Liberty Holdings Limited Financial results …...Liberty Holdings Limited Financial results for the...

Financial resultspresentation

Liberty Holdings Limited

For the six months ended 30 June2016

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Liberty Holdings LimitedFinancial results for the six months ended 30 June 2016 1

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Liberty Holdings Limited Financial results presentation 2016 for the six months ended 30 June

Group financial performance review Liberty Holdings Limited Casper Troskie, Group Financial Director

2 Liberty Holdings LimitedFinancial results for the six months ended 30 June 2016

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3

Operating environment

Source: I-Net Bridge and Bloomberg 1. Indices based to 31 Dec 2015 = 100

•  Political developments in a number of global economies have resulted in significant movements in financial markets, increasing global growth concerns

•  South Africa averted a foreign currency debt rating downgrade in June •  Tough consumer environment continues as monetary tightening of the last three quarters starts to filter through the economy

SA market performance¹ ZAR/USD and bond yields

All Bond Index JSE All Share Index ZAR/USD 10 year SA bond

Jan 2016 Jun 2016 Jan 2016 Jun 2016

-7%

-4%

4 * Comparative restated to account for revised modelling of shareholder expenses and LibFin Credit contribution

Group financial summary

Rm (unless stated otherwise) Jun 16 Jun 15 % Δ

BEE normalised headline earnings 1 821 1 991 (9)

BEE normalised operating earnings 1 100 1 296 (15)

LibFin Investments 721 695 4

BEE normalised headline earnings per share (c) 650.0 705.5 (8)

Embedded value of insurance new business* 257 380 (32)

Indexed long-term insurance new business 3 569 3 529 1

Long-term insurance net customer cash flows (353) 2 852 (>100)

Asset management net cash flows 453 10 317 (96)

Retail and Institutional excluding money market 3 169 5 378 (41)

Money market (2 716) 4 939 (>100)

LGL CAR cover (times covered) 2.95 3.07 (4)

BEE normalised Group Equity Value per share (R)* 148.44 141.30 5

BEE normalised RoGEV (%)* 10.3 10.8 (5)

BEE normalised RoE (%) 16.4 19.4 (15)

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•  Risk discount rate increased by 58 basis points from June 2015 ›  Lower value of new business for the period

•  Risk discount rate reduced by 98 basis points from December 2015 ›  Economic assumptions had a positive impact of R305m on Equity Value growth in the period

•  Key assumption and other changes: ›  Strengthening of longevity improvement factor in group annuity business

›  Comparative restatement for cost allocation basis to ensure consistency for EV, IFRS, statutory basis and SAM

›  Inclusion of capital gains increased the cost of capital

›  Strengthening of inflation basis for investment business and implementation of full yield curve on risk business

Changes in key assumptions

Business managed to model despite once off negatives

6

Business unit BEE normalised operating earnings

Rm Jun 16 Jun 15 % Δ

Individual Arrangements 718 873 (18)

Group Arrangements 68 88 (23)

Liberty Corporate 88 97 (9)

Liberty Africa Insurance 11 28 (61)

Liberty Health (11) (22) 50

Africa growth initiatives (20) (15) (33)

Asset Management 267 301 (11)

Balance sheet management 130 125 4

LibFin Markets – Credit portfolio 139 108 29

LibFin Markets – LibFin ALM (9) 17 (>100)

Central overheads and sundry income (83) (91) 9

BEE normalised operating earnings 1 100 1 296 (15)


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7 * Comparative restated to account for revised modelling of shareholder expenses and LibFin Credit contribution

Sources of BEE normalised Group Equity Value earnings

Rm Jun 16 Jun 15* % Δ

Value of long-term insurance new business 257 380 (32)

Expected return on SA covered business 1 483 1 242 19

Variances / changes in operating assumptions 90 488 (82)

Headline earnings of other businesses 247 307 (20)

Operational Equity Value earnings 2 077 2 417 (14)

Development costs (43) (24) (79)

Investment return on net worth and investment variances (34) 96 (>100)

Changes in economic assumptions – SA covered business 305 (179) >100

Decrease in fair value adjustment on value of other businesses (259) (251) (3)

Change in allowance for share rights 15 15 -

Group Equity Value earnings 2 061 2 074 (1)

8

Long-term insurance indexed new business*

* Excludes natural increases

Satisfactory indexed new business in a deteriorating environment


Individual Arrangements 3 094 3 058 1

Group Arrangements 475 471 1

Liberty Corporate 324 318 2

Liberty Africa Insurance 151 153 (1)

Total 3 569 3 529 1


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Value of new business

* Comparative restated to account for revised modelling of shareholder expenses and LibFin Credit contribution

Period specific challenges impacted margins

Jun 16 Jun 15 % Δ

Value of new business (Rm) 257 380 (32)

Individual Arrangements* 242 343 (29)

Group Arrangements 15 37 (59)

New business margins (%) 1.4 2.0 (30)

Individual Arrangements* 1.6 2.1 (24)

Group Arrangements 0.5 1.3 (62)

10 * Excludes Gateway LISP R129m for 1H2016 (1H2015: R663m)

Group net customer cash flows


STANLIB net customer cash flows 453 10 317 (96)

Insurance net customer cash flows (353) 2 852 (>100)

Individual Arrangements* 597 3 509 (83)

Group Arrangements (955) (651) (47)

STANLIB multi-manager 5 (6) >100

Total 100 13 169 (>100)


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Assets under management

* Excludes intergroup Life Funds

Growth in assets under management impacted by low positive cash flows

Rbn Jun 16 Dec 15 % Δ

Assets under management 679 668 2

STANLIB 584 579 1

LibFin 53 50 6

Other internal, external managers & GateWay LISP 42 39 8


STANLIB net cash flows* 453 10 317 (96)

Retail and Institutional 3 169 5 378 (41)

Money market (2 716) 4 939 (>100)

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Gross return (%)

Selection of indices 2012 2013 2014 2015 1H2016

SWIX 29.1 20.7 15.4 3.6 7.3 ALBI 16.0 0.6 10.2 (3.9) 11.2 STEFI 5.6 5.2 5.9 6.5 3.5 R/$ exchange 4.7 23.8 10.3 33.7 (4.8) SIP gross return 16.0 14.6 10.3 9.6 4.0

LibFin Investments

80

90

100

110

120

Jan Feb Mar Apr May Jun

Local equity Local bonds Foreign Local preference shares Shareholder Investment Portfolio

Asset class performance 1H2016

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13 1. For foreign currency split by asset class refer to supplementary information

LibFin Investments – Shareholder Investment Portfolio

Rm Jun 16 % Dec 15 %

South African Rand 20 476 80 20 758 80

Equities 3 685 14 2 416 9

Bonds 5 664 22 5 775 22

Cash 5 840 23 5 560 22

Preference shares - - 604 2

Property 2 846 11 3 986 16

Other 2 441 10 2 417 9

Foreign currency¹ 5 264 20 5 277 20

Total 25 740 100 26 035 100

Assets backing capital 13 815 54 14 427 55

Assets backing life funds 7 423 29 6 986 27

90:10 exposure 4 502 17 4 622 18

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LibFin Markets – ALM

SWIX40 10 year swap 3 year SWIX40 implied volatility

A volatile trading environment for ALM managed with defensive positioning

Volatile equity trading environment

Rally as SA concerns subside and global developments

become supportive

Long-term implied volatility drifted higher

in volatile equity environment

1H2016 1H2016 1H2016

2.5%

1.2%

20%


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LibFin Markets – Credit

•  Portfolio diversification continues

•  Greater allocation to corporate, property, asset backed and project finance sectors

Increased diversification continues to improve the risk adjusted return

Jun 16 Jun 15 % Δ

Net earnings from Credit portfolio (Rm) 139 108 29

Total LibFin assets 53 48 10

Credit portfolio assets (Rbn) 31 27 15

Banks, treasuries and shorter dated assets (Rbn) 22 21 5

LibFin assets Jun 16

Banks and Sovereign

Diversified corporates

SOE

Industrials

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Capital position – 30 June 2016

Capital largely in line with targets

Rm Liberty

Holdings Limited Liberty

Group Limited

IFRS

IFRS shareholder funds 22 032 19 096

BEE preference shares 204 204

BEE normalised shareholder funds 22 236 19 300

Regulatory capital

Shareholder assets 18 129 15 176

Regulatory capital requirement 5 836 5 145

Surplus above regulatory requirement 12 293 10 031

Risk appetite capital coverage ratio 1.50 1.50

Capital buffer in excess of risk appetite 9 375 7 459

Capital ratio at period end 3.11 2.95

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•  Capital management ›  Standard and Poor’s appointed as new credit rating agency, initiated on upgraded ratings:

-  Subordinated debt: ‘AA+’

-  National IFS rating: ‘AAA’

•  Risk appetite ›  In line with other risk appetite targets, the CAR ratio target has been changed to a range (2.5 – 3.0 times)

›  CAR volatility reduced through collar structures on components of the Shareholders Investment Portfolio

•  Return targets ›  Cost of equity; risk free rate + 3%

›  Return targets (EV based); risk free rate + 4%

›  Through the cycle ROE target >19%

•  Capital buffer ›  Earmarked for acquisitions at Liberty Holdings Limited

›  Maintain a strong capital ratio during the SAM transition

Capital management

Appropriate capital levels – continued focus on capital efficiency

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SA covered business net worth – delivery on assumption

Continued positive delivery on actuarial assumptions

Net worth (Rm) 1H2016 2015 2014 2013 2012 2011

Expected net of tax transfer to net worth 2 154 3 825 3 266 2 816 2 569 2 324

Operating experience variances, assumption and modelling changes 127 464 566 141 52 16

Development expenses - (24) (52) (53) (78) (61)

Incentives - (64) (103) (154) (181) (131)

Change in allowance for fair value of share options / rights 11 75 100 69 (125) 3

Actual net of tax transfer to net worth 2 292 4 276 3 777 2 819 2 237 2 144

Performance in line with expectation 106% 112% 116% 100% 87% 92%


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Distributions

The dividend has been declared in line with Liberty’s interim dividend policy

Per cycle – cents per share Jun 16 2015 % Δ

Interim 276 254 9

Final - 437 -

Total 276 691 -

20

Individual Arrangements Performance metrics reflect operating environment

* Comparative restated to account for revised modelling of shareholder expenses and LibFin Credit contribution

Performance reflects difficult operating environment

Rm (unless stated otherwise) Jun 16 Jun 15 % Δ

Headline earnings 718 873 (18)

Gross sales 11 991 12 392 (3)

Indexed new business 3 094 3 058 1

Insurance net customer cash flows (including LISP) 726 4 172 (83)

Value of new business* 242 343 (29)

Retail margin excluding STANLIB (%)* 1.8 2.3

Retail margin including STANLIB (%)* 1.6 2.1

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21 1. Includes Liberty Health and excludes African growth initiatives 2. Comparative restated to account for revised modelling of shareholder expenses and LibFin Credit contribution

Group Arrangements Impacted by tough market conditions in all territories Rm Jun 16 Jun 15 % Δ


South Africa¹ 77 75 3

Other African territories 11 28 (61)

Indexed new business 475 471 1

South Africa 324 318 2


Value of new business 15 37 (59)

South Africa2 (1) 10 (>100)


Long-term insurance net cash flows (950) (657) (45)

South Africa (900) (865) (4)

Other African territories (50) 208 (>100)

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STANLIB attracts third party cash inflows in volatile markets



South Africa 249 271 (8)


Net cash flows 453 10 317 (96)

South Africa (947) 9 152 (<100)

Other Africa 1 400 1 165 20

Rbn Jun 16 Dec 15 % Δ

Assets under management (AUM) 584 579 1

South Africa 531 529 -

Other Africa 53 50 6


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Operational performance review Liberty Holdings Limited Thabo Dloti, Chief Executive

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Individual Arrangements growth muted by product capacity and consumer trends •  Sales and cash flows muted by the lack of a guaranteed investment product until May and the absence of an offshore domiciled

offering

•  Focus remains on managing to model, quality of business written, retention initiatives and continued delivery of new innovative products

•  Delivered another period of positive operating experience variances

•  Earnings impacted by introduction of risk fund with delayed re-pricing of new risk policies

Group Arrangements faced operating challenges in a tough environment •  Focus on expanding footprint across sub-Saharan Africa remains on track, capacity investment impacting costs in the short-term

•  Africa insurance reflects higher group life claims and lower than expected credit life sales from tightened bank lending

•  Continued positive growth in Liberty Health Cover risk product

•  Liberty Corporate cash flows and new business contain no large single premiums and LDS mandates

Asset Management delivers positive non-money market flows and margin growth •  Continued execution on strategic initiatives to diversify earnings

•  Muted growth however improved margins due to better mix

•  Once off costs to reposition shared services strategic focus

Operating performance dominated by short-term impacts in tough conditions

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1 030

1 274

183

1 026

1 461

181

Agency Liberty Entrepreneurs

Broker Consultant

1H14 1H15 1H16

Individual Arrangements, focused on a sustainable distribution strategy

•  Strategy to build tied capacity with a variable cost model drove increase in Liberty Entrepreneurs headcount

•  Stable Agency force, with aim of improving productivity

•  Quality sales maintained with growth of experienced advisers in tied channels

•  Lower single premium volumes – constrained by capacity and product offering

•  Growth in recurring premium business driven mainly by increased risk sales

•  Marked improvement in guaranteed investment plan sales since relaunch in May

•  Agile sales since launch (Oct 2015) in excess of R750m

•  Retention initiatives (policies and advisers) critical in a tough environment

Strategy remains on track to continue growing experienced tied advisers

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•  Number of participating schemes are up, with strong recurring new business into the umbrella proposition, however higher rate of unemployment is impacting member withdrawals

•  New marketing initiatives focused on passive range to promote Stable Growth and Secure portfolios

•  No large liability-driven solutions (LDS) deals have been concluded, good prospects still remain

•  Reduced quote opportunities in the group risk market impacted new business, and pricing pressures contributed to lower recurring premium business

•  Stable underwriting experience and expense control offset the cost of a longevity improvement assumption change in the bulk annuity portfolios

•  Liberty Corporate received the highest ratings in the Group Life/Risk and Investment product categories in the recent PMR Africa Excellence survey

Group Arrangements – Liberty Corporate, focus on growing investment book and improving efficiencies


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•  Good progress made with strategic partners on the continent supported growth in LHC lives to more than 113 000 and improved up and cross sell opportunities for Liberty Africa Insurance

•  Claims ratio remains within acceptable levels

•  African expansion initiatives to capture full value on own license – already bearing fruit

•  Integration is improving, with increased brand credibility of Health offering in all territories

•  Stable underwriting experience combined with growth in lives positively improved earnings

•  The Total Health Trust business in Nigeria was awarded the Health Maintenance Organisation of the Year 2016 award at the annual Nigeria Healthcare Excellence Awards

•  Ongoing focus for a sustainable health product solution for the South African customer value proposition

•  Structural changes in the business will improve operational efficiencies

Group Arrangements – Liberty Health focus on growing lives in the rest of Africa

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•  Good progress being made on geographic expansion opportunities – geography and licenses

•  Improved distribution capacity and sales management practices and focus on transactional channel execution improved productivity in Namibia, Botswana and Swaziland

•  Tighter bank lending impacted bancassurance sales in Kenya and Botswana together with lower renewals in the group risk business

•  Investment in capacity made to deliver geographic and channel expansion initiatives

•  Volatile financial markets, poor underwriting experience and operational challenges impacted results

Group Arrangements – Liberty Africa Insurance, focus on growing distribution capacity and geographic reach

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STANLIB, focus on diversification of asset classes and geographic reach

•  Strategy to shift from overweight exposure on money market to broader asset classes

•  Good growth of Alternatives franchise ›  Infrastructure - Fund 1 is performing exceptionally

well with returns doubled in 18 months

›  Private Equity - Agri Vie fund raising capital 2nd fund

›  Direct Property - Africa Direct Property Development Fund creating a strong pipeline

•  Short term performance in Retail unit trusts has significantly improved with 87% of funds in Q1 and Q2 (2015: 13%)

•  Retail net client cash flows impacted by large redemptions during the period

25% 19%

20% 22%

19% 18%

16% 13%

12% 17%

8% 11%

1H2012 1H2016

Money market Fixed interest Equity Real estate Asset allocation Foreign

Strategic shift in asset mix over time to diversify from money market cash flow volatility

Conclusion Liberty Holdings Limited Thabo Dloti, Group CE


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•  Leverage strong distribution capabilities and product innovation in Individual Arrangements to maintain and grow value in the retail affluent market in South Africa

•  Invest in product and distribution capacity in Group Arrangements to grow in select markets in sub-Saharan Africa where long-term growth is expected due to favourable demographics

•  Extract value from investments made in diversified capabilities of asset classes and across geographies

•  Whilst responding to emerging challenges from tough economic environments: ›  Strong drive on expense savings in our existing operations

›  Improved alignment to create capacity to deliver on the transformational initiatives for the strategy

•  Our competitive advantage in developing innovative solutions for our clients remains key to ensure Liberty stays relevant to our target market regardless of market conditions ›  Several product launches are planned for the latter part of the year in South Africa and the rest of Africa

Our long-term strategy remains on track as we navigate short-term operational challenges

Strong distribution, innovation and expansive geographic reach are key to unlock value

Questions


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Financial review (continued)

for the year ended 31 December 2015

Financialresults


For the six months ended 30 June

2016

CONTENTSFinancial performance indicators 21

Financial review 22

Accounting policies 27

Definitions 27

Consolidated statement of financial position

28

Consolidated statement of comprehensive income

29

Summary consolidated statement of changes in shareholders' funds

30

Summary consolidated statement of cash flows

30

Headline earnings and earnings per share 31

Summary consolidated segment information

32

Group equity value report 34

Long-term insurance new business 41

Long-term insurance net cash flows 42

Assets under managemenwt 43

Asset management net cash flows – STANLIB

43

Short-term insurance indicators 44

Capital commitments 44

Corporate actions 45

Retirement benefit obligations 46

Related parties 47

Offsetting, enforceable master netting arrangements or similar agreements

48

Highlights

Group equity value

R42 billion

Group equity value

Return on BEE normalised group equity value

= R148,44 per share 10,3%

BEE normalised returns on IFRS equity Indexed new business

16,4% R3,6 billion

Liberty Group Limited CAR cover Interim dividend up

2,95 times 9%

Assets under management

R679 billion

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Financial performance indicatorsfor the six months ended 30 June 2016

30 June2016

30 June2015

% change

12 months31 December

2015

Liberty Holdings LimitedEarningsBEE normalised operating earnings (Rm) 1 100 1 296 (15) 2 772 Basic earnings per share (cents) 666,9 741,1 (10) 1 493,5 BEE normalised headline earnings per share (cents) 650,0 705,5 (8) 1 464,5BEE normalised return on IFRS equity (%) 16,4 19,4 (15) 19,5 Group equity valueBEE normalised group equity value per share (R)(2) 148,44 141,30 5 145,96 BEE normalised return on group equity value (%)(2) 10,3 10,8 (5) 10,5 Distributions per share (cents) Normal dividend 276 254 9 691

Interim dividend 276 254 9 254 Final dividend n/a n/a 437

Total assets under management (Rbn) 679 645 5 668

Long-term insurance operationsIndexed new business (excluding contractual increases) (Rm) 3 569 3 529 1 7 515 Embedded value of new business (Rm)(2) 257 380 (32) 729 New business margin (%)(2) 1,4 2,0 (30) 1,8 Net customer cash (outflows)/inflows (Rm) (353) 2 852 >(100) 5 402 Capital adequacy cover of Liberty Group Limited (times covered) 2,95 3,07 (4) 3,03

Asset management – STANLIBAssets under management (Rbn) 584 560 4 579 Net cash inflows including money market (Rm)(1) 453 10 317 (96) 8 454

Retail and institutional net cash inflows excluding money market (Rm)(1) 3 169 5 378 (41) 7 343 Money market net cash (outflows)/inflows (Rm)(1) (2 716) 4 939 >(100) 1 111

(1) Excludes intergroup life funds.(2) To better align to future statutory guidance on expense modelling, with effect from 1 January 2015 the method to value the contribution of LibFin Markets – credit portfolio

(LibFin Credit) and the treatment of certain recurring shareholder costs was revised. In order to improve the analysis of certain financial performance indicators the 30 June 2015 numbers were restated to reflect the change.

