SANLAM LIFE INSURANCE LIMITED cover 2005 › Sanlam Shared Documents... · (Registration no....

SANLAM LIFE INSURANCE LIMITED (Registration no. 1998/021121/06)

Annual Financial Statements

2005

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SANLAM LIFE INSURANCE LIMITED

REGISTRATION NO. 1998/021121/06

Company incorporated in South Africa Directors Non Executive Independent Other WG James P de V Rademeyer* GE Rudman J van Zyl* (Chairman) JJM van Zyl CG Swanepoel MMM Bakane-Tuoane FA du Plessis *full time employees but not actively involved in an executive capacity in the operations of the company. Executive L Lambrechts (CEO : Individual Life) BT Gamedze (CEO : Employee Benefits) HC Werth (Chief Financial Officer) Company Secretary M Lombard Registered office Postal address 2 Strand Road PO Box 1 Bellville Sanlamhof 7530 7532 Auditors Ernst & Young P.O. Box 504 SANLAMHOF 7532


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CONTENTS PAGE Directors’ Responsibility for Financial Reporting 3

Certificate by Company Secretary 3

Report of the Statutory Actuary 4

Report of the Independent Auditors 5

Directors’ Report 6

Basis of Presentation and Accounting Policies 8

Balance Sheet 28

Income Statement 29

Statement of Changes in Equity 30

Cash Flow Statement 31

Notes to the Annual Financial Statements 32

Transitional Provisions to International Financial Reporting Standards 60

Principal Subsidiaries 64

Related parties 65


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DIRECTORS’ REPORT FOR THE YEAR ENDED 31 DECEMBER 2005 NATURE OF BUSINESS Sanlam Life Insurance Limited conducts long-term insurance business in South Africa. It is a public company incorporated in terms of the Companies Act, 1973, in South Africa.

CORPORATE GOVERNANCE The Board of Sanlam Life Insurance Limited endorses the Code of Corporate Practice and Conduct recommended in the King II Report on Corporate Governance. The directors constantly pursue the implications of the King Code and are of the opinion that the company does substantially comply with the requirements of the King Code. In supporting the Code, the directors recognise the need to conduct the enterprise with integrity, transparency, accountability and in accordance with generally accepted corporate practices.

COMPANY RESULTS Profit before tax decreased from R9 271 million in 2004 to R7 214 million in 2005. Further details regarding the company’s results are included in the financial statements on pages 28 to 66.

EARLY TERMINATION BENEFITS

In December 2005 an agreement was reached with National Treasury on early termination benefits in respect of certain savings policies. The estimated gross settlement amount in respect of this agreement before tax is of R620 million (R440 million after tax) and is reflected in the income statement. The settlement consists of R595 million for the improvement of policyholder benefits and an estimated R25 million for the implementation costs of the settlement. SHARE CAPITAL There were no changes in the authorised and issued share capital of the company during the financial year.

DIVIDEND The Board has declared a dividend of R1 800 million (2004: R1 300 million) in respect of the 2005 financial year. In addition, a special dividend of R4 000 million was declared on 27 July 2005.

SUBSIDIARIES Details of the company’s principal subsidiaries are set out on page 64.

HOLDING COMPANY Sanlam Life Insurance Limited is a wholly owned subsidiary of Sanlam Limited, a company incorporated in South Africa and listed on the Johannesburg Securities Exchange and the Namibia Stock Exchange.


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BASIS OF PRESENTATION AND ACCOUNTING POLICIES BASIS OF PRESENTATION The financial statements are prepared on the historical cost basis, as modified by the revaluation of investment properties, investment instruments and derivative assets and liabilities, in accordance with International Financial Reporting Standards (IFRS) and the Companies Act, 1973, in South Africa. The financial statements are presented in South African Rand rounded to the nearest million, unless otherwise stated. Being a first-time adopter of IFRS for the 2005 financial year, the Company’s date of transition to IFRS is 1 January 2004. The Company’s opening balance sheet on 1 January 2004 and comparative information for 2004 have been restated to comply with all IFRS effective as at 31 December 2005. The impact of these restatements on reported earnings and equity is analysed on pages 60 to 63. The following section provides additional information in respect of the presentation of selected items in the financial statements on pages 28 to 66. Use of estimates, assumptions and judgements The preparation of the financial statements necessitates the use of estimates, assumptions and judgements. These estimates and assumptions affect the reported amounts of assets, liabilities and contingent liabilities at the balance sheet date as well as affecting the reported income and expenses for the year. Although estimates are based on management’s best knowledge and judgement of current facts as at the balance sheet date, the actual outcome may differ from these estimates, possibly significantly. For further information on critical estimates and judgements, refer to note 27. Policyholders’ and shareholders’ activities The assets, liabilities and activities of the policyholders and shareholders are managed separately and are governed by the valuation bases for policy liabilities and profit entitlement rules, which are determined in accordance with prevailing legislation, IFRS, generally accepted actuarial practice and the stipulations contained in the demutualisation proposal. The valuation bases in respect of policy liabilities and the profit entitlement of shareholders are set out on pages 21 to 27. Financial services income Financial services income for the shareholders consists of income earned from long-term insurance activities such as investment and administration fees, risk underwriting charges and asset mismatch profits or losses in respect of non-participating business.


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BASIS OF PRESENTATION (Continued) Cash, deposits and similar securities Cash, deposits and similar securities include bank account balances, call, term and negotiable deposits, promissory notes and money market collective investment schemes. Early adoption of standards The following new or revised IFRS have been issued with effective dates applicable to future annual financial statements of the Company: • IFRS 7 Financial Instruments: Disclosures • IAS 1 Amendment to International Accounting Standard 1 Presentation of Financial

Statements: Capital Disclosures • IAS 19 Amendment to IAS 19: Employee Benefits - Actuarial Gains and Losses, Group Plans

and Disclosures • IAS 39 Amendments to IAS 39 Financial Instruments: Recognition And Measurement Cash

Flow Hedge Accounting of Forecast Intragroup Transactions • IAS 39 Amendments to IAS 39 Financial Instruments: Recognition and Measurement: The

Fair Value Option • IAS 39 Amendments to International Financial Reporting Standards IAS 39 Financial

Instruments: Recognition and Measurement and IFRS 4 Insurance Contracts Financial Guarantee Contracts

The Company has not early adopted any of the above standards. The application of these standards in future financial reporting periods will not have a significant impact on the Company’s reported results, financial position and cash flows. Funds received from clients Funds received from clients include single and recurring long term insurance premium income from insurance and investment policy contracts, which are included in the financial statements. New business In the case of long-term insurance business the value of all new policies (insurance and investment contracts) that have been issued during the financial year and have received at least one premium is regarded as new business. Payments to clients Payments to clients include policy benefits paid in respect of long term insurance and investment policy contracts, which are included in the financial statements.


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ACCOUNTING POLICIES The Company has identified the accounting policies that are most significant to its business operations and the understanding of its results. These accounting policies are those that involve the most complex or subjective decisions or assessments, and relate to insurance liabilities, deferred acquisition costs, the ascertainment of fair values of financial assets, financial liabilities and derivative financial instruments and the determination of impairment losses. In each case, the determination of these is fundamental to the financial results and position and requires management to make complex judgements based on information and financial data that may change in future periods. Since these involve the use of assumptions and subjective judgements as to future events and are subject to change, the use of different assumptions or data could produce materially different results. The significant accounting policies adopted in the preparation of the financial statements are set out below and are in accordance with and comply with IFRS. The accounting policies have been applied consistently for all periods presented, unless otherwise indicated. Property and equipment Property and equipment are reflected at their depreciated cost prices less provisions for impairment in value, where appropriate. Depreciation is provided for on a straight-line basis, taking into account the residual value and estimated useful lives of the assets, which vary from two to twenty years. If the expected residual value is equal to or greater than the carrying value, no depreciation is provided for. The residual value and estimated useful lives of the assets are reviewed at each balance sheet date and adjusted as appropriate. Cost prices include costs directly attributable to the acquisition of property and equipment as well as any subsequent expenditure when it is probable that future economic benefits associated with the item will flow to the Company and the expenditure can be measured reliably. All other repairs and maintenance expenditure is recognised in the income statement when incurred. Property and equipment is included in the net asset value of cash generating units for impairment testing purposes. Property and equipment are derecognised at disposal date or at the date when it is permanently withdrawn from use without the ability to be disposed of. The difference between the carrying amount at date of derecognition and any disposal proceeds, as applicable, is recognised in the income statement. Owner-occupied property Owner-occupied property is property held for use in the supply of services or for administration purposes. These properties are valued at carrying amount less depreciation and provisions for impairment in value, where appropriate. Depreciation is provided for by taking into account the residual value and estimated useful life of the property. If the expected residual value is equal to or greater than the carrying value, no depreciation is provided for. The carrying amount is based on the cost of properties classified as owner-occupied on date of acquisition and the fair value at date of reclassification in instances where properties are reclassified from investment properties to owner-occupied properties. Owner-occupied property is included in the net asset value of cash generating units for impairment testing purposes.


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ACCOUNTING POLICIES (Continued) Goodwill Goodwill may arise on the acquisition or change in the holding (“adjustment”) in a business. It represents the excess of the cost of an acquisition or adjustment over the Company’s share of the fair value of the net identifiable assets of the subsidiary or business at the date of acquisition or adjustment. Goodwill is not amortised. For impairment purposes the carrying amount of goodwill is allocated to cash generating units, reviewed bi-annually for impairment and written down where this is considered necessary. Impairment losses in respect of goodwill are not reversed. Where a number of related businesses are acquired in the same business combination, these businesses are combined for purposes of determining the recoverable amount of the related goodwill. The gain or loss on the disposal of a subsidiary or business includes the carrying amount of goodwill attributable to the entity or business sold. Other intangible assets No value is attributed to internally developed trademarks or similar rights and assets. Costs incurred on these items are charged to the income statement in the period in which they are incurred. Costs associated with software development for internal use are capitalised if the software is technically feasible, the Company has the intent and ability to complete the development and use the asset, the asset can be reliably measured and will generate future economic benefits. The cost is amortised to the income statement over the expected useful life of the asset. Deferred acquisition costs Incremental costs directly attributable to the acquisition of investment policy contracts are capitalised to a deferred acquisition cost (DAC) asset if they are separately identifiable, can be measured reliably and it is probable that they will be recovered. Deferred acquisition costs are amortised to the income statement over the term of the contracts as the related services are rendered and revenue recognised. The DAC asset is tested for impairment bi-annually and written down when it is not expected to be fully recovered from future fee income. Long-term reinsurance contracts Contracts entered into with reinsurers under which the Company is compensated for losses on one or more long-term policy contracts issued by the Company and that meet the classification requirements for insurance contracts are classified as long-term reinsurance contracts. The expected claims and benefits to which the Company is entitled under these contracts are recognised as assets. The Company assesses its long-term reinsurance assets for impairment bi-annually. If there is objective evidence that the reinsurance asset is impaired, the carrying amount is reduced to a recoverable amount, and the impairment loss is recognised in the income statement.


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ACCOUNTING POLICIES (Continued) Financial instruments Financial instruments carried on the balance sheet include cash, deposits and similar securities, investment policy contracts, investments (excluding investment properties, associates and joint ventures), receivables and trade creditors. Financial instruments are recognised when the Company becomes party to a contractual arrangement that constitutes a financial asset or financial liability for the Company that is not subject to suspensive conditions. Financial assets are derecognised when the contractual rights to receive the cash flows expire or when the asset is transferred. Financial liabilities are derecognised when the obligation to deliver cash or other resources in terms of the contract is discharged, cancelled or expires. Financial instruments are classified into the following categories: • Financial assets: At fair value through profit or loss

Loans and receivables • Financial liabilities: At fair value through profit or loss

Other financial liabilities The classification of financial instruments is determined at initial recognition based on the purpose for which the financial assets are acquired or liabilities assumed. All financial instruments are designated as at fair value through profit or loss apart from: • Working capital receivables that are classified as loans and receivables based on their short-

term nature; and • Working capital payables that are classified as other financial liabilities based on their short-

term nature. The Company designates financial instruments as at fair value through profit or loss in line with its risk management policies and procedures that are based on the management of the Company’s capital and activities on a fair value basis, apart from the exceptions outlined above. The Company’s internal management reporting basis is consistent with the classification of its financial instruments. Financial instruments at fair value through profit or loss are initially recognised at fair value. Costs directly attributable to the acquisition of financial assets classified as at fair value through profit or loss are recognised in the income statement as investment surpluses. Other financial instruments are recognised at the fair value of the consideration given or received in exchange for the instrument plus transaction costs that are directly attributable to their acquisition. Regular way investment transactions are recognised by using trade date accounting. Financial instruments classified as at fair value through profit or loss are carried at fair value after initial recognition, with changes in fair value recognised in the income statement as investment surpluses. The particular valuation methods adopted are disclosed in the individual policy statements associated with each item. Loans and receivables and other financial liabilities are generally carried at amortised cost using the effective interest rate method. The carrying values of all loans and receivables are reviewed for impairment bi-annually.


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ACCOUNTING POLICIES (Continued) Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. Investments Fixed properties Fixed properties comprise properties held to earn rental income and/or for capital appreciation. Fixed properties that generate income are carried at fair value based on valuations by experienced valuators internally employed by the Sanlam group, less the cumulative straight-line rental adjustment (refer to the accounting policy for Investment income). The valuators have appropriate qualifications and extensive experience in property valuations. Fair value is determined by discounting expected future cash flows at appropriate market interest rates. Valuations are carried out on a monthly basis. Fixed property under development is valued at cost less provision for impairment in value, where appropriate. Changes in the fair value of fixed properties are recognised in the income statement as investment surpluses. When fixed properties become owner-occupied, the company reclassifies it to owner-occupied properties at a deemed cost equal to the fair value of the fixed properties on the date of reclassification. The deemed cost is depreciated on a straight-line basis at rates calculated to reduce the carrying value of these assets to estimated residual values over their expected useful lives. Fixed properties are derecognised when they have either been disposed off or when they are permanently withdrawn from use and no future benefit is expected from their disposal. Associates An associate is an entity, not being a subsidiary, in which the company has a long-term investment and over which it has the ability to exercise significant influence on the financial and operating policies. The Company has significant influence where it has the ability to participate in the financial and operating policies of an entity without being able to control those policies by virtue of a majority vote. Investments in associates, including those held by investment-linked life insurance funds, are treated as investments at fair value and are not equity-accounted. Investments in associates for which significant influence is intended to be temporary, because the investments are acquired and held exclusively with a view to their subsequent disposal, are accounted for as non-current assets held for sale. Joint ventures A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. The results of joint ventures, including those held by investment-linked life insurance funds, are treated as investments at fair value and are not equity-accounted.


