense will be recognised over the vesting period, which will continue until 2010.

The remaining 3% will be allocated within the next two years and the recognition of the expense relating to this portion has commenced

and will continue over the vesting period.

The fair value of the options were measured using a stochastic simulation model, which incorporated the terms and conditions of the

BEE transaction. The model requires a number of assumptions, which are as follows:

• Grant date of the options: 29 October 2004, being the last date of trade before the scheme implementation;

• Market price of the underlying shares at the grant date: R57 per share;

• Dividend yield: assumed to equal the average dividend yield of 5,22% for the 12 months preceding the grant date;

• Strike price: this will differ based on the investment return scenario generated by the valuation mode;

• Expiry date: the options are assumed to have a term of 20 years, and therefore, the expiry date will be in the year 2024;

• Volatility: the annualised standard deviation of the monthly return on Liberty Group Limited shares was used, namely 29,71%;

• Risk-free rate of interest: Bond Exchange of South Africa (BESA) zero-coupon South African government bond curve used as at the

grant date. From the zero-coupon curve, a forward rate curve was derived; and

• Preference dividend rate: this rate is set at 66% (65% when the company income taxation rate was 30%) of the prime lending rate.

Share-based payment expense recognised during 2006 relating to the BEE transaction was R24 million (2005: R23 million). The BEE

transaction is classified as an equity-settled scheme, and therefore, a share-based payment reserve has been recognised.



34. Share-based payments (continued)

Staff options (continued)

Phantom share scheme

Liberty Life reduced its capital by approximately R1 billion, or R3,60 per share, which was paid out to shareholders on 12 June 2006from the share premium account.

Share option holders are not entitled to receive dividends on their share options and therefore each employee who had outstandingshare options at that date received a participation right in a phantom share scheme to compensate for the economic opportunitycost applicable to the capital no longer available. The number of phantom rights were calculated as the number of share optionsoutstanding multiplied by R3,60, divided by the average share price over five days starting 5 June 2006 (R73,81 per share). Thevesting dates of these rights have been matched to the share options in respect of which they were granted, with the earliest datebeing 11 August 2006, and can be exercised at the option of the employee over a maximum of a 10 year period from 12 June 2006.On exercise Liberty Life will compensate the employee in cash for the difference between price and market price at the date ofexercise. The phantom share scheme qualifies as a cash-settled scheme, as Liberty Life incurs a liability to the employee based onthe price of Liberty Group Limited’s shares.

Group

2006 2005Rm Rm

35. Finance costs

Interest expense:– interest paid on policyholder claims and supplier balances 21 16– interest on financial liabilities at amortised cost 194 65

Total finance costs 215 81

Group Company

2006 2005 2006 2005Rm Rm Rm Rm

36. Taxation

36.1 Sources of taxation

South African normal taxation 1 127 750 4

Current year taxation 823 493 3Prior years’ taxation 17 (159) 1Current deferred taxation 287 292Under provision prior year deferred taxation 125Attributable to a decrease in the taxation rate (1)

South African capital gains taxation 871 700 1

Current year taxation 352 266Overprovision prior year current tax (50)Deferred taxation 569 442 1Attributable to a decrease in the taxation rate (8)

Other related South African taxes 324 227 58 6

Retirement fund taxation 176 147Secondary tax on companies 148 80 58 6

Total taxation 2 322 1 677 58 11

Charged directly to equity 15 43Income statement 2 307 1 634 58 11



36. Taxation (continued)

36.2 Taxation rate reconciliation (continued)

Group

CIT RFT STC CGT Total(1)(8) (2) (3) (4)(8)(9)

2006 Rm Rm Rm Rm Rm

Taxation per the income statement 1 112 176 148 871 2 307Taxation directly charged to equity reserves 15 15

Total taxation 1 127 176 148 871 2 322

Taxation specific to policyholder tax funds (5) (6) (375) (176) (783) (1 334)

Shareholder taxation 752 – 148 88 988

Revenue per the income statement 3 145 2 167 5 312

Defined as capital 2 167 2 167Defined as revenue 3 145 3 145

Taxable revenue directly charged to reserves 50 50Dividends paid 1 446 1 446

Ordinary 959 959Preference (6) 2 2Paid to minorities in subsidiaries 485 485

Total 3 195 – 1 446 2 167

% % %Effective rate of taxation 23,5 10,2 4,1

Adjustments due to:

Income exempt from normal taxation:Dividends received 8,0Equity accounted earnings from joint ventures 1,3

Non-tax deductible expenses (15,9)Revenue offset for life fund taxes 11,8(Under)/over provision of taxes in respect of prior years (0,5) 2,5Deferred acquisition costs and deferred revenue liability 0,9Income attributable to controlled foreign companies (0,6)Change in valuation basisUtilised tax losses and special transfers 0,3Effect of differing foreign taxation rates 0,2Amounts excluded from capital gains tax 6,9Base cost difference to historical cost 1,0Secondary taxation paid by subsidiaries (6,2)Relief obtained from secondary taxation credits on dividends received 8,5

Standard rate of South African taxation 29,0 12,5 14,5

(1) CIT represents corporate income taxation.(2) RFT represents retirement funds taxation which is a South African tax on interest on rental income earned within defined retirement

tax funds.(3) STC represents secondary tax on companies which is a South African tax on defined dividend distributions to shareholders.(4) CGT represents capital gains taxation which is an effective tax on defined capital gains in South Africa.(5) Policyholder taxation funds are separate taxation persons which have differing taxation rules applied in the South African taxation

legislation. There are three separate funds defined as untaxed, individual and corporate. As these funds and related taxes are inessence direct taxes against investments held on behalf of policyholders (not shareholders), it is not considered necessary toreconcile effective rates by fund.

(6) R16 million of preference dividends is disclosed as interest expense in the income statement but is defined as dividends for taxationpurposes.




36.2 Taxation rate reconciliation (continued)

Group

CIT RFT STC CGT Total(1)(8) (2) (3) (4)(8)(9)

2005 Rm Rm Rm Rm Rm

Taxation per the income statement 712 147 80 695 1 634 Taxation directly charged to equity reserves 38 5 43

Total taxation 750 147 80 700 1 677

Taxation specific to policyholder tax funds (5) (6) (385) (147) (547) (1 079)

Shareholder taxation 365 – 80 153 598

Revenue per the income statement 1 930 1 390 3 320

Defined as capital 1 390 1 390Defined as revenue 1 930 1 930

Taxable revenue directly charged to reserves 138 38 176

Defined as capital 38 38 Defined as revenue 138 138

Dividends paid 763 763

Ordinary 383 383 Preference 2 2Paid to minorities in subsidiaries 378 378

Total 2 068 763 1 428

% % %Effective rate of taxation 17,6 10,5 10,7

Adjustments due to:

Income exempt from normal taxation:Dividends received 4,8Equity accounted earnings from joint ventures 1,1

Non-tax deductible expenses (1,7)Revenue offset for life fund taxes 8,7Over provision of taxation in respect of prior years 1,7Deferred acquisition costs and deferred revenue liability 2,3Change in valuation basis (0,5)Utilised tax losses and special transfers (6,5)Effect of differing foreign taxation rates 1,5Capital gains tax roll-over relief 0,1Amounts excluded from capital gains tax 2,7Base cost difference to historical cost 1,0Secondary taxation paid by subsidiaries (9,6)Relief obtained from secondary taxation credits on dividends received 11,6

Standard rate of South African taxation 29,0 12,5 14,5

(7) Normal policyholder taxation contains a charge of R21 million (2005: release of R242 million) in respect of deferred taxation relatingto investment property fair value movements which as detailed in notes 18 and 19 is considered to be an effective double countingof the taxation effects implicit in the valuation.

(8) During 2005, the normal South African income taxation rate pertaining to companies changed from 30% to 29% and as aconsequence the effective CGT rate reduced to 14,5% from 15%.

(9) Capital gains taxation arising on the possible disposal of subsidiaries or business units will only be provided for when a firm intentionto sell has been mandated by the directors of the holding company.