Preparation and supervision: This announcement on Liberty Holdings Limited interim financial results for the six months ended 30 June 2016 has been prepared and supervised by Y Maharaj (Executive: Group Finance) CA (SA) and CG Troskie (Financial Director) CA (SA).


Financial reviewfor the six months ended 30 June 2016

Capital position remains strong notwithstanding weaker sales and earnings in the first six months – 16,4% return on equity at half year

Operating conditions during the first six months of 2016 were difficult with the continuation of the challenging macro-economic environment and trends observed in the final quarter of 2015. Whilst the weaker sales and earnings are below expectation, the group's capital position remains strong.

Liberty’s performance and cash flows were impacted by specific developments which compounded the negative impact of the challenging market conditions on the group’s performance for the first half of the year. These are discussed below.

Management implemented two key changes which had once-off negative impacts on the period’s earnings. The first relates to a modelling change implemented by strengthening the expense inflation assumption on investment business and moving to a full yield curve for discounting our risk product cash flows given the favourable interest rate levels during the period. This change will significantly improve risk management and reduce the expected future hedging costs. This resulted in a negative earnings impact of R120 million in the period. In addition, the longevity improvement factor in the group annuity book was strengthened in line with international trends and resulted in a R22 million impact on Liberty Corporate earnings.

Following the new tax legislation effective 1 January 2016, Liberty transferred eligible risk policies to the new risk tax fund. This decision was taken to benefit existing policyholders. All new risk policies from that date were required to be written in the risk fund, but the re-pricing of new policies could only be operationally implemented from March 2016. As a result of pipeline business, most of the risk policies in the first half were contracted at historical rates. This had a negative impact on earnings and value of new business through higher new business strain and lower margins respectively.

The actions taken by management discussed later will lessen the impact of these developments going forward.

Group BEE normalised headline earnings of R1 821 million were 9% lower, representing a 15% decline in BEE normalised operating earnings and an 4% increase in earnings from LibFin Investments – Shareholder Investment Portfolio (SIP). The SIP gross performance of 4,0% (30 June 2015: 4,4%) was below benchmark as a result of the impact of the rand strengthening over the period on the overweight exposure to foreign assets. The three year cumulative return however remains ahead of the benchmark. BEE normalised return on equity was 16,4% (30 June 2015: 19,4%) due to lower earnings in the period.

Net customer cash inflows amounted to R0,5 billion (30 June 2015: R13,8 billion). Long-term insurance net customer cash outflows of R0,4 billion (30 June 2015: inflows of R2,9 billion) resulted from lower single premium inflows, increased individual policy surrenders and scheme member withdrawals. STANLIB net cash inflows were lower than the prior period inflows as a result of increased consumer pressure and net cash outflows of money market products.

In the group’s long-term insurance operations, indexed new business was 1% higher at R3 569 million. Recurring premium business was higher, increasing by 4% over the prior half year. Single premium investment business was down 8%. This was the result of an inability to meet the demand for guaranteed investment products in the Individual Arrangements business and the lack of any large single premium investment mandates in Liberty Corporate.

New business margins at 1,4% (30 June 2015 restated: 2,0%) were lower, mainly as a result of the writing of new business in the new risk tax fund prior to re-pricing the risk products, an increase in the risk discount rate to 11,79% (30 June 2015: 11,21%) and a changed new business mix reflecting lower single premium volumes. The insurance business continues to be managed within the long-term actuarial expense and policyholder behaviour assumptions.

Total assets under management increased moderately to R679 billion (31 December 2015: R668 billion), due to positive, albeit lower, market returns offset by net external customer outflows.

BEE normalised group equity value per share of R148,44 was up 5% on the 30 June 2015 restated amount, and reflected R2 061 million of equity value profits for the period. This represents an annualised 10,3% (30 June 2015 restated: 10,8%) return on opening group equity value. Lower investment returns and reduced operating earnings from Individual and Group Arrangements as well as STANLIB accounted for the lower return compared to 2015.

The group was managed within the board approved risk appetite throughout the first half of 2016 and the capital position of the group’s main long-term insurance licence, Liberty Group Limited, remained strong with the capital adequacy ratio at 2,95 (31 December 2015: 3,03) times the regulatory minimum.

Given the demanding conditions experienced in the first half, management has taken active steps to address some of the shorter term challenges. These include:

• The lack of capacity to provide guaranteed investment products has been addressed with a new guaranteed product option launched in May 2016 with over 40% of Liberty’s first half guaranteed investment product volumes sold in June 2016, reflecting strong support for this product;

• A more competitive offshore domiciled investment product offering will be launched in the second half of 2016;

• Continued close monitoring of customer persistency trends with appropriate management action where necessary;

• Continued focus on ensuring cost efficiency; and

• Ongoing focus on ensuring that the group remains within risk appetite.

Whilst tough market conditions will continue to impact the business, these actions are expected to address the shorter term challenges within management's control.

Our 31 March 2016 capital calculations under the draft SAM guidelines confirm that the group is well positioned from a solvency and SAM capital perspective, which is expected to become effective during 2017.

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Earnings by business unit

Rm (unaudited)30 June

201630 June

2015%

change


2015

Insurance Individual Arrangements 718 873 (18) 1 869 Group Arrangements 68 88 (23) 204

Liberty Corporate 88 97 (9) 219 Liberty Africa Insurance 11 28 (61) 25 Liberty Health (11) (22) 50 (19)Growth initiatives (20) (15) (33) (21)

Balance sheet management 130 125 4 260

LibFin Markets – credit portfolio 139 108 29 260 LibFin Markets – asset/liability management portfolio (9) 17 >(100)

Asset Management 267 301 (11) 629

STANLIB South Africa(1) 249 271 (8) 567 STANLIB Other Africa 18 30 (40) 62

Central overheads and sundry income (83) (91) 9 (190)

Centre overheads and sundry income (103) (109) 6 (233)Liberty Properties(1) 20 18 11 43

BEE normalised operating earnings 1 100 1 296 (15) 2 772LibFin Investments – SIP 721 695 4 1 356

BEE normalised headline earnings 1 821 1 991 (9) 4 128BEE preference share adjustment (8) (15) 47 (26)

Headline earnings 1 813 1 976 (8) 4 102(1) Liberty entered into a strategic partnership with the retail division of JHI combining the collective property management service capabilities under a joint venture entity,

JHI Retail (Pty) Ltd. The transaction was effective 1 May 2015 with Liberty's interest in JHI Retail being 49%. Earnings from the 49% interest in JHI Retail are included in the STANLIB South Africa's earnings, together with the Liberty Properties development capability. The results of the operations to 30 April 2015 and the ongoing portfolio liquidity charge were reflected in central overheads and sundry income.

Commentary on the earnings by business unit follows on the pages below. Additional information is contained in the summary consolidated segment information.


for the six months ended 30 June 2016




Individual ArrangementsHeadline earnings from the group’s South African retail operations of R718 million was 18% down compared to 2015. Increased new business strain, worsening investment and early duration risk persistency together with lower positive risk variances were the primary contributors to this result. In addition, modelling changes were made to utilise a term structure of interests rates to value the risk business. This facilitates improved future risk management but had a negative once-off earnings effect.

Net customer cash inflows were positive at R0,6 billion (30 June 2015: R3,5 billion). The decrease compared to 2015 is mainly attributable to a higher value of surrenders and maturities and lower single premium new business volumes. The lack of capacity to provide a guaranteed investment product solution together with a challenging consumer environment led to lower growth in indexed new business sales of 1% compared to the first half of 2015.

Value of new business of R242 million was below the prior year restated amount of R343 million mainly due to the delayed re-pricing of the risk products, the increase in the risk discount rate and a changed new business mix reflecting lower single premium volumes. The new business margin declined to 1,6% from 2,1% at 30 June 2015.

Despite the tough environment, the business continued to deliver positive variances and was managed to better than model, continuing a five year trend.

Group Arrangements

Liberty CorporateEarnings of R88 million included a once-off R22 million charge related to strengthening of longevity improvement assumptions. Stable underwriting experience and good expense control continued during the period. Indexed new business was 2% higher at R324 million reflecting no significant single premium investment or annuity mandates and an extremely competitive group risk environment. Recurring premium sales into the umbrella offering however grew by 13%. Net cash outflows amounted to R905 million (30 June 2015: R859 million), reflecting low single premium new business and a noticeable trend of higher member withdrawals in participating employer funds linked to the challenging economic environment and associated job losses.

Liberty Africa InsuranceHigher claims experience and investment in capacity to support expansion negatively impacted earnings which, at R11 million, were lower than the prior period. Indexed new business in the long-term insurance businesses was broadly flat relative to the prior period at R151 million, with value of new business lower at R16 million (30 June 2015: R27 million) but at a good margin of 7%. Economic conditions across the continent have deteriorated and placed pressure on pricing and new business flows. Customer cash flows were impacted by the loss of a Namibian investment mandate on maturity of R175 million. Despite more difficult conditions in the short term, the longer term GDP growth forecasts in our targeted jurisdictions remain attractive and management is continuing to execute on growth and geographic expansion strategies.

Liberty HealthThe half year loss of R11 million reflects an improvement on the prior half year loss of R22 million. Management are strategically repositioning the business to focus primarily on providing health risk value solutions to employers and their employees across the African continent. Growth of 15% per annum in the number of Liberty Health Cover product lives has been achieved over the last three years. Total lives serviced now amount to 113 thousand. Claims loss ratios experienced remain steady and in line with expectation.

Balance sheet management

LibFin Markets – Asset liability management and credit portfolioThe credit portfolio, a diversified portfolio of government, state owned enterprise and corporate securities backing the guaranteed investment product sets, contributed R139 million (30 June 2015: R108 million) in line with the growth of the portfolio and improved portfolio diversification.

The asset liability management portfolio, which consists of the market and liquidity risk exposures arising from the guaranteed investment product set, produced a loss of R9 million for the half year (30 June 2015: earnings of R17 million) resulting from the establishment of a risk provision post the implementation of the new yield curve hedging approach.

LibFin assets under management were higher at R53 billion (31 December 2015: R50 billion).

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LibFin Investments – Shareholder Investment PortfolioThe SIP includes the assets backing capital in the insurance operations as well as the group's investment market exposure to the 90:10 book of business. This portfolio has a conservative balanced mandate and is managed with a long-term investment horizon.

During the period, the portfolio had an overweight exposure to foreign assets (particularly developed market equity) and an underweight exposure to the local equity market, resulting in a gross return of 4,0% (30 June 2015: 4,4%), which was below the strategic benchmark for the year. The SIP contributed R721 million (30 June 2015: R695 million) to the group’s headline earnings.

Asset Management

STANLIBContinued market volatility and lower than anticipated market growth resulted in STANLIB's headline earnings of R267 million being 11% lower than the prior period. First half earnings were impacted by once-off costs relating to the shared services outsourcing programme. Total assets under management by STANLIB increased by 1% to R584 billion (31 December 2015: R579 billion), as a result of incremental growth from investment market returns and net cash outflows.

Net customer cash inflows (excluding intergroup) amounted to R0,5 billion compared to R10,3 billion in the prior period. This result was mainly driven by lower cash flows from group channels and third party independent financial advisors. Money market outflows of R2,1 billion offset positive non-money market inflows of R1,2 billion in the South African business. Inflows of R1,4 billion were received in the Africa businesses. Intergroup cash outflows for the period amounted to R8,1 billion.

In respect of short term investment performance, 87% of STANLIB’s core retail funds performed in the top two quartiles compared to 13% in the previous period, showing a marked improvement. STANLIB’s alternative franchises continue to perform ahead of benchmark.

BancassuranceThe commercial bancassurance joint venture relationship with Standard Bank, which is applicable across the group’s asset management and insurance operations, continues to make a considerable contribution to new business volumes and earnings. The total indexed new business premiums sold under the agreement amounted to R1,4 billion (30 June 2015: R1,5 billion).

Capital adequacy coverThe capital adequacy cover of Liberty Group Limited remained strong at 2,95 times the statutory requirement (31 December 2015: 3,03 times). All other group subsidiary life licences were adequately capitalised.

Capital adequacy requirements in South Africa are set at the higher of the “termination” (TCAR) basis or “ordinary” (OCAR) basis. Both 30 June 2016 and 31 December 2015 reflected OCAR as the higher amount.

Dividends

2016 interim dividend In line with the group’s interim dividend policy of paying 40% of the prior full year dividend, the board has approved and declared a gross interim dividend of 276 cents per ordinary share. The interim dividend will be paid out of income reserves and is payable on Monday, 5 September 2016 to all ordinary shareholders recorded in the books of Liberty Holdings Limited on the record date.

The dividend of 276 cents per ordinary share will be subject to a local dividend tax rate of 15% which will result in a net interim dividend, to those shareholders who are not exempt from paying dividend tax, of 234,6 cents per ordinary share. Liberty Holdings Limited’s income tax number is 9050/191/71/8. The number of ordinary shares in issue in the company’s share capital at the date of declaration is 286 202 373.

The important dates pertaining to the dividend are as follows:

Last date to trade cum dividend on the JSE

Tuesday, 30 August 2016

First trading day ex dividend on the JSE

Wednesday, 31 August 2016

Record date Friday, 2 September 2016

Payment date Monday, 5 September 2016

Share certificates may not be dematerialised or rematerialised between Wednesday, 31 August 2016 and Friday, 2 September 2016, both days inclusive. Where applicable, in terms of instructions received by the company from certificated shareholders, the payment of the dividend will be made electronically to shareholders’ bank accounts on payment date.

In the absence of specific mandates, cheques will be posted to shareholders. Shareholders who have dematerialised their shares will have their accounts with their CSDP or broker credited on Monday, 5 September 2016.




ProspectsManagement is taking active steps to address shorter term challenges relating to sales, the competitiveness of Liberty's product suite, persistency and cost pressures.

Operating conditions are expected to remain tough and the ongoing pressure on consumer disposable income is likely to continue in the short term. However, we are resolute in developing competitive value propositions for our customers, managing risk appropriately, deploying capital effectively and pursuing profitable growth opportunities over the long term.

Thabo Dloti Jacko MareeChief Executive Chairman

28 July 2016

Liberty Holdings Limited Incorporated in the Republic of South Africa (Registration number: 1968/002095/06)JSE code: LBHISIN code: ZAE0000127148Telephone +27 11 408 3911

Transfer SecretariesComputershare Investor Services (Pty) Limited(Registration number: 2004/003647/07)Ground Floor, 70 Marshall Street, Johannesburg 2001PO Box 61051, Marshalltown 2107Telephone +27 11 370 5000

Sponsor

These results are available at www.libertyholdings.co.za

www.libertyholdings.co.za

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The unaudited condensed interim consolidated financial statements of Liberty Holdings Limited for the six months ended 30 June 2016 have been prepared in accordance with and containing information required by:

• International Financial Reporting Standards (IFRS) including IAS 34 Interim Financial Reporting (with the exception of disclosures required under IAS 34 16A (j) relating to fair value measurement, which are not required by the JSE Listing Requirements);

• the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee;

• Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council;

• the Listings Requirements of the JSE Limited; and

• the South African Companies Act No. 71 of 2008.

The full interim report for the six months ended 30 June 2016 (which includes IAS 34 16A (j)) is available on the Liberty Holdings Limited website and upon request from the company's registered offices.

The accounting policies applied in the preparation of these interim financial statements are in terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements except for the mandatory adoption of minor amendments and early adoption of amendments to IFRS, as set out below. The minor amendments have not resulted in any material impacts to the group’s 2016 reported results, comparative periods or interim disclosures.

Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative and IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealised Losses, effective 1 January 2017, have been early adopted on 1 January 2016. These amendments are not expected to impact significantly on the group results, however increased disclosure will be required under the Disclosure Initiative amendments for the annual financial statements.