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ACCOUNTING POLICIES (Continued) Other investments Fair values of other investments are determined on the following bases: • Listed shares and units in collective investment schemes are valued at the stock exchange and

net asset value prices respectively. The value of unlisted shares are determined on a monthly basis by the directors using appropriate valuation bases;

• Interest-bearing investments are valued by discounting expected future cash flows at appropriate market interest rates;

• Listed bonds are valued at the stock exchange prices; • Listed derivative instruments are valued at the South African Futures Exchange prices and

the value of unlisted derivatives is determined by the directors using generally accepted valuation models;

• Unlisted subsidiaries are valued at fair value by the directors using appropriate valuation bases.

• Loans of investment scrip to and from third parties are not treated as sales and purchases. Financial instruments included in investments are classified as at fair value through profit or loss in terms of IAS 39 Financial Instruments: Recognition and Measurement and are reflected at fair value, with the exception of certain classes of interest-bearing investments that are loans and receivables and consequently valued on an amortised cost basis. Other financial assets and liabilities Trade and other payables are carried at amortised cost. Trade and other receivables are carried at settlement value less provision for impairment. Financial liabilities classified as at fair value through profit or loss are carried at fair value. The fair value of investment contract liabilities is determined on the bases as disclosed in the section on Policy Liabilities and Profit Entitlement. Derivative instruments Derivative financial instruments include foreign exchange contracts, interest rate futures, forward rate agreements, currency and interest rate swaps, currency, interest rate and equity options and other derivative financial instruments that are marked-to-market. The Company does not separate embedded derivatives that meet the definition of an insurance contract. Fair values are obtained from quoted market prices, discounted cash flow models and option pricing models, as appropriate. Accounting for these instruments is dependent upon the nature of the transactions.


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ACCOUNTING POLICIES (Continued) Derivative instruments are used for non-trading transactions, which are held for hedging purposes as part of the Company’s risk management strategy against assets, liabilities, positions or cash flows measured at fair value as well as structures incorporated in the product design of policyholder products. Such derivative financial instruments are marked-to-market and any gains or losses are recognised in the income statement as investment surpluses. The fair values related to these contracts are included in equity investments. Provisions Provisions are recognised when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Provisions for onerous contracts are recognised when the expected benefits to be derived from contracts are less than the unavoidable cost of meeting the obligations under the contracts. Provisions are measured at the present value of the amounts that are expected to be paid to settle the obligations. Contingencies Possible obligations of the Company whose existence will only be confirmed by the occurrence or non-occurrence of uncertain future events not wholly within the control of the Company and present obligations of the Company where it is not probable that an outflow of economic benefits will be required to settle the obligation or where the amount of the obligation cannot be measured reliability, are not recognised in the Company’s balance sheet but are disclosed in the notes to the financial statements. Possible assets of the Company whose existence will only be confirmed by the occurrence or non-occurrence of uncertain future events not wholly within the control of the Company are not recognised in the Company’s balance sheet and are only disclosed in the notes to the financial statements where an inflow of economic benefits is probable. Share capital Share capital is classified as equity where the Company has no obligation to deliver cash or other assets to shareholders. Incremental costs attributable to the issue of equity instruments are recognised directly in equity, net of tax.


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ACCOUNTING POLICIES (Continued) Investment return Investment income Interest income is accounted for on a time proportionate basis that takes into account the effective yield on the asset and includes the net income earned from interest margin business. Rental income is reflected net of property expenditure. Rental income is recognised on an accrual basis, apart from operating leases that contain fixed escalation clauses, where it is recognised on a straight-line basis over the lease term. The difference between rental income on a straight-line and accrual basis is recognised as part of the carrying amount of investment properties, which are subsequently remeasured to fair value in terms of the accounting policy for investment properties. Dividend income is recognised once the last day for registration has passed. Capitalisation shares received in terms of a capitalisation issue from reserves, other than share premium or a reduction in share capital, are treated as dividend income. Dividend income from subsidiaries is recognised when the dividends are declared by the subsidiary. Investment surpluses Investment surpluses consist of net realised gains and losses on the sale of investments and net unrealised fair value gains and losses on the valuation of investments at fair value. These surpluses are recognised in the income statement on the date of sale or upon valuation to fair value. Premium income Premium income from long-term insurance policy contracts is recognised as an increase in long-term policy liabilities. The full annual premiums on individual insurance and investment policy contracts that are receivable in terms of the policy contracts are accounted for on policy anniversary dates, notwithstanding that premiums are payable in instalments. The monthly premiums in respect of certain new products are in terms of their policy contracts accounted for when due. Group life insurance and investment contract premiums are accounted for when receivable. Where premiums are not determined in advance they are accounted for upon receipt. The unearned portion of accrued premiums is included within long-term policy liabilities.


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ACCOUNTING POLICIES (Continued) Financial services income Fees for investment management services Fees for investment management services in respect of investment contracts are recognised as services are rendered. Initial fees that relate to the future rendering of services are deferred and recognised as those future services are rendered. Fee income – long-term policy contracts Investment and insurance contract policyholders are charged for policy administration, risk underwriting and other services. These fees are recognised as revenue on an accrual basis as the related services are rendered. Policy contract benefits Underwriting benefits Life insurance policy claims received up to the last day of each financial period and claims incurred but not reported (IBNR) are provided for and included in underwriting policy benefits. Past claims experience is used as the basis for determining the extent of the IBNR claims. Underwriting policy benefits in respect of long-term insurance business include the change in the corresponding actuarial liabilities. Other policy benefits Other policy benefits are not recognised in the income statement but reflected as a reduction in long-term policy liabilities. Maturity and annuity payments are recognised when due. Surrenders are recognised at the earlier of payment date or the date on which the policy ceases to be included in long-term policy liabilities. Income from reinsurance policies are recognised concurrently with the recognition of the related policy benefit. Sales remuneration Sales remuneration consists of commission payable to sales staff on long-term and short-term investment and insurance business and expenses directly related thereto, bonuses payable to sales staff and the Company’s contribution to their retirement and medical aid funds. Commission on life business is accounted for on all in-force policies in the financial period during which it is incurred. The portion of sales remuneration that is directly attributable to the acquisition of long-term recurring premium investment policy contracts is capitalised to the DAC asset and recognised over the period in which the related services are rendered and revenue recognised (refer policy statement for DAC asset).


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ACCOUNTING POLICIES (Continued) Sales remuneration recognised in the income statement includes the amortisation of deferred acquisition costs as well as sales remuneration incurred that is not directly attributable to the acquisition of long-term investment policy contracts. Administration costs Administration costs include, inter alia, indirect taxes such as VAT, property and administration expenses relating to owner-occupied property, property and investment expenses related to the management of the policyholders’ investments, claims handling costs, product development and training costs. Leases Leases of assets, under which the lessor effectively retains all the risks and benefits of ownership, are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. When an operating lease is terminated, any payment required by the lessor by way of penalty is recognised as an expense in the period in which termination takes place. Taxation Current income tax is provided in respect of taxable income based on currently enacted tax legislation. Deferred income tax is provided for all temporary differences between the tax bases of assets and liabilities and their carrying values for financial reporting purposes using the liability method, except for: • Temporary differences relating to investments in associates, joint ventures and subsidiaries;

and • Temporary differences arising from the initial recognition of assets or liabilities in

transactions other than business combinations that at transaction date do not affect either accounting or taxable profit or loss.

The amount of deferred income tax provided is based on the expected realisation or settlement of the deferred tax assets and liabilities using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets relating to unused tax losses are recognised to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised. Deferred tax balances are reflected at current values and have not been discounted.


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ACCOUNTING POLICIES (Continued) Foreign currencies Transactions and balances Foreign currency transactions are translated to functional currency, i.e. the currency of the primary economic environment in which the Company operates, at the exchange rates on transaction date. Monetary assets and liabilities are translated to functional currency at the exchange rates ruling at the financial year end. Non-monetary assets and liabilities carried at fair value are translated to functional currency at the exchange rates ruling at valuation date. Non-monetary assets and liabilities carried at historic cost are translated to functional currency at the exchange rates ruling at the date of initial recognition. Exchange differences arising on the settlement of transactions or the translation of working capital assets and liabilities are recognised in the income statement as financial services income. Exchange differences on non-monetary assets and monetary assets classified as investment assets, such as equities and foreign interest-bearing investments, are included in investment surpluses. Retirement benefits Retirement benefits for employees are provided by a number of defined benefit and defined contribution pension and provident funds. The assets of these funds, including those relating to any actuarial surpluses, are held separately from those of the Company. The retirement plans are funded by payments from employees and the company, taking into account the recommendations of the retirement fund valuator. The Company’s contributions to the defined contribution and defined benefit funds are charged to the income statement in the year in which they are incurred. A valuation in accordance with IAS 19 Employee Benefits is performed on the balance sheet date. For the purpose of calculating pensions, medical contributions are deemed to be a part of pensionable salary. Retirement fund contributions are made on the pensionable salary. Therefore, pensioners fund post-retirement medical contributions themselves from their increased pensions. The Company has provided in full for its medical contribution commitments in respect of pensioners and disabled members who are not covered under the current scheme. Defined benefit plans The schemes are valued using the valuation basis for past service cost. Any deficits advised by the actuaries are funded either immediately or through increased contributions to ensure the ongoing soundness of the schemes. Contributions are expensed during the year in which they are funded. The net surplus or deficit in the benefit obligation is the difference between the present value of the funded obligation and the fair value of plan assets. The Company recognises the estimated liability using the projected unit credit method. The present value of the overfunded portion of these schemes is recognised as an asset to the extent that there are material benefits available in the form of refunds and reductions in contributions. The amount of actuarial gains and losses recognised in the income statement is equal to the amount that the cumulative actuarial gains and losses at the end of the previous reporting period exceed the greater of 10% of the present value of the defined obligation or 10% of the fair value of the plan assets, amortised over the employees’ average working life.


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ACCOUNTING POLICIES (Continued) Defined contribution plans Company contributions to the pension and provident funds are based on a percentage of the payroll and are charged against income as incurred. Medical aid benefits Company contributions to medical aid funds are charged to the income statement in the year in which they are incurred. Post-retirement medical aid benefits The present value of this post-retirement medical aid obligation is actuarially determined annually and any deficit or surplus is immediately recognised in the income statement. The Company recognises the estimated liability using the projected unit credit method. The Company has no significant exposure to any other post-retirement benefit obligation. Equity compensation plans The Sanlam Group operates a staff share incentive scheme through Sanlam Limited Share Incentive Trust. The employees of the Company participate in this share incentive scheme. Shares are offered on a combined option and deferred delivery basis, which staff can take up in tranches over a period of up to seven years, provided that they remain in the employment of the Group. The beneficiaries under the scheme are executive directors, management and sales advisors employed on a full time basis. The fair value of equity instruments granted is measured on grant date using option-pricing models. The models are consistent with those used for pricing financial instruments and incorporate all factors and assumptions that market participants would consider in determining a willing buyer/willing seller price. The fair value on grant date is recognised in the income statement on a straight-line basis over the vesting period of the equity instruments (adjusted to reflect actual levels of vesting), with a corresponding increase in equity. Dividends Dividends proposed or declared after the balance sheet date are not recognised at the balance sheet date.


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POLICY LIABILITIES AND PROFIT ENTITLEMENT

Introduction The valuation bases and methodology used to calculate the policy liabilities of all material lines of long-term insurance business and the corresponding shareholder profit entitlement are set out below. This basis, which complies with South African actuarial guidelines and requires minimum liabilities to be held based on a prospective calculation of policy liabilities, serves as a liability adequacy test. No adjustment is required to the liabilities at 31 December 2005 as a result of the aforementioned adequacy test. The valuation bases and methodology comply with the requirements of IFRS. The 2004 results were restated in line with the 2005 valuation methodology, but financial assumptions appropriate to the relevant dates were used (refer to pages 60 to 63 for further information on the transition to IFRS). The methodology has been applied for purposes of the company financial statements and the changes to determine the prudential regulatory results in terms of the requirements of the Long-term Insurance Act, are presented at the end of this section. Where the valuation of long-term policy liabilities are based on the valuation of supporting assets, the assets are valued at fair value on the bases as set out in the accounting policy for investments. It was not considered necessary to exclude intangible assets, which are inadmissible assets for prudential regulatory purposes, from the value of the assets for the purposes of the financial statements. Classification of contracts A distinction is made between investment contracts (which fall within the scope of IAS39 Financial Instruments: Recognition and Measurement), investment contracts with discretionary participating features and insurance contracts (where the Financial Soundness Valuation (FSV) method continues to apply, subject to certain requirements specified in IFRS 4 Insurance Contracts). A contract is classified as insurance where the company accepts significant insurance risk by agreeing with the policyholder to pay benefits if a specified uncertain future event (the insured event) adversely affects the policyholder or other beneficiary. Significant insurance risk exists where it is expected that for the duration of the policy or part thereof, policy benefits payable on the occurrence of the insured event will exceed the amount payable on early termination, before allowance for expense deductions at early termination. Once a contract has been classified as an insurance contract, the classification remains unchanged for the remainder of its lifetime, even if the insurance risk reduces significantly during this period. Insurance contracts and investment contracts with discretionary participating features (DPF) The actuarial value of the policy liabilities is determined using the FSV method as described in the actuarial guidance note PGN 104 of the Actuarial Society of South Africa (ASSA), which is consistent with the valuation method prescribed in the Long-term Insurance Act (LTIA) and consistent with the valuation of assets at fair value as described in the accounting policy for investments.