Group

2006 2005

Rm Rm


36.3 Potential future taxation relief

Secondary taxation credits not utilised and not provided for representing possible future STC taxation relief 15 22South African assessed losses carried forward not provided for representing possible future normal taxation relief 40 84

Group Company

2006 2005 2006 2005Rm Rm Rm Rm

37. Reconciliation of total earnings to cash generated from/(utilised for) operationsTotal earnings 3 005 1 686 474 392Adjustments for:

Policyholders’ liability transfers 29 935 25 630Interest received (5 036) (3 962) (8) (13)Interest paid 215 81Dividends received (2 750) (2 135) (528) (396)Taxation 2 307 1 634 58 11Recovery of share-based payment expenses 3 5Net fund inflows after service fees on policyholder investment contracts (735) 47Service fee income deferred on new business 19 16Deferred acquisition costs on new business (174) (147)

26 789 22 855 (4) (6)Adjustments for non-cash items:

Investment gains on treasury shares 27Retained income of joint ventures (95) (10)Amortisation of intangible assets 203 175Depreciation of equipment 107 128Loss on sale of Hightree Financial Services Limited 2Net profit on sale of subsidiaries (374)Impairment of goodwill 397Loss on disposal of equipment 3 2Share-based payment expenses 48 40Investment gains (28 570) (25 049)Investment gains attributable to third party mutual fund liabilities 1 480 1 879Income attributable to minority shareholders in subsidiaries 184 138Amortisation of deferred acquisition costs 164 121Amortisation of deferred revenue liability (7) (9)Impairment of intangible assets 20Impairment of equipment 6Movement on provisions and short-term employee benefits 33 58Profit on dilution of shareholding (4) (9)

(39) 771 (4) (6)

Working capital changes: 231 2 572 (6) 3

Prepayments, insurance and other receivables (349) 1 684 3Insurance and other payables 580 888 (6)

Cash generated from/(utilised for) operations 192 3 343 (10) (3)



Group Company

2006 2005 2006 2005

Rm Rm Rm Rm

38. Dividends paid

Dividends as per statement of changes in shareholders'

funds (961) (385) (987) (396)

Dividends received on preference shares held in relation

to BEE transaction 89 72

Dividends paid to minority shareholders in subsidiary (623) (480)

Total dividends paid (1 495) (793) (987) (396)

39. Taxation paid

Taxation payable and deferred taxation at

beginning of year (2 850) (1 402) (3) –

Addition through business acquisition (303)

Taxation attributable to group and company (2 322) (1 677) (58) (11)

Charged directly to equity (15) (43)

Charged directly to the income statement (2 307) (1 634) (58) (11)

3 616 2 873 1 3

Taxation payable and deferred taxation at end of year 3 616 2 850 1 3

Reclassified as disposal groups held for sale 23

Total taxation paid (1 556) (509) (60) (8)



Group

2006 2005

Rm Rm

40. Headline earnings and earnings per share

Reconciliation of total earnings to headline earnings attributable to equity holders

Total earnings attributable to equity holders 1 390 719Non-headline earnings (194) 200

Goodwill impairment 199(Profit)/loss on sale of subsidiaries (194) 1

Headline earnings 1 196 919

Insurance operations 725 613Shareholders’ fund investments 471 306

Headline earnings after preference dividends 1 194 917Total earnings after preference dividends 1 388 717

Cents CentsEarnings per shareTotal earnings attributable to equity holders

Basic 2 978,5 1 536,6Headline 2 561,7 1 965,3

Fully diluted

Basic 2 977,6 1 536,2Headline 2 561,8 1 964,7

Definitions:Basic earnings per share is total earnings divided by the weighted average number of ordinary shares in issue during the year.

Headline earnings per share is calculated by dividing the headline earnings by the weighted average number of shares in issue during the year.

Fully diluted basic and headline earnings per share is calculated adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.The share options could potentially cause dilution.A calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company’s shares) based on the monetary value of the subscription rights attached to outstanding share options adjusted for any share-based payment expense recognised.The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

000’s 000’sFully diluted weighted average number of shares in issue 46 610 46 674

Weighted average number of shares in issue (excluding treasury shares) 46 608 46 660Adjustments for :Implementation of shares under option below fair value 2 14



41. Business acquisition and disposal

41.1 Disposal of Liberty Ermitage Jersey Limited (Ermitage) and Prefsure Holdings Limited (Prefsure)

Early in 2006, the group concluded the disposal of the previously recorded disposal groups Ermitage (incorporated inJersey, Channel Islands) and Prefsure (incorporated in Australia).The sales have effectively been recorded with effect from1 January 2006.

Ermitage sale

The sale of Ermitage resulted in net proceeds of R943 million, of which £17,5 million is required to be deposited offshore in agroup subsidiary, for the benefit of the group, but as security in the event of any warranty claims. £15 million will be unrestrictedand available to the group on 31 July 2007 while £2,5 million must be held for a period of seven years. The directors have noreason to believe any warranty claims will be forthcoming and consequently no provision has been raised.The group realised aprofit on sale of R397 million.

Prefsure sale

The sale of Prefsure resulted in net proceeds of R378 million, of which $Aus 21 million is held in escrow at an Australian firm ofattorneys. The escrow deposit is for the benefit of the group and is held as security in the event of any warranty claims.$Aus10,5 million less the aggregate maximum estimated value of all unresolved claims will be released on 1 October 2007, withthe remaining balance on 1 April 2010.

The directors have no reason to believe any claims will be forthcoming and consequently no provision has been raised.The grouprealised a loss on sale of R23 million.

At 31 December 2005, based on the requirements of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, theassets and liabilities attributable to Ermitage and Prefsure were disclosed as a disposal group, and separately disclosed on thebalance sheet.

The classes of assets and liabilities comprising the disposal groups classified as held for sale and at the date of disposal were as follows:

2006Rm

Total assets classified as held for sale 2 380Comprising:

Equipment 16Intangible assets 162Reinsurance assets 501Financial instruments 1 152Prepayments, insurance and other receivables 412Cash and cash equivalents 137Other –

Total liabilities classified as held for sale (1 267)Comprising:

Policyholders’ liabilities – insurance contracts (745)Policyholders’ liabilities – investment contracts (82)Provisions (11)Insurance and other payables (406)Deferred taxation (15)Current taxation (8)

Net asset value of the disposal groups 1 113Attributable to minorities (166)

Net asset value attributable to Liberty Group Limited 947

Proceeds received 1 321

Ermitage 943Prefsure 378

Net profit on sale of subsidiaries 374

Ermitage 397Prefsure (23)



41. Business acquisition and disposal (continued)

41.2 Acquisition of Capital Alliance Holdings Limited (CAHL)

On 1 April 2005, Liberty Group Limited acquired 100% of the issued share capital (excluding existing holdings), at a purchaseprice consideration of R3 047 million, utilising excess shareholder funds.

CAHL is a proven integrator of life books that specialises in the reduction of back office and administration costs through theimprovement of service levels and operational efficiencies.

The assets and liabilities arising from the acquisition were as follows:

Total recognised Value of in- Net assetRm values force acquired value

Equipment 24 24Owner-occupied properties 19 19Investment properties 89 89Intangible assets 1 467 1 331 136Deferred acquisition costs 123 123Interests in joint ventures 51 51Interests in associates 78 78Reinsurance assets 866 866Deferred taxation assets 263 263Financial instruments 16 371 16 371Prepayments, insurance and other receivables 1 731 1 731Cash and cash equivalents 1 445 1 445Policyholders’ liabilities – insurance contracts (15 211) (15 211)Policyholders’ liabilities – investment contracts (2 606) (2 606)Financial liabilities at amortised cost (200) (200)Retirement benefit obligation (24) (24)Deferred revenue (3) (3)Deferred taxation liability (554) (386) (168)Provisions (24) (24)Insurance and other payables (1 082) (1 082)Current taxation (12) (12)Minority interests (161) (161)

Net identifiable assets and liabilities 2 650 945 1 705Goodwill on acquisition 397

Consideration paid 3 047Less cash acquired (1 445)

Net cash outflow 1 602

The goodwill arose from the residual cost of the acquisition over the embedded value at acquisition date, which could not beattributed to any other asset (no other intangibles existed). In the case of CAHL, no value was placed on the potential to generatenew business, as CAHL is essentially a “closed book” administrator.