Review/auditThese interim results have not been reviewed or audited by the company's auditors PricewaterhouseCoopers Inc.

DefinitionsBEE normalised: headline earnings per share, return on equity, group equity value per share and return on group equity valueThese measures reflect the economic reality of the Black Economic Empowerment (BEE) transaction as opposed to the required technical accounting treatment that reflects the BEE transaction as a share buy-back. Dividends received on the group’s BEE preference shares (which are recognised as an asset for this purpose) are included in income. Shares in issue relating to the transaction are reinstated.

Capital adequacy requirement (CAR)The capital adequacy requirement is the minimum amount by which the Financial Services Board requires an insurer’s assets to exceed its liabilities. The assets, liabilities and CAR must be calculated using a method which meets the Financial Services Board’s requirements. Capital adequacy cover refers to the amount of capital the insurer has as a multiple of the minimum requirement.

Development costsRepresents project costs incurred on developing or enhancing future revenue opportunities.

FCTRForeign Currency Translation Reserve.

“Liberty” or “group”Represents the collective of Liberty Holdings Limited and its subsidiaries.

Long-term insurance operations – Indexed new businessThis is a measure of new business which is calculated as the sum of twelve months’ premiums on new recurring premium policies and one tenth of single premium sales.

Long-term insurance operations – Value of new business and marginThe present value, at point of sale, of the projected stream of after tax profits for new business issued, net of the cost of required capital. The present value is calculated using a risk adjusted discount rate. Margin is calculated using the value of new business divided by the present value of future modelled premiums.

Short-term insurance operations – claims loss ratioThis is a measure of underwriting risk and is measured as a ratio of claims incurred divided by the net premiums earned.

Accounting policies


Rm

Unaudited30 June

2016

Unaudited30 June

2015

Audited31 December

2015

AssetsEquipment 1 178 1 009 1 178 Owner-occupied properties 1 551 1 463 1 540 Investment properties 30 955 29 273 30 508 Intangible assets 303 314 317 Defined benefit pension fund employer surplus 300 278 301 Deferred acquisition costs 706 643 673 Interests in joint ventures 889 512 979 Reinsurance assets 1 735 1 591 1 658 Long-term insurance 1 378 1 293 1 317 Short-term insurance 357 298 341 Operating leases – accrued income 1 254 1 222 1 273 Pledged assets measured at fair value through profit or loss 17 482 16 522 19 225 Assets held for trading and for hedging 9 668 8 593 11 890 Interests in associates measured at fair value through profit or loss 19 555 16 816 16 967 Financial investments 308 017 307 464 308 818 Deferred taxation 315 364 326 Prepayments, insurance and other receivables 7 809 6 014 4 360 Cash and cash equivalents 12 820 12 297 19 305 Total assets 414 537 404 375 419 318 LiabilitiesLong-term policyholder liabilities 305 065 295 353 298 232 Insurance contracts 201 746 199 488 198 523 Investment contracts with discretionary participation features 11 691 10 112 11 250 Financial liabilities under investment contracts 91 628 85 753 88 459 Short-term insurance liabilities 990 758 937 Financial liabilities 3 916 3 906 3 914 Third party financial liabilities arising on consolidation of mutual funds 39 147 41 375 46 329 Employee benefits 1 035 958 1 400 Deferred revenue 261 235 247 Deferred taxation 3 222 4 373 4 436 Deemed disposal taxation liability 879 Provisions 196 169 168 Derivative liabilities 7 548 5 933 11 125 Repurchase agreements liabilities and collateral received 14 159 14 880 16 159 Insurance and other payables 11 265 11 455 10 041 Current taxation 507 326 337 Total liabilities 388 190 379 721 393 325 EquityShareholders’ interests 22 032 20 488 21 739 Share capital 26 26 26 Share premium 5 495 5 593 5 524 Retained surplus 17 242 15 401 16 615 Other reserves (731) (532) (426)Non-controlling interests 4 315 4 166 4 254 Total equity 26 347 24 654 25 993 Total equity and liabilities 414 537 404 375 419 318

Consolidated statement of financial positionas at 30 June 2016

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Consolidated statement of comprehensive incomefor the six months ended 30 June 2016

Rm

Unaudited30 June

2016

Unaudited30 June

2015

Audited12 months

31 December2015

RevenueInsurance premiums 19 535 18 741 39 245 Reinsurance premiums (1 022) (800) (1 673)Net insurance premiums 18 513 17 941 37 572 Service fee income from long-term policyholder investment contracts 615 483 1 145 Investment income 10 122 10 178 19 634 Hotel operations sales 288 241 524 Investment gains 6 868 5 633 12 425 Fee revenue and reinsurance commission 1 338 1 324 2 695 Total revenue 37 744 35 800 73 995 Claims and policyholder benefits under insurance contracts (19 111) (16 242) (34 362)Insurance claims recovered from reinsurers 735 501 1 203 Change in long-term policyholder liabilities (4 031) (4 175) (3 725)Insurance contracts (3 578) (4 168) (2 933)Investment contracts with discretionary participation features (517) (1) (802)Applicable to reinsurers 64 (6) 10 Fair value adjustment to long-term policyholder liabilities under investment contracts (3 671) (3 389) (6 181)Fair value adjustment to financial liabilities (14) (14)Fair value adjustment on third party mutual fund interests 250 (1 300) (7 301)Acquisition costs (2 248) (2 228) (4 760)General marketing and administration expenses (5 208) (4 775) (10 149)Finance costs (716) (397) (1 196)Profit share allocations under bancassurance and other agreements (482) (435) (933)Equity accounted earnings from joint venture 11 2 13 Profit before taxation 3 259 3 362 6 590 Taxation(1) (1 267) (1 225) (2 303)Total earnings 1 992 2 137 4 287 Other comprehensive (loss)/income (39) (73) 62 Items that may be reclassified subsequently to profit or loss (35) (86) 71 Net change in fair value on cash flow hedges 117 (40) (150)Income and capital gains tax relating to net change in fair value on cash flow hedges (29) 12 37 Foreign currency translation (123) (58) 184 Items that may not be reclassified subsequently to profit or loss (4) 13 (9)Owner-occupied properties – fair value adjustment 18 16 54 Income and capital gains tax relating to owner-occupied properties fair value adjustment (5) (5) (17)Change in long-term policyholder insurance liabilities (application of shadow accounting) (13) (11) (37)Actuarial gains/(losses) on post-retirement medical aid liability 4 19 (34)Income tax relating to post-retirement medical aid liability (1) (5) 10 Net adjustments to defined benefit pension fund(2) (10) (1) 20 Income tax relating to defined benefit pension fund 3 (5)

Total comprehensive income 1 953 2 064 4 349 Total earnings attributable to:Shareholders’ interests 1 814 1 977 4 011 Non-controlling interests 178 160 276

1 992 2 137 4 287 Total comprehensive income attributable to:Shareholders’ interests 1 799 1 927 4 010Non-controlling interests 154 137 339

1 953 2 064 4 349 Basic and fully diluted earnings per share Cents Cents CentsBasic earnings per share 666,9 741,1 1 493,5 Fully diluted basic earnings per share 647,6 704,7 1 428,0 (1) IFRS requires both policyholder and shareholder taxation to be reported in the taxation line. This therefore distorts the effective tax charge relative to profit before taxation.(2) Net adjustments to defined benefit pension fund include actuarial gains or losses, return on plan assets, reduced by the interest on the net defined benefit asset and the effect

of the application of the asset ceiling.


Summary consolidated statement of changes in shareholders' fundsfor the six months ended 30 June 2016

Rm

Unaudited30 June

2016

Unaudited30 June

2015

Audited12 months

31 December2015

Balance of ordinary shareholders’ interests at 1 January 21 739 19 487 19 487 Ordinary dividends (1 241) (1 150) (1 874)Total comprehensive income 1 799 1 927 4 010 Share buy-backs(1) (460) (337) (444)Black Economic Empowerment transaction 129 492 520 Share-based payments 67 70 140 Preference dividends (1) (1) (2)Transactions between owners (98)

Ordinary shareholders’ interests 22 032 20 488 21 739

Balance of non-controlling interests at 1 January 4 254 4 147 4 147 Total comprehensive income 154 137 339 Acquisition of interest in East African Underwriters Limited 28 Unincorporated property partnerships net distributions (108) (97) (144)Non-controlling interests share of subsidiary dividend (13) (21) (43)Non-controlling interests capital reduction (1)Transactions between owners (44)

Non-controlling interests 4 315 4 166 4 254

Total equity 26 347 24 654 25 993 (1) Share buy-backs are purchases of shares from the market to meet employee share-based payment obligations.

Summary consolidated statement of cash flowsfor the six months ended 30 June 2016

Rm

Unaudited30 June

2016

Unaudited30 June

2015

Audited12 months

31 December2015

Operating activities (8 860) 20 278 13 489 Investing activities 4 892 (21 928) (19 298)Financing activities (2 444) 1 10 937

Net (decrease)/increase in cash and cash equivalents (6 412) (1 649) 5 128 Cash and cash equivalents at the beginning of the period 19 305 13 985 13 985 Cash and cash equivalents acquired through business acquisition 6 Foreign currency translation (79) (39) 192

Cash and cash equivalents at the end of the period 12 820 12 297 19 305

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Headline earnings and earnings per sharefor the six months ended 30 June 2016

Rm (unless otherwise stated)

Unaudited30 June

2016

Unaudited30 June

2015

Audited12 months

31 December2015

Reconciliation of total earnings to headline earnings attributable to shareholdersTotal earnings attributable to shareholders 1 814 1 977 4 011 Preference share dividend (1) (1) (2)

Basic earnings attributable to ordinary shareholders 1 813 1 976 4 009 Impairment of intangible assets 110 Tax on headline earnings adjustable item (17)

Headline earnings attributable to ordinary shareholders 1 813 1 976 4 102 Net income earned on BEE preference shares 8 15 26

BEE normalised headline earnings attributable to ordinary shareholders 1 821 1 991 4 128

Weighted average number of shares in issue (‘000) 271 873 266 646 268 423 BEE normalised weighted average number of shares in issue (‘000) 280 149 282 227 281 864Fully diluted weighted average number of shares in issue (‘000) 279 957 280 402 280 736

Earnings per share Cents Cents Cents

Total earnings attributable to ordinary shareholdersBasic 666,9 741,1 1 493,5 Headline 666,9 741,1 1 528,2 BEE normalised headline 650,0 705,5 1 464,5

Fully diluted earnings attributable to ordinary shareholdersBasic 647,6 704,7 1 428,0 Headline 647,6 704,7 1 461,2


Summary consolidated segment information for the six months ended 30 June 2016

In line with the implementation of the new operating model in 2015 and the stated intention to manage the business primarily around customer groupings, the group's reportable operating segments have been aligned to the new organisational design, namely Individual Arrangements, Group Arrangements and Asset Management. In order to assist in comparison, the segment information for the six months ended 30 June 2015 has been restated. The customer facing unit is supported by shared service functions (Group Enablement) and LibFin (incorporating LibFin Markets and LibFin Investments), which are strategic competency units. The impact of LibFin Markets is disclosed in the relevant customer grouping.

The unaudited segment results for the six months ended 30 June 2016 are as follows:

Rm

Individual Arrange-

ments

Group Arrange-

ments

Asset Manage-

ment Other Total

Reporting adjust-

ments(1)IFRS

reported

Total revenue 31 992 10 275 1 755 1 139 45 161 (7 417) 37 744

Profit before taxation 1 619 235 359 900 3 113 146 3 259 Taxation (865) (111) (88) (203) (1 267) (1 267)

Total earnings 754 124 271 697 1 846 146 1 992 Other comprehensive income/(loss) 89 (20) (19) (89) (39) (39)

Total comprehensive income 843 104 252 608 1 807 146 1 953 Attributable to non-controlling interests (4) (4) (8) (146) (154)

Shareholders 843 100 248 608 1 799 1 799

Reconciliation of total earnings to headline earnings attributable to shareholders Total earnings 754 124 271 697 1 846 146 1 992 Attributable to non-controlling interests (28) (4) (32) (146) (178)Preference share dividend (1) (1) (1)

Headline earnings 754 96 267 696 1 813 1 813 Net income earned on BEE preference shares 8 8 8

BEE normalised headline earnings 754 96 267 704 1 821 1 821 (1) Reporting adjustments include the consolidation of unincorporated property partnerships, the consolidation of third party mutual fund liabilities, the classification of long-term

insurance into defined IFRS ‘investment’ and 'insurance' products, the application of shadow accounting for the change in long-term policyholder insurance liabilities and the elimination of intergroup transactions.

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Summary consolidated segment information (continued)for the six months ended 30 June 2016

The unaudited restated segment results for the six months ended 30 June 2015 are as follows:

Rm

Individual Arrange-

ments

Group Arrange-

ments

Asset Manage-

ment Other Total

Reporting adjust-ments(1)

IFRS reported

Total revenue 30 254 8 412 1 650 898 41 214 (5 414) 35 800 Profit before taxation 2 076 253 401 506 3 236 126 3 362 Taxation (1 069) (70) (97) 11 (1 225) (1 225)Total earnings 1 007 183 304 517 2 011 126 2 137 Other comprehensive loss (16) (52) (4) (1) (73) (73)Total comprehensive income 991 131 300 516 1 938 126 2 064 Attributable to non-controlling interests (8) (3) (11) (126) (137)Shareholders 991 123 297 516 1 927 1 927 Reconciliation of total earnings to headline earnings attributable to shareholders Total earnings 1 007 183 304 517 2 011 126 2 137 Attributable to non-controlling interests (31) (3) (34) (126) (160)Preference share dividend (1) (1) (1)Headline earnings 1 007 152 301 516 1 976 1 976 Net income earned on BEE preference shares 15 15 15 BEE normalised headline earnings 1 007 152 301 531 1 991 1 991

The audited segment results for the year ended 31 December 2015 are as follows:

Rm

Individual Arrange-

ments

Group Arrange-

ments

Asset Manage-

ment Other Total

Reporting adjust-ments(1)

IFRS reported

Total revenue 57 694 18 527 3 436 2 169 81 826 (7 831) 73 995 Profit before taxation 3 427 499 842 1 599 6 367 223 6 590 Taxation (1 737) (193) (205) (168) (2 303) (2 303)Total earnings 1 690 306 637 1 431 4 064 223 4 287 Other comprehensive (loss)/income (136) 138 44 16 62 62 Total comprehensive income 1 554 444 681 1 447 4 126 223 4 349 Attributable to non-controlling interests (106) (10) (116) (223) (339)Shareholders 1 554 338 671 1 447 4 010 4 010 Reconciliation of total earnings to headline earnings attributable to shareholdersTotal earnings 1 690 306 637 1 431 4 064 223 4 287 Attributable to non-controlling interests (45) (8) (53) (223) (276)Preference share dividend (2) (2) (2)Impairment of intangible assets 51 21 21 93 93 Headline earnings 1 741 282 629 1 450 4 102 4 102 Net income earned on BEE preference shares 26 26 26BEE normalised headline earnings 1 741 282 629 1 476 4 128 4 128(1) Reporting adjustments include the consolidation of unincorporated property partnerships, the consolidation of third party mutual fund liabilities, the classification of long-term

insurance into defined IFRS ‘investment’ and 'insurance' products, the application of shadow accounting for the change in long-term policyholder insurance liabilities and the elimination of intergroup transactions.


Group equity value reportas at 30 June 2016

1. IntroductionLiberty presents a “group equity value” report to reflect the combined value of the various components of Liberty’s businesses.

Section 3 below describes the valuation bases used for each reported component. It should be noted that the group equity value is presented to provide additional information to shareholders to assess performance of the group. The total equity value is not intended to be a fair value calculation of the group but should provide indicative information of the inherent value of the component parts.

2 Change in measurement basis of LibFin Markets – credit portfolio (LibFin Credit) and certain shareholder recurring costs

In order to improve relevance of sources of equity value earnings and to better align to future statutory guidance on expense modelling, with effect from 1 January 2015 the method to value the contribution of LibFin Credit and the treatment of certain recurring shareholder costs was changed as described in the 31 December 2015 annual financial statements.

These changes have been applied retrospectively with the cumulative effect recognised at 1 January 2015. The effect of these changes at 1 January 2015 was a decrease in the BEE normalised group equity value of R189 million. The 30 June 2015 results have been restated to reflect this change in the measurement basis to facilitate comparison of the 30 June 2016 figures.

3 Component parts of the group equity value and valuation techniques usedGroup equity value has been calculated as the sum of the following component parts:

3.1 South African (SA) covered business:The wholly owned subsidiary, Liberty Group Limited, comprises the South African long-term insurance entities and related asset holding entities. The embedded value methodology in terms of Advisory Practice Note 107 issued by the Actuarial Society of South Africa continues to be used to derive the value of this business cluster described as “South African covered business”. The embedded value report of the South African covered business has been reviewed by the group’s statutory actuary. The full embedded value report is included in the supplementary information section.

3.2 Other businesses:

STANLIB Valued using a 10 times (June and December 2015: 10 times) multiple of estimated sustainable earnings.

Liberty Health As Liberty Health has yet to establish a history to support a sustainable earnings calculation, an adjusted IFRS net asset value is applied.

Liberty Africa Insurance

Liberty Africa Insurance is an emerging cluster of both long and short-term insurance businesses located in various African countries outside of South Africa. A combination of valuation techniques including embedded value, discounted cash flow and earnings multiples have been applied to value these businesses. The combined value of this cluster is not material relative to the other components of group equity value and therefore a detailed analysis of this valuation has not been presented. The combined valuations approximated the cluster's IFRS net asset value. Therefore the IFRS net asset value was used.

Liberty Holdings The net market value of assets and liabilities held by the Liberty Holdings Limited company excluding investments in any subsidiaries which are valued separately.

3.3 Other adjustments: These comprise the fair value of share rights allocated to staff not employed by the South African covered businesses, adjusting certain deferred tax assets to current values and allowance for certain shareholder recurring costs incurred in Liberty Holdings Limited capitalised at a multiple of 9 times (June and December 2015: 9 times).