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POLICY LIABILITIES AND PROFIT ENTITLEMENT (Continued)

The underlying philosophy is to recognise profits prudently over the term of each contract consistent with the work done and risk borne. In the valuation of liabilities, provision is made for: • the best estimate of future experience; • the compulsory margins prescribed in the LTIA; and • discretionary margins determined to release profits to shareholders consistent with policy

design and company policy.

The policy liabilities exceeded the minimum requirements in terms of the LTIA and actuarial guidance notes PGN 104, PGN 105 and PGN 110.

The application of the PGN 104, PGN 105 and PGN 110 principles is described below in the context of the Company’s major product classifications.

Best estimate of future experience

The best estimate of future experience is determined as follows:

• Future investment return assumptions are derived from market-related interest rates on risk-free fixed-interest securities with adjustments for the other asset classes. The appropriate asset composition of the various asset portfolios, investment management expenses, taxes at current tax rates and charges for investment guarantees are taken into account. Refer to page 40 for investment return assumptions per asset class.

• Unit expenses are based on the 2005 actual expenses and escalated at estimated expense inflation rates per annum. The allocation of initial and renewal expenses is based on functional cost analyses.

• Assumptions with regard to future mortality, disability and disability payment termination rates and surrender and lapse rates are consistent with the experience for the five years up to 30 June 2005. Mortality and disability rates are adjusted to allow for expected deterioration in mortality rates as a result of Aids and for expected improvements in mortality rates in the case of annuity business.

Asset portfolios

Separate asset portfolios are maintained in support of policy liabilities for each of the major lines of business; each portfolio consisting of an asset mix appropriate for the specific product. Bonus rates are declared for each class of participating business in relation to the funding level of each portfolio and the expected future net investment return on the assets of the particular investment portfolio.


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Unrecouped expenses

The timing of fees recovered from some individual life policies do not correspond to the timing of the expenses incurred in respect of the policies. For certain of these policies an unrecouped expense account is created and included in the valuation of the policy liabilities. The unrecouped expense account is increased with expenses incurred and reduced by an allocation of policy charges. Policy charges are designed to ensure that on average the unrecouped expense account is redeemed over the lifetime of the related policies. Bonus stabilisation reserves

The group and individual stabilised bonus portfolios are valued on a retrospective basis. If the fair value of the assets in such a portfolio is greater than the policyholders’ investment accounts (net premiums invested plus declared bonuses), a positive bonus stabilisation reserve is created which will be used to enhance future bonuses. Conversely, if assets are less than the investment accounts, a negative bonus stabilisation reserve is created. A negative bonus stabilisation reserve will be limited to the amount that the Statutory Actuary expects will be recovered through the declaration of lower bonuses during the ensuing three years, if investment returns are in line with long-term assumptions. Negative bonus stabilisation reserves in excess of 7,5% of the investment accounts are specifically disclosed. Bonus stabilisation reserves are included in long-term policy liabilities. Provision for future bonuses

Provision was made for future bonuses so that each asset fund, less charges for expenses (including investment guarantee charges) and profit loadings, for each line of business would be fully utilised for the benefit of the policyholders of that fund. As all the portfolios had positive bonus stabilisation reserves, the provision for future bonuses for these portfolios exceeded the expected long-term investment returns less expense recoveries.

Reversionary bonus business

The liability is set equal to the fair value of the underlying assets. This is equivalent to a best estimate prospective liability calculation using the bonus rates as set out above, and allowing for the shareholders’ share of one-ninth of the cost of these bonuses.

The present value of the shareholders’ entitlement is sufficient to cover the margins prescribed in the LTIA and the ASSA guidelines for the valuation of policy liabilities. The prescribed margins are thus not provided for in addition to the shareholders’ entitlement.

Individual stable bonus, linked and market-related business

For investment policies where the bonuses are stabilised or directly related to the return on the underlying investment portfolios, the liabilities are equated to the retrospectively accumulated fair value of the underlying assets less any unrecouped expenses. These retrospective liabilities are higher than the prospective liabilities calculated as the present value of expected future benefits and expenses less future premiums at the relevant discount rates.


24


To the extent that the retrospective liabilities exceed the prospective liabilities, the valuation contains second-tier margins. The valuation methodology results in the release of these margins to shareholders on a fee minus expenses basis consistent with the work done and risks borne over the lifetime of the policies. Group stable bonus business

In the case of group policies where bonuses are stabilised, the liabilities are equated to the fair value of the retrospectively accumulated underlying assets.

Future fees exceed expenses, including allowance for the prescribed margins. These excesses are released to shareholders consistent with the work done and risks borne over the lifetime of the policies.

Participating annuities

The liabilities are equated to the fair value of the retrospectively accumulated underlying assets. This is equivalent to a best estimate prospective liability calculation allowing for future bonus rates as described above and expected future investment returns. Shareholder entitlements emerge in line with fees charged less expenses incurred consistent with work done and risks borne over the lifetime of the annuities. The present value of the shareholders’ entitlement is sufficient to cover the prescribed margins for the valuation of policy liabilities. The prescribed margins are thus not provided for in addition to the shareholders’ entitlement. Non-participating annuity business

Non-participating life annuity instalments and future expenses in respect of these instalments are discounted at the government bond yield curve adjusted to allow for investment administration charges. All profits or losses accrue to the shareholders when incurred. Other non-participating business

Other non-participating business forms less than 6% of the total liabilities. Most of the other non-participating business liabilities are valued on a retrospective basis. The remainder is valued prospectively and contains second-tier margins via an explicit interest rate deduction of approximately 3% on average.

For non-participating business other than life annuity business, an asset mismatch provision is maintained. The interest and asset profits arising from the non-participating portfolio are added to this provision. The asset mismatch provision accrues to shareholders at the rate of 1,33% monthly, based on the balance of the provision at the end of the previous quarter. The effect of holding this provision is to dampen the impact on earnings of short-term fluctuations in fair values of assets underlying these liabilities. The asset mismatch provision represents a second-tier margin. A negative asset mismatch provision will not be created, but such shortfall will accrue to shareholders in the year in which it occurs.


25

POLICY LIABILITIES AND PROFIT ENTITLEMENT (Continued) HIV/Aids

A specific provision for HIV/Aids-related claims is maintained and included with the ‘Other non-participating business’ referred to above. A prospective calculation according to the relevant guidelines is performed for non-participating individual policies and for those with a small savings element. The provision for other individual policies (72% of the total HIV/Aids provision for individual policies) is built up by increasing the opening provision by the HIV/Aids risk premiums and investment returns on the underlying assets. It is then reduced by claims attributed to HIV/Aids and further limited to a maximum of the prospective calculation without allowance for future increases in HIV/Aids risk premiums. This retrospectively built-up provision is higher than a prospective calculation done according to the relevant guidelines allowing for possible increases in future HIV/Aids risk premiums. This difference can be regarded as a second-tier margin. It is the intention to re-rate premiums as experience develops. Premium rates for group business are reviewed annually. The HIV/Aids provision is based on the expected HIV/Aids claims in a year and the time that may elapse before premium rates and underwriting conditions can be suitably adjusted should actual experience be worse than expected. Provision for minimum investment return guarantees In addition to the liabilities described above, a stochastic modelling approach was used to provide for the possible cost of minimum investment return guarantees provided by some participating and market-related policies, consistent with actuarial guidance note PGN 110. Working capital

To the extent that the management of working capital gives rise to profits, no credit is taken for this in determining the policy liabilities. Reinsurance

Liabilities are valued gross before taking into account reinsurance. Where material, the difference between the gross and net (after reinsurance) value of liabilities is held as a reinsurance asset. Investment contracts (other than with DPF) Policy contracts not classified as insurance contracts in terms of IFRS are classified as investment contracts. Contracts with investment management services

The liabilities for individual and group contracts are set equal to the retrospectively accumulated fair value of the underlying assets. No deduction is made for unrecouped expenses. The profit or loss that accrue to shareholders are equal to fees received during the period concerned plus the movement in the DAC asset less expenses incurred. Where these contracts provide for minimum investment return guarantees, provision was made for the fair value of the embedded option.


26

POLICY LIABILITIES AND PROFIT ENTITLEMENT (Continued) Non-participating annuity business

Term annuity instalments and expected future expenses in respect of these instalments are discounted at market-related interest rates. All profits or losses accrue to the shareholders when incurred. Guaranteed plans

Guaranteed maturity values and expected future expenses are discounted at market-related interest rates. All profits or losses accrue to the shareholders when incurred.

Prudential regulatory results The valuation of assets and policy liabilities for prudential regulatory purposes is generally in line with the methodology for the published results. Some adjustments are however required, as set out below. Reinsurance

Policy liabilities are valued net of reinsurance and the reinsurance asset is eliminated. Investment contracts with investment management services

The liabilities are set equal to the retrospectively accumulated fair value of the underlying assets less unrecouped expenses (set equal to the DAC asset) in the case of individual business. These retrospective liabilities are higher than the prospective liabilities calculated as the present value of expected future benefits and expenses less future premiums at the relevant discount rates. DAC Asset

The DAC asset is eliminated. Group undertakings and inadmissible assets The value of assets is reduced by taking into account the prescribed valuation bases for group undertakings and to eliminate inadmissible assets (as defined in the LTIA). Capital adequacy requirements

The excess of assets over liabilities of life insurance operations on the prudential regulatory basis should be sufficient to cover the capital adequacy requirements in terms of the LTIA, PGN 104 and PGN 110. The capital adequacy requirements provide a buffer against experience worse than that assumed in the valuation of assets and liabilities.


27

POLICY LIABILITIES AND PROFIT ENTITLEMENT (Continued) On the valuation date the ordinary capital adequacy requirements were used as they exceeded the termination and minimum capital adequacy requirements. The largest element of the capital adequacy requirements relates to stabilised bonus business. Consistent with an assumed fall in the fair value of the assets (the resilience scenario), which is prescribed in the actuarial guidance notes, the calculation of the capital adequacy requirements takes into account a reduction in non-vesting bonuses and future bonus rates and for the capitalisation of some expected future profits (resulting from second-tier margins in the valuation basis and held as part of the liabilities). The resilience scenario assumes that: • equity values decline by 30%; • property values decline by 15%; • fixed interest yields and inflation-linked real yields increase or decrease by 25% of the

nominal or real yields (whichever gives the worst result); and • assets denominated in foreign currencies decline by at least 20%

on the valuation date and do not subsequently recover within the short-term.

28

2005 2004Note R million R million

ASSETSProperty and equipment 1 127 104 Owner-occupied properties 2 395 329 Goodwill 3 745 684 Deferred acquisition costs 4 1 085 973 Long-term reinsurance assets 5 260 237 Investments 6 192 134 170 558

Properties 6.1 8 721 9 185 Investment properties 7 338 7 445 Properties held for sale 447 675 Straight-line rental adjustment 936 1 065

Joint Ventures and Associates at fair value 6.2 4 502 7 746 Investments in subsidiaries 6.4 23 265 22 495 Equities and similar securities 6.5 81 409 64 807 Public sector stocks and loans 6.6 36 495 34 133 Debentures, insurance policies, preference shares and other loans 6.6 16 452 15 677 Cash, deposits and similar securities 6.6 21 290 16 515

Deferred tax 10 33 150 Working capital assets 6 051 5 629

Trade and other receivables 7 5 956 5 518 Cash, deposits and similar securities 95 111

Total assets 200 830 178 664

EQUITY AND LIABILITIESCapital and reserves

Share capital and premium 8 5 000 5 000 Other reserves 5 429 5 429 Retained earnings 16 482 15 826

Total equity 26 911 26 255 Long-term policy liabilities 9 164 758 144 923

Insurance contracts 100 202 86 859 Investment contracts 64 556 58 064

Deferred tax 10 1 799 1 757 Non-current provisions 12 444 213 Working capital liabilities 6 918 5 516

Trade and other payables 11 5 520 4 822 Provisions 12 6 20 Taxation 1 392 674

Total equity and liabilities 200 830 178 664


AT 31 DECEMBER 2005BALANCE SHEET

29


Net income 41 964 35 497 Financial services income 13 6 873 6 480 Reinsurance premiums paid ( 187) ( 161) Reinsurance commission received 31 17 Investment income 14 8 400 8 633 Investment surpluses 14 26 847 20 528

Net insurance and investment contract benefits and claims (31 348) (23 284) Long-term insurance contract benefits 15 (19 917) (14 931) Long-term investment contract benefits 15 (10 940) (8 472) Early premium terminations ( 620) - Reinsurance claims received 129 119

Expenses (3 402) (2 942) Sales remuneration ( 904) ( 832) Administration costs 16 (2 498) (2 110)

Profit before tax 7 214 9 271 Taxation 17 (1 303) (1 681)

Shareholders' fund ( 657) ( 977) Policyholders' fund ( 646) ( 704)

Earnings attributable to shareholders 5 911 7 590

SANLAM LIFE INSURANCE LIMITEDINCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2005

30

R million Share capitalShare

premium

Non-distributable

reserve (1)

Retained earnings Total equity

Balance at 1 January 2004 1 4 999 5 429 9 273 19 702 Profit for the year - - - 7 590 7 590 Share-based payments - - - 34 34 Dividends paid - - - (1 071) (1 071)

Balance at 31 December 2004 1 4 999 5 429 15 826 26 255

Profit for the year - - - 5 911 5 911 Share-based payments - - - 45 45 Dividends paid - - - (5 300) (5 300)

Balance at 31 December 2005 1 4 999 5 429 16 482 26 911

(1) Represents the transfer from the Sanlam mutual capital fund on demutualisation.