41.3 Acquisition of Wedelin Investments 1 (Pty) Limited (Wedelin)

The effective date of acquiring Wedelin was determined by the Competition Tribunal approval, which was received on26 May 2005. The only asset acquired from the acquisition was an investment property under development of R169 million.The purchase consideration was allocated to ordinary shares of R28 million and loan claims of R141 million.

41.4 Disposal of Hightree Financial Services Limited (Hightree)

On 1 November 2005, Liberty Life, through its subsidiary Libgroup Jersey Holdings Limited, disposed of its investment inHightree. At date of sale, the net asset value was Rnil and the group incurred a loss on disposal of R2 million.

The assets and liabilities at date of disposal were as follows:

Rm

Equipment 2Prepayments, insurance and other receivables 2Cash and cash equivalents 1Insurance and other payables (5)

Net asset value –Payment in respect of lease commitments (2)

Loss on disposal (2)



42. Related party disclosures

List of related parties as defined:

Parent

Direct holding company: Standard Bank Group Limited controls 58,50% (2005: 56,04%) of the issued ordinary shares.

Fellow subsidiaries

All subsidiaries of the Standard Bank Group Limited are fellow subsidiaries of Liberty Holdings Limited – a full list can be obtained fromthe company secretary and details are contained in the published annual report of Standard Bank Group Limited.

Liberty Holdings Limited has no other direct subsidiaries.

Subsidiaries

Directly owned

The only directly owned subsidiary is Liberty Group Limited in which Liberty Holdings Limited controls 51,99% (2005: 52,22%) of theissued ordinary shares including BEE transaction shares.

Indirectly owned

All subsidiaries of the Liberty Group Limited are indirectly owned by Liberty Holdings Limited – a full list can be obtained from thecompany secretary and details are contained in the published annual report of Liberty Group Limited.

Joint ventures

Details of joint ventures of the group are contained in note 12.

Associates

Details of associates of the group are contained in note 13.

Key management personnel

Key management personnel have been defined as follows:

Standard Bank Group Limited directors and executive committee members;Liberty Holdings Limited directors;Liberty Group Limited directors and executive committee members.

Refer to the published annual financial statements of Standard Bank Group Limited and Liberty Group Limited for details pertainingto their key management members.

Details of the current directors of Liberty Holdings Limited are on page 1.

It is not considered necessary to disclose details of key management family members and their influenced or controlled separate entities.To the extent that specific transactions have occurred between the group and these related parties (as defined in IAS 24) the details areincluded in the aggregate disclosure contained below under key management and where significant full details of all relationships andterms of the transaction are provided.

Post-employment benefit plans

Refer to note 21.

Summary of related party transactions:

For purposes of this section the company’s subsidiary Liberty Group Limited will be referred to as Liberty and where relevant, amountsare excluding value added taxation.

A. Direct subsidiary – Liberty Group Limited

Liberty provided certain administrative and secretarial services to Liberty Holdings Limited for which it is reimbursed – 2006: R1,5 million (2005: R3,5 million).

A.1 Investment in shares

Liberty and its subsidiaries invest from time to time in securities issued by Liberty Holdings Limited for the benefit of policyholders.Summary of investments held is as follows:



42. Related party disclosures (continued)

A. Direct subsidiary – Liberty Group Limited (continued)

Nominal holding Market value

Liberty Holdings ordinary shares 2006 2005 2006 2005Summary of ordinary share holdings and movements: ’000 ’000 Rm Rm

Holdings at 1 January 2 630 2 607 497 459

Liberty 2 513 2 607 475 459Capital Alliance Life Limited 117 22

Additions through business acquisition

Capital Alliance Life Limited 117 19

Purchases 404 544 81 94

Liberty 398 544 80 94Liberty Active Limited 6 1

Sales (310) (638) (63) (105)

Liberty (193) (638) (42) (105)Capital Alliance Life Limited (117) (21)


Liberty 58 27Capital Alliance Life Limited (1) 3

Holdings at 31 December 2 724 2 630 572 497

Liberty 2 718 2 513 571 475Capital Alliance Life Limited 117 22Liberty Active Limited 6 1

Percentage of total issued ordinary shares 5,55% 5,36%

These shares are accounted for as treasury shares on consolidation.

B. Ultimate holding company – Standard Bank Group Limited and fellow subsidiaries

B.1 Investment in ordinary shares, preference shares, bonds and debentures

Liberty and its subsidiaries invest from time to time in securities issued by its ultimate holding company, Standard Bank GroupLimited for the benefit of policyholders. Summary of investments held is as follows:


Standard Bank Group ordinary shares 2006 2005 2006 2005Summary of ordinary share holdings and movements: ’000 ’000 Rm Rm

Holdings at 1 January 46 489 49 308 3 525 3 245

Liberty 41 088 47 931 3 115 3 154Capital Alliance Life Limited 3 082 176Liberty Active Limited 2 319 1 377 234 91


Capital Alliance Life Limited 3 716 234

Purchases 3 346 9 559 281 653

Liberty 2 629 7 639 222 521Capital Alliance Life Limited 715 278 59 19Liberty Active Limited 2 1 642 – 113

Sales (11 247) (16 094) (906) (1 101)

Liberty (9424) (14 482) (756) (989)Capital Alliance Life Limited (993) (912) (79) (63)Liberty Active Limited (830) (700) (71) (49)


Liberty 660 429Capital Alliance Life Limited 51 44Liberty Active Limited 36 21

Holdings at 31 December 38 588 46 489 3 647 3 525

Liberty 34 293 41 088 3 241 3 115Capital Alliance Life Limited 2 804 3 082 207 234Liberty Active Limited 1 491 2 319 199 176

Percentage of total issued ordinary shares 2,83% 3,44%




B. Ultimate holding company – Standard Bank Group Limited and fellow subsidiaries (continued)


Standard Bank Group preference shares 2006 2005 2006 2005

Summary of preference share holdings and movements: ’000 ’000 Rm Rm

Holdings at 1 January 626 1 103 76 128

Liberty 611 843 76 98

Capital Alliance Life Limited 15

Liberty Active Limited 260 30


Capital Alliance Life Limited 15

Purchases 2 588 383 294 45

Liberty 2 470 383 281 45


Sales (255) (875) (30) (100)

Liberty (143) (615) (19) (70)

Liberty Active Limited (112) (260) (11) (30)

Fair value adjustments (33) 3

Liberty (32) 3

Liberty Active Limited (1)

Holdings at 31 December 2 959 626 307 76

Liberty 2 938 611 306 76

Capital Alliance Life Limited 15 15 – –







Standard Bank Group fixed interest bonds 2006 2005 2006 2005Summary of fixed interest bond holdings and movements: Millions Millions Rm Rm

Holdings at 1 January 480 207 488 248

Liberty 475 93 483 112Liberty Active Limited 5 114 5 136

Purchases 480 494

Liberty 475 489Liberty Active Limited 5 5

Sales (207) (244)

Liberty (93) (110)Liberty Active Limited (114) (134)

Fair value adjustments 33 (10)

Liberty 33 (8)Liberty Active Limited (2)

Holdings at 31 December 480 480 521 488

Liberty 475 475 516 483Liberty Active Limited 5 5 5 5


Standard Bank Group unsecured quoted debenturesSummary of unsecured quoted debentures holdings 2006 2005 2006 2005and movements: Millions Millions Rm Rm

Holdings at 1 January 1 567 1 427 1 634 1 476

Liberty 1 194 1 104 1 240 1 140Capital Alliance Life Limited 80 87Liberty Active Limited 293 323 307 336