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Group equity value report (continued)

as at 30 June 2016

4 BEE normalised group equity value

4.1 Analysis of BEE normalised group equity value

Unaudited

SA covered business

Other businesses

Group funds

investedAdjust-

ments Net worth

Value of in-force

SA covered

business Total30 June 2016 Rm Rm Rm Rm Rm Rm Rm

SA insurance operations 13 815 13 815 (6 429) 7 386 24 627(3) 32 013 Individual Arrangements 21 968Liberty Corporate 2 659Value of in-force acquired 20 20 (20) Working capital and other assets(2) 5 261 5 261 (538) 4 723 176 4 899 South African insurance operations 19 096 19 096 (6 987) 12 109 24 803 36 912 Asset Management(4) 1 018 1 018 5 582 6 600 6 600 STANLIB South Africa(2) 762 762 5 238 6 000 6 000 STANLIB Other Africa 256 256 344 600 600 Liberty Health 330 330 330 330 Liberty Africa Insurance 772 772 772 772 Liberty Holdings 816 816 (100) 716 716 Cost of required capital (1 601) (1 601)Net equity reported under IFRS 19 096(1) 2 936 22 032 (1 505) 20 527 23 202 43 729 BEE preference funding 204 204 204 204 Allowance for future shareholder costs (1 845) (1 845) (1 845) (1 845)Allowance for employee share rights (50) (44) (94) (94) (94)BEE normalised equity value 19 250 1 047 20 297 (1 505) 18 792 23 202 41 994

Summary of adjustments:Negative rand reserves (6 429) (6 429)Deferred acquisition costs (682) (682)Deferred revenue liability 244 244 Frank Financial Services allowance for future expenses (100) (100)Carrying value of in-force business acquired (20) (20)Fair value adjustment of non SA covered business(2) 5 582 5 582 Impact of discounting on deferred tax asset (100) (100)

(6 987) 5 482 (1 505)

(1) Reconciliation to SA covered business net worth as per analysis in supplementary information

Net equity of SA covered business as reported under IFRS 19 096 Adjustments as above (6 987)Allowance for employee share rights (50)BEE preference share funding 204 Net worth as reported in supplementary information 12 263 (2) Liberty Properties was previously valued as a separate business unit. After the transaction with JHI, the development operations and Liberty’s interest (49%) in

the JHI Retail Proprietary Limited entity are included in the STANLIB South Africa valuation. In addition, the liquidity fee component charge to the property portfolio is valued as part of the Liberty Group Limited value of in-force and disclosed as an adjustment to working capital and other assets.

(3) Includes the value of LibFin Credit, previously disclosed separately in group equity value.(4) Valued using a ten times multiple of estimated sustainable earnings after normalising for once-off items.



as at 30 June 2016

4 BEE normalised group equity value (continued)

4.1 Analysis of BEE normalised group equity value (continued)

Unaudited and restated

SA covered business

Other businesses

Group funds

investedAdjust-ments Net worth

Value of in-force

SA covered

business Total30 June 2015 Rm Rm Rm Rm Rm Rm Rm

SA insurance operations 13 694 13 694 (5 990) 7 704 23 993(3) 31 697

Individual Arrangements 21 731 Liberty Corporate 2 262

Value of in-force acquired 47 47 (47)Working capital and other assets(2) 4 517 4 517 (501) 4 016 140 4 156

South African insurance operations 18 258 18 258 (6 538) 11 720 24 133 35 853 Asset Management(4) 693 693 5 807 6 500 6 500

STANLIB South Africa(2) 498 498 5 402 5 900 5 900 STANLIB Other Africa 195 195 405 600 600

Liberty Health 312 312 312 312 Liberty Africa Insurance 604 604 604 604 Liberty Holdings 621 621 (144) 477 477 Cost of required capital (1 568) (1 568)

Net equity reported under IFRS 18 258(1) 2 230 20 488 (875) 19 613 22 565 42 178 BEE preference funding 340 340 340 340 Allowance for future shareholder costs (1 882) (1 882) (1 882) (1 882)Allowance for employee share rights (123) (92) (215) (215) (215)

BEE normalised equity value 18 475 256 18 731 (875) 17 856 22 565 40 421

Summary of adjustments:Negative rand reserves (5 990) (5 990)Deferred acquisition costs (624) (624)Deferred revenue liability 223 223 Frank Financial Services allowance for future expenses (100) (100)Carrying value of in-force business acquired (47) (47)Change in measurement basis: recurring shareholder expenses (44) (44)Fair value adjustment of non SA covered business(2) 5 807 5 807 Impact of discounting on deferred tax asset (100) (100)

(6 538) 5 663 (875)


Net equity of SA covered business as reported under IFRS 18 258 Adjustments as above (6 538)Allowance for employee share rights (123)BEE preference share funding 340 Net worth as reported in supplementary information 11 937

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4.1 Analysis of BEE normalised group equity value (continued)

Audited

SA covered business

Other businesses

Group funds

investedAdjust-ments Net worth

Value of in-force

SA covered

business Total31 December 2015 Rm Rm Rm Rm Rm Rm Rm

SA insurance operations 14 427 14 427 (6 216) 8 211 23 857(3) 32 068

Individual Arrangements 21 353 Liberty Corporate 2 504

Value of in-force acquired 30 30 (30) Working capital and other assets(2) 4 806 4 806 (517) 4 289 168 4 457

South African insurance operations 19 263 19 263 (6 763) 12 500 24 025 36 525 Asset Management(4) 805 805 5 825 6 630 6 630

STANLIB South Africa(2) 546 546 5 454 6 000 6 000 STANLIB Other Africa 259 259 371 630 630

Liberty Health 373 373 373 373 Liberty Africa Insurance 736 736 736 736 Liberty Holdings 562 562 (100) 462 462 Cost of required capital (1 518) (1 518)

Net equity reported under IFRS 19 263(1) 2 476 21 739 (1 038) 20 701 22 507 43 208 BEE preference funding 322 322 322 322 Allowance for future shareholder costs (1 786) (1 786) (1 786) (1 786)Allowance for employee share rights (61) (48) (109) (109) (109)

BEE normalised equity value 19 524 642 20 166 (1 038) 19 128 22 507 41 635

Summary of adjustments:Negative rand reserves (6 216) (6 216)Deferred acquisition costs (651) (651)Deferred revenue liability 234 234 Frank Financial Services allowance for future expenses (100) (100)Carrying value of in-force business acquired (30) (30)Fair value adjustment of non SA covered business(2) 5 825 5 825 Impact of discounting on deferred tax asset (100) (100)

(6 763) 5 725 (1 038)


Net equity of SA covered business as reported under IFRS 19 263 Adjustments as above (6 763)Allowance for employee share rights (61)BEE preference share funding 322 Net worth as reported in supplementary information 12 761


as at 30 June 2016





4.2 BEE normalised group equity value earnings and value per share

Unaudited 30 June 2016

Unaudited and restated30 June 2015

Audited12 months

31 Dec 2015

RmSA covered

businessOther

businesses Total

SA covered

businessOther

businesses Total Total

BEE normalised equity value at the end of the period 35 465 6 529 41 994 34 502 5 919 40 421 41 635

Equity value at the end of the period 35 261 6 529 41 790 34 162 5 919 40 081 41 313 BEE preference shares 204 204 340 340 322

Net share buy-backs 460 460 337 337 444Funding of restricted share plan 136 (136) 115 (115) Intergroup dividends 2 000 (2 000) 1 150 (1 150) Dividends paid 1 242 1 242 1 151 1 151 1 876 BEE normalised equity value at the beginning of the period (35 268) (6 367) (41 635) (33 562) (6 273) (39 835) (39 835)

Equity value at the beginning of the period (34 946) (6 367) (41 313) (30 564) (8 653) (39 217) (39 217)Change in measurement basis: recurring shareholder expenses (1 315) 1 480 165 165Change in measurement basis: LibFin Credit (876) 900 24 24BEE preference shares (322) (322) (807) (807) (807)

BEE normalised equity value earnings 2 333 (272) 2 061 2 205 (131) 2 074 4 120

BEE normalised return on group equity value (%) 13,7 (8,8) 10,3 13,6 (4,3) 10,8 10,5BEE normalised number of shares (’000) 282 905 286 074 285 259

Number of shares in issue (’000) 271 517 270 390 270 371 Shares held for the employee restricted share scheme (’000) 4 578 4 308 3 780 Adjustment for BEE shares (’000) 6 810 11 376 11 108

BEE normalised group equity value per share (R) 148,44 141,30 145,96

The 30 June 2015 comparative figures have been restated to allow for the change in measurement bases for LibFin Credit and certain recurring shareholders expenses. Refer to section 2 above.

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4.3 Sources of BEE normalised group equity value earnings

Unaudited30 June 2016

Unaudited and restated30 June 2015

Audited12 months

31 Dec2015

Rm

SA covered business

Other businesses Total

SA covered

businessOther

businesses Total Total

Value of new business written in the period 241 16 257 353 27 380 729 Expected return on value of in-force business 1 483 1 483 1 242 1 242 2 538 Variances/changes in operating assumptions 213 (123) 90 623 (135) 488 627

Operating experience variances (including incentive outperformance) 276 35 311 496 13 509 789 Operating assumption changes (30) (158) (188) 22 (148) (126) (265)Changes in modelling methodology (33) (33) 105 105 103

Headline earnings of other businesses 247 247 307 307 635

Operational equity value profits 1 937 140 2 077 2 218 199 2 417 4 529 Non headline earnings adjustments (93)Development costs (43) (43) (24) (24) (41)Economic adjustments 385 (114) 271 (26) (57) (83) (145)

Investment return on net worth 357 (114) 243 306 (57) 249 696 Investment variances(1) (277) (277) (153) (153) 37 Change in economic assumptions 305 305 (179) (179) (878)

Change in fair value adjustments on value of other businesses (259) (259) (251) (251) (251)Change in allowance for share options/rights 11 4 15 13 2 15 121

Group equity value earnings 2 333 (272) 2 061 2 205 (131) 2 074 4 120 (1) Includes effect of R106 million (31 December 2015: negative R133 million, 30 June 2015: negative R28 million) in respect of the change in fair value of cash flow hedges supporting

LibFin Credit.

The 30 June 2015 comparative figures have been restated to allow for the change in measurement bases for LibFin Credit and certain recurring shareholders expenses. Refer to section 2 above.



4.4 Analysis of value of long-term insurance new business and margins

Rm (unless otherwise stated)

Unaudited 30 June

2016

Unaudited and restated

30 June 2015

Audited 12 months

31 December 2015

South African covered business: Individual Arrangements 734 833 1 761

Traditional Life 580 661 1 463 Direct Channel 37 31 54 Credit Life 42 39 71 LibFin Credit uplift to Individual Arrangements 75 102 173

Group Arrangements: Liberty Corporate 43 46 134

Traditional business 39 40 117LibFin Credit uplift to Group Arrangements 4 6 17

Gross value of new business 777 879 1 895 Overhead acquisition costs impact on value of new business (488) (477) (1 116)Cost of required capital (48) (49) (95)

Net value of South African covered new business 241 353 684 Present value of future expected premiums 18 226 18 749 38 886 Margin (%) 1,3 1,9 1,8

Group Arrangements: Liberty Africa Insurance Net value of new business 16 27 45 Present value of future expected premiums 225 374 679 Margin (%) 7,0 7,1 6,6

Total group net value of new business 257 380 729 Total group margin (%) 1,4 2,0 1,8

The 30 June 2015 comparative amounts for value of new business for South African covered business have been restated to allow for the change in measurement bases for LibFin Credit and certain recurring shareholders expenses. Refer to section 2 above.



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Long-term insurance new businessfor the six months ended 30 June 2016

Rm

Unaudited30 June

2016

Unaudited30 June

2015

Audited12 months

31 December2015

Sources of insurance operations total new business by product typeRetail 12 097 12 486 25 790

Single 9 911 10 398 21 392 Recurring 2 186 2 088 4 398

Institutional 665 727 2 114

Single 304 362 1 262 Recurring 361 365 852

Total new business 12 762 13 213 27 904

Single 10 215 10 760 22 654 Recurring 2 547 2 453 5 250

Insurance indexed new business 3 569 3 529 7 515 UnauditedSources of insurance indexed new business:Individual Arrangements 3 094 3 058 6 421 Group Arrangements: 475 471 1 094

Liberty Corporate 324 318 790 Liberty Africa Insurance(1) 151 153 304

(1) Liberty owns less than 100% of certain entities that make up Liberty Africa. The information is recorded at 100% and is not adjusted for proportional legal ownership.


Long-term insurance net cash flowsfor the six months ended 30 June 2016

Rm

Unaudited30 June

2016

Unaudited30 June

2015

Audited12 months

31 December2015

Net premiums by product typeRetail 20 005 19 643 40 532

Single 9 775 10 311 21 146Recurring 10 230 9 332 19 386

Institutional 5 668 5 002 12 139

Single 1 367 988 3 915Recurring 4 301 4 014 8 224

Net premium income from insurance contracts and inflows from investment contracts 25 673 24 645 52 671

Single 11 142 11 299 25 061Recurring 14 531 13 346 27 610

Net claims and policyholders benefits by product typeRetail (19 254) (15 986) (33 917)

Death and disability claims (3 249) (2 711) (5 947)Policy surrender and maturity claims (13 388) (10 815) (22 682)Annuity payments (2 617) (2 460) (5 288)

Institutional (6 772) (5 807) (13 352)

Death and disability claims (1 186) (918) (2 305)Scheme terminations and member withdrawals (5 211) (4 431) (10 358)Annuity payments (375) (458) (689)

Net claims and policyholders benefits (26 026) (21 793) (47 269)

Long-term insurance net cash flows(2) (353) 2 852 5 402 Unaudited Sources of insurance operations net cash flows:Individual Arrangements 597 3 509 6 288 Group Arrangements: (955) (651) (496)

Liberty Corporate (905) (859) (891)Liberty Africa Insurance(1) (50) 208 395

Asset Management:STANLIB Multi-manager 5 (6) (390)

(1) Liberty owns less than 100% of certain of the entities that make up Liberty Africa. The information is recorded at 100% and is not adjusted for proportional legal ownership.(2) This excludes net cash inflows attributed to the off balance sheet GateWay LISP of R129 million (30 June 2015: R663 million).

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Rbn (Unaudited)30 June

201630 June

201531 December

2015

Managed by group business units 648 615 641STANLIB South Africa 531 518 529STANLIB Other Africa(2) 53 42 50LibFin 53 48 50Other internal managers 11 7 12Externally managed 31 30 27Total assets under management(3) 679 645 668(1) Includes funds under administration.(2) Liberty owns less than 100% of certain of the entities that make up STANLIB Other Africa. The information is recorded at 100% and is not adjusted for proportional legal

ownership.(3) Included in total assets under management are the following LISP (June 2016) amounts:

Unit trusts listed (Rbn)

STANLIBmanaged

Othermanaged Total

STANLIB 36 70 106 Gateway 2 3 5

Asset management net cash flows – STANLIB(1)


Rm (Unaudited)30 June

201630 June

2015


2015

South AfricaNon-money market 1 189 5 465 6 366Retail 202 5 426 8 511Institutional 987 39 (2 145)Money market (2 136) 3 687 (672)Retail (202) (939) (1 413)Institutional (1 934) 4 626 741

Net South Africa cash (outflows)/inflows (947) 9 152 5 694Other Africa(2)

Non-money market 1 980 (87) 977

Retail (6) 249 (62)Institutional 1 986 (336) 1 039 Money market (580) 1 252 1 783 Net Other Africa cash inflows 1 400 1 165 2 760 Net cash inflows from asset management 453 10 317 8 454(1) Cash flows exclude intergroup segregated life fund mandates and Delta LISP with effect from June 2016.(2) Liberty owns less than 100% of certain of the entities that make up STANLIB Other Africa. The information is recorded at 100% and is not adjusted for proportional legal

ownership.

Assets under management(1)

as at 30 June 2016


Short-term insurance indicatorsfor the six months ended 30 June 2016

Rm

Unaudited30 June

2016

Unaudited30 June

2015

Audited 12 months

31 December2015

Net premiums 805 571 1 249 Liberty Health – medical risk 508 366 778 Liberty Africa Insurance – motor, property, medical and other 297 205 471 Net claims (496) (343) (771)Liberty Health – medical risk (353) (251) (554)Liberty Africa Insurance – motor, property, medical and other (143) (92) (217)

Net cash inflows from short-term insurance 309 228 478 UnauditedClaims loss ratio (%)

Liberty Health 70 69 71 Liberty Africa Insurance 48 45 46 Combined loss ratio (%)Liberty Health 99 100 101 Liberty Africa Insurance 91 96 97

Capital commitmentsas at 30 June 2016

Rm

Unaudited30 June

2016

Unaudited30 June

2015

Audited 31 December

2015

Equipment 366 220 401 Investment and owner-occupied properties 1 760 2 283 1 495 Unconsolidated structured entities(1) 351 Total capital commitments 2 126 2 854 1 896 Under contracts 714 2 005 903 Authorised by the directors but not contracted 1 412 849 993

(1) These were undrawn commitments to various unconsolidated structured entities and mainly form part of the ongoing build of LibFin Credit asset portfolio. Drawing was subject to covenant checks by Liberty.

The above 2016 capital commitments will be financed by available bank facilities, existing cash resources, internally generated funds and R135 million (31 December 2015: R225 million) from non-controlling interests in unincorporated property partnerships in respect of investment properties.

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Corporate actionsfor the six months ended 30 June 2016

Unaudited

Acquisition of East African Underwriters Limited (EAUL) Effective 12 January 2016, Liberty Holdings Limited acquired a 51% stake in EAUL for R45 million. EAUL is a short-term insurance business in Uganda. This transaction has an insignificant impact on the group financial results.

Retirement benefit obligationsas at 30 June 2016

Unaudited

Post-retirement medical benefitThe group operates an unfunded post-retirement medical aid benefit for permanent employees who joined the group prior to 1 February 1999 and agency staff who joined prior to 1 March 2005.

As at 30 June 2016, the Liberty post-retirement medical aid benefit liability was R497 million (31 December 2015: R480 million).