FOR THE YEAR ENDED 31 DECEMBER 2005STATEMENT OF CHANGES IN EQUITY

31


Net cash flow from operating activities 8 064 9 252 Cash generated from operations before working capital changes 26.1 ( 312) 991 Working capital changes 26.8 497 464 Interest received 26.2 5 032 4 874 Interest paid ( 75) ( 82) Dividends received 26.3 2 496 2 804 Rental income received 26.4 852 899 Cash inflow from operating activities before taxation 8 490 9 950 Taxation 26.5 ( 426) ( 698)

Net cash from investment activities 26.6 5 774 ( 676)

Cash flow from policyholders' funds 26.7 (8 554) (7 528)

Dividends paid (5 300) (1 071)

Net decrease in cash and cash equivalents ( 16) ( 23) Cash, deposits and similar securities at beginning of year 111 134 Cash, deposits and similar securities at end of year 95 111

SANLAM LIFE INSURANCE LIMITEDCASH FLOW STATEMENT


32

Computer equipment

Furniture, equipment

and vehicles Total 1. PROPERTY AND EQUIPMENT R million R million R million

24 80 104 138 173 311 ( 114) ( 93) ( 207)

51 76 127 173 179 352 ( 122) ( 103) ( 225)

2005 2004R million R million

Reconciliation of beginning to ending balanceBook value at beginning of year 104 57 Additions & expenditure capitalised 70 86 Disposals ( 10) ( 7) Depreciation ( 37) ( 32) Book value at end of year 127 104

329 327 Adjustments during the year - 2

66 - 395 329

684 684

61 - 71 -

( 10) -

745 684

4. DEFERRED ACQUISITION COSTSBalance at beginning of year 973 821 Charged to income statement 112 152

Acquisition costs capitalised 282 293 Expensed for the year ( 170) ( 141)

Balance at end of year 1 085 973

5. LONG-TERM REINSURANCE ASSETSBalance at beginning of year 237 223 Movement in reinsurers' share of insurance liabilities 23 14 Balance at end of year 260 237 Maturity analysis of long-term reinsurance assetsDue within one year 2 2 Due within two to five years 25 23 Due after more than five years 233 212 Total long-term reinsurance assets 260 237

Fair value of net assets acquiredNet consideration paid

Additions during the year

Balance at end of year

Register of owner-occupied properties

Balance at beginning of year3. GOODWILL

A register containing details of all owner-occupied properties is available for inspection at the registered office of Sanlam Life Insurance Limited.

SANLAM LIFE INSURANCE LIMITEDNOTES TO THE ANNUAL FINANCIAL STATEMENTS


CostAccumulated depreciation and impairment

Book value at beginning of year

Amounts due from reinsurers in respect of claims incurred by the company that are reinsured, are included in trade and other receivables (refer note 7).

Book value at end of yearCostAccumulated depreciation and impairment

Balance at beginning of year

Transfer from subsidiary

2. OWNER-OCCUPIED PROPERTIES

Balance at end of year

33


6.1 Properties

3 537 4 155 3 714 3 554 474 408 20 18 353 360

8 098 8 495 262 277 361 413

8 721 9 185 Less: Properties held for sale ( 447) ( 675) Less: Straight-line rental asset ( 936) (1 065) Total investment properties 7 338 7 445

8 495 3 086 54 40

(1 228) ( 451) 90 2 913

687 2 907 8 098 8 495

Reconciliation of Straight-line rental assetBalance at beginning of year 1 065 1 157 Disposals ( 16) ( 64) Included with properties held for sale ( 110) ( 44) Investment (loss)/surplus ( 3) 16 Balance at end of year 936 1 065

Within one year 718 821 Within two to five years 2 054 2 337 After more than five years 1 839 2 274

4 611 5 432

4 502 7 746

71 163 60 11

124 - 255 174

% % Interest in material joint venturesSanlam Direct-Axis (Proprietary) Limited 70 70Sanlam Home Loans (Proprietary) Limited 50 50Shriram Life Insurance Limited 26 0

Acquisitions

Listed property Property collective investment schemesTotal properties

Fixed properties - balance at beginning of year

During the year Sanlam Life Insurance Limited concluded a contract to dispose of properties to the value of R447 million (2004: R675 million). All the suspensive conditions have not yet been fullfilled and the sale transaction has therefore not been reflected in these financial statements. The company expects to transfer the properties during 2006.

Reconciliation of carrying amount of fixed properties

Industrial buildingsUndeveloped landResidential and other propertyTotal fixed properties

Properties comprise the following: Office buildingsRetail buildings



6. INVESTMENTS

Total investments in joint ventures

Investments in joint venturesSanlam Direct-Axis (Proprietary) LimitedSanlam Home Loans (Proprietary) LimitedShriram Life Insurance Limited

Contractual future minimum lease rentals receivable under non-cancellable operating leases:

Disposals

6.2 Joint ventures and Associates at fair value

Fixed properties - balance at end of year

Future minimum lease payments

Transferred from subsidiariesInvestment surpluses

34


2 922 2 524 775 604 550 -

- 4 444 4 247 7 572

R million 4 460 3 881 2 922 2 524 1 538 1 357

000s 55 402 54 655 36 297 35 550 19 105 19 105

% 47.6 47.4 45.7 44.2

1.9 3.2

R million 775 604 775 604

- - 000s 86 128 85 624

86 074 85 624 54 -

% 26.1 26.0 26.0 26.0

0.1 -

R million 554 - 550 -

4 - 000s 76 464 -

75 906 - 558 -

% 28.5 - 2.2 -

26.3 -

R million - 10 515 - 4 444 - 6 071

000s - 138 370 - 58 475 - 79 895

% - 21. 1 - 18. 9 - 2. 2

Fair value of interest Direct interestIndirectly held by subsidiaries

Interest in issued share capital Shareholders' fundPolicyholders' fund

Number of shares held Direct interestIndirectly held by subsidiaries

Peermont Global Limited

Direct interestIndirectly held by subsidiaries


Interest in issued share capital

Policyholders' fundShareholders' fund

Investments in associated companies

Absa Limited

Fair value of interest Santam Limited

Santam Limited

Total investment in associated companies

Details of associated companies

Peermont Global LimitedVukile Property Fund Limited



6. INVESTMENTS (continued)

Shareholders' fundPolicyholders' fund

Vukile Property Fund LimitedFair value of interest

Direct interestIndirectly held by subsidiaries


Interest in issued share capital

Shareholders' fundPolicyholders' fund

Indirectly held by subsidiaries

Direct interestNumber of shares held

Indirectly held by subsidiariesInterest in issued share capital

Absa LimitedThe company's investment in Absa Limited was disposed of to Barclays Plc during July 2005.

Fair value of interest Direct interest

35

2005 20046. INVESTMENTS (continued)6.3 Shares held in holding company

Sanlam Limited shares held directly and indirectly by investment subsidiariesShareholders

Number of shares (thousand) 33 192 8 473 Fair value (R million) 504 110

PolicyholdersNumber of shares (thousand) 106 386 140 287 Fair value (R million) 1 616 1 823

R million R million6.4 Investments in subsidiaries

Equity holding 57 907 51 344 Loans to subsidiaries 887 1 147 Loans from subsidiaries (35 529) (29 996) Net investments in subsidiaries 23 265 22 495

Refer to page 64 for details of principal subsidiaries.

6.5 Equities and similar securitiesListed on the JSE - at market value 61 594 48 935 Unlisted - at directors' valuation 1 445 1 306 Derivative equity investments ( 60) 2 512 Offshore equity investments 4 623 2 869 Equity collective investment schemes 13 807 9 185 Total equities and similar securities 81 409 64 807

81 409 64 807 Designated as at fair value through profit or loss 81 469 62 295 Held for trading ( 60) 2 512

Total equities and similar securities 81 409 64 807

Direct offshore investmentsEquities 4 623 2 869 Derivatives 238 201 Interest-bearing investments 597 522 Total offshore investments 5 458 3 592

6.6 Investments other than properties and equitiesPublic sector stocks and loans and cash, deposits and similar securities are designated as at fair value through profit or loss.

Debentures, insurance policies, preference shares and other loans comprise the following:

15 319 12 646 Designated as at fair value through profit or loss 14 398 11 987 Held for trading 921 659

Loans and receivables at amortised cost 1 133 3 031 16 452 15 677


FOR THE YEAR ENDED 31 DECEMBER 2005NOTES TO THE ANNUAL FINANCIAL STATEMENTS

At fair value through profit or lossEquities and similar securities comprise the following:

At fair value through profit or loss

Total debentures, insurance policies, preference shares and other loans

36

6. INVESTMENTS (continued)

31 December 2005 <1 1-5 >5 OpenR million year years years ended TotalPublic sector stocks and loans 6 706 7 921 21 868 - 36 495 Debentures, insurance policies, preference shares and other loans 1 392 7 274 5 384 2 402 16 452 Cash, deposits and similar securities 20 180 953 157 - 21 290 Total 28 278 16 148 27 409 2 402 74 237

31 December 2004R million

Public sector stocks and loans 7 322 3 507 23 304 - 34 133 Debentures, insurance policies, preference shares and other loans 2 082 7 591 4 763 1 241 15 677 Cash, deposits and similar securities 15 087 1 276 152 - 16 515 Total 24 491 12 374 28 219 1 241 66 325

6.7 Register of investments

6.8 Investments encumbered


Premiums receivable 3 482 3 560 Accrued investment income 908 888 Amounts due from holding company and subsidiaries 311 444 Amounts due from reinsurers 31 18 Accounts receivable 1 224 608 Total trade and other receivables 5 956 5 518

Authorised share capital100 million ordinary shares of 1 cent each 1 1Issued share capital and share premium

Nominal value of 1 cent per share 1 1 Share premium 4 999 4 999 Total nominal value and share premium 5 000 5 000 Authorised and unissued shares



8. SHARE CAPITAL AND PREMIUM

There were no trade or other receivables pledged as collateral.

7. TRADE AND OTHER RECEIVABLES

A register containing details of all investments, including fixed property investments, is available for inspection at the registered office of Sanlam Life Insurance Limited.

Investments of R363 million (2004: R637 million) were pledged as collateral for Over The Counter structured transactions. The Registrar of Long-Term Insurance approved these pledges.

Subject to the restrictions imposed by the Companies Act, the authorised and unissued shares are under the control of the directors until the forthcoming annual general meeting.

50 million ordinary shares issued at:

Public sector stocks and loans; debentures, insurance policies, preference shares and other loans; deposits and similar securities as at:

Maturity analysis of:

37

2005 2004

TotalInsurance contracts

Investment contracts Total

Insurance contracts

Investment contracts

R million R million R million R million R million R million9. LONG-TERM POLICY LIABILITIES9.1 Analysis of movement in policy liabilities

Income 49 334 27 586 21 748 41 368 23 024 18 344 Premium income (note 9.2) 20 945 10 137 10 808 20 554 10 682 9 872 Investment return after tax (note 15) 28 389 17 449 10 940 20 814 12 342 8 472 Outflow (30 064) (14 838) (15 226) (28 031) (14 116) (13 915) Policy benefits (note 9.3) (18 692) (9 678) (9 014) (17 573) (8 824) (8 749) Retirement fund terminations (4 604) - (4 604) (3 939) - (3 939) Transfer to segregated assets - - - ( 297) - ( 297) Fees, risk premiums and other payments to shareholders’ fund (6 768) (5 160) (1 608) (6 222) (5 292) ( 930)

Movement in policy loans ( 30) - ( 30) ( 51) - ( 51) Early premium terminations 595 595 - - - - Net movement for the year 19 835 13 343 6 492 13 286 8 908 4 378 Balance at beginning of the year 144 923 86 859 58 064 131 637 77 951 53 686 Balance at end of the year 164 758 100 202 64 556 144 923 86 859 58 064


9.2 Analysis of premium incomeIndividual business 15 277 15 145

Recurring 8 879 8 697 Single 4 756 4 889 Continuations 1 642 1 559

Employee benefits business 5 668 5 409 Recurring 3 041 2 985 Single 2 627 2 424

Total premium income 20 945 20 554

9.3 Analysis of long-term policy benefitsIndividual business 15 272 13 961

Maturity benefits 8 657 7 343 Surrenders 3 205 3 214 Life and term annuities 2 854 2 973 Death and disability benefits (1) 543 411 Cash bonuses (1) 13 20

Employee benefits business 3 420 3 612 Withdrawal benefits 1 512 1 706 Pensions 1 171 1 155 Lump-sum retirement benefits 554 555 Taxation paid on behalf of certain 82 87 Death and disability benefits (1) 79 72 Cash bonuses (1) 22 37

Total long-term policy benefits 18 692 17 573 (1) Excludes death and disability benefits and cash bonuses underwritten by the shareholders.

NOTES TO THE ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2005


38


9.4 Composition of policy liabilitiesIndividual business 125 218 108 251

Market-related liabilities 47 512 36 894 Stable bonus fund 32 050 27 990 Reversionary bonus policies 9 949 8 855 Non-participating annuities 17 108 16 160 Other non-market-related liabilities 18 599 18 352

Employee benefits business 39 540 36 672 Market-related liabilities 15 996 12 883 Stable bonus portfolios 9 905 10 941 Participating annuities 8 579 8 384 Non-participating annuities 3 155 2 561 Other non-market-related liabilities 1 905 1 903

Total policy liabilities 164 758 144 923

9.5 Maturity analysis of investment contracts

2005: R million < 1 year 1 -5 years > 5 years Open ended TotalMarket related liabilities 1 316 4 670 11 745 24 041 41 772 Stable bonus fund 7 43 4 9 905 9 959 Non-participating annuities 113 824 241 279 1 457 Other non-market related liabilities 1 951 4 877 4 540 - 11 368 Total investment contracts 3 387 10 414 16 530 34 225 64 556

2004: R million < 1 year 1 -5 years > 5 years Open ended TotalMarket related liabilities 1 184 4 488 8 314 18 495 32 481 Stable bonus fund 231 34 5 10 940 11 210 Non-participating annuities 113 1 407 223 - 1 743 Other non-market related liabilities 2 728 5 327 4 432 143 12 630 Total investment contracts 4 256 11 256 12 974 29 578 58 064

2005: R million < 1 year 1 -5 years > 5 years Open ended TotalMarket related liabilities 1 067 4 605 15 294 770 21 736 Stable bonus fund 1 400 5 788 22 402 2 406 31 996 Reversionary bonus policies 430 2 000 6 409 1 110 9 949 Participating annuities - - - 8 579 8 579 Non-participating annuities - - - 18 807 18 807 Other non-market related liabilities 440 235 1 415 7 046 9 136 Total insurance contracts 3 338 12 628 45 520 38 717 100 202

2004: R million < 1 year 1 -5 years > 5 years Open ended TotalMarket related liabilities 849 3 666 12 174 613 17 303 Stable bonus fund 1 213 5 014 19 408 2 084 27 719 Reversionary bonus policies 383 1 780 5 704 989 8 855 Participating annuities - - - 8 384 8 384 Non-participating annuities - - - 16 977 16 977 Other non-market related liabilities 357 205 1 219 5 840 7 621 Total insurance contracts 2 802 10 665 38 505 34 887 86 859

9. LONG-TERM POLICY LIABILITIES (continued)

9.6 Maturity analysis of insurance contracts



Investment policy contracts are classified as at fair value through profit or loss.