Purchases 1 775 637 1 770 661

Liberty 1 693 509 1 688 528Capital Alliance Life Limited 57 57Liberty Active Limited 25 128 25 133

Sales (372) (577) (372) (602)

Liberty (259) (419) (257) (440)Capital Alliance Life Limited (19) (23)Liberty Active Limited (94) (158) (92) (162)

Fair value adjustments (32) 19

Liberty (15) 12Capital Alliance Life Limited (3) 7Liberty Active Limited (14)


Liberty 2 628 1 194 2 656 1 240Capital Alliance Life Limited 118 80 118 87Liberty Active Limited 224 293 226 307




B. Holding company – Standard Bank Group Limited and fellow subsidiaries (continued)


Standard Bank Group unsecured unquoted debenturesSummary of unsecured unquoted debenture holdings 2006 2005 2006 2005and movements: Millions Millions Rm Rm

Holdings at 1 January 1 895 918

Liberty 1 415 574Capital Alliance Life Limited 17 17Liberty Active Limited 463 327



Purchases 1 489 1 878 939 864

Liberty 1 415 542Liberty Active Limited 1 489 463 939 322

Sales (102) (75)

Capital Alliance Life Limited (17) (17)Liberty Active Limited (85) (58)


Liberty 33 32Liberty Active Limited 97 5

Holdings at 31 December 3 282 1 895 1 912 918

Liberty 1 415 1 415 607 574Capital Alliance Life Limited 17 17Liberty Active Limited 1 867 463 1 305 327


Standard Bank Group local money marketSummary of local money market investments 2006 2005 2006 2005and movements: Millions Millions Rm Rm

Transfers from cash and cash equivalents as at 1 January 2006 2 005 1 776 1 828 1 622

Liberty 138 407 181 434Capital Alliance Life Limited 45 46Liberty Active Limited 1 822 1 369 1 601 1 188

Purchases 269 562 269 425

Liberty 48 48Capital Alliance Life Limited 269 45 269 45 Liberty Active Limited 469 332

Sales (281) (333) (327) (326)

Liberty (131) (317) (177) (311)Capital Alliance Life Limited (53) (53)Liberty Active Limited (97) (16) (97) (15)


Liberty 2 10Capital Alliance Life Limited 2 1Liberty Active Limited 112 96


Liberty 7 138 6 181Capital Alliance Life Limited 261 45 264 46Liberty Active Limited 1 725 1 822 1 616 1 601





B.2 Acquisition of proportionate share of Sandton Property Consortium

Liberty on 1 July 2005 increased its investment in property consortiums (which includes properties such as Sandton City,

Sandton Sun and Towers and Nelson Mandela Square), on average by 15%, by purchasing Main Street 9 (Pty) Limited interests

(a 100% held subsidiary of Standard Bank Group Retirement Fund) for R709 million. This brings Liberty’s share of the

consortiums to an average of 75%. Administration fees charged to Main Street 9 (Pty) Limited by Liberty were R0,2 million

(2005: R2,8 million).

B.3 Information technology outsourcing arrangement

With effect from 1 October 2004, Liberty partially outsourced its information technology services to Standard Bank of South

Africa Limited in terms of an agreement until 31 March 2010. Fees charged for 2006 amounted to R24 million (2005:

R26 million).

B.4 Software development

Standard Bank of South Africa Limited have contracted Liberty to develop a commission and specific customer information

system. Fees associated with this development will be charged over five years. 2006 fees received are R2,3 million (2005:

R2,7 million).

B.5 Banking arrangements

Liberty and its subsidiaries makes use of banking facilities provided by Standard Bank of South Africa Limited.

Summary of cash balances, interest earned and fees charged:

Cash balances

2006 2005

Rm Rm

Holdings at 1 January 606 527

Liberty 267 449

Liberty subsidiaries 339 78

Other net movements during the year 1 069 79 Interest earned Fees charged

Liberty 968 (182) 2006 2005 2006 2005

Liberty subsidiaries 101 261 Rm Rm Rm Rm

Holdings at 31 December

Liberty 1 235 267 11 32 22,0 17,7

Liberty subsidiaries 440 339 25 36 1,9 1,4

Total 1 675 606 36 68 23,9 19,1

B.6 Operating lease

Lease expense

Liberty leases a Pretoria property from Standard Bank of South Africa Limited in terms of a lease entered on 22 December

1999 for a period of 13,5 years terminating on 31 May 2013. Lease escalations are fixed at 12% per annum. Total lease

payments for 2006: R57 million (2005: R51 million).

Lease income

Standard Bank of South Africa Limited leases several properties from Liberty, including 50% of its head office at 5 Simmonds

Street, Johannesburg, and various retail branches in shopping centres. These leases are governed by numerous separate lease

agreements. Total lease receipts for 2006: R44 million (2005: R47 million).





B.7 Bancassurance

Liberty and Liberty Active Limited have entered into a profit share agreement (renegotiated on 25 April 2002 for a period

until 31 December 2010) with Standard Bank of South Africa Limited for the sale and promotion of insurance products. New

business premium income received in respect of this business in 2006 amounted to R5 043 million (2005: R4 513 million).

In terms of the agreement Liberty Active Limited pays 90% of profits on simple products and 50% of profits on complex

products through a preference share dividend to Standard Bank of South Africa Limited. The preference dividend accrued for

2006 is R184 million (2005: R138 million).

B.8 Forward exchange contracts

In 2005 Liberty Ermitage Jersey Limited, while a group subsidiary, entered into forward exchange contracts with Standard Bank

of South Africa Limited and certain of its offshore subsidiaries.

A summary of contracts entered into:

2005

Sell Settlement

US Dollars British Pounds

Contractor US$m GBPm

Liberty Ermitage Jersey Limited 13 7

B.9 Corporate action

Standard Bank of South Africa Limited provided consultancy services to Liberty with respect to various corporate actions.

Fees charged are as follows:

2006 2005

Rm Rm

Purchase of preference shares in Shanduka Newsprint 2,0

Issue of callable capital bonds 4,4

Acquisition of Capital Alliance Holdings Limited 1,5

BEE ownership transaction 10,0

Total 2,0 15,9

B.10 Liberty conference centre utilisation

Various subsidiaries of the Standard Bank Group Limited used the facilities of Liberty’s conference centre in 2006 – fees

earned amounted to R2,0 million (2005: R1,6 million).

B.11 Insurance

Certain insured risks of the Liberty Group are negotiated and/or included in the Standard Bank Group Limited insurance

policy. These include R1,5 billion (2005: R230 million) cover for professional indemnity and R500 million for computer crime

and bankers bond (2005: R230 million), R1 billion (2005: R800 million) directors’ and officers’ cover and R620 million (2005:

R600 million) assets all risks cover. The proportionate share of premiums charged to Liberty by Standard Bank Group Limited

for 2006 is R7,3 million (2005: R6,3 million).

B.12 Approved purchase of shares held by Standard Bank Limited in STANLIB Limited

Liberty shareholders on 29 January 2007 approved the purchase of shares in STANLIB Limited held by Standard Bank

Limited, refer note 44 for further details.




C. Transactions with directors and related entities

Refer to note 46 for related party relationships in respect of the 2004 BEE transaction.

C.1 Computer equipment

RentWorks Africa (Pty) Limited is 51% controlled by Shanduka Group (Pty) Limited which in turn is a related entity of

Cyril Ramaphosa, a current director of Standard Bank Group Limited.

A substantial portion of the Liberty and Liberty subsidiaries computer equipment is leased from RentWorks Africa (Pty)

Limited under various lease agreements ranging between three to four years with no escalations.

Rentals paid are summarised as follows:

2006 2005

Rm Rm

Liberty 16 17

Liberty subsidiaries 4 4

Total 20 21

D. Joint ventures

D.1 Treasury function

STANLIB Limited (STANLIB) performs a treasury function for Liberty and its subsidiaries in terms of the asset management

agreement referred to below. Fees charged for this service are included in the asset management fees.