Defined benefit retirement fundsThe group operates a number of defined benefit pension schemes on behalf of employees. All these funds are closed to new membership and are well funded with no deficits reported.


Related partiesfor the six months ended 30 June 2016

UnauditedStandard Bank Group Limited and any subsidiary (excluding Liberty) is referred to as Standard Bank in the context of this section.

The following selected significant related party transactions have occurred or have been contracted in the 30 June 2016 financial period:

1. Summary of related party transactions with Standard Bank1.1 Summary of movement in investment in ordinary shares held by the group in the group’s holding

company is as follows:

Number’000

Fair valueRm

Ownership%

Standard Bank Group LimitedBalance at 1 January 2016 10 501 1 192 0,66 Purchases 3 228 361Sales (3 250) (387)Fair value adjustments 173Balance at 30 June 2016 10 479 1 339 0,66

1.2 Bancassurance The Liberty group has joint venture bancassurance agreements with the Standard Bank group for the manufacture, sale and promotion of insurance, investment and health products through the Standard Bank’s African distribution capability. New business premium income in respect of this business in 2016 amounted to R3 108 million (2015 full year: R7 503 million). In terms of the agreements, Liberty’s group subsidiaries pay joint venture profit shares to various Standard Bank operations. The amounts to be paid are in most cases dependent on source and type of business and are paid along geographical lines. The total combined net profit share amounts accrued as payable to the Standard Bank group for the six months to 30 June 2016 is R470 million (2015 full year: R896 million).

The bancassurance agreements are evergreen agreements with a 24-month notice period for termination – as at the date of the approval of these financial results, neither party had given notice.

A binder agreement was entered into with Standard Bank effective from 31 December 2012. The binder agreement is associated with the administration of policies sold under the bancassurance agreement, and shall remain in force for an indefinite period with a 90-day notice period for termination. Fees accrued for the six months to 30 June 2016 is R61 million (2015 full year: R110 million).

1.3 Purchases and sales of financial instrumentsAs per Liberty's 2015 annual financial statements, in the normal course of conducting business, Liberty deposits cash with Standard Bank, purchases and sells financial instruments issued by Standard Bank and enters into sale and repurchase agreements and derivative transactions with Standard Bank. These transactions are at arm’s length and are primarily used to support investment portfolios for policyholders and shareholders’ capital.

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Related parties (continued)


2. Summary of related party transactions with other group entities2.1 Acquisition of investment from an interest in associate As at 30 June 2016, Liberty held an investment in the South Africa Infrastructure Fund Trust (SAIF), which was accounted for as an interest in associate measured at fair value through profit or loss. SAIF has commenced a process to realise its assets. Through this process Liberty, on 4 July 2016, purchased a share in Trans African Concessions (TRAC) Proprietary Limited from SAIF for an amount of R1,5 billion. This purchase is part of an agreed arrangement with several partners that will facilitate the establishment of a STANLIB managed infrastructure fund holding various non-controlling interests in toll road concessions. This fund is likely to be accounted for as a mutual fund subsidiary of Liberty.

2.2 Proposed sale of hotels businesses to The Cullinan Hotel Proprietary Limited (Cullinan)Liberty has entered into a sale of business agreement with Cullinan to dispose of the interests in the two investment properties and accompanying hotel businesses for an aggregate cash consideration of R310 million. Liberty has a 40% interest in Cullinan, which is accounted for as an associate measured at fair value through profit or loss.

There will be no significant financial impacts to Liberty’s results or statement of financial position arising from this disposal.

There are no other significant changes to related party transactions as reported in Liberty's 2015 annual financial statements.


The group does not have any financial assets or financial liabilities that are currently subject to offsetting in accordance with IAS 32 Financial Instruments: Presentation. Master netting arrangements (MNA) or similar agreements entered into only allow setoff on default. However, related amounts not offset in the statement of financial position that are subject to MNA or similar agreements are disclosed in the table below:

Rm

Total per statement of financial

position

Not subject to MNA

or similar agreements

Subject to MNA

or similar agreements

Financial collateral Net amount

Unaudited30 June 2016AssetsAssets held for trading and for hedging 9 668 (621) 9 047 (7 525) 1 522 Pledged assets measured at fair value through profit or loss 17 482 17 482 (14 159) 3 323

Total 27 150 (621) 26 529 (21 684) 4 845

LiabilitiesDerivative liabilities 7 548 (23) 7 525 (7 525)Repurchase agreements liabilities and collateral received 14 159 14 159 (14 159)

Total 21 707 (23) 21 684 (21 684)

Audited31 December 2015AssetsAssets held for trading and for hedging 11 890 (163) 11 727 (10 982) 745 Pledged assets measured at fair value through profit or loss 19 225 19 225 (16 153) 3 072

Total 31 115 (163) 30 952 (27 135) 3 817

LiabilitiesDerivative liabilities 11 125 (143) 10 982 (10 982)Repurchase agreements liabilities and collateral received 16 159 16 159 (16 153) 6

Total 27 284 (143) 27 141 (27 135) 6

Offsetting, enforceable master netting arrangements or similar agreementsas at 30 June 2016

Supplementaryinformation


For the six months ended 30 June

2016

CONTENTSGROUPAnalysis of ordinary shareholders' funds 51Analysis of group earnings – core earnings 52Summary of BEE transaction status 54Reconciliation of business unit earnings to segment result 53South African covered business embedded value 56 Bancassurance – Benefit to Liberty 62 90:10 Shareholder exposure 62 Long-term policyholder liabilities IFRS reconciliation 63 South African insurance distribution headcount 63 Long-term insurance – New business by distribution channel(1) 64 Total long-term insurance premiums 66

BALANCE SHEET MANAGEMENT 18

LibFin – Shareholder Investment Portfolio exposure 66 LibFin – Shareholder Investment Portfolio percentage allocation 67 LibFin – Shareholder Investment Portfolio return 67

INDIVIDUAL ARRANGEMENTS 18

Individual Arrangements – Headline earnings 68 Individual Arrangements – Key performance indicators 68 Individual Arrangements – Indexed new business 69 Individual Arrangements – Maintenance cost per policy 69 Individual Arrangements – Negative rand reserves 69

GROUP ARRANGEMENTS 18

Liberty Corporate – Headline earnings 70 Liberty Corporate – Key performance measures 70 Liberty Health – Headline earnings 71 Liberty Health Cover Product – Lives serviced 71 Liberty Africa Insurance – Headline earnings 72 Liberty Africa Insurance – Key performance indicators 72 Liberty Africa Insurance – Long-term insurance net cash flows 73 Liberty licensed entity presence in Africa 73

ASSET MANAGEMENT 18

STANLIB South Africa – Headline earnings 74 STANLIB South Africa – Net cash flows and assets under management by asset category 74 STANLIB South Africa – Assets under management breakdown by source and asset type 75 STANLIB South Africa – Retail investment performance 76 STANLIB South Africa – Institutional investment performance 76 STANLIB South Africa – Investment performance 77 STANLIB Other Africa – Assets under management 77 STANLIB Other Africa – Assets under management by geographical location 78

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Analysis of ordinary shareholders' fundsfor the six months ended 30 June 2016

Group funds invested Contribution to earnings

Rm30 June

201630 June

2015


201530 June

201630 June

2015


2015

South African insurance 19 096 18 258 19 263 1 657 1 790 3 704

Insurance operating surplus 998 1 338 2 487 Present value of in-force business 20 47 30 (10) (27) (44)Investment portfolios 13 815 13 694 14 427 605 398 1 144 Fixed assets and working capital(1) 8 761 8 017 8 306 170 185 326 Subordinated notes (excluding accrued interest) (3 500) (3 500) (3 500) (106) (104) (209)

Other insurance 1 102 916 1 109 (20) (9) (15)

Liberty Africa Insurance 772 604 736 11 28 25 Growth initiatives (20) (15) (21)Liberty Health 330 312 373 (11) (22) (19)

Asset Management 1 018 693 805 267 301 629

STANLIB South Africa(2) 762 498 546 249 271 567 STANLIB Other Africa 256 195 259 18 30 62

Central overheads and sundry income (90) (105) (214)

Centre expenses and sundry income (110) (123) (257)Liberty Properties(2) 20 18 43

Liberty Holdings Limited 816 621 562 Preference share dividend (1) (1) (2)

Headline earnings 1 813 1 976 4 102 Preference share dividend 1 1 2 Impairment of intangible assets (93)

Liberty Holdings shareholders’ funds/total earnings 22 032 20 488 21 739 1 814 1 977 4 011

BEE normalised:Liberty Holdings shareholders’ funds/headline earnings 22 032 20 488 21 739 1 813 1 976 4 102 BEE preference shares 204 340 322 8 15 26

BEE normalised shareholders’ funds/headline earnings 22 236 20 828 22 061 1 821 1 991 4 128 (1) With effect from 1 July 2005 Liberty Group Limited established a working capital funding loan between insurance operations and shareholder assets, subsequently supported

by the subordinated notes issue. Inter-divisional interest is charged at 8,77% nacm.(2) Liberty entered into a strategic partnership with the retail division of JHI combining the collective property management service capabilities under a joint venture entity,



Analysis of group earnings – core earningsfor the six months ended 30 June 2016

Rm30 June

201630 June

2015


2015

Individual Arrangements planned margin release including annual contribution increases 913 939 1 908 Individual Arrangements credit life 82 70 147 Individual Arrangements VIF amortisation (10) (27) (44)LibFin Markets 130 125 260 Expected long-term rate of return on Shareholder Investment Portfolio(1) 747 692 1 379 Other businesses headline earnings 252 298 572

Group Arrangements 68 88 204

Liberty Corporate 88 97 219 Liberty Africa Insurance 11 28 25 Liberty Health (11) (22) (19)Growth initiatives (20) (15) (21)

Asset Management 267 301 629

STANLIB South Africa(2) 249 271 567 STANLIB Other Africa 18 30 62

Central overheads and sundry income (83) (91) (261)

Centre overheads and sundry income (111) (124) (330)Liberty Properties(2) 20 18 43 BEE preference share income 8 15 26

Core operating earnings 2 114 2 097 4 222 Individual Arrangements new business strain (270) (182) (392)Individual Arrangements operating variances, assumption changes and other 3 73 250 Sundry income strategic investment return 71

Adjusted core operating earnings 1 847 1 988 4 151 Variance to long-term rate of return on Shareholder Investment Portfolio (26) 3 (23)

BEE normalised headline earnings 1 821 1 991 4 128 (1) The expected long-term rate of return on the SIP portfolio is based on the long-term view to avoid volatility in the core operating earnings.(2) Liberty entered into a strategic partnership with the retail division of JHI combining the collective property management service capabilities under a joint venture entity,


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Summary of BEE transaction statusas at 30 June 2016

Safika Holdings

Proprietary Limited

Shanduka Group

Proprietary Limited

The Black Managers’

Trust

The Liberty Community

Trust Total

Number of shares (’000)Balance at date of trading restrictions lifted 6 191 4 127 10 319 5 159 25 796 Shares traded or transferred to participant on settlement of proportional debt (6 191) (8 229) (14 420)

Balance at 30 June 2015 4 127 2 090 5 159 11 376 Shares traded or transferred to participant on settlement of proportional debt (268) (268)

Balance at 31 December 2015 4 127 1 822 5 159 11 108 Shares traded or transferred to participant on settlement of proportional debt (4 127) (171) (4 298)

Balance at 30 June 2016 1 651 5 159 6 810

Preference share debt (Rm)Balance at date of trading restrictions lifted 191 127 324 165 807 Shares traded or transferred to participant on settlement of proportional debt (191) (12) (264) (467)

Balance at 30 June 2015 115 60 165 340 Shares traded or transferred to participant on settlement of proportional debt (8) (10) (18)

Balance at 31 December 2015 107 50 165 322 Shares traded or transferred to participant on settlement of proportional debt (107) (11) (118)

Balance at 30 June 2016 39 165 204

Liberty’s 100% held subsidiary, Liberty Group Limited, entered into a series of transactions during 2004 whereby an investment in aggregate of R1 251 million was made in cumulative redeemable preference shares. The proceeds of this transaction were used by the BEE entities to purchase Liberty Group Limited shares. On 1 December 2008, in terms of a Companies Act section 311 transaction to remove Liberty Holdings’ control structure, each BEE entity accepted an exchange of Liberty Holdings Limited ordinary shares for Liberty Group Limited shares on a one for one basis.

The cumulative redeemable preference shares attract dividends at 67% (with effect from 1 March 2008) of Standard Bank’s prime lending rate. The preference dividends are payable on each date the company (which has issued the preference shares) receives an ordinary dividend from Liberty Holdings Limited.

The preference shares do not meet the definition of a financial asset in terms of International Financial Reporting Standards and therefore the investment value of the preference shares has reduced group equity and is stated in the analysis of group equity as a negative empowerment reserve. Receipt of preference share redemptions and dividends are credited directly to reserves.

For the purposes of earnings per share calculations, the weighted average number of ordinary shares in issue is reduced by the number of Liberty shares held by the empowerment subsidiaries directly funded by the proceeds received from the preference shares. In accordance with interpretations of International Financial Reporting Standards, the reduction of the weighted average number of shares will reduce to the extent that the preference shares are redeemed or to the extent any preference shares are sold to an external party without recourse.

With effect from 1 January 2015 the trading restrictions on the underlying Liberty Holdings shares securing the cumulative redeemable preference shares were lifted. If however, part or all these shares are traded, any related outstanding preference share liability would need to be settled from the proceeds.


Reconciliation of business unit earnings to segment resultfor the six months ended 30 June 2016

Business unit (Rm)

Individual Arrange-

ments

GroupArrange-

ments

Asset Manage-

ment Other Total

30 June 2016

Individual Arrangements 718 718 Group Arrangements 68 68 Liberty Corporate 88 88 Liberty Africa Insurance 11 11Growth initiatives (20) (20)Liberty Health (11) (11)LibFin (Markets and Investments) 17 59 775 851 LibFin Markets – credit portfolio 91 48 139 LibFin Markets – asset/liability matching (9) 3 (3) (9)LibFin Investments – SIP (65) 8 778 721 Asset Management 267 267 STANLIB South Africa 249 249 STANLIB Other Africa 18 18 Central overheads and sundry income 19 (31) (71) (83)BEE normalised headline earnings 754 96 267 704 1 821 Preference share dividend 1 1 Net income earned on BEE preference shares (8) (8)Total earnings attributable to shareholders 754 96 267 697 1 814

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Reconciliation of business unit earnings to segment result (continued)


Business unit (Rm)

Individual Arrange-

ments

GroupArrange-

ments

Asset Manage-

ment Other Total

Allocatedrecurring

share-holder

expenses(1)Adjusted

total(1)

Restated 30 June 2015Individual Arrangements 873 873 (67) 806Group Arrangements 103 103 (15) 88Liberty Corporate 97 97 (15) 82Liberty Africa Insurance 28 28 28 Liberty Health (22) (22) (22)

LibFin (Markets and Investments) 140 49 631 820 820 LibFin Markets – credit portfolio 77 31 108 108 LibFin Markets – asset/liability matching 17 17 17 LibFin Investments – SIP 46 18 631 695 695 Asset Management 301 301 301 STANLIB South Africa 271 271 271 STANLIB Other Africa 30 30 30 Central overheads and sundry income(2) (6) (100) (106) 82 (24)BEE normalised headline earnings 1 007 152 301 531 1 991 1 991 Preference share dividend 1 1 1 Net income earned on BEE preference shares (15) (15) (15)Total earnings attributable to shareholders 1 007 152 301 517 1 977 1 977

31 December 2015Individual Arrangements 1 869 1 869 (119) 1 750Group Arrangements 225 225 (26) 199

Liberty Corporate 219 219 (26) 193Liberty Africa Insurance 25 25 25Liberty Health (19) (19) (19)

LibFin (Markets and Investments) 63 83 1 470 1 616 1 616

LibFin Markets – credit portfolio 176 84 260 260LibFin Markets – asset/liability matching (4) 4 LibFin Investments – SIP (109) (5) 1 470 1 356 1 356

Asset Management 629 629 629

STANLIB South Africa 567 567 567STANLIB Other Africa 62 62 62

Central overheads and sundry income(2) (191) (26) 6 (211) 145 (66)

BEE normalised headline earnings 1 741 282 629 1 476 4 128 4 128Preference share dividend 2 2 2 Impairment of intangible assets (51) (21) (21) (93) (93)Net income earned on BEE preference shares (26) (26) (26)

Total earnings attributable to shareholders 1 690 261 629 1 431 4 011 4 011 (1) With reference to note 2 to the group equity value report, the allocation of recurring shareholder expenses is provided to indicate what the business unit earnings would be for

2015, on this basis.(2) Central overheads included negative R15 million (December 2015: negative R21 million) relating to Growth initiatives which is reflected in Group Arrangements.


South African covered business embedded valuefor the six months ended 30 June 2016

1 Description of embedded value of South African covered businessThe prudential regulatory regime governing South African insurance companies is expected to change imminently. Liberty will continue to report embedded value on the same basis as before while the best practice for embedded value reporting emerges.

The current version of Advisory Practice Note (APN) 107 came into force for all financial years ending on or after 31 December 2012. APN 107 governs the way in which embedded values of life assurance companies are reported.

The embedded value consists of:

• The net worth; plus

• The value of in-force covered business; less

• The cost of required capital.

The net worth represents the excess of assets over liabilities on the statutory valuation method, adjusted for the elimination of the carrying value of covered business acquired and for the fair value of share rights granted to Liberty Group Limited employees.

The value of in-force covered business is the discounted value of the projected stream of after-tax shareholder profits arising from existing in-force covered business. These shareholder profits arise from the release of margins under the statutory basis of valuing liabilities, which differs from the release of profits on the published accounting basis. Covered business is defined as business regulated by the FSB as long-term insurance business written in Liberty Group Limited.

For reversionary and smoothed bonus business, the value of in-force covered business has been calculated assuming that bonuses are changed over time so that the full amount of the bonus stabilisation reserves is distributed to policyholders over the lifetime of the in-force policies.