39


9.7 Policy liabilities include the following:HIV/Aids reserve 2 532 2 306

( 48) ( 81) Asset mismatch reserve 781 704

9.8 Analysis of movement in excess of assets over liabilitiesResult from financial services before tax 1 529 1 524 Investment return on excess of assets over liabilities 5 809 7 619

Investment income 737 1 303 Realised and unrealised investment surpluses 5 072 6 316

Donation of Sanlam Limited shares to Ubuntu-Botho Community Development Trust - ( 338) Early premium terminations ( 440) -

Cost incurred ( 620) - Income tax 180 -

Other ( 150) - Taxation ( 837) (1 215)

Income tax ( 408) ( 522) Capital gains tax ( 305) ( 763) Secondary tax on companies ( 124) 70

Attributable earnings 5 911 7 590 Share-based payments 45 34 Dividends paid (5 300) (1 071) Increase/(decrease) in adjustment of goodwill to fair value 350 ( 306) Movement in excess of assets over liabilities 1 006 6 247

9.9 Capital adequacy requirementsCapital adequacy requirements (CAR) before management actions 8 350 11 150 Management actions assumed (2 975) (4 600) CAR after management actions assumed 5 375 6 550 Shareholders' fund 26 911 26 255 Adjustment of goodwill to fair value 403 53 Shareholders' fund at fair value 27 314 26 308 Adjustment for regulatory purposes (1) (6 440) (2 689) Shareholders fund for regulatory purposes 20 874 23 619

3.9 3.6

Management actions

- 346

2 097 2 644 - 321

Reduction in grossing up of the assets covering CAR 892 1 374 ( 14) ( 85)

2 975 4 600 Total management actions

The following management actions were assumed in the calculation of the capital adequacy requirements:

Reduction in future bonus rates; on average 2 % per annum below expected long- term rates, for three years (2004: 2,0%)Capitalisation of proportion of expected future profits held as second-tier margins

Independence credits




Reduction in earnings caused by using a retrospective HIV/Aids valuation basis instead of a prospective valuation basis

Times CAR covered by excess of assets over liabilities for prudential regulatory purposes(1) The adjustment to the effect of valuing group undertakings on the method prescribed by the Long-Term Insurance Act for the purpose of returns to the Registrar of Long-Term Insurance, taking into account the capital adequacy requirement of life insurance subsidiaries and deducting any inadmissible assets in terms of the Long-Term Insurance Act.

Reduction in non-vested bonuses; on average 0 % of non-vested bonuses (2004: 3,0%)

CAR cover is based on the excess of assets over liabilities for prudential regulatory purposes and the capital adequacy requirements for Sanlam Life Insurance Limited. All the life insurance subsidiaries of Sanlam Life Insurance Limited were in a sound financial position with their excess assets exceeding their capital adequacy requirements.

40

2005 2004% %

CAR asset composition

Cash 15 15Fixed-interest securities 20 20Hedged equities 35 40Properties 5 8Equities 25 17

100 1009.10 Investment return and inflation assumptions

Fixed-interest securities 7.5 8.3Equities and offshore investments 9.5 10.3Hedged equities 7.5 8.3Properties 8.5 9.3Cash 5.5 6.3

4.0 4.33.0 3.3

% %

Retirement annuity business 7.8 8.5Individual policyholder business 7.2 7.8

Individual stable bonus businessRetirement annuity business 7.5 8.4Individual policyholder business 6.9 7.7Non-taxable business 8.0 9.0Corporate policyholder business 6.7 7.4

Individual market-related businessRetirement annuity business 7.8 8.5Individual policyholder business 7.2 7.8Non-taxable business 8.2 9.1Corporate policyholder business 6.9 7.5

Participating annuity business 6.6 7.4Non-participating annuity business* 7.1 7.6Guarantee plans* 6.8 7.4

9.12 Valuation methodology and assumptions

9.13 Bonus stabilisation reserves

9.14 Financial assistance provided to policyholders



Future expense inflation (excluding margin)

The assets backing the capital adequacy requirements after management actions, used for the purpose of grossing up the intermediate ordinary capital adequacy requirements (as defined in PGN 104) to determine the ordinary capital adequacy requirements were i d f ll

In prior years the shareholders supported the financial position of the Participating Annuity Portfolio with R443 million in total. The possible repayment of the support will be determined by future financial conditions. It will be reviewed on a regular basis, but at present any repayment seem unlikely.

No portfolio had a negative bonus stabilisation reserve which exceeded 7,5% of the relevant investment accounts at 31 December 2005.


Pre-tax investment returns by major asset categories and inflation assumptions were as follows:

9.11 Discount rates used in calculating prospective policy liabilitiesReversionary bonus business

A number of changes were made in 2005 to the valuation methodology and assumptions, which resulted in a net reduction of R43 million (2004: R103 million) in the operating profit for 2005.

* The calculation of policy liabilities is based on discount rates derived from the zero-coupon yield curve. This is the average rate that produces the same result.

Consumer price index inflation for premium indexation

Total CAR asset composition

41

Reconciliation of the deferred tax balances:R million R million

Balance at 1 January 2004 75 633 Temporary differences charged to income statement 75 1 124

Accruals and provisions 5 - Tax losses and credits 70 - Net unrealised investment surpluses on shareholders' fund - 815 Net unrealised investment surpluses on policyholders' fund - 309

Balance at 31 December 2004 150 1 757 Temporary differences charged to income statement ( 117) 42

Accruals and provisions ( 80) - Tax losses and credits ( 37) - Net unrealised investment surpluses on shareholders' fund - ( 163) Net unrealised investment surpluses on policyholders' fund 209 Other temporary differences - ( 4)

Balance at 31 December 2005 33 1 799

Analysis of the deferred tax balances:

Tax losses and credits 33 - Net unrealised investment surpluses on shareholders' fund - 923 Net unrealised investment surpluses on policyholders' fund - 880 Other temporary differences - ( 4) Total deferred tax balances 33 1 799


Total deferred tax asset 33 150 Total deferred tax liability 1 799 1 757 Total net deferred tax 1 766 1 607

11. TRADE AND OTHER PAYABLESAccounts payable 2 703 2 420 Policy benefits payable 2 022 1 610 Amounts due to reinsurers 10 2 Amounts due to fellow subsidiary 5 48 Claims incurred but not reported 780 742 Total trade and other payables 5 520 4 822

Deferred tax in respect of investment properties is provided for at capital gains tax rates, where applicable, as it is expected that capital gains tax will be payable on the recovery of the carrying value of the properties. Refer to note 27 for additional information.

Capital Gains Tax Liability

Income Tax Asset



10. DEFERRED TAX

42

12. PROVISIONS Details of the different classes of provisions are as follows:

Restruc-turing

Possible claims

Post- retirement medical aid

Onerous contracts Other Total

R million R million R million R million R million R millionBalance at 1 January 2004 58 104 42 58 67 329 Additional provisions - 9 5 - 31 45 Utilised during the year ( 58) ( 30) ( 6) ( 32) ( 15) ( 141) Balance at 31 December 2004 - 83 41 26 83 233 Additional provisions - 208 - - 43 251 Utilised during the year - ( 10) ( 4) ( 19) ( 1) ( 34) Balance at 31 December 2005 - 281 37 7 125 450 Analysis of provisionsCurrent - - - 6 - 6Non-current - 281 37 1 125 444Total provisions at 31 December 2005 - 281 37 7 125 450Restructuring Provision was made for employee termination costs in terms of announced restructuring plans.The restructuring was completed during 2004.Possible claimsThe company provides for possible claims that may arise as a result of past events, transactions or investments. Due to the nature of the provision, the timing of the expected cash outflows are uncertain.Estimates are reviewed annually and adjusted as appropriate for new circumstances.Post-retirement medical aid contributionThe company provides for the future medical aid contributions for certain pensioners, disabled staff members and disabled advisores. The provision represents the present value of future contributions which is actuarially determined on an annual basis. Refer to note 24: Retirement benefits for employees. Onerous contractsProvision is made for the full term of the contractual rental payable in respect of vacated offices where the lease term has not yet expired. A provision for related costs (e.g. electricity) is also included.Other


1 799 1 720 Investment management fees 392 316

4 682 4 444 6 873 6 480

2 445 2 098 64 688

Interest-bearing, preference shares and similar securities 5 017 4 965 874 882

1 050 1 105 ( 176) ( 223)

Total investment income 8 400 8 633

Rental related expenses

Properties

Administration services

Equities and similar securities

Total financial services income Risk benefit charges and other fee income

13. FINANCIAL SERVICES INCOME

14. INVESTMENT RETURNInvestment income

Rental income

Dividends received from wholly owned subsidiaries

Includes sundry provisions for possible outflows of resources from the Company arising from past events. None of the items are individually material.



43


Investments classified as at fair value through profit or loss 25 422 17 621 Investment properties - fixed properties 687 2 907 Profit/(loss) on disposal of associated companies 738 - Total investment surpluses 26 847 20 528

Underwriting policy benefits 2 468 2 589 Investment return and tax attributable to insurance contract liabilities 17 449 12 342 Total long-term insurance contract benefits 19 917 14 931

Investment contractsInvestment return and tax attributable to investment contract liabilities 10 940 8 472 Total long-term investment contract benefits 10 940 8 472

Analysis of underwriting policy benefits1 218 1 276 1 250 1 313 2 468 2 589

16. ADMINISTRATION COSTS INCLUDE: Directors’ remuneration Total remuneration paid by Sanlam Life Insurance Limited to its present and previous directors:

0.8 0.8 Other services (basic remuneration, pensions and bonuses) 26.3 26.7

0.2 - Other services (basic remuneration, pensions and bonuses) - 1.5

Total directors’ remuneration 27.3 29.0

Analysis of directors’ remuneration10.5 9.016.8 20.0

Total directors’ remuneration 27.3 29.0

Audit fees: statutory audit 10 9 2 2

Total auditors’ remuneration 12 11

Auditors’ remuneration

Other services

Non-executive directors Executive directors

Present

Previous Directors’ fees

Directors’ fees


Investment surpluses


14. INVESTMENT RETURN (continued)

Investment return includes foreign exchange gains and losses of R1 801 million (2004:R2 779 million).

15. LONG-TERM INSURANCE AND INVESTMENT CONTRACT BENEFITS

Total underwriting policy benefitsEmployee benefitsIndividual insurance

Insurance contracts

44


29 24 58 52

Properties 51 44 Equipment 7 8

121 109 32 30 15 -

Litigation settlements 10 37 1 293 1 164

Salaries and other short-term benefits 1 156 1 040 Pension costs - defined contribution plans 85 78 Pension costs - defined benefit plans 7 7 Post-employment benefits - 5 Share-based payments 45 34

4 741 4 648

Audit fees 2 - Consultancy fees 80 -

Executive share incentive scheme

2005 2005 2005 2004 2004 2004

Shares OptionsAverage option Shares Options

Average option

000s 000s price (R) 000s 000s price (R)Executive share incentive schemeTotal number of shares and options at the beginning of the year 340 109 647 7. 51 1 770 114 380 7. 17 Unrestricted shares at the beginning of the year - (19 893) 7. 62 - (25 908) 6. 77 Restricted shares and share options at the beginning of the year 340 89 754 7. 49 1 770 88 472 7. 29 New share options granted - 626 8. 94 - 26 883 8. 21 Unconditional share options and shares released, available for release, or taken up ( 16) (23 240) 7. 67 (1 401) (21 930) 7. 91 Share options forfeited ( 4) (2 775) 7. 61 ( 41) (3 206) 7. 48 Share options expired - - ( 465) 7. 96 Cash dividends received on restricted shares and converted into shares 1 - 12 - Restricted shares and share options at the end of the year 321 64 365 7. 44 340 89 754 7. 49 Unrestricted shares at the end of the year - 20 488 7. 84 - 19 893 7. 62 Total number of shares and options at the end of the year 321 84 853 7. 53 340 109 647 7. 51

Share options

AverageShares Options ption price

Unconditional during year ending 000's 000's R31 December 2006 320 17 064 7. 05 31 December 2007 1 21 968 7. 55 31 December 2008 - 17 896 7. 37 31 December 2009 - 7 437 8. 16

Details regarding the restricted shares and share options outstanding on 31 December 2005 and the financial years during which they become unconditional, are as follows:

Number of

16. ADMINISTRATION COSTS (continued)

Employee benefits

Technical, administrative and secretarial fees Consultancy fees

Operating leases Depreciation

Restructuring costs

The employees of Sanlam Life Insurance Limited participate in the Share Incentive Trust of the company's holding company, Sanlam Limited. Details of the Share scheme are given below:

In addition to the above, the following fees paid were capitalised:



Office staff (number of persons)

45

2005 2004

Weighted average share price in Rands 9.82 8.98Weighted average exercise price in Rands 8.94 8.21Weighted average expected volatility 22.92% 23.58%Expected term 6.84 years 6.11 yearsWeighted average expected dividend yield 4.37% 4.43%

3.01 2.72


291 222 242 825 117 62 125 763 124 ( 70) 657 977

Analysis of income tax per category 703 237 228 289 ( 80) - 468 ( 52)

87 - ( 46) 740

- ( 5) 80 -

( 163) 815 37 ( 70)

657 977

159 133 39 35 14 13

212 181 Total indirect taxes and levies

In addition to income tax the following indirect taxes and levies were paid, which are include in the appropriate items:

Indirect taxes and levies include value-added tax and statutory levies payable to the Regional Services Councils and the Financial Services Board.