Summary of cash balances and interest earned:

Cash balances Interest earned

2006 2005 2006 2005

Rm Rm Rm Rm

Cash

Liberty 27 49 43 24

Liberty subsidiaries 49 87 3 5

Total 76 136 46 29

D.2 Asset management

In terms of an asset management agreement effective from 1 January 2005, subject to 30 days notice period, between STANLIB,

Liberty and Liberty Active Limited, STANLIB is mandated to manage policyholder investments.

Value of assets

under management

31 December Fees charged

2006 2005 2006 2005

Rm Rm Rm Rm

Liberty 105 470 81 396 161 141

Liberty Active Limited 10 706 10 355 29 26

Total 116 176 91 751 190 167




D. Joint ventures (continued)

D.3 Administration, forensics, internal audit, information technology and human resources services

Liberty provides certain administration, internal audit, information systems and human resources services to joint ventures

STANLIB Limited and The Financial Services Exchange (Pty) Limited. Fees earned are as follows:

2006 2005

Rm Rm

STANLIB Limited 6,4 5,7

The Financial Services Exchange (Pty) Limited 0,1

Total 6,4 5,8

The Financial Services Exchange (Pty) Limited provides financial verification services to Liberty and fees charged were

R1,3 million (2005: R1,0 million).

D.4 Share-based transactions

The value of Liberty share options granted to employees of STANLIB are reimbursed to Liberty by STANLIB. Reimbursement

for 2006 was R2,6 million (2005: R3,7 million).

D.5 Reinsurance arrangement

Liberty Active Limited, a subsidiary of Liberty, has entered into a reinsurance contract with a STANLIB subsidiary. The contract

is designated as a financial instrument asset by Liberty Active Limited. Summary of movements are as follows:

2006 2005

Rm Rm


Fair value adjustment 5 3


D.6 Mutual fund subsidiaries

Mutual fund subsidiaries paid investment management fees to STANLIB as follows:

2006 2005

Rm Rm

STANLIB Value Fund 5,2 3,4

STANLIB ALSI 40 Fund 1,3 0,8

STANLIB Small Cap Fund 4,1 3,3

STANLIB Multi-Manager Property Fund 20,4 17,8

STANLIB Multi-Manager Equity Feeder Fund 19,7 18,2

STANLIB Multi-Manager Flexible Property Fund 20,8 7,5

STANLIB Multi-Manager International Fund of Funds 17,3 18,6

Total 88,8 69,6

D.7 Multivest administration

STANLIB Wealth Management Limited, a subsidiary of STANLIB, administers various Liberty investment products collectively

named Multivest. Fees charged for this administration service were R13,9 million for 2006 (2005: R10,8 million).




E. Key management personnel of Liberty Holdings Limited and Standard Bank Group Limited, families of keymanagement (as defined in IAS 24) and entities significantly influenced or controlled by key management

(i) Liberty Holdings Limited directors’ compensation paid by the company or on behalf of the company for services renderedto Liberty Holdings Limited, amounted to R230 500 (2005: R276 000).

(ii) Aggregate details of insurance, annuity and investment transactions between Liberty Holdings Limited, any subsidiary, associateor joint venture of Liberty Holdings Limited and key management personnel, their families (as defined per IAS 24) and entitiessignificantly influenced or controlled by key management:

Insurance

Aggregate Premiums insured cover received Claims paid Surrender value

2006 2005 2006 2005 2006 2005 2006 2005R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

Life 94 441 6 537 1 102 54 1 5 4 929 171Morbidity 9 559 3 350 (included in life (included in life

premiums) claims)

Annuities

Premiums received Amounts paid

2006 2005 2006 2005R’000 R’000 R’000 R’000

Life (1) Nil Nil 664 600

Investment

Fund value

2006 2005R’000 R’000

Balance at 1 January 6 680 5 111Appointments and resignations 844Premiums received 1 780 1 121Investment return credited net of charges 4 216 470Commission and other transaction fees (36) (22)Claims and withdrawals (72)


(1) There are no certain or term annuity related party transactions.

Group

2006 2005Rm Rm

43. Commitments

43.1 Operating lease commitments

Equipment 32 64

Within 1 year 17 311 to 5 years 15 33

Investment properties 600 691

Within 1 year 78 791 to 5 years 359 3446 to 10 years 163 268



Group

2006 2005Rm Rm

43. Commitments (continued)43.2 Capital commitments

STANLIB Limited acquisition – refer note 44 1 575Equipment 101 288

Under contracts 248Authorised by the directors but not contracted 101 40

Investment properties 233Under contracts 89Authorised by the directors but not contracted 144

Owner-occupied properties 78Under contracts 50Authorised by the directors but not contracted 28

Total commitments 2 619 1 043

The group's share of commitments of joint ventures amounting to R60 million (2005: R50 million), is disclosed in note 12. The aboveexpenditure will be financed by available bank facilities, existing cash resources, internally generated funds, issue of Liberty GroupLimited ordinary shares and R27 million from minorities in unincorporated property partnerships.

44. Acquisition of STANLIB Limited (STANLIB)

The board of directors released various announcements during the second half of 2006, stating their intention to pursue the acquisitionof the remaining 62,6% of the ordinary shares of STANLIB, currently owned by Standard Bank Group Limited (Standard Bank) (37,4%)and Quantum Leap Investments 740 (Proprietary) Limited (Quantum Leap) (25,2%).A circular was issued to shareholders on 2 January2007 to provide information regarding the transaction and to convene a general meeting which was held on 29 January 2007, at whichthe shareholders approved the transaction.The effective date of the acquisition is therefore 29 January 2007.

The life industry has experienced a pronounced shift from on-balance sheet life products to off-balance sheet savings products over thepast few years enhancing the value of STANLIB (an investment management, linked investment and collective investment schemebusiness). In order for Liberty Life to grow and retain market share, it must be in a position to provide new products and formulate asustainable asset acquisition strategy.The primary reason for the acquisition therefore is to enable Liberty Life to defend its asset baseagainst competing investment houses and to enable both companies to manage the rate and extent of asset conversion to newgeneration products.

The purchase consideration will be settled as follows:

Liberty Group Limited issuing to Standard Bank 7 246 005 ordinary shares and a cash payment of R384 million; and

Liberty Group Limited issuing to Quantum Leap 2 486 577 ordinary shares and a cash payment of R441 million.

The shares which will be issued for the purpose of this transaction will be issued on or about 4 April 2007 at the ruling share price atthe close of business on the preceding day.The final acquisition value will therefore only be, determined at that date but is likely to bein the order of R1,6 billion.

Transaction costs of R10 million will be written off directly against shareholders’ reserves.

Carrying value of assets and liabilities of STANLIB at the effective date of acquisition

Rm Total recognised values

Equipment 33Goodwill 1 076Interests in joint ventures 11Financial instruments 6 400Deferred taxation 40Prepayments, insurance and other receivables 192Cash and cash equivalents 565Policyholders‘ liabilities – investment contracts (6 343)Financial liabilities at amortised cost (935)Employee benefits (91)Deferred taxation (7)Net inter group balances (146)Insurance and other payables (137)Current taxation (58)

Net identifiable assets and liabilities 600



44. Acquisition of STANLIB Limited (STANLIB) (continued)

This transaction falls outside the scope of IFRS 3 Business Combinations as it involves entities under common control, Standard Bank beingthe ultimate parent before and after the acquisition. IFRS allows the use of other accounting standards where there is no specific IFRSframework governing a transaction. As such, the transaction is being accounted for under US GAAP with reference to businesscombinations involving entities under common control, which allows the use of the pooling-of-interests method.

Under this method, the carrying amount of assets and liabilities recognised in the balance sheet of each of the combining entities is carriedforward to the balance sheet of the combined entity. No other assets or liabilities are recognised as a result of the combination, and thusthe excess purchase price over the net asset value acquired is not recognised.The full value of intangible assets, being the difference betweenthe STANLIB reported net asset value and the total acquisition value will be written off directly against shareholder reserves in the 2007financial year.