The required capital is defined as the level of capital that is restricted for distribution to shareholders. This comprises the statutory CAR calculated in accordance with Standard of Actuarial Practice (SAP) 104 plus any additional capital considered appropriate by the board given the risks in the business. Required capital has been calculated at 1,5 x CAR, consistent with risk appetite. The cost of required capital is the present value, at the risk discount rate, of the projected release of the required capital allowing for investment returns on the assets supporting the projected required capital.

The value of new business written is the present value at the point of sale of the projected stream of after-tax profits from that business, reduced by the cost of required capital. New business is defined as covered business arising from the sale of new policies and once-off premium increases in respect of in-force covered business during the reporting period. Risk policies with an inception date prior to the reporting date where no premium has been received are included in the embedded value and value of new business. The contractual terms of these policies state that Liberty Group Limited is on risk from the inception date, even though a premium may not have been received. This definition is consistent with that used in the financial statements.

The value of new business has been calculated on the closing assumptions. Investment yields at the point of sale have been used for new fixed annuities, embedded derivatives and guaranteed investment plans; for all other business the investment yields at the date of reporting have been used.

No adjustment has been made for the discounting of tax provisions in the embedded value.

Change in measurement basis relating to LibFin Credit and certain shareholder recurring costsThe change in measurement basis of LibFin Credit and certain shareholder recurring costs is explained in section 2 of the group equity value report.

These changes were adopted with effect from 1 January 2015. The 30 June 2015 comparatives have therefore been restated to show the effect of these changes and facilitate analysis of the 30 June 2016 figures.

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South African covered business embedded value (continued)


2 BEE normalised embedded value

Rm (unless otherwise stated)30 June

2016

Restated30 June

201531 December

2015

Risk discount rate %(a) 11,79 11,21 12,77Net worth 12 263 11 937 12 761

Ordinary shareholders’ funds on published basis 19 096 18 258 19 263 BEE preference share funding 204 340 322 Adjustment of ordinary shareholders’ funds from published basis(b) (6 867) (6 391) (6 633)Adjustment for carrying value of in-force business acquired(c) (20) (47) (30)Allowance for fair value of share rights (50) (123) (61)Frank Financial Services allowance for future expenses (100) (100) (100)

Net value of life business in-force 23 202 22 565 22 507

Value of life business in-force 24 803 24 133 24 025 Cost of required capital (1 601) (1 568) (1 518)

BEE normalised embedded value 35 465 34 502 35 268

3 BEE normalised embedded value earningsEmbedded value at the end of the period 35 465 34 502 35 268 Less change in measurement basis: LibFin Credit (876) (876)Less change in measurement basis: recurring shareholder expenses (1 315) (1 315)Funding of restricted share plan 136 115 112 Intergroup dividends 2 000 1 150 2 250 Less embedded value at the beginning of the period (35 268) (31 371) (31 371)

Embedded value earnings 2 333 2 205 4 068

Return on embedded value (%) 13,7 13,6 12,2




4 Analysis of BEE normalised embedded value earnings

30 June2016

Restated30 June

2015

12 months 31 Dec 2015

RmNet

worth

Value of in-force covered

business

Cost of required

capital

Em-bedded

valueNet

worth

Value of in-force covered

business

Cost of required

capital

Em-bedded

value

Em-bedded

value

Embedded value at the end of the period 12 263 24 803 (1 601) 35 465 11 937 24 133 (1 568) 34 502 35 268 Plus dividends paid 2 000 2 000 1 150 1 150 2 250 Plus funding of restricted share plan 136 136 115 115 112 Less change in measurement basis: LibFin Credit 170 (1 046) (876) (876)Less change in measurement basis: recurring shareholder expenses 251 (1 566) (1 315) (1 315)Embedded value at the beginning of the period (12 761) (24 025) 1 518

(35 268) (11 838) (20 989) 1 456 (31 371) (31 371)

Embedded value earnings 1 638 778 (83) 2 333 1 785 532 (112) 2 205 4 068 Components of embedded value earningsValue of new business written in the period (766) 1 055 (48) 241 (782) 1 184 (49) 353 684 Expected return on value of in-force business(d) 1 463 20 1 483 1 234 8 1 242 2 538 Expected net of tax profit transfer to net worth 2 154 (2 154) 1 966 (1 966) Operating experience variances(e) 179 55 42 276 199 276 21 496 764 Operating assumption changes(f) (4) 71 (97) (30) 23 (1) 22 (111)Changes in modelling methodology (48) 15 (33) (23) 82 46 105 103 Embedded value earnings from operations 1 515 505 (83) 1 937 1 383 809 26 2 218 3 978 Economic adjustments 112 273 385 389 (277) (138) (26) 15 Investment return on net worth(g) 357 357 306 306 856 Investment variances(h) (15) (262) (277) 69 (82) (140) (153) 37 Changes in economic assumptions(i) (230) 535 305 14 (195) 2 (179) (878)Change in allowance for fair value of share rights(j) 11 11 13 13 75 BEE normalised embedded value earnings 1 638 778 (83) 2 333 1 785 532 (112) 2 205 4 068

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Notes to embedded valuea) Future investment returns on major asset classes and other economic assumptions have been set with reference to the

market yield on medium-term South African government stock.

Investment return p.a.

%30 June

201630 June

201531 December

2015

Government stock 8,99 8,41 9,97Equities 12,49 11,91 13,47Property 9,99 9,41 10,97Cash 7,49 6,91 8,47

The risk discount rate has been set equal to the risk free rate plus 80% of the equity risk premium 11,79 11,21 12,77

Maintenance expense inflation rate 7,24 5,41 6,97

b) Adjustment of ordinary shareholders’ funds from the published basis

The amounts represent the change in the amount of shareholder funds as a result of moving from a published valuation basis to the statutory valuation basis. This is largely due to the elimination of certain negative rand reserves on the statutory valuation basis. The reduction in net worth results in a corresponding increase in the value of in-force.

c) Adjustment for carrying value of in-force business acquired

The carrying value of business acquired by Liberty has been deducted from shareholders’ funds in order to avoid double counting. For embedded value purposes, the value in respect of this acquired business is included in the value of life business in-force. The net 30 June 2016 adjustment was R20 million (31 December 2015: R30 million, 30 June 2015: R47 million).

d) The expected return on the value of life business is obtained by applying the previous year’s risk discount rate to the value of life business in-force at the beginning of the period and the current year’s risk discount rate from the point of sale to the valuation date in respect of the value of new business.




Notes to embedded value (continued)

e) Operating experience variances (including incentive outperformance) consist of the combined effect on net worth and value of in-force of operating experience being different to that anticipated at the prior year end.

The net 30 June 2016 operating experience variance of R276 million (31 December 2015: R764 million, 30 June 2015: R496 million) comprised:

RmOperating experience variances Net worth

Value of in-force

covered business

Cost of required

capitalEmbedded

value

30 June 2016

Individual Arrangements 80 98 178 Mortality and morbidity 84 45 129 Policyholder behaviour (8) 26 18 Other, including tax variances 4 27 31 Group Arrangements 48 (43) 5Credit portfolio variance 62 62 Property portfolio liquidity fee variance (1) (1)Other (non Individual Arrangements) (10) 42 32 Total 179 55 42 276 Restated 30 June 2015Individual Arrangements 159 164 323 Mortality and morbidity 135 43 178 Policyholder behaviour 1 94 95 Other, including tax variances 23 27 50 Group Arrangements 28 (28)Credit portfolio variance 41 41 Property portfolio liquidity fee 3 140 143 Short-term incentives outperformance (36) (36)Cash settled incentives linked to share price (14) (14)Other (non Individual Arrangements) 18 21 39 Total 199 276 21 496 31 December 2015Individual Arrangements (24) 213 189 Mortality and morbidity 60 70 130 Policyholder behaviour (41) 184 143 Other, including tax variances (43) (41) (84)Group Arrangements 67 26 93 Credit portfolio variance 161 161 Property portfolio liquidity fee 14 168 182 Short-term incentives outperformance (60) (60)Cash settled incentives linked to share price (4) (4)Other (non Individual Arrangements), mainly release of tax over-provisions 201 2 203 Total 355 407 2 764

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Notes to embedded value (continued)

f) The amount of negative R30 million (31 December 2015: negative R111 million, 30 June 2015: R22 million) arises mainly due to the effect of the change in the capital gains tax inclusion rate on the cost of required capital amounting to R97 million.

g) Reconciliation of embedded value investment return on net worth to LibFin Investments earnings:

Rm30 June

2016

Restated30 June

201531 December

2015

LibFin Investments 721 695 1 356 Adjustments for differences between the statutory and published bases (282) (164) (327)90:10 book (56) (145) (275)Frank Financial Services (47) (118) (119)Bancassurance obligations relating to Liberty Africa and STANLIB (6) (6) (21)Software asset impairment (44)BEE preference share scheme 11 25 35 Other 16 19 251

Investment return on net worth 357 306 856

h) Includes effect of R106 million (31 December 2015: negative R133 million, 30 June 2015: negative R28 million) in respect of the change in fair value of cash flow hedges supporting LibFin Credit.

i) The amount of R305 million (31 December 2015: negative R878 million, 30 June 2015: negative R179 million) relates to changes in economic assumptions as described in note a, and includes the 1,75% relative increase in the expense inflation rate.

j) The amount of R11 million (31 December 2015: R75 million, 30 June 2015: R13 million) in respect of the change in the fair value of share rights arises from the change in the number of share rights for staff employed by Liberty Group Limited and the change in the market value of Liberty Holdings Limited share price over the reporting period.

Other bases, bonus rates and assumptionsTaxation has been allowed for at rates and on bases applicable to Section 29A of the Income Tax Act. Full taxation relief on expenses to the extent permitted was assumed. Capital gains taxation has been taken into account in the embedded value.

Parameters reflect best estimates of future experience, consistent with the valuation bases used by the statutory actuaries, excluding any compulsory or discretionary margins. However, in contrast to the assumptions in the valuation basis, the embedded value makes allowance for non-compulsory automatic premium and benefit increases.

The assets backing the required capital are consistent with the long-term strategic mix of shareholder funds approved by the Liberty Holdings board.


Bancassurance – Benefit to Libertyas at 30 June 2016

Liberty share (Rm)30 June

201630 June

201531 December

2015

Credit LifeIFRS headline earnings 82 70 147 Embedded value of in-force contracts 450 441 413 Other insurance productsEmbedded value of new business 21 40 69 Embedded value of in-force contracts 1 084 1 042 1 048 STANLIBNet service fees on assets under management sourced from Standard Bank distribution 201 173 351

90:10 Shareholder exposure as at 30 June 2016

The “90:10 exposure” refers to the shareholders exposure to certain policyholder portfolios on which a fee arrangement exists whereby the investment return on the portfolios is shared between the policyholders and shareholders in a 90:10 ratio.

As a result of the market risk that arises for shareholders on this exposure it is managed as part of the Shareholders Investment Portfolio (SIP) and consequently the earnings form part of the SIP returns and are included in the LibFin Investments revenue account.

Because of its nature as a management fee the present value of these 90:10 fees are included in the Value of In Force of the business and the annual expected amount forms part of the expected transfer to Net Worth in the AoEV. There is therefore an inconsistency between the

IFRS revenue account (shown as LibFin Investments revenue) and the AoEV (shown as expected Life Fund Operating earnings).

Rm30 June

201630 June

201531 December

2015

Exposure as at the beginning of the period 4 622 4 757 4 757

Expected earnings 197 152 309 Variance (141) (7) (34)

Total net earnings 56 145 275

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Long-term policyholder liabilities IFRS reconciliation as at 30 June 2016

Rm30 June

201630 June

201531 December

2015

Policyholder liabilities at beginning of the period net of reinsurance 296 915 286 214 286 214 Transfers to policyholder liabilities 6 892 7 956 10 238

Net premium income from insurance contracts and inflows from investment contracts 25 673 24 645 52 671

Net insurance premiums 17 708 17 370 36 323 Fund inflows from investment contracts 7 965 7 275 16 348

Investment returns 15 604 13 209 21 677 Net claims and policyholder benefits (26 026) (21 793) (47 269)

Net insurance claims (17 880) (15 398) (31 256)Fund outflows from investment contracts (8 146) (6 395) (16 013)

Acquisition costs (1 973) (1 970) (4 208)Management expenses, finance costs and profit share allocations (4 452) (3 629) (8 583)Taxation (971) (1 050) (1 779)Operating profit from insurance operations (963) (1 456) (2 271)

Foreign currency translation reserve (120) (110) 463

Policyholder liabilities at end of period net of reinsurance 303 687 294 060 296 915 Reinsurance assets 1 378 1 293 1 317

Policyholders liabilities at end of period as published 305 065 295 353 298 232

South African insurance distribution headcount as at 30 June 2016

0

400

800

1 200

1 600

Agency1 Liberty entrepreneurs1 Liberty@work1 Standard Bank Financial Consultants

BrokerConsultants1 Tied agents.

December 2012 December 2013 December 2014 December 2015 June 2016

1 043

1 501

779

673

181


Long-term insurance – New business by distribution channel(1) for the six months ended 30 June 2016

Recurring premiums Single premiums Total premiums Indexed premiums

Rm30 June

201630 June

201531 December

201530 June

201630 June

201531 December

201530 June

201630 June

201531 December

201530 June

201630 June

201531 December

2015

Retail 2 741 2 614 5 603 9 911 10 398 21 392 12 652 13 012 26 995 3 732 3 655 7 743

Broker 615 569 1 328 2 934 2 910 5 852 3 549 3 479 7 180 908 860 1 913Bancassurance 1 206 1 147 2 344 1 928 2 670 5 243 3 134 3 817 7 587 1 399 1 414 2 869Tied channels(2) 814 798 1 701 4 776 4 708 9 928 5 590 5 506 11 629 1 292 1 269 2 694Other 106 100 230 273 110 369 379 210 599 133 112 267

Institutional 361 365 852 304 362 1 262 665 727 2 114 391 401 978

Broker 202 182 438 77 88 602 279 270 1 040 209 191 499Bancassurance 11 12 19 2 11 12 21 11 12 19Tied channels(2) 128 153 360 205 134 494 333 287 854 149 166 409Other 20 18 35 22 140 164 42 158 199 22 32 51

Total new business 3 102 2 979 6 455 10 215 10 760 22 654 13 317 13 739 29 109 4 123 4 056 8 721

Split between:South Africa(1)

Individual Arrangements 2 660 2 547 5 493 9 886 10 371 21 334 12 546 12 918 26 827 3 648 3 585 7 627


Liberty Corporate 294 283 669 297 352 1 214 591 635 1 883 324 318 790

Broker 165 166 398 70 78 556 235 244 954 172 174 454Bancassurance 10 7 13 10 7 13 10 7 13Tied channels(2) 110 109 258 205 134 494 315 243 752 131 122 307Other 9 1 22 140 164 31 141 164 11 15 16


Liberty Africa InsuranceRetail 81 67 110 25 27 58 106 94 168 84 70 116

Broker 1 1 1 Bancassurance 29 64 84 7 14 27 36 78 111 30 65 87Tied channels(2) 45 45 45 Other 6 3 26 18 13 31 24 16 57 8 5 29

Institutional 67 82 183 7 10 48 74 92 231 67 83 188

Broker 37 16 40 7 10 46 44 26 86 37 17 45Bancassurance 1 5 6 2 1 5 8 1 5 6Tied channels(2) 18 44 102 18 44 102 18 44 102Other 11 17 35 11 17 35 11 17 35

Total new business 148 149 293 32 37 106 180 186 399 151 153 304(1) Includes premium escalations for Individual Arrangements; excludes STANLIB Multi-manager.(2) Tied channels include Agency, Liberty entrepreneurs and Liberty@work.

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Long-term insurance – New business by distribution channel(1) for the six months ended 30 June 2016

Recurring premiums Single premiums Total premiums Indexed premiums

Rm30 June

201630 June

201531 December

201530 June

201630 June

201531 December

201530 June

201630 June

201531 December

201530 June

201630 June

201531 December

2015

Retail 2 741 2 614 5 603 9 911 10 398 21 392 12 652 13 012 26 995 3 732 3 655 7 743


Institutional 361 365 852 304 362 1 262 665 727 2 114 391 401 978

Broker 202 182 438 77 88 602 279 270 1 040 209 191 499Bancassurance 11 12 19 2 11 12 21 11 12 19Tied channels(2) 128 153 360 205 134 494 333 287 854 149 166 409Other 20 18 35 22 140 164 42 158 199 22 32 51


Split between:South Africa(1)

Individual Arrangements 2 660 2 547 5 493 9 886 10 371 21 334 12 546 12 918 26 827 3 648 3 585 7 627


Liberty Corporate 294 283 669 297 352 1 214 591 635 1 883 324 318 790

Broker 165 166 398 70 78 556 235 244 954 172 174 454Bancassurance 10 7 13 10 7 13 10 7 13Tied channels(2) 110 109 258 205 134 494 315 243 752 131 122 307Other 9 1 22 140 164 31 141 164 11 15 16


Liberty Africa InsuranceRetail 81 67 110 25 27 58 106 94 168 84 70 116

Broker 1 1 1 Bancassurance 29 64 84 7 14 27 36 78 111 30 65 87Tied channels(2) 45 45 45 Other 6 3 26 18 13 31 24 16 57 8 5 29

Institutional 67 82 183 7 10 48 74 92 231 67 83 188

Broker 37 16 40 7 10 46 44 26 86 37 17 45Bancassurance 1 5 6 2 1 5 8 1 5 6Tied channels(2) 18 44 102 18 44 102 18 44 102Other 11 17 35 11 17 35 11 17 35

Total new business 148 149 293 32 37 106 180 186 399 151 153 304(1) Includes premium escalations for Individual Arrangements; excludes STANLIB Multi-manager.(2) Tied channels include Agency, Liberty entrepreneurs and Liberty@work.