Included in administration costs Included elsewhere in the income statement Included in policyholders investment return


FOR THE YEAR ENDED 2005

Secondary Tax on Companies

The fair value of options granted during the period, based on a binomial valuation model, was R2 million (2004: R73 million). The significant inputs used in the model were as follows:

Weighted average fair value of options at measurement date in Rands

16. ADMINISTRATION COSTS (continued)

Deferred taxNormal tax - current year

The risk-free yield curve used to calculate the fair value of options granted was determined at grant date.

Result from financial services

Investment returnInvestment income - current year

SHAREHOLDERS' FUND Analysis of income tax on profit attributable to shareholders’ fund

Capital gains taxSecondary Tax on Companies

Tax expense: shareholders' fund

- prior yearCapital gains tax - current yearSecondary Tax on Companies

Normal income taxRSA – current yearRSA – prior year

The expected volatility is based on the historic volatility of the Sanlam Limited share price over the previous 7 years and the expected term on management's best estimate of the effects of non-transferability, exercise restrictions and behavioural considerations.

Investment surpluses

Tax expense: shareholders' fund

Current year

17. TAXATION

46

2005 2004% %

29.0 30.0

(3.5) (3.6)0.6 -1.7 (0.8)

(16.1) (10.8)6.4 3.6

18.1 18.4

R million R million

Normal income tax 33 262 RSA – current year 33 252 RSA – prior year - 10

Capital gains tax 460 314 Normal 251 5 Deferred 209 309

Tax on retirement funds 153 128 Tax expense: policyholders' fund 646 704

Long-term insurance premium income (note 9.2) 20 945 20 554

Long-term insurance benefits paid 21 160 20 162 Underwriting (note 15) 2 468 2 589 Other (note 9.3) 18 692 17 573

Retirement fund terminations (note 9.1) 4 604 3 939 Total payments to clients 25 764 24 101

21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT 21.1 Financial risks

Additional information on the management of financial risks is provided below.

The company manages these risks through various operational risk management processes, all forming part of an asset liability management framework. These processes have been developed to ensure that the long-term investment return on assets supporting policy liabilities are sufficient to fund policyholders' reasonable benefit expectations and the shareholders' profit entitlement.

An Asset Liability Committee has been established within Sanlam Life Insurance Ltd. The principle aim of this committee is to ensure that insurance and investment contract liabilities are matched with appropriate supporting assets based on the type of benefits payable to the contract holders. Separate asset portfolios are maintained for the different products and categories of long-term policy liabilities.

17. TAXATION (continued)



The company is exposed to various financial risks in connection with its current operating activities, such as foreign currency risk, interest rate risk, credit risk, market risk and liquidity risk. These risks contribute to the key financial risk that the proceeds from the company's financial assets are not sufficient to fund the obligations arising from insurance and investment policy contracts.

Income tax

Reconciliation of tax rateStandard rate of taxationAdjusted for:

Non-taxable incomeDisallowable expenses

20. DIVIDENDSA dividend of R1 800 million (2004: R1 300 million) was declared in March 2006 in respect of the 2005 earnings. A special dividend of R4 000 million was declared on 27 July 2005. The secondary tax on companies (STC) liability in respect of the dividend is dependent on the STC credits that will be available at the end of the dividend cycles and is impracticable to determine.

Effective tax rate

Secondary Tax on CompaniesCGT base difference

19. PAYMENTS TO CLIENTS

Policy holder investment return

18. FUNDS RECEIVED FROM CLIENTS

POLICYHOLDERS’ FUND

47

21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)21.1 Financial risks (continued)

Derivative financial instruments

2005

R million < 1 year 1-5 yearsTotal notional

amountsTotal fair value

of amountsMarket risk productsCliquet structures 227 1 823 2 050 ( 205) Collar structures - - - - Forward purchase of shares

Local - - - - OTC structures

Local 1 019 - 1 019 ( 38) International 71 - 71 -

Total market risk products 1 317 1 823 3 140 ( 243)

2004

R million < 1 year 1-5 yearsTotal notional

amountsTotal fair value

of amountsMarket risk productsCliquet structures 128 412 540 162 Collar structures 732 - 732 ( 146) Forward purchase of shares

Local 128 - 128 ( 78) OTC structures

Local 760 - 760 ( 60) International 338 - 338 ( 22)

Total market risk products 2 086 412 2 498 ( 144)

Securities lending


Fair value of collateral accepted as security for scrip lending arrangements 10 840 3 628

- Ownership is not transferred with collateral.- Collateral is returned when scrip lent is returned.

Market risk - interest and equities

Sanlam Life Insurance Limited conducts securities lending activities in respect of some of its listed equities and bonds. The exposure to these activities was less than 38% (2004: 15%) of the shareholders' fund of Sanlam Life Insurance Limited and collateral security and guarantees of between 105 % and 150% (2004: 105% and 150%) of the value of the loaned securities are held.

Material terms and conditions associated with the use of the collateral are as follows:

The company's operations are exposed to market risk. Market risk arises from the uncertain movement in fair value of the investments that stems principally from potential changes in sentiment towards the investment, the variability of future earnings that is reflected in the current perceived value of the investment and the fluctuations in interest rates and foreign currency exchange rates. Policyholders' and shareholders' investments in equities are valued at fair value and are therefore susceptible to market fluctuations. Investments subject to equity risk are analysed in the balance sheet and in note 6.

The acquisition of policyholders' assets is based on the contract entered into and the preferences expressed by the policyholder. Within these parameters, investments are managed with the aim of maximising policyholder returns while limiting risk to acceptable levels within the framework of statutory requirements. The focus of risk measurement and management is to ensure that the potential risks inherent in an investment are reasonable for the future potential reward, exposure to investment risk is limited to acceptable levels, premium rates are adequate to compensate for investment risk and an adequate reserving policy is applied for long-term policy liabilities.

Residual term to contractual maturity

Residual term to contractual maturity



For the management of the shareholders' fund's financial risks, the company uses derivative financial instruments primarily for the preservation of their capital bases.

48


Market risk - interest and equities

The mean duration of non-participating annuity liabilities 9.5 years The mean duration for the supporting assets is: 8.9 years

Operational Risk



Stable bonus business:The company is exposed to market risk to the extend that declared bonuses have vested and other investment guarantees provided. The risk is managed by appropriate investment policies for supporting investments. Negative bonus stabilisation reserves are allowed for in the valuation of these liabilities to the extend that the shortfall is expected to be recovered by declaring lower bonuses in the subsequent years. The funding level of portfolios are bolstered in instances where negative stabilisation reserves will not be eliminated by these management actions. At 31 December 2005 all portfolios had a funding level in excess of 92,5%.

Linked and market-related liabilities:The company is not exposed to market risk in respect of linked liabilities, as the benefits under the contracts are linked to the fair value of the supporting assets. Market risk is assumed by the contract holder. The company is exposed to some market risk where the policy contract provides for guaranteed minimum benefits at death or maturity. The risk is managed by appropriate investment policies and by adjusting the level of guarantees for new policies to prevailing market conditions. The Asset Liability Committee determines appropriate investment policies where investment guarantees are provided. These policies are then reflected in the investment guidelines for the policyholder portfolios. The company's long-term policy liabilities include a specific provision for investment guarantees. The current provision is sufficient to cover the expected additional benefits within a 77% confidence level.

Comprehensive measures and limits are in place to control the exposure to market risk of the investments of the company. Continuous monitoring takes place to ensure that appropriate assets are held where the liabilities are dependent upon the performance of specific portfolios of assets and that a suitable match of assets exists for all non-linked liabilities. Limits are applied in respect of the exposure to asset classes and individual counters. Capital intensive products are also subject to new business limits.

Operational risk is the risk of loss due to factors such as inadequate systems, management failure, inadequate internal controls, fraud or human error. The company mitigates these risks through its culture and values, a comprehensive system of internal controls, internal audit, forensic and compliance functions and other measures such as back-up facilities, contingency planning and insurance.

The initiation of transactions and their administration is conducted on the basis of the segregation of duties, designed to ensure the correctness, completeness and validity of all transactions. Control is further strengthened through the settlement of transactions through custodians, approved by the FSB. The custodians are also responsible for the safe custody of the company’s securities. To ensure validity, all transactions are confirmed with counter-parties independently from the initial executors. The company has a risk-based internal audit approach, in terms of which priority is given to the audit of higher risk areas, as identified in the planning phase of the audit process. The internal control systems and procedures are subject to regular internal audit reviews.

Non-participating annuities:Interest rate risk is the principle financial risk in respect of non-participating annuities, given the long-term profile of these liabilities. Liabilities are matched with assets, mostly interest-bearing, to ensure that the duration of assets and liabilities is closely matched. The impact of changes in interest rates are continuously tested and for a 1% parallel movement in interest rates the impact on profit will be immaterial.

Guarantee plans:These policies provide for guaranteed maturity amounts. Market risk is managed by matching the liabilities with assets that have similar maturity profiles as the liabilities.

49


Currency risk

Policyholders' fund:

Shareholders' fund:

United States BritishDollar Pound Total

31 December 2005 R million R million R millionEquities 1 389 119 1 508 Public sector stocks and loans 373 11 384 Debentures, insurance policies and other loans 1 070 - 1 070 Cash, deposits and similar securities 107 7 114 Trade and other receivables 20 - 20 Trade and other payables ( 211) ( 1) ( 212) Foreign currency exposure 2 748 136 2 884 Exchange rates:Closing rate 6.35 10.89Average rate 6.36 11.56

United States BritishDollar Pound Total

31 December 2004 R million R million R millionEquities 1 046 97 1 143 Public sector stocks and loans 124 12 136 Debentures, insurance policies and other loans 767 - 767 Cash, deposits and similar securities 52 1 53 Trade and other receivables 6 - 6 Trade and other payables ( 19) - ( 19) Foreign currency exposure 1 976 110 2 086 Exchange rates:Closing rate 5.64 10.82 Average rate 6.42 11.77

Currency risk is the risk that the value of a financial instrument will fluctuate owing to changes in foreign exchange rates. The company's exposure to currency risk is in respect of foreign investments made on behalf of policyholders and shareholders for the purpose of seeking international diversification of investments. Exposure to different foreign currencies is benchmarked against the currency composition of the Morgan Stanley Capital International World Equity Index and the JP Morgan Government Bond Index.

Policyholder portfolios with exposure to foreign currencies are predominantly in respect of linked, market-related and participating policy liabilities where the holder of the contract is in the first instance exposed to the currency risk. For other policy liabilities the currency exposure is negligible.

The following shareholders' fund assets and liabilities denominated in foreign currencies are included in the balance sheet:



Property riskProperty risk is the risk that the value of the investment properties will fluctuate as a result of changes in the environment. Property investments are made on behalf of policyholders and shareholders and are reflected at market value. Diversification in property type, geographical location and tenant exposure are all used to reduce the risk exposure.

50



4 565 4 047 10 856 7 321 2 884 3 249 1 363 3 248 247 251

19 915 18 116

Included in interest-bearing financial instruments are the following short-term fixed interest stock:

Promissory notesDepositsCall depositsLoansOther short-term fixed interest stock

Liquidity riskLiquidity risk is the risk that the company will encounter difficulty in raising cash to meet commitments associated with financial instruments. Liquidity risk arises when there is mismatch between the maturities of liabilities and assets. Policyholder funds are invested in appropriate assets, taking into account expected cash outflows. Almost 100% of term finance liabilities are backed by appropriate assets with the same maturity profile. Details of current liabilities are provided in note 11. The company has significant liquid resources and substantial unutilised banking facilities.

Capital adequacy risk Capital adequacy risk is the risk that there are insufficient reserves to provide for variations in actual future experience that is worse than assumed in the financial soundness valuation. The company must maintain shareholders' funds that will be sufficient to meet obligations in the event of substantial deviations from the main assumptions affecting the company's business. A stochastic modelling process is used to simulate a large number of investment scenarios. This is used to determine required capital levels that will ensure sustained solvency with an acceptable confidence level. Capital adequacy requirements for the company were covered 3.9 times by the companies' shareholders' funds (as determined for regulatory purposes) at 31 December 2005 (2004: 3.6 times ) and are determined according to regulation and the guidelines issued by the Actuarial Society of South Africa.

Legal risk Legal risk is the risk that the company will be exposed to contractual obligations which have not been provided for, particularly in respect of policy benefits. The risk also arises from the uncertainty of the enforceability, through legal or judicial processes, of the obligations of Sanlam Life Insurance Limited's counter parties, including contractual provisions intended to reduce credit exposure by providing for the netting of mutual obligations.

During the development stage of any new product and for material transactions entered into by the company, the legal resources of the company monitor the drafting of the contract documents to ensure that rights and obligations of all parties are clearly set out. The company seeks to minimise uncertainties through continuous consultation with internal and external legal advisers, to understand the nature of risks and to ensure that transactions are appropriately structured and documented.

Credit riskCredit risk arises from the inability or unwillingness of a counter party to a financial instrument to discharge its contractual obligations. The company determines counter-party credit quality by reference to ratings from independent ratings agencies or, where such ratings are not available, by internal analysis. The company seeks to avoid unacceptable concentration of credit risk to groups of counter-parties, to business sectors, product types, etc.

The company's financial instruments do not represent a concentration of credit risk because the company deals with a variety of major banks and its accounts receivable and loans are spread among a number of major industries, customers and geographic areas. Amounts receivable in terms of long-term insurance business are secured by the underlying value of the unpaid policy benefits in terms of the policy contract. An appropriate level of provision is maintained. Exposure to outside financial institutions concerning deposits and similar transactions is monitored against approved limits.



51

21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)21.2 Long-term insurance risk

Long-term insurance risks can be classified into four main categories:Investment risk;Underwriting risk;Operational risk; andReputational risk.

Investment risk

Underwriting risk



Underwriting risk is the risk that the actual mortality, morbidity and medical claims will exceed the expected claims. Insurance events are random and the actual number and amount of claims will vary from estimates. The company manages these risks through its underwriting policy to prevent anti-selection and ensure appropriate premium rates (loadings) for substandard risks, adequate reinsurance arrangements to limit exposure per individual and manage concentration of risks, claims handling policy to prevent anti-selection, fraud and excessive disability claims and adequate pricing and reserving.