45. Statement of Intent (SOI)

After a period of negotiation, representatives of the LOA and the five largest life insurance groups and the Minister of Finance signed aSOI in December 2005. This was as a result of various Pension Fund Adjudicator rulings relating to charges levied on early premiumreduction or cessation.

On 1 December 2006, regulations giving effect to the minimum standards specified in the SOI were gazetted in the government noticeVol. 498, No. 29446.These regulations are materially consistent with the group’s interpretation of the SOI.Therefore the financial effectsas indicated in 2005 remain management’s best estimate of the likely impact when applying the regulations.

The proposed revised commission regulations referred to in the SOI are still under discussion with likely resolution during 2007. NationalTreasury has agreed to provide regulations intended to reduce exposure to churn within the industry whilst the new commissionregulations are outstanding.These regulations are anticipated to be gazetted shortly.

The new commission regulations and churn protection will not require any adjustment to existing policyholder liabilities.

46. Black Economic Empowerment (BEE) transaction

Liberty Group Limited entered into a series of transactions during 2004 whereby an investment in aggregate of R1 251 million was madein cumulative redeemable preference shares split. On 12 June 2006 the company paid a capital reduction of R3,60 per ordinary share.The total amount received by the respective BEE entities of R92 million was utilised at the request of the various directors andtrustees to redeem a portion of the cumulative preference shares.

Originalamount Remaininginvested Redemption amounts

2004 2006 investedCompanies Beneficiary Rm Rm Rm

Lexshell 620 (Pty) Limited Safika Holdings (Pty) Limited 300 (22) 278Lexshell 621 (Pty) Limited Shanduka Group (Pty) Limited 200 (15) 185Lexshell 622 (Pty) Limited The Black Managers’Trust (1) 501 (37) 464Lexshell 623 (Pty) Limited The Community Trust (2) 250 (18) 232

1 251 (92) 1 159

(1) Registered as the Katleho Managers Trust(2) Registered as the Katleho Community Trust

The cumulative redeemable preference shares attract dividends at 66% (2005: 66% w.e.f. 1 March 2005, 65% prior) of Standard Bank’sprime lending rate. The preference dividends are payable on each date the company (which has issued the preference shares)receives an ordinary dividend from Liberty Group Limited.

In accordance with local and international accounting advice the preference shares do not meet the definition of a financial asset interms of International Financial Reporting Standards and therefore the investment value of the preference shares has reduced equityand is stated in the analysis of equity as a negative empowerment reserve. Receipt of preference share redemptions and dividendswill be credited directly to reserves.

For the purposes of earnings per share calculations the weighted average number of shares in issue is reduced by the number ofcompany shares held by the empowerment subsidiaries directly funded by the proceeds received from the preference shares. Inaccordance with interpretations of International Financial Reporting Standards, the reduction of the weighted average number of shareswill remain at the initial amount until all the preference shares are redeemed or to the extent any preference shares are sold to anexternal party without recourse.

Saki Macozoma, who is currently defined as key management through his directorships of Liberty Group Limited and Standard BankLimited, effectively controls 20% of Safika Holdings (Pty) Limited. Mr Macozoma is also chairman of STANLIB Limited in which SafikaHoldings (Pty) Limited has a 13,9% effective ownership.

Cyril Ramaphosa, who is currently defined as key management through his directorship of Standard Bank Group Limited, effectivelycontrols 35,9% of Shanduka Group (Pty) Limited.



47. Changes to comparatives

47.1 Consolidation of unincorporated property partnerships

The group has certain investments in properties and related property management in which the benefit is shared with externalparties in terms of partnership agreements. The group previously accounted for the relevant income and share of assets andliabilities on a proportional consolidation basis. On review of the existing agreements, in conjunction with IFRS, it is nowconsidered that these unincorporated partnerships are subsidiary entities and therefore full consolidation is appropriate. Theexternal partners’ beneficial ownership is accounted for as minority interests.

This has resulted in increases in other assets of R11 million, investments of R1 721 million, prepayments, insurance and otherreceivables of R41 million, insurance and other payables of R45 million and minority interest of R1 728 million as at31 December 2005.

The effect on the income statement for the year ended 31 December 2005 is an increase in investment income of R285 million,investment gains of R143 million and an increase in general marketing and administration expenses of R146 million, with the netamount of R282 million being earnings attributable to minority interests.

There is no impact on the earnings attributable to equity holders from the above adjustments.

Lease straight-lining

As a result of accounting for these minority interests and the subsequent effect on straight-lining rental income, investmentproperties have decreased by R142 million with the same amount increasing operating leases-accrued income as at31 December 2005.

In the income statement for the year ended 31 December 2005, R39 million of investment income has been reclassified toinvestment gains.

47.2 Reclassifications and grossing up

• Properties under development included in owner-occupied properties (R59 million) and investment properties (R46 million)as at 31 December 2005 have been reclassified as equipment and properties under development.

• Short-term employee benefits comprising incentive scheme and leave pay of R119 million (company: R100 million) have beenreclassified from provisions to employee benefits as at 31 December 2005.

• Certain rental income relating to hotel operations was stated net of operating expenses. Investment income and generalmarketing and administration expenses have both increased by R153 million for the year ended 31 December 2005.

• Reclassified reinsurance premiums of R774 million previously net-off against insurance premium revenue in the group incomestatement – no impact on net insurance premiums.

• Intercompany management fees on assets under management were previously not eliminated. Management fees on assetsunder management have decreased by R88 million with a corresponding decrease in general marketing and administrationexpenses for the year ended 31 December 2005.

• The current portion of financial liabilities at amortised cost of R60 million has been reclassified from insurance and otherpayables to financial liabilities at amortised cost.

• On further analysis of the group’s investment portfolio, it was considered more appropriate to adopt a look throughapproach to underlying interests in certain investments. This resulted in a reclassification of a number of mutual funds thegroup invests in, into associates and subsidiaries. 2005 reported amounts were consequently restated. The impact can besummarised as follows:

Mutual fund subsidiaries

• Increase in financial instruments of R2 080 million;• Increase in prepayments, insurance and other receivables of R51 million;• Increase in cash and cash equivalents of R138 million;• Increase in third party liabilities arising on consolidation of mutual funds of R2 202 million;• Increase in insurance and other payables of R67 million;• Increase in investment income of R248 million;• Increase in investment gains of R346 million;• Increase in fair value adjustment on third party mutual fund interests of R525 million; and• Increase in general marketing and administration expenses of R69 million.

Mutual fund associates

• Reclassification of R1 432 million from financial instruments to interest in associates

There is no impact on earnings from the above adjustments.

47.3 Risk disclosures

To ensure comparability arising from new definitions, certain changes have been made to comparatives in various templates inthe risk disclosures in note 3.

LIBERTY HOLDINGS LIMITED

(“the Company”)

Registration No. 1968/002095/06

JSE Code: LBH

ISIN Code: ZAE000004032

Notice is hereby given that the thirty-ninth annual general meeting of members will be held on Friday, 25 May 2007 at 09:00 at the Liberty

Life Conference Centre, 1 Anerley Road, Parktown, Johannesburg, to transact the following business:

Ordinary resolution number 1

To receive, consider and adopt the audited financial statements for the year ended 31 December 2006.


To approve the remuneration of the Chairman of the board of R66 000 for the year ending 31 December 2007.


To approve the remuneration of the non-executive directors of R30 000 per non-executive director for the year ending 31 December 2007.


To approve the remuneration of the Chairman of the Audit Committee of R20 000 for the year ending 31 December 2007.


To approve the remuneration of the members of the Audit Committee of R10 000 per member for the year ending 31 December 2007.

Ordinary resolutions number 6 and 7

To elect directors in place of Messrs D E Cooper and S J Macozoma who retire in accordance with the Company’s articles of association but,

being eligible, offer themselves for re-election. Brief curriculum vitae of the directors standing for re-election are provided on page 111 of the

annual report for 2006.