Total long-term insurance premiumsfor the six months ended 30 June 2016

Recurring premiums Single premiums Total premiums

Rm30 June

201630 June

201530 June

201630 June

201530 June

201630 June

2015

Individual Arrangements 9 976 9 117 9 744 10 290 19 720 19 407 Liberty Corporate 4 080 3 804 1 123 888 5 203 4 692 Liberty Africa Insurance 475 425 64 37 539 462 STANLIB Multi-manager 211 84 211 84

Total premiums 14 531 13 346 11 142 11 299 25 673 24 645

Indexed premiums 15 645 14 476

Individual Arrangements 10 950 10 146 Liberty Corporate 4 192 3 893 Liberty Africa Insurance 482 429 STANLIB Multi-manager 21 8

The difference between the single premiums reported under total long-term insurance premiums and single premiums reported under long-term insurance new business by distribution channel arises mainly from different treatment for extensions of matured policies, reinvestment of fund withdrawals, conversions of standalone funds to umbrella funds and fund member movements within Liberty administered funds.

LibFin – Shareholder Investment Portfolio exposureas at 30 June 2016

30 June 2016 31 December 2015

Local Foreign Total Local Foreign TotalExposure category Rm Rm Rm % Rm Rm Rm %

Equities(1)(2) 3 685 3 566 7 251 28 2 416 3 865 6 281 24 Bonds 5 664 238 5 902 23 5 775 242 6 017 23 Cash 5 840 1 189 7 029 27 5 560 966 6 526 25 Preference shares 604 604 2 Property(2) 2 846 2 846 11 3 986 3 986 16 Other 2 441 271 2 712 11 2 417 204 2 621 10

Total 20 476 5 264 25 740 100 20 758 5 277 26 035 100

Assets backing capital 13 815 54 14 427 55 Assets backing life funds 7 423 29 6 986 27 90:10 exposure 4 502 17 4 622 18 (1) Protection has been put into place on the portfolio's local equity exposure.(2) Listed property was reclassified from property to equity on 30 June 2016 based on some refinements to the equity mandate.

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LibFin – Shareholder Investment Portfolio percentage allocationas at 30 June 2016

30 June 2016 31 December 2015

%

Assets backing

capital

Assets backing

life funds90:10

exposure Total

Assets backing

capital

Assets backing

life funds90:10

exposure Total

Local assetsEquities 7 7 14 5 4 9Bonds, cash and property 33 19 4 56 23 27 9 59Preference shares 2 2Other 10 10 9 9Foreign assets Equities 2 8 4 14 12 3 15Bonds, cash and property 1 2 2 5 3 2 5Other 1 1 1 1

Total 54 29 17 100 55 27 18 100

LibFin – Shareholder Investment Portfolio returnas at 30 June 2016

Rm30 June

201630 June

201531 December

2015

Realised gross result 1 296 1 095 2 287 Taxation (406) (237) (565)Bond cost (147) (145) (290)Expenses (including asset management fees) (22) (18) (76)

Net profit 721 695 1 356

Gross return (%) 4,0 4,4 9,6

Taxation note:

The taxation treatment of income derived from assets backing capital is the normal taxation rules applicable to life investment portfolios. The taxation applicable to income derived from assets backing life funds and the 90:10 exposure is determined by the tax rates pertaining to each life tax fund to which the assets are allocated (I-E tax). In addition there is transfer tax at 28% on the net surplus, after the applicable I-E tax.


Individual Arrangements – Headline earningsfor the six months ended 30 June 2016

Rm30 June

201630 June

2015


2015

Expected profit and premium escalations 1 022 1 033 2 080 Variances, modelling and assumption changes 11 201 237 New business strain (270) (182) (392)Project, outperformance incentive and non cost per policy expenses (34) (42) (112)Direct Financial Services (47) (45) (49)Other (19) (98) 114 Tax variances and release of tax provisions 35 (15) (33)

Earnings before bancassurance 698 852 1 845 Liberty share of credit life bancassurance (net of all taxes) 82 70 147 Complex bancassurance preference dividend (62) (49) (123)

Headline earnings 718 873 1 869

Individual Arrangements – Key performance indicatorsas at 30 June 2016


201630 June

201531 December

2015

Net customer cash flows 726 4 172 7 790

Insurance products 597 3 509 6 288 LISP 129 663 1 502

Gross sales (excluding LISP) 11 991 12 392 25 622 Indexed new business (excluding LISP) 3 094 3 058 6 421 Value of new business(1) 242 343 654 Retail margin excluding STANLIB (%) 1,8 2,3 2,3 Retail new business margin including STANLIB (%) 1,6 2,1 2,0 (1) Value of new business at 30 June 2015 has been restated to allow for the inclusion of further shareholder and non-recurring expenses together with an allocation for

LibFin Credit.

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Individual Arrangements – Indexed new business as at 30 June 2016

Rm30 June

201630 June

201531 December

2015

Individual Arrangements Insurance (excluding emerging consumer market) 2 671 2 677 5 594 Emerging consumer market 131 120 265 Total Individual Arrangements Insurance 2 802 2 797 5 859 Direct Financial Services 50 54 115 STANLIB ‘on balance sheet’ sales 242 207 447 Total ‘on balance sheet’ sales 3 094 3 058 6 421 STANLIB ‘off balance sheet’ sales 854 912 1 947 GateWay LISP ‘off balance sheet’ sales 96 113 240 Total Individual Arrangements distribution 4 044 4 083 8 608

Individual Arrangements – Maintenance cost per policy as at 30 June 2016

R30 June

201630 June

2015(1)31 December

2015(1)

Valuation basisComplex 579 553 559Simplex 289 277 280Annuities 289 277 280(1) The maintenance cost per policy has been restated at 31 December 2015 and 30 June 2015 to allow for the inclusion of further shareholder and non-recurring expenses.

Individual Arrangements – Negative rand reserves(1)

as at 30 June 2016

Rm30 June

201630 June

201531 December

2015

Published IFRS basis 18 077 19 086 18 522 Statutory basis 9 179 10 753 9 889 (1) Gross of taxation

By their nature “negative rand reserves” includes offsets between policies with positive and negative reserves. The Directive 145 (on the statutory basis) adjustment is applied only to policies with negative reserves.


Rm30 June

201630 June

2015


2015

Gross contribution 576 528 1 107

Underwriting margin 265 225 530 Fee income 297 280 561 Pension businesses and other income 14 23 16

Longevity improvement factor assumption change (30)Expenses and other items (424) (394) (802)

Profit before tax 122 134 305 Taxation (34) (37) (86)

Headline earnings 88 97 219

Liberty Corporate – Key performance measures for the six months ended 30 June 2016


201630 June

2015


2015

Gross sales 591 635 1 883 Indexed new business 324 318 790 Value of new business(1) (1) 10 30 New business margin (%) (0,1) 0,4 0,5 Net customer cash flows (905) (859) (891)(1) Value of new business at 30 June 2015 has been restated to allow for the inclusion of further shareholder and non-recurring expenses together with an allocation for

LibFin Credit.

Liberty Corporate – Headline earnings for the six months ended 30 June 2016

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Rm30 June

201630 June

2015


2015

Earnings before depreciation and amortisation 7 (5) 27 Amortisation and depreciation (20) (18) (35)

Loss before taxation (13) (23) (8)Taxation 2 5 (14)

Headline loss (11) (18) (22)

Headline loss attributable to Liberty (11) (22) (19)

Liberty Health Cover Product – Lives servicedas at 30 June 2016

Thousands30 June

201631 December

201531 December

201431 December

2013

RegionEastern Africa 51 48 37 33Western Africa 37 36 34 30Southern Africa 25 21 19 15

Total 113 105 90 78

Liberty owned licenses 79Third party licenses 34

Liberty Health – Headline earnings for the six months ended 30 June 2016

Eastern Africa Western Africa Southern Africa

June 2016 December 2015 December 2014 December 2013

0

10

20

30

40

50

60


Liberty Africa Insurance – Headline earningsfor the six months ended 30 June 2016

Rm30 June

201630 June

2015


2015

Insurance entities earnings(1)

Long-term insurance 53 55 101 Short-term insurance 30 27 51

Headline earnings – Liberty share (before head office expenses) 83 82 152Non controlling shareholders share of headline earnings (34) (32) (64)

Liberty share of headline earnings 49 50 88Head office costs (38) (22) (63)

Net headline earnings attributable to Liberty 11 28 25(1) The headline earnings result is shown at 100% of the earnings of certain of the entities that make up Liberty Africa Insurance.

Liberty Africa Insurance – Key performance indicatorsfor the six months ended 30 June 2016


201630 June

2015


2015

Long term:Embedded value of new business written in period 16 27 45New business margin (%) 7,0 7,1 6,6Indexed new business 151 153 304Net customer cash flows (50) 208 395Short term:Net customer cash flows 154 113 254Claims loss ratio (%) 48 45 46

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Rm30 June

201630 June

2015


2015

Net premiums by product typeRetail 285 236 513 Single 31 21 71 Recurring 254 215 442 Institutional 254 226 482 Single 33 16 68 Recurring 221 210 414

Net premium income from insurance contracts and inflows from investment contracts 539 462 995 Net claims and policyholders benefits by product typeRetail (131) (88) (186)Death, critical illness and disability claims (29) (20) (55)Policy surrender and maturity claims (100) (67) (127)Annuity payments (2) (1) (4)Institutional (458) (166) (414)Death, critical illness and disability claims (64) (35) (93)Policy surrender and maturity claims (394) (131) (321)

Net claims and policyholders benefits (589) (254) (600)Net cash flow split as follows: (50) 208 395 Retail 154 148 327 Institutional (204) 60 68

Liberty licensed entity presence in Africaas at 30 June 2016

Liberty Africa Insurance – Long-term insurance net cash flowsfor the six months ended 30 June 2016

LesothoSwaziland

Botswana

South Africa

Namibia

Zambia

Tanzania

Nigeria

Uganda Kenya

KEY

Health

Health products

Life insuranceShort-term insurance

( )

( )

( )

( )

( ) ( )



201630 June

2015


2015

Net fee income 854 842 1 717

Base fees 854 845 1 704Performance fees (3) 13

Operating expenses (567) (505) (1 042)

Profit before investment income 287 337 675Other income 41 20 53

Profit before taxation 328 357 728Taxation (79) (86) (161)

Total headline earnings 249 271 567

Average margin (bps) 33 32 33Average assets under management (Rbn) 525 514 519

STANLIB South Africa – Net cash flows and assets under management by asset category as at 30 June 2016

Net cash flows Assets under management

Rm30 June

201630 June

201531 December

201530 June

201630 June

201531 December

2015

Retail – 4 516 7 880 213 751 203 058 210 803Fixed interest 393 846 498 40 159 40 075 39 201 Equity (307) (104) (310) 14 720 15 405 14 589 Property (326) 183 740 13 384 12 383 12 804 Money Market (202) (939) (1 413) 24 935 25 653 25 108 Other 442 4 530 8 365 120 553 109 542 119 101Institutional (947) 4 665 (1 404) 95 218 96 955 93 225 Fixed interest 512 (626) (1 222) 19 132 18 072 16 486 Equity 1 417 (129) 411 4 312 2 373 2 904 Property (158) (62) (780) 8 349 8 415 7 901 Money Market (1 929) 4 626 741 45 765 49 720 46 938 Other (789) 856 (554) 17 660 18 375 18 996 Liberty – Delta LISP (1 398) (29) (782) 36 327 35 816 36 188Liberty – intergroup (6 632) (6 115) (9 256) 185 916 181 417 188 920 Total (8 977) 3 037 (3 562) 531 212 517 246 529 136

STANLIB South Africa – Headline earnings for the six months ended 30 June 2016

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STAN

LIB

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Rolling period

1 Year 3 Year 5 Year

Core retail funds – quartile performance Fund name 2016 2015 2016 2015 2016 2015

STANLIB SA Equity 2 3 4 3 2 2STANLIB Equity 1 3 2 2 1 1STANLIB Growth 4 4 4 4 4 3STANLIB Value 1 4 4 4 4 4

STANLIB Balanced 2 3 3 2 2 1STANLIB Balanced Cautious 1 3 3 3 2 2STANLIB Inflation Plus 5% 4 4 4 4 4 4STANLIB Inflation Plus 3% 1 4 3 4 4 4STANLIB Absolute Plus 1 4 3 4 4 4

STANLIB Bond 2 3 2 3 1 1STANLIB Income 1 3 2 3 1 1STANLIB Money Market 2 4 3 3 2 2STANLIB Flexible Income 2 3 3 4 2 2STANLIB Aggressive Income 1 2 3 4 3 3

STANLIB Property Income 2 2 2 3 3 2

STANLIB South Africa – Institutional investment performance for the six months ended 30 June 2016

Rolling period

Survey funds (Alexander Forbes Surveys– quartile performance)


2016 2015 2016 2015 2016 2015

Large Manager – Global 3 3 4 3 3 2Full Global Mandate 3 3 3 2 2 2Domestic Only Mandate 3 3 3 4 3 3

STANLIB Core Equity 4 3 4 3 3 3STANLIB Growth Equity 4 4 4 4 3 3STANLIB Value 1 4 3 4 3 4STANLIB Enhanced Index 4 2 4 1 1 1

Absolute Return 1 4 1 4 2 4Domestic Absolute Return 4 4 4 4 4 4

STANLIB Core Bond 2 3 3 3 2 2Money Market 4 4 4 4 4 3STANLIB Institutional Property 4 2 4 3 4 2

STANLIB South Africa – Retail investment performance for the six months ended 30 June 2016

FINA

NCIA

L RESULTS


STANLIB South Africa – Investment performance as at 30 June 2016, four year history

STANLIB Other Africa – Assets under management as at 30 June 2016

Rm30 June

201630 June

201531 December

2015

Opening market value 50 317 41 257 41 257 Net cash inflows 1 297 1 142 2 398 Capital appreciation/(depreciation) 924 (69) 6 662

Closing market value 52 538 42 330 50 317

Segregated funds 32 836 24 007 29 433 Unit trusts 8 053 6 909 8 412 Money Market 11 649 11 414 12 472

Total assets under management 52 538 42 330 50 317

% of Core Retail Products in 1st and 2nd quartile

0

20

40

60

80

100


87%

27%

53%

2013 2014 2015 2016

% of Institutional Funds in 1st and 2nd quartile

0

20

40

60

80

100

1 Year 3 Year 5 year

15%

31%

62%

2013 2014 2015 May 2016


STANLIB Other Africa – Assets under management by geographical location as at 30 June 2016

Rm30 June

201630 June

201531 December

2015

Southern region(1) 27 956 25 568 28 140

Fixed interest 10 635 7 553 8 879 Equity 8 504 8 099 9 448 Property 89 48 61 Money Market 8 251 9 557 9 291 Other 477 311 461

Eastern region(2) 21 580 15 692 19 983

Fixed interest 11 276 7 718 9 377 Equity 3 870 4 150 5 119 Property 3 566 2 054 2 548 Money Market 2 868 1 770 2 939

Western region(3) 3 002 1 070 2 194

Fixed interest 628 70 396 Equity 8 Money Market 156 87 116 Other 2 218 905 1 682

Total assets under management 52 538 42 330 50 317

CombinedFixed interest 22 539 15 341 18 652 Equity 12 374 12 257 14 567 Property 3 655 2 102 2 609 Money Market 11 275 11 414 12 346 Other 2 695 1 216 2 143

52 538 42 330 50 317 (1) Southern region includes Botswana, Swaziland, Lesotho and Namibia. (2) Eastern region includes Kenya, Tanzania and Uganda.(3) Western region is Ghana.

GRO

UP AN

NU

AL FINAN

CIAL STATEMEN

TSRISK M

ANAG

EMEN

TCO

MPAN

Y ANN

UAL FIN

ANCIAL STATEM

ENTS

APPEND

ICESLiberty Holdings Limited

Annual financial statements and supporting information 2015 79

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FINA

NCIA

L RESULTS


Appendix: Fair value measurement disclosures

Financial instruments measurement analysisas at 30 June 2016

Unaudited Measurement basis Fair value hierarchy

Designation per Financial Position StatementRm

Amortised cost(1)

Equity accounted

Financial sound-

nessvalue(2) Fair value Total

Providedbelow

Notprovided(3)

AssetsPledged assets 17 482 17 482 17 482 Assets held for trading and for hedging 9 668 9 668 6 423 3 245 Interests in associates measured at fair value 19 555 19 555 19 555 Interests in joint ventures 10 879 889 879 10 Financial instruments 1 247 306 770 308 017 306 770 1 247 Prepayments, insurance and other receivables 7 809 7 809 7 809 Cash and cash equivalents 12 820 12 820 12 820 Properties (investment and owner-occupied) 33 760 33 760 33 760

Total financial instrument and property assets 1 247 10 408 743 410 000 384 869 25 131

Fair value of amortised cost assets 1 134

LiabilitiesInvestment contracts with discretionary participation features 11 691 11 691 11 691 Financial liabilities under investment contracts 91 628 91 628 91 628 Financial liabilities 3 581 335 3 916 335 3 581 Third-party financial liabilities arising on consolidation of mutual funds 39 147 39 147 39 147 Derivative liabilities 7 548 7 548 7 548 Repurchase agreements liabilities and collateral received 14 159 14 159 10 009 4 150Insurance and other payables 11 265 11 265 11 265

Total financial instrument liabilities 3 581 11 691 164 082 179 354 148 667 30 687

Fair value of amortised cost liabilities 3 441(1) Amortised cost The R1 247 million financial instrument asset relates to policyholder loans. The fair value has been determined by utilising a discounted cash flow model utilising a discount rate

of 12,5%. The financial liabilities comprise subordinated bonds of R3 576 million and redeemable preference shares of R5 million. The fair value of these liabilities is R3 436 million and R5 million respectively. The fair value of the subordinated bonds is determined by discounting the cash flows using the government bond curve and a credit spread. The credit spread ranges from 2,66% to 3,05%.

(2) Financial soundness value The financial soundness valuation methodology is described in SAP 104 issued by the Actuarial Society of South Africa. With regards to investment contracts with discretionary

participation features, the group cannot reliably measure the fair value of the investment contracts with discretionary participation features (DPF). The DPF is a contractual right that gives investors in these contracts the rights to receive supplementary discretionary returns through participation in the surplus arising from the assets held in the investment DPF fund. These supplementary returns are subject to the discretion of the group. Given the discretionary nature of these investments returns and the absence of an exchange market in these contracts, there is no generally recognised methodology available to determine fair value. These instruments are issued by the group and the intention is to hold the instruments to full contract term.