Investment risk is particularly relevant to products providing smoothed bonuses or guaranteed investment amounts. It relates to the relative sensitivity of long-term policy liabilities and the supporting policyholder assets to interest rate, market, credit, liquidity, currency and derivative risks. Refer to note 21.1 for additional information on the management of these risks.

The following policies and practices are used by the company as part of its underwriting strategy to mitigate underwriting risk:

The company's reinsurance arrangements include proportionate, excess and catastrophe coverage. All risk exposures in excess of specified monetary limits are reinsured. Catastrophe insurance is in place for single-event disasters. Credit risk in respect of reinsurance is managed by limiting the company's exposure to companies with high international or similar credit ratings.

Risk profiles are determined monthly; and

The experience of reinsurers is used where necessary for the rating of substandard risks;

Applications for risk cover are reviewed by experienced underwriters and evaluated against established standards. Retention limits are applied to limit the exposure per individual life;

Regular investigations into mortality and morbidity experience are conducted to ensure that corrective action is taken where necessary.

The right to rerate premiums is retained as far as possible;

All long-term insurance product additions and alterations are required to pass through the approval framework that forms part of the company's governance process. The statutory actuary approves the policy conditions and premium rates of new and revised products;

Specific testing for HIV/Aids is carried out in all cases where the applications for risk cover exceed a set limit. Product pricing and reserving policies also include specific allowance for the risk of HIV/Aids;

Reasonable income replacement levels apply to disability insurance;

52

21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)21.2 Long-term insurance risk (continued)

2005 2004 2005 2004% % % %58 57 64 6218 18 18 1820 21 17 192 2 1 12 2 0 0

100 100 100 100

Non-participating annuity payable per annum per life insured

2005 2004R'000 % %

47 4720 2010 116 64 4

13 12100 100

Operational risk

Lapse risk;Expense risk;Legislation; andTaxation.

Lapse risk

Expense risk

Operational risk can be classified into the following main categories:

Lapse risk relates to the risk of financial loss due to negative lapse experience. Distribution models are used by the company to identify high risk clients. Client relationship management programmes are aimed at managing client expectations and relationships to reduce lapse rates. The design of insurance products excludes material surrender value guarantees (subject to regulatory constraints) to limit financial loss at surrender. Lapse experience is monitored to ensure that negative experience is timeously identified and corrective action taken. The company's reserving policy is based on actual experience to ensure that adequate provision is made for lapses.

Expense risk is the risk of loss due to actual expense experience being worse than that assumed in premium rates and policy liabilities. Expenses are continuously monitored and managed through the company's budgeting process.



> 100

Before reinsurance

80 - 100

5 000 - 8 000> 8 000

0 - 20

60 - 80

20 - 4040 - 60

A well diversified portfolio reduces the risk. The tables below provide analyses of the concentration of insured benefits andannuities per individual life insured, expressed as percentages of the relevant total benefits insured and total annuities payable.

Concentration of insurance risk

Claims risk is the risk that the company may pay claims not intended to be incurred. Training of client service staff takes place to ensure that fraudulent claims are identified and investigated timeously. The legitimacy of claims is verified by internal, financial and operating controls that are designed to contain and monitor claims risks. The forensic investigation team also advises on improvements to internal control systems.

1 000 - 5 000

After reinsuranceBenefits insured per individual life

0 - 500500 - 1 000

53

21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)21.2 Long-term insurance risk (continued)

Legislation

Taxation

Reputational risk


39 63 92 89 60 103

191 255

The above fund is valued annually. According to the latest valuation in accordance with IAS 19 the above fund was in a materially sound financial position.

Total operating lease There are no other material commitments or contingencies that were not fully provided for.

Defined benefit funds The company has a defined benefit fund. This fund relate to staff that did not elect to transfer to the defined contribution fund. This fund is closed for new entrants. Sanlam Life Insurance Limited contributed R7 million during 2005 to this fund (2004: R7 million). These contributions relate to current service costs and are included in administration costs. The Sanlam Office Personnel Fund is governed by the Pensions Funds Act in South Africa.

23. COMMITMENTS AND CONTINGENCIES

In terms of the articles of association of Sanlam Life Insurance Limited, the directors may at their discretion raise or borrow money for the purpose of the business of the company subject to the prior approval of the Registrar of Long Term insurance.

Lease rentals due within two to five yearsLease rentals due within more than five years

Reputational risk is the risk that the company is prevented from applying mitigating risk management policies due to the potential reputational impact on the company. Actions with a potential reputational impact are escalated to the appropriate level of senior management. The Audit Committees and Board of Directors are involved as required. Events with an industry-wide reputational impact are addressed through industry representatives.

Defined contribution fundsThere are separate defined contribution funds for advisers, full-time and part-time office staff. The company contributed R85 million to these funds during 2005 (2004: R78 million).

22. BORROWING POWERS

At 31 December 2005 94% of employees were covered by defined contribution plans and 6% by defined benefit funds (2004: 92% and 8% respectively).

24. RETIREMENT BENEFITS FOR EMPLOYEESRetirement provision The company provides for the retirement benefits of full-time employees and for certain part-time employees by means of defined benefit and defined contribution pension and provident funds.

Future operating lease commitments:Lease rentals due within one year



Changes in tax legislation may result in financial loss due to the fact that the actual tax expense relating to policyholder assets and activities may be worse than that assumed in the determination of premium rates and guaranteed policy benefits. The risk is addressed through clear contracting to ensure that policy contracts entitle policyholders to after tax returns where applicable. The company's internal tax resources monitor the impact of changes in tax legislation, participate in discussions with the tax legislator to influence changes in legislation and are involved in the development of new products. External tax advice is obtained as required.

The company is exposed to the risk that practices established in the past may not be acceptable in changing legislative environments. The risk is managed through clear contracting as also described in note 21.1 under Legal risk. The company monitors and influences events to the extent possible by participation in discussions with legislators, directly and through industry representatives.

54

24. RETIREMENT BENEFITS FOR EMPLOYEES (continued)

Principal actuarial assumptions were as follows:

2005 20048.25% 10%6.0% 7.5%8.25% 10%

2005 20048.25% 10%7.95% 9.8%8.25% 10%

2005 2004 2005 2004R million R million R million R million

638 643 - - ( 818) ( 743) - - ( 180) ( 100) - -

- - 37 41 ( 180) ( 100) 37 41

180 100 - - - - 37 41

- - 41 42 Net expense recognised in the income statement 7 7 - 5

( 7) ( 7) ( 4) ( 6) - - 37 41


Net expense recognised in the income statement 12 12 61 62

( 153) ( 129) 135 43

- 19 ( 48) -

7 7

19.1% 19.3%

Latest valuation datePre-retirement discount rateFuture salary increases

Expected increase in medical aid contributions

Principal actuarial assumptions were as follows:

Pre-retirement discount rate

Expected return on assets

Medical aid fundsThe actuarially determined present value of medical aid obligations for disabled members and certain pensioners is fully provided for at year-end. The company has no further unprovided post-retirement medical aid obligations for current or retired employees.

Based on reasonable actuarial assumptions about future experience, the employers’ contribution, as a fairly constant percentage of the remuneration of the members of the funds, should be sufficient to meet the promised benefits of the funds.

Returns for All bond index (ALBI)

Current service cost

The above value of fund assets includes an investment of R 7million (2004: R 7million) in Sanlam shares.

Expected return on plan assets

Net liability at beginning of year

Amounts recognised in the Balance Sheet

Present value of unfunded obligation

Net liability included on balance sheet

Net present value of funded obligations

Release of reserve



Movements in the net liability recognised in the balance sheet are as follows:

Actuarial value of plan assets

Net (assets)/liabilitiesUnrecognised actuarial gains

Present value of funded obligations

Defined Benefits PlansPost-employment medical aid

benefits

The actuarial surplus is currently not recognised as an asset by the company, as the extent of the surplus available to the company cannot be determined with certainty.

Utilised/Change in liabilityNet liability at end of year

Total included in "staff costs"

Actual return on plan assets:

Net actuarial losses recognised during the year

Office Personnel

Past service cost

Defined Benefit Plans

Interest cost

55

2005 2004 2005 2004R million R million R million R million

Transaction / Related Parties Balance typeHolding companySanlam Ltd Inter-company balances 311 439

SubsidiariesSanbes Inter-company balances ( 5) ( 48) Beldiv Inter-company balances - 6

Subsidiaries of subsidiariesSanlam Properties (Pty) Ltd Asset management fees ( 24) ( 25)

Handling fee ( 7) ( 2) Insurance brokerage ( 0) ( 1) Sales commission ( 35) ( 15) Inter-company balances - 2

Fellow subsidiariesSantam Ltd Building insurance ( 5) ( 6)

Subsidiaries of fellow subsidiariesSanlam Collective Investments Ltd Commission fee income 11 9

Marketing fees received 4 5 Interest paid ( 4) ( 7)

Associate of holding companyGensec Property Services Ltd Asset management fees ( 56) ( 67)

Tenant commission ( 20) ( 19) Inter-company balances 3 2

Joint VenturesSanlam Direct-Axis (Pty) Ltd Interest on loan account 83 49

Inter-company balances 1 081 662

Sanlam Home Loans (Pty) Ltd Service & commission fees 1 1 Inter-company balances 53 ( 25)

Policy administration

Transactions with entities in the Sanlam Group

Total Transactions

Certain companies in the Sanlam Group carry out third party policy and other administration activities for other related parties in the Group. These transactions are entered into in the normal course of business, under terms that are no more favourable than those arranged with third parties.

During the year the company in the ordinary course of business entered into various transactions with subsidiary companies, associated companies, joint ventures and other stakeholders. These transactions occurred at arm’s length. Refer below for detail of transactions and balances outstanding with related parties.The company advanced, repaid and received loans from other subsidiaries in the Sanlam Group during the current and previous years.Details of investments in associated companies are disclosed in note 6 and details of investments in subsidiaries are disclosed on page 64.

Balances outstanding

Details of transactions that occurred during the financial period and outstanding balances with related parties, are listed below. A complete list of all related parties are disclosed on Annexure A to the financial statements.

Ultimate shareholderSanlam Limited is the ultimate holding company of Sanlam Life Insurance Ltd.Transactions with directorsRemuneration is paid to directors in the form of fees to non-executive directors and remuneration to executive directors of the company. All directors of Sanlam Life Insurance Limited have notified that they did not have a material interest in any contract of significance with the company, which could have given rise to a conflict of interest during the year. Details relating to directors’ emoluments are included in note 16.



25. RELATED PARTIES

56


25. RELATED PARTIES (continued)Related Parties Transaction

Sanlam General Institutional Fund Distributions received 8 3Sanlam Global Equity Fund Distributions received 2 0Sanlam Institutional Growth Fund Distributions received 10 9Sanlam Institutional Long Bond Fund Distributions received 337 392Sanlam Institutional Special Opportunities Fund Distributions received 60 84Sanlam Multi Managed Institutional All Bond One Distributions received 20 6 Sanlam Multi Managed Institutional All Bond Three Distributions received 12 5 Sanlam Multi Managed Institutional All Bond Two Distributions received 35 26 Sanlam Multi Managed Institutional General Equity Distributions received 10 8 Sanlam Multi Managed Institutional General Equity Two Distributions received 4 1 Sanlam Multi Managed Institutional Positive Return Distributions received 8 5 Sanlam Multi Managed Institutional Positive Return Three Distributions received 0 1 Sanlam Multi Managed Institutional Positive Return Two Distributions received 14 4 Sanlam Property Fund Distributions received 8 3 Sanlam Value Institutional Fund Distributions received 25 13 Sanlam Multi Managed Institutional Aggressive Equity Distributions received - 3

Post-employment benefit fundsPension funds Pension fund admin charges ( 5) ( 6)

Pension fund contributions ( 85) ( 78)

Key management personnel compensationShort-term employee benefits 66 60 Post-employment benefits 7 - Share-based payments 14 11 Other long-term benefits 2 -

Director of subsidiary


26.1 Cash generated from operations Profit before tax per income statement 7 214 9 271 Tax paid on behalf of policyholders ( 646) ( 704) Non-cash items 74 58

Depreciation 29 24 Share-based payments 45 34

Items disclosed separately or included in other cash flow activities (6 836) (7 561) Dividends received ( 398) (1 097) Interest received ( 861) ( 875) Interest paid 75 82 Rental income received ( 53) ( 41) Profit on disposal of associated companies ( 738) - Investment surpluses (4 861) (5 630)

Net purchase of fixed assets and goodwill ( 52) ( 71) Net increase of owner-occupied properties ( 66) ( 2) Cash generated from operations before working capital changes ( 312) 991

26. NOTES TO THE CASH FLOW STATEMENT



Total Transactions

The director of Sanlam Umbrella Fund Administrators, Smorenburg, has an interest bearing investment of Rnil (2004: R4 million).