To consider and if deemed fit, to pass with or without modification, the following ordinary resolution number 8:

“That all the unissued ordinary shares, the unissued redeemable cumulative preference shares and the unissued convertible redeemable

cumulative preference shares of the Company be placed under the control of the directors of the Company who are hereby authorised,

subject to sections 221 and 222 of the Companies Act, 1973 and the Listings Requirements of the JSE Limited (“the JSE”) (“Listings

Requirements”), to allot and issue such shares in their discretion on such terms and conditions as and when they deem it fit to do so, subject

to the aggregate number of ordinary shares to be allotted and issued in terms of this resolution being limited to 5% of the number of ordinary

shares in issue at 31 December 2006 in addition to any ordinary shares reserved for the purpose of carrying out the terms of the Company’s

Senior Executive Share Option Scheme (1988), particulars of which are set out in the annual report for 2006.”


To consider and if deemed fit, to pass with or without modification, the following ordinary resolution number 9:

“That with the exception of a pro rata rights offer to members and subject to the passing of ordinary resolution number 8, and the Listings

Requirements of the JSE Limited (“Listings Requirements”), the directors be given the general authority to issue ordinary shares of 25 cents

each for cash as and when suitable situations arise, subject to the following limitations:

(a) that this general authority shall be valid until the Company’s next annual general meeting or for 15 months from the date of this

resolution, whichever occurs first;

(b) that the equity securities, which are the subject of the issue for cash, be of a class already in issue, or where this is not the case, must be

limited to such securities or rights that are convertible into a class already in issue;

Notice to Members


Notice to Members(continued)


(c) that the equity securities be issued to persons qualifying as public shareholders as defined in the Listings Requirements, and not to

related parties;

(d) that issues in the aggregate in any one financial year (including the number to be issued in the future as a result of the exercise of options

or conversion of convertible securities issued in that same financial year) will not exceed 5% of the number of shares of any class of the

Company’s issued share capital, including instruments which are compulsorily convertible into shares of that class;

(e) that, in determining the price at which an issue of shares will be made in terms of this authority, the maximum discount permitted will

be 10% of the weighted average traded price of the shares in question, as determined over the 30 business days prior to the date that

the price of the issue is determined;

(f) that after the Company has issued equity securities in terms of an approved general issue for cash representing, on a cumulative basis

within a financial year, 5% of the number of equity securities in issue prior to that issue, the Company shall publish an announcement

containing full details of the issue; including:

– the number of securities issued;

– the average discount to the weighted average traded price of the equity securities over the 30 days prior to the date that the price

of the issue was determined;

– the effect of the issue on net asset value per share, net tangible asset value per share, earnings per share and headline earnings per

share.”

The approval of a 75% majority of the votes cast by shareholders present or represented by proxy at this meeting is required for this ordinary

resolution number 9 to become effective.

Special resolution number 1

To consider and if deemed fit, to pass the following resolution as special resolution number 1:

“That the directors be authorised to facilitate the acquisition by the Company, or a subsidiary of the Company, from time to time of the issued

shares of the Company upon such terms and conditions and in such amounts as the directors of the Company may from time to time decide,

but subject to the provisions of the Companies Act, 1973, as amended, and the Listings Requirements of the JSE Limited (“the JSE”) (“Listings

Requirements”), which general approval shall endure until the following annual general meeting of the Company (whereupon this approval

shall lapse unless it is renewed at the aforementioned annual general meeting, provided that it shall not extend beyond fifteen months from

the date of registration of this special resolution number 1), it being recorded that the Listings Requirements currently require, inter alia, that

the Company may make a general repurchase of securities only if:

(i) the repurchase of securities is being effected through the order book operated by the JSE trading system and done without any prior

understanding or arrangement between the Company and the counter party (reported trades are prohibited);

(ii) the Company is authorised thereto by its articles of association;

(iii) the Company is authorised by shareholders in terms of a special resolution of the Company, in general meeting, which authority shall

only be valid until the next annual general meeting, provided it shall not extend beyond fifteen months from the date of the resolution;

(iv) the repurchase shall not in aggregate in any one financial year exceed 10% of the Company’s issued ordinary shares, provided that any

general repurchase may not exceed 10% of the Company’s issued ordinary share capital in any one financial year ;

(v) at any point in time, the Company may only appoint one agent to effect any repurchase(s) on the Company’s behalf;

(vi) the Company may only undertake a repurchase of securities if after such repurchase the Company still complies with shareholder spread

requirements in terms of the Listings Requirements;

(vii) the Company or its subsidiary may not repurchase securities during a prohibited period;

(viii) repurchases are not made at a price more than 10% above the weighted average of the market value for the securities for the five

business days immediately preceding the repurchase; and

(ix) a paid press announcement containing full details of such acquisition is published as soon as the Company has acquired shares

constituting, on a cumulative basis, 3% of the number of shares in issue prior to the acquisition.”



The board of directors are of the opinion that, if the Company enters into a transaction to repurchase shares totalling 10% of the current

issued share capital at the maximum price at which repurchase may take place, i.e. a 10% premium above the weighted average of the market

value for the securities for the five business days immediately preceding the date of the repurchase, based on the ruling market price of the

Company’s ordinary shares on the JSE at the last practical date prior to the printing of these annual financial statements:

1. the Company and the group will be able to pay its debts as they become due in the ordinary course of business;

2. the assets of the Company and the group, valued in accordance with the accounting policies used in the latest audited group annual

financial statements, will exceed the liabilities of the Company and the group;

3. the issued share capital of the Company and the group will be adequate for the purpose of the business of the Company and of its

subsidiaries for the foreseeable future; and

4. the working capital available to the Company and the group will be sufficient for the Liberty Holdings Group’s requirements for the

foreseeable future.

At the present time the directors have no specific intention with regard to the utilisation of this authority, which will only be used if the

circumstances are appropriate.

The reason for and effect of special resolution number 1 is to grant the Company a general authority in terms of the Companies Act, 1973,

as amended, to facilitate the acquisition of the Company’s own shares, which general authority shall be valid until the earlier of the next annual

general meeting of the Company or its variation or revocation of such general authority by special resolution by any subsequent general

meeting of the Company, provided that the general authority shall not extend beyond 15 months from the date of this general meeting. Such

general authority will provide the directors with flexibility to effect a repurchase of the Company’s shares, should it be in the interest of the

Company to do so at any time while the general authority is in force.

For the purpose of considering the special resolution and in compliance with paragraph 11.26 of the Listings Requirements, the information

listed below has been included in the Annual Report in which this notice of Annual General Meeting is included, at the places indicated.

Directors’ responsibility statement

The directors, whose names are given on page 1 of this annual financial report, collectively and individually accept full responsibility for the

accuracy of the information given in special resolution number 1 and certify that to the best of their knowledge and belief there are no facts

that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have

been made and that special resolution number 1 contains all information required by the Listings Requirements.

Special resolution number 2

"Resolved as a special resolution that the articles of association of the Company be amended by the insertion of new article 18.1 as follows:

‘18.1 COMMUNICATION BY ELECTRONIC MEDIUM AND VOTING AND ATTENDING MEETINGS THROUGH ELECTRONIC MEDIUM

If the directors so authorise, and subject to any guidelines and procedures as the directors may adopt, members and proxies may by means

of electronic medium:

18.1.1 participate in a meeting of the members; and

18.1.2 be deemed present in person at a meeting of members, whether such meeting is to be held at a designated place or solely by

means of electronic medium, provided that:

18.1.2.1 the Company shall implement reasonable measures to verify that each person deemed to be present and permitted

to vote at the meeting by means of electronic medium is a member or a proxy;

18.1.2.2 the Company shall implement reasonable measures to provide such members and proxies a reasonable opportunity

to participate in the meeting and to vote on matters submitted to the member, including an opportunity to read or

hear the proceedings; and

18.1.2.3 if any member or proxy votes or takes any other action at the meeting by means of electronic medium, the Company

or its agent shall maintain a record of such vote or other action by that member.’ ”

The reason for and effect of this special resolution is to amend the articles of association of the Company to permit members and proxies to

participate in meetings of members by electronic means.



General information

– Information relating to the directors of the Company can be found on page 1 and pages 3 to 7 of the report for 2006.