(3) Fair value hierarchy not provided The fair value of prepayments, insurance and other receivables, collateral deposits, cash and cash equivalents, insurance and other payables and collateral received approximate

their carrying value and are not included in the hierarchy table. In most cases their settlement terms are short-term and therefore, from a materiality perspective, fair values are not required to be modelled.

FINA

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L RESULTS


Appendix: Fair value measurement disclosures (continued)

Financial instruments measurement analysis (continued)as at 31 December 2015

Audited Measurement basis Fair value hierarchy

Designation per Financial Position StatementRm

Amortised cost(1)

Equity accounted

Financial soundness

value(2) Fair value TotalProvided

belowNot

provided(3)

AssetsPledged assets 19 225 19 225 19 225 Assets held for trading and for hedging 11 890 11 890 7 811 4 079 Interests in associates – measured at fair value 16 967 16 967 16 967 Interests in joint ventures 20 959 979 959 20 Financial instruments 1 210 307 608 308 818 307 608 1 210 Prepayments, insurance and other receivables 4 360 4 360 4 360 Cash and cash equivalents 19 305 19 305 19 305 Properties (investment and owner-occupied) 33 321 33 321 33 321

Total financial instrument and property assets 1 210 20 413 635 414 865 385 891 28 974

Fair value of amortised cost assets 1 106

LiabilitiesInvestment contracts with discretionary participation features 11 250 11 250 11 250 Financial liabilities under investment contracts 88 459 88 459 88 459 Financial liabilities 3 579 335 3 914 335 3 579 Third-party financial liabilities arising on consolidation of mutual funds 46 329 46 329 46 329 Derivative liabilities 11 125 11 125 11 125 Repurchase agreements liabilities and collateral received 16 159 16 159 10 239 5 920Insurance and other payables 10 041 10 041 10 041

Total financial instrument liabilities 3 579 11 250 172 448 187 277 156 487 30 790

Fair value of amortised cost liabilities 3 300 (1) Amortised cost The R1 210 million financial instrument asset relates to policyholder loans. The fair value has been determined by utilising a discounted cash flow model utilising discount rates

ranging between 11,8% and 13,5%. The financial liabilities comprise subordinated bonds of R3 574 million and redeemable preference shares of R5 million. The fair value of these liabilities is R3 295 million and R5 million respectively. The fair value of the subordinated bonds is determined by discounting the cash flows using the government bond curve and a credit spread. The credit spread ranges from 2,66% to 3,05%.

(2) Financial soundness value The financial soundness valuation methodology is described in SAP 104 issued by the Actuarial Society of South Africa. With regards to investment contracts with discretionary

participation features, the group cannot reliably measure the fair value of the investment contracts with discretionary participation features (DPF). The DPF is a contractual right that gives investors in these contracts the rights to receive supplementary discretionary returns through participation in the surplus arising from the assets held in the investment DPF fund. These supplementary returns are subject to the discretion of the group. Given the discretionary nature of these investments returns and the absence of an exchange market in these contracts, there is no generally recognised methodology available to determine fair value. These instruments are issued by the group and the intention is to hold the instruments to full contract term.

(3) Fair value hierarchy not provided The fair value of prepayments, insurance and other receivables, collateral deposits, cash and cash equivalents, insurance and other payables and collateral received approximate

their carrying value and are not included in the hierarchy table. In most cases their settlement terms are short-term and therefore, from a materiality perspective, fair values are not required to be modelled.

Fair value hierarchy of instruments measured at fair valueThe table below analyses the fair value measurement of applicable assets by level:

Level 1 – Values are determined using readily and regularly available quoted prices in an active market for identical assets or liabilities. These prices would primarily originate from the Johannesburg Stock Exchange, the Bond Exchange of South Africa or an international stock or bond exchange.Level 2 – Values are determined using valuation techniques or models, based on assumptions supported by observable market prices or rates either directly (that is, as prices) or indirectly (that is, derived from prices) prevailing at the financial position date. The valuation techniques or models are periodically reviewed and the outputs validated.Level 3 – Values are estimated indirectly using valuation techniques or models for which one or more of the significant inputs are reasonable assumptions (that is unobservable inputs), based on market conditions.

FINA

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L RESULTS



Fair value hierarchy of instruments measured at fair valueThe table below analyses the fair value measurement of applicable assets by level:

Unaudited Level 1

RmLevel 2

RmLevel 3

RmTotal

Rm

30 June 2016

Equity instruments 132 490 42 2 036 134 568

Listed ordinary shares on the JSE 91 182 91 182 Foreign equities listed on foreign exchanges 41 308 42 41 350 Unlisted equities 657 657 Interests in joint ventures measured at fair value 879 879 Interests in associates measured at fair value 500 500

Debt instruments 56 435 50 698 726 107 859

Preference shares listed on the JSE or foreign exchanges 753 753 Unlisted preference shares 390 173 563 Listed term deposits(1) on BESA, JSE or foreign exchanges 55 682 24 340 80 022Unlisted term deposits(1) 25 968 4 25 972 Interests in associates measured at fair value 549 549

Mutual funds(2) 867 90 497 2 645 94 009

Active market 867 89 630 1 90 498

Property 7 2 407 2 414 Equity instruments 371 14 891 15 262 Interest-bearing instruments 361 23 512 23 873 Mixed asset classes 128 48 820 1 48 949

Non-active market 867 2 644 3 511

Equity instruments 32 384 416 Interest-bearing instruments 835 2 837 Mixed asset classes 2 258 2 258

Investment policies 6 828 1 422 8 250 Derivatives 6 423 6 423

Equity instruments 1 820 1 820 Currency exchange 774 774 Interest rate 3 829 3 829

Properties (investment and owner-occupied) 33 760 33 760

Assets subject to fair value hierarchy analysis 189 792 154 488 40 589 384 869

Comprising:Held-for-trading 6 423 6 423 Designated as at fair value through profit or loss 189 792 148 065 6 829 344 686 Properties measured at fair value 33 760 33 760

Total assets carried at fair value 189 792 154 488 40 589 384 869 (1) Term deposits include instruments which have a defined maturity date and capital repayment. These instruments are by nature interest bearing at a predetermined rate, which

is either fixed or referenced to quoted floating indices.(2) Mutual funds are categorised into property, equity or interest-bearing instruments based on a minimum of 80% of the underlying asset composition of the fund by value being

of a like category. In the event of “no one category meeting this threshold” it is classified as mixed assets class.

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Fair value hierarchy of instruments measured at fair value (continued)

The table below analyses the fair value measurement of applicable assets by level:

AuditedRm Level 1 Level 2 Level 3 Total

31 December 2015Equity instruments 128 121 35 2 061 130 217

Listed ordinary shares on the JSE 85 345 85 345 Foreign equities listed on an exchange other than the JSE 42 776 17 42 793 Unlisted equities 18 610 628 Interests in joint ventures measured at fair value 959 959 Interests in associates measured at fair value 492 492

Debt instruments 59 483 53 678 1 124 114 285

Preference shares listed on the JSE or foreign exchanges 1 118 1 118 Unlisted preference shares 378 159 537 Listed term deposits(1) on BESA, JSE or foreign exchanges 58 365 23 762 48 82 175 Unlisted term deposits(1) 29 538 367 29 905 Interests in associates measured at fair value 550 550

Mutual funds(2) 803 88 793 2 605 92 201

Active market 803 88 216 89 019

Property 14 2 924 2 938 Equity 292 20 002 20 294 Interest-bearing instruments 398 24 565 24 963 Mixed 99 40 725 40 824

Non-active market 577 2 605 3 182

Equity 33 1 564 1 597 Interest-bearing instruments 544 88 632 Mixed 953 953

Investment policies 6 492 1 564 8 056 Derivatives 7 811 7 811

Equity 1 348 1 348 Foreign exchange 17 17 Interest rate 6 446 6 446

Properties (investment and owner-occupied) 33 321 33 321

Assets subject to fair value hierarchy analysis 188 407 156 809 40 675 385 891

Comprising:Held-for-trading 7 811 7 811 Designated as at fair value through profit or loss 188 407 148 998 7 354 344 759 Properties measured at fair value 33 321 33 321

Total assets carried at fair value 188 407 156 809 40 675 385 891 (1) Term deposits include instruments which have a defined maturity date and capital repayment. These instruments are by nature interest bearing at a predetermined rate, which

is either fixed or referenced to quoted floating indices.(2) Mutual funds are categorised into property, equity or interest-bearing instruments based on a minimum of 80% of the underlying asset composition of the fund by value being

of a like category. In the event of “no one category meeting this threshold” it is classified as mixed assets class.

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L RESULTS




The table below analyses the fair value measurements of applicable financial instrument liabilities which are all categorised as follows:

Level 1 Rm

Level 2 Rm

Level 3 Rm

Total Rm

30 June 2016

Financial liabilities measured at fair valuePolicyholder long-term investment contract liabilities 91 628 91 628Third-party financial liabilities arising on consolidation of mutual funds 38 169 978 39 147Repurchase agreements liabilities 10 009 10 009Derivative liabilities 7 548 7 548Financial liabilities measured at fair value through profit or loss – senior secured term facility 335 335

Liabilities subject to fair value hierarchy analysis 147 689 978 148 667

Comprising:Held-for-trading 7 548 7 548Fair value through profit or loss 140 141 978 141 119

Total financial instrument liabilities carried at fair value 147 689 978 148 667

31 December 2015Financial liabilities measured at fair valuePolicyholder long-term investment contract liabilities 88 459 88 459 Third-party financial liabilities arising on consolidation of mutual funds 45 327 1 002 46 329 Repurchase agreements liabilities 10 239 10 239Derivative liabilities 11 125 11 125 Financial liabilities measured at fair value through profit or loss – senior secured term facility 335 335

Liabilities subject to fair value hierarchy analysis 155 485 1 002 156 487

Comprising:Held-for-trading 11 125 11 125 Fair value through profit or loss 144 360 1 002 145 362

Total financial instrument liabilities carried at fair value 155 485 1 002 156 487

There were no transfer between levels 1, 2 and 3 during the period.

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Reconciliation of level 3 assetsThe table below analyses the movement of level 3 assets (investment and owner-occupied property and financial instruments) for the period under review:

Rm

Unaudited30 June

2016

Audited31 December

2015

Balance at the beginning of the period 40 675 32 529 Reclassification from level 3(1) 7 3 530 Reclassification to level 3(1) (601) (51)Fair value adjustment recognised in profit or loss as part of investment gains(2) 441 1 806 Fair value adjustment recognised in other comprehensive income(2) 18 54 Foreign currency translation (27) 377 Additions 222 2 954 Disposals (150) (622)Movements on third-party share of financial instruments in mutual funds 4 98

Balance at the end of the period 40 589 40 675

Investment and owner-occupied properties 33 760 33 321 Financial instruments – equity and mutual funds 4 681 4 666 Financial instruments – debt 726 1 124 Financial instruments – investment policies 1 422 1 564

(1) These movements were assessed based on the latest information available and one or more changes in the observability of valuation inputs. These changes were effective 1 January 2015 and 1 January 2016 respectively.

(2) Included in the fair value adjustment is a R346 million (31 December 2015: R1 638 million) unrealised gain.

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Level 3 – significant fair value model assumptions and sensitivitiesInvestment and owner-occupied property

Investment properties (including owner-occupied properties) fair values were derived by determining sustainable net rental income, to which an appropriate capitalisation rate is applied. Capitalisation rates are adjusted for occupancy levels, age of the building, location and expected future benefit of recent alterations.

The capitalisation rates applied at 30 June 2016 range between 6,8% and 10,5% (2015: between 6,8% and 10,5%). This compares to the ten year government yield of 9,73% (2015: 9,73%). The non-observable adjustments included in the valuation can therefore be referenced to the variance to the ten year government rate.

The table below indicates the sensitivity of the aggregate market values for a 0,5% change in the capitalisation rate. Both the investment and the owner-occupied properties are largely linked to policyholder benefits and consortium non-controlling interests which limits the impact to group ordinary shareholder comprehensive income or equity for any changes in the fair value measurement.

Change in capitalisation rate

Unaudited Rm0,5%

increase0,5%

decrease

30 June 2016

Properties below 6,8% capitalisation rate 25 055 23 510 26 862 Properties between 6,8% – 8,5% capitalisation rate 4 574 4 284 4 907 Properties between 8,6% – 10,5% capitalisation rate 4 131 3 918 4 369

Total 33 760 31 712 36 138

Audited31 December 2015Properties below 6,8% capitalisation rate 24 616 19 723 26 423 Properties between 6,8% – 8,5% capitalisation rate 4 574 4 284 4 907 Properties between 8,6% – 10,5% capitalisation rate 4 131 3 918 4 369

Total 33 321 27 925 35 699

Financial instrument assets

Equities R1 509 million (December 2015: R4 578 million) – discount rates applied between 9% and 30% (December 2015: between 8% and 17%).

Debt instruments R1 583 million (December 2015: R2 776 million) – discount rates applied between 11% and 12% (December 2015: between 9% and 11%).

Approximately 59% (December 2015: 77%) of these assets are allocated to policyholder unit linked portfolios and therefore changes in estimates would be offset by equal changes in liability values.

The net shareholder exposure is approximately R2,775 million (December 2015: R2 675million). Changes to discount rates applied of 50bps would result in between positive R25 million (December 2015: positive R136 million) to negative R23 million (December 2015: negative R131 million) after taxation net impact to profit or loss and shareholder funds.

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Group’s valuation processThe group’s appointed asset managers have qualified valuators that perform the valuations of financial assets and appointed independent valuators to determines fair values of properties required for financial reporting purposes, including level 3 fair values. These valuations are reviewed and approved every reporting period by the group balance sheet committee. The committee is chaired by the group’s financial director.

The fair value of level 3 instruments are determined using valuation techniques that incorporate certain assumptions that are not supported by prices from observable current market transactions in the same instruments and are not based on available observable market data. Such assumptions include the assumed risk adjusted discount rate applied to estimate future cash flows and the liquidity and credit spreads applied to debt instruments. Changes in these assumptions could affect the reported fair value of the financial instruments.

Valuation techniques used in determining the fair value of assets and liabilities classified within level 2

INSTRUMENT VALUATION BASIS/TECHNIQUES MAIN ASSUMPTIONS

Unlisted preference shares Discounted cash flow model (DCF) Bond and interbank swap interest rate curves Agreement interest rate curvesIssuer credit ratingsLiquidity spreads

Unlisted term deposits, illiquid listed term deposits and senior secured term facility

DCF Bond and interbank swap interest rate curvesIssuer credit ratingsLiquidity spreads

Mutual funds Quoted put (exit) price provided by the fund manager

Price – not applicableNotice period – bond interest rate curves

Investment policies Quoted put/surrender price provided by the issuer, adjusting for any applicable notice periods (DCF)

Price – not applicableBond interest rate curves

Derivative assets and liabilities

Option pricing modelsDCF

Volatility and correlation factorsBond and interbank swap interest rate curvesForward equity and currency rates

Policyholder investment contracts liabilities

– unit-linked policies Current unit price of underlying unitised financial asset that is linked to the liability, multiplied by the number of units held

Not applicable

– annuity certains DCF Bond and interbank swap interest rate curvesOwn credit/liquidity

Third-party financial liabilities arising on the consolidation of mutual funds

Quoted put (exit) price provided by the fund manager

Not applicable

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Valuation techniques used in determining the fair value of assets and liabilities classified within level 3

INSTRUMENT VALUATION BASIS/TECHNIQUES MAIN ASSUMPTIONS

Investment and owner-occupied properties

DCF Capitalisation and discount rates

Price per square meter

Long-term net operating income margin

Vacancies

Market rental trends (average net rental growth of between 2,3% – 2,5%)

Economic outlook

Location

Hotel income trends/inflation based

Hotel occupancy (range between 50% – 75%)

Sale price (if held for sale) Not applicable

Unlisted equities and debt, including associates and joint ventures – measured at fair value

DCF/earnings multiple Cost of capital

Bond and interbank swap interest rate curves

Consumer price index

Gross domestic product

If a property investment entity, then assumptions applied are as above under investment and owner-occupied property

Net asset value Not applicable

Recent arm’s length transactions Not applicable

Unlisted preference shares DCF Bond and interbank swap interest rate curves

Agreement interest rate curves

Issuer credit ratings

Liquidity spreads

Unlisted term deposits and illiquid listed term deposits

DCF Bond and interbank swap interest rate curves Issuer credit ratingsLiquidity spreads

Mutual funds Quoted put (exit) price provided by the fund manager, adjusted for liquidity

Price – not applicableNotice periods and estimated repayment – bond interest rate curvesLiquidity spreads

Investment policies Probalistic valuation methodologyDCF

Face valuePremium burdenLife expectancyBond and interbank swap interest rate curves

Investor RelationsSharon SteynTel: +27 (11) 408 [email protected]@liberty.co.za

Financial DirectorCasper TroskieTel: +27 (11) 408 [email protected]

Executive Group FinanceYuresh MaharajTel: +27 (11) 408 [email protected]

Statutory ActuaryDavid JewellTel: +27 (11) 408 [email protected]

Company SecretaryJill ParrattTel: +27 (11) 408 [email protected]

Head Office and Registered AddressLiberty Life Centre, 1 Ameshoff StreetBraamfontein, Johannesburg 2001Postal address: PO Box 10499, Johannesburg 2000Tel: +27 (11) 408 3911Registration number: 1968/002095/06

Transfer SecretariesComputershare Investor Services (Proprietary) Limited(Reg No 2004/003647/07)70 Marshall Street, Johannesburg 2001Tel: +27 (11) 370 5000

AuditorsPricewaterhouseCoopers Inc.2 Eglin Road, Sunninghill 2157Postal address: Private Bag X36, Sunninghill 2157Tel: +27 (11) 797 4000

Website: www.libertyholdings.co.zaCustomer Call CentreTel: 0860 456 789

Contact details

www.libertyholdings.co.za

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