– Information relating to the major shareholders of the Company can be found on page 7 of the report for 2006.

– There has been no material change in the financial or trading position of the Company and its subsidiaries subsequent to the publication

of the Company’s audited preliminary financial statements for the year ended 31 December 2006.

– Information relating to the directors’ interests in the Company can be found on page 6 of the report for 2006.

– Information relating to the share capital of the Company can be found on page 80 of the report for 2006.

– There are no legal or arbitration proceedings which may have, or have had, during the twelve-month-period preceding the date of this

notice, a material effect on the financial position of the Company and the Company is not aware of any such pending or threatened

proceedings.

Attendance and voting

– If you hold dematerialised shares with “own name” registration or are the registered holder of certificated shares:

You may attend the annual general meeting in person.

Alternatively, you may appoint a proxy to represent you at the annual general meeting by completing the attached form of proxy in

accordance with the instructions it contains and returning it to the transfer secretaries to be received not later than 09:00 on

Thursday, 24 May 2007.

– If you hold dematerialised shares not with “own name“ registration:

If you wish to vote at the annual general meeting, you should contact your CSDP or broker and furnish them with your voting instructions.

You must not complete the attached form of proxy.

If you wish to attend the annual general meeting, you must obtain the necessary letter of authority from your CSDP or broker.

By order of the board

V E Barnard

Company Secretary

Johannesburg

5 March 2007

Registered address: Transfer Secretaries:

155 Fifth Street Computershare Investor Services 2004 (Proprietary) Limited

Sandown 70 Marshall Street, Johannesburg, 2001

Sandton PO Box 61051, Marshalltown 2107

2196 Telephone +27 11 370 5000

Private Bag 10015

Sandton

2146

Brief Curriculum Vitae of Retiring Directors


D E Cooper

Age: 66

Appointed to the board: 1999

Educational qualifications: CA(SA)

Directorships: Chairman of Standard Bank Group Limited, Standard Bank of South Africa Limited, Liber ty Holdings Limited and

Liber ty Group Limited. Director of Business Leadership SA, The Business Trust and The Riverclub Limited.

Member: None

S J Macozoma

Age: 49

Appointed to the board: 2003

Educational qualifications: BA, BHons (Boston)

Directorships: President of Business Leadership SA, Co-Chairman of The Business Trust, Chairman of President’s Big Business Working

Group, Council on Higher Education and STANLIB Limited, director of Liberty Group Limited, Liberty Holdings Limited, Safika Holdings

(Proprietary) Limited, Safika Resources (Proprietary) Limited, Standard Bank Group Limited, Standard Bank of South Africa Limited and

Volkswagen SA Limited.

Member: Audit Committee.

Shareholders’ Diary


Financial year end 31 December

Annual general meeting 25 May 2007

Announcements

Half-year results for 2007 13 August 2007

Full-year results for 2007 10 March 2008

Annual report for 2007 31 March 2008

Ordinary dividends

Interim – 2007

– announcement 13 August 2007

– payable 17 September 2007

Final – 2007

– announcement 10 March 2008

– payable 7 April 2008

Preference dividends

In respect of 6 months ending 30 June 2007

– announcement 18 May 2007

– payable 2 July 2007

In respect of 6 months ending 31 December 2007

– announcement 23 November 2007

– payable 31 December 2007

Notes


Liberty Holdings Limited

(“the Company”)

(Incorporated in the Republic of South Africa)

(Registration Number 1968/002095/06)

(JSE Code: LBH)

(ISIN Code: ZAE000004032)

For use by certificated shareholders and dematerialised shareholders with “own name” registration.

Thirty-ninth annual general meeting to be held on Friday, 25 May 2007 at 09:00 at the Liberty Life Conference Centre, 1 Anerley Road,

Parktown, Johannesburg.

I/We

(Please print)

of

being a member/s of the Company and being the registered owner/s of ordinary shares in the Company hereby appoint

or failing him

the chairman of the meeting to vote for me/us and on my/our behalf at the annual general meeting of the Company to be held on

Friday, 25 May 2007 and at any adjournment thereof and to speak and act for me/us and, on a poll, vote on my/our behalf.

My/Our proxy shall vote as follows:

Resolution No. In favour of Against Abstain

Ord. No. 1 Adoption of financial statements

Ord. No. 2 Remuneration of Chairman of the board

Ord. No. 3 Remuneration of the non-executive directors

Ord. No. 4 Remuneration of the Chairman of the Audit Committee

Ord. No. 5 Remuneration of the members of the Audit Committee

Election of directors:

Ord. No. 6 D E Cooper

Ord. No. 7 S J Macozoma

Ord. No. 8 Placing unissued shares under the control of the directors

Ord. No. 9 Authority to issue shares for cash

Spec. No. 1 Authority to repurchase the Company’s shares

Spec. No. 2 Voting and attending meetings through electronic medium

Indicate with a cross how you wish your votes to be cast. If you do not do so, the proxy may vote or abstain at his discretion.

Dated this day of 2007

Signature

Please read the notes overleaf

Proxy Form


Notes to Proxy


1. All beneficial holders who have dematerialised their shares through a Central Securities Depository Participant

(“CSDP”) or broker, other than those in “own name”, must provide the CSDP or broker with their voting

instruction.Alternatively, should they wish to attend the meeting in person, they may request the CSDP or broker

to provide them with a letter of representation in terms of the custody agreement entered into between the

beneficial owner and the CSDP or broker.

2. Proxies must be lodged at the Company’s transfer office, Computershare Investor Services 2004 (Proprietary) Limited, 70 Marshall

Street, Johannesburg, (PO Box 61051, Marshalltown, 2107), so as to be received by not later than 09:00 on Thursday, 24 May 2007.

3. A member may appoint one or more persons of his own choice as his proxy/ies by inserting the name/s of such proxy/ies in the space

provided and any such proxy need not be a member of the Company. Should this space be left blank, the proxy will be exercised by the

chairman of the meeting.The person whose name appears first on the form of proxy and who is present at the meeting will be entitled

to act as proxy to the exclusion of those persons whose names follow.

4. If a member does not indicate on this instrument that his proxy is to vote in favour of or against any resolution or resolutions or to

abstain from voting, or gives contradictory instructions, or should any further resolution/s or any amendment/s which may be properly

put before the annual general meeting be proposed, the proxy shall be entitled to vote as he thinks fit.

5. Unless the above section is completed for a lesser number of shares, this proxy shall apply to all the ordinary shares registered in the

name of the member/s at the date of the annual general meeting or any adjournment thereof.

6. Companies and other corporate bodies are advised to appoint a representative in terms of section 188 of the Companies Act, 1973,

for which purpose a duly certified copy of the resolution appointing such a representative should be lodged with the Company, as set

out in 1 above.

7. The authority of the person signing a proxy form under a power of attorney must be attached hereto unless that power of attorney has

already been recorded by the Company.

8. Any alterations made in this form of proxy must be initialled by the authorised signatory/ies.

9. The completion and lodging of this form of proxy will not preclude the member who grants the proxy from attending the meeting,

speaking and voting in person thereat to the exclusion of the proxy appointed in terms thereof, should such member wish to do so.

Contact Information


Contact officer

John Sturgeon

Tel: +27 (11) 408 2872

[email protected]

Company secretary

Vincent Barnard

Tel: +27 (11) 408 4014

[email protected]

Registered address

155 Fifth Street

Sandown

Sandton

2146

Postal address

Private Bag 10015

Sandton

2146

Tel: +27 (11) 408 2872

Transfer secretaries

Computershare Investor Services 2004 (Pty) Limited

70 Marshall Street

Johannesburg

2001

Postal address

PO Box 61051

Marshalltown

2107

Tel: +27 (11) 370 5000

Auditors

PricewaterhouseCoopers Inc.

2 Eglin Road

Sunninghill

2157

Postal address

Private Bax X36

Sunninghill

2157

Tel: +27 (11) 797 4000

Website: www.libertyholdings.co.za

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