57


26.2 Interest receivedInterest receivable at the beginning of the year 902 811 Interest income included in income statement (note 14) 5 017 4 965 Interest receivable at the end of the year ( 887) ( 902) Interest received 5 032 4 874

26.3 Dividends receivedDividends receivable at the beginning of the year ( 8) 10 Dividend income included in income statement (note 14) 2 509 2 786 Dividends receivable at the end of the year ( 5) 8 Dividends received 2 496 2 804

26.4 Rental income receivedRental income receivable at the beginning of the year ( 6) 11 Rental income included in income statement (note 14) 874 882 Rental income receivable at the end of the year ( 16) 6 Rental income received 852 899

26.5 TaxationTaxation payable at the beginning of the year ( 674) ( 740) Taxation per income statement (1 303) (1 681) Movement in net deferred tax liability 159 1 049 Taxation payable at the end of the year 1 392 674 Taxation paid ( 426) ( 698)

26.6 Net cash flow from investment activitiesNet movement in goodwill ( 61) - Net movement in investments, deferred acquisition costs and reinsurance assets (20 973) (21 204) Net investment surpluses 26 808 20 528 Shareholders 4 861 5 630 Policyholders 21 947 14 898

Net cash flow from investment activities 5 774 ( 676) 26.7 Cash flow from policyholders' funds

Premium income (note 9.2) 20 945 20 554 Policy benefits (note 9.3) (18 692) (17 573) Retirement fund terminations (note 9.1) (4 604) (3 939) Transfer to segregated assets (note 9.1) - ( 297) Payments to shareholders (note 9.1) (6 768) (6 222) Movement in policy loans (note 9.1) ( 30) ( 51) Improved benefits with early terminations (note 9.1) 595 - Cash flow from policyholders' funds (8 554) (7 528)

26.8 Working capital changesCurrent assets ( 418) ( 302)

Premiums receivable 78 104 Accounts receivable ( 616) ( 368) Reinsurance debtor ( 13) 1 Amounts owing by holding company and fellow subsidiaries 133 ( 39)

Current liabilities 915 766 Accounts payable 283 738 Reinsurance creditor 8 ( 1) Provisions 217 ( 96) Policy benefits payable 412 83 Claims incurred but not reported 38 32 Amounts owing to fellow subsidiaries ( 43) 10

Working capital changes 497 464

26. NOTES TO THE CASH FLOW STATEMENT (continued)



58

27. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Impairment of goodwill

Properties

AssumptionBase

asssumptionChange in

assumptionDecrease in assumption

Increase in assumption

Base discount rate 7.75% 1% 271 (270)Capitalisation rate 9.5% 1% 425 (362)

Deferred tax on investment properties

The best estimate of future experience is determined as follows:Investment return

Future bonus rates for participating business



Policy liabilities in respect of insurance contracts and investment contracts other than those with investment management services

Further, in some instances the sensitivities are non-linear. Interdependencies between certain assumptions cannot be quantified and are accordingly not included in the sensitivity analyses; the primary example being the relationship between economic conditions and lapse risk.

The following process is followed to determine the valuation assumptions:· Determine the best estimate for a particular assumption.· Prescribed margins are then applied as required by the Long-term Insurance Act in South Africa and Board Notice 72 issued in terms of the Act. · Discretionary margins may be applied as required by the valuation methodology or if the statutory actuary considers such margins necessary to cover the risks inherent in the contracts.

Future investment return assumptions are derived from market-related interest rates on fixed-interest securities with adjustments for the other asset classes. The appropriate asset composition of the various asset portfolios, investment management expenses, taxes at current tax rates and charges for investment guarantees are taken into account. Investment return information for the most important products are provided on page 40.

Assumed future bonus rates are determined to be consistent with the valuation implicit rate assumptions. Refer to page 40 for additional information.

Estimates and assumptions are an integral part of financial reporting and as such have an impact on the amounts reported for the Company's assets and liabilities. Management applies judgement in determining best estimates of future experience. These judgements are based on historical experience and reasonable expectations of future events and changes in experience. Estimates and assumptions are regularly updated to reflect actual experience. It is reasonably possible that outcomes in future financial years will be different to the current assumptions and judgements, which could require a material adjustment to the carrying amounts of the affected assets and liabilities. The critical estimates and judgements made in applying the Company's accounting policies are summarised below. Given the correlation between assumptions, it is not possible to demonstrate the effect of changes in key assumptions whilst other assumptions remain unchanged.

Change in fair value of properties

In terms of the company's accounting policies, deferred tax is recognised in respect of temporary differences between the carrying value and tax base of investment properties. IAS 12 Income Taxes requires that deferred tax be measured to reflect the tax consequences that would follow from the manner in which the entity expects, at the balance sheet date, to recover the carrying value of its assets.Based on historic experience, the company's investment strategy and the expected future growth in the fair value of investment properties, it is expected that mainly capital gains tax will be payable on the realisation of the carrying value of the properties. Deferred tax has accordingly been provided for at capital gains tax rates. Should income tax rates be applied, the deferred tax liability would have increased by R331 million on 31 December 2005 (2004: R382 million).

The recoverable amount of goodwill for impairment testing purposes has been determined based on the fair value for all subsidiaries and the embedded value for the life subsidiary companies, less the consolidated net asset value. The fair value of a business therefore has a significant impact on whether an impairment of goodwill is required.

The valuation of properties is based on estimates and assumptions that have a direct impact on the fair value of properties included in the Company's balance sheet. The main assumptions used for the valuation of properties as at 31 December 2005 and the sensitivity of the valuations to changes in the assumptions are summarised below:

This disclosure should be read in conjuction with the valuation methodology as described on pages 21 to 27.

59

27. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)Decrements

Sensitivity to changes in the valuation assumptions

Base value

Investment returns

Expenses Expense inflation

Lapse and surrender

rates

Mortality and

morbidity rates

-1% +10% +1% +10% +10% or -10% (1)

Non-participating annuitiesIndividual business 17 108 17 661 17 135 17 155 17 108 17 419 Employee benefits business 3 155 3 572 3 160 3 163 3 155 3 205 Non-participating annuities policy liability 20 263 21 233 20 295 20 318 20 263 20 624

Non-participating life businessIndividual business 18 598 19 101 18 637 18 657 18 280 19 144 Employee benefits business 1 905 1 983 1 905 1 905 1 905 1 905 Non-participating life business policy liability 20 503 21 084 20 542 20 562 20 185 21 049 (1) +10% was used for insurance business and -10% for annuity business

Policy liabilities for investment contracts with investment management servicesThe valuation of these contracts is linked to the fair value of the supporting assets and deviations from future investment return assumptions will therefore not have a material impact. The recoverability of the DAC asset is impacted by lapse experience. It is not expected that if future lapse experience was to differ by 10% from management's estimates, it will necessitate an impairment of the DAC asset.

The above sensitivities are after taking into account the rerating of premiums but before the impact of reinsurance. The impact of reinsurance is not material for the disclosed sensitivities.

Assumptions with regard to future mortality, disability and disability payment termination rates and surrender and lapse rates are consistent with the experience for the five years up to 30 June 2005. Mortality and disability rates are adjusted to allow for expected deterioration in mortality rates as a result of Aids and for expected improvements in mortality rates in the case of annuity business.

Bonus rates or investment return credited to market-related and smoothed bonus contracts will be adjusted in line with the change in assumed future investment return, with accordingly no impact on profit.

For non-participating business where the policy liabilities are closely matched by appropriate fixed interest securities, the change in the value of liabilities is offset by a commensurate movement in the value of assets. This assumption is confirmed by sensitivity analyses on the non-participating annuity portfolio where a 1% increase in interest rates will have an immaterial impact on profit.



The sensitivity of the policy liabilities to changes in the valuation assumptions are set out below, assuming a worsening of experience. For changes in the valuation rates of contracts, it was assumed that:

60

INTRODUCTION

TRANSITIONAL PROVISIONS

RECONCILIATION OF REPORTED EARNINGS 2004Note R million

Attributable earnings reported under SA GAAP 2 351 Adoption of IFRS:New business strain from investment contracts 1 ( 14) Share-based payments 2 ( 34) Goodwill amortisation 3 98 Redesignation of Joint Ventures to fair value 4 153 Reclassification of available for sale investments 5 4 769 Change in net asset value of subsidiary 8 ( 1) Restatement:Change in valuation method of subsidiaries 9 268 Profit attributable to shareholders' fund under IFRS 7 590

Sanlam Life Insurance Limited adopted International Financial Reporting Standards (IFRS) with effect from the 2005financial year. The date of transition to IFRS is 1 January 2004. The opening balance sheet on 1 January 2004 andcomparative information for 2004 have been restated to comply with all IFRS effective as at 31 December 2005, except forthe exemptions applied in terms of IFRS 1 First-time Adoption of International Financial Reporting Standards . Theimpact of the transition to IFRS on reported earnings for 2004 and the balance sheets on 31 December 2004 and 1 January2004 is presented below.


FOR THE YEAR ENDED 31 DECEMBER 2005TRANSITIONAL PROVISIONS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS

IFRS 1 First-time Adoption of International Financial Reporting Standards requires retrospective compliance with all IFRSeffective at the reporting date. However, it contains a number of exemptions to this full retrospective application of IFRS.The Group has applied the following exemptions:

Business combinationsThe Group has elected not to apply IFRS 3 Business Combinations retrospectively to business combinations that occurredprior to 1 January 2004. No adjustments have been required to be made to the accounting treatment of these businesscombinations.

Property and equipmentThe Group has elected to use the previous SA GAAP revaluation of selected property and equipment as deemed cost on thedate of transition to IFRS.

Compound financial instrumentsThe Group has elected not to separate compound financial instruments into equity and liability components where theliability component is no longer outstanding on the date of transition.

Cumulative translation differencesThe cumulative translation differences in respect of the Group’s foreign operations have been deemed to be zero on the dateof transition to IFRS.

Designation of financial instrumentsThe majority of the Group’s financial instruments were designated as ‘available for sale’ in terms of SA GAAP. The Grouphas elected to redesignate these financial instruments to the ‘at fair value through profit or loss’ category in IAS 39Financial Instruments: Recognition and Measurement.

Share-based paymentsThe Group has elected not to apply IFRS 2 Share-based Payment to equity instruments granted on or before 7 November2002 or granted after 7 November 2002 but which had vested prior to 1 January 2005.

ComparativesIn terms of IFRS 1 an entity need not disclose comparative information that complies with IAS 32 Financial Instruments:Disclosure and Presentation, IAS 39 Financial Instruments: Recognition and Measurement and IFRS 4 Insurance Contractsin its first set of IFRS annual financial statements. In the interest of comparable disclosure, the Group has not applied thisexemption.

61

RECONCILIATION OF EQUITY - NET ASSET VALUESanlam Life Insurance Limited Balance Sheetat 31 December 2004R million

Note Investments

Deferred Acquisition

Costs

Long-term reinsurance

assetsDeferred

taxWorking capital

assets Other assets Total Assets

Reported under SA GAAP 170 304 70 5 629 1 019 177 022 Withdrawal of AC121:Reclassification of policy loans 6 ( 258) ( 258) Adoption of IFRS:Recognition of deferred acquisition costs asset 1 973 973 Tax effect of change in investment contract valuationbasis 1 80 80 Goodwill amortisation 3 98 98 Redesignation of Joint Ventures to fair value 4 153 153 Reclassification of long-term reinsurance assets 7 237 237 Change in net asset value of subsidiary 8 ( 7) ( 7) Restatement:Change in valuation method of subsidiaries 9 366 366 Reported under IFRS 170 558 973 237 150 5 629 1 117 178 664

R million EQUITY

Note

Long-term policy

liabilities Deferred tax

Working capital

liabilitiesOther

liabilities Total LiabilitiesShareholders'

fund

Reported under SA GAAP 143 704 1 757 5 516 213 151 190 25 832 Withdrawal of AC121:Reclassification of policy loans 6 ( 258) ( 258) Adoption of IFRS:Recognition of deferred acquisition costs asset 1 1 240 1 240 ( 267) Tax effect of change in investment contract valuationbasis 1 80 Goodwill amortisation 3 98 Redesignation of Joint Ventures to fair value 4 153 Reclassification of long-term reinsurance assets 7 237 237 Change in net asset value of subsidiary 8 ( 7) Restatement:Change in valuation method of subsidiaries 9 366 Reported under IFRS 144 923 1 757 5 516 213 152 409 26 255

LIABILITIES

ASSETS

SANLAM LIFE INSURANCE LIMITEDTRANSITIONAL PROVISIONS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS


62

RECONCILIATION OF EQUITY - NET ASSET VALUESanlam Life Insurance Limited Balance Sheetat 1 January 2004R million

NoteInvest-ments

Deferred Acquisition

Costs

Long-termreinsurance

assetsDeferred

taxWorking

capital assets Other assetsTotal

Assets

Reported under SA GAAP 149 635 5 294 1 068 155 997 Withdrawal of AC121:Reclassification of policy loans 6 ( 207) ( 207) Adoption of IFRS:Recognition of deferred acquisition costs asset 1 821 821 Tax effect of change in investment contract valuationbasis 1 75 75 Goodwill amortisation 3Redesignation of Joint Ventures to fair value 4Reclassification of long-term reinsurance assets 7 223 223 Change in net asset value of subsidiary 8 ( 6) ( 6) Restatement:Change in valuation method of subsidiaries 9 98 98 Reported under IFRS 149 520 821 223 75 5 294 1 068 157 001

R million EQUITY

Note

Long-termpolicy

liabilities Deferred tax

Working capital

liabilitiesOther

liabilitiesTotal

LiabilitiesShareholders'

fund

Reported under SA GAAP 130 552 633 4 789 240 136 214 19 783 Withdrawal of AC121:Reclassification of policy loans 6 ( 207) ( 207) Adoption of IFRS:Recognition of deferred acquisition costs asset 1 1 069 1 069 ( 248) Tax effect of change in investment contract valuationbasis 1 75 Goodwill amortisation 3Redesignation of Joint Ventures to fair value 4Reclassification of long-term reinsurance assets 7 223 223 Change in net asset value of subsidiary 8 ( 6) Restatement:Change in valuation method of subsidiaries 9 98 Reported under IFRS 131 637 633 4 789 240 137 299 19 702

LIABILITIES


ASSETS

TRANSITIONAL PROVISIONS TO INTERNATIONAL FINANCIAL REPORTING STANDARDSFOR THE YEAR ENDED 31 DECEMBER 2005

63

SANLAM LIFE INSURANCE LIMITEDTRANSITIONAL PROVISIONS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS


1. MEASUREMENT OF INVESTMENT POLICY CONTRACTSInvestment contracts issued by Sanlam Life Insurance Limited were measured under SA GAAP using bases similar to the Financial Soundness Valuation (FSV) method. These contracts are valued at fair value in terms of IFRS, requiring an adjustment to their carrying value. The FSV valuation includes specific allowance for commission and other issuing costs. In a fair value environment, the FSV cost allowance is replaced by a deferred acquisition costs (DAC) asset in terms of IAS 18 Revenue . The new business strain, as well as the increase in the total net liability recognised in respect of investment contracts, result primarily from the difference between the incremental cost that can be capitalised to DAC in terms of IFRS and the level of cost allowance inherent to the FSV method.

2. SHARE-BASED PAYMENTSIFRS 2 Share-based Payment requires the recognition of an income statement expense in respect of equity instruments granted to employees of the company by the Group’s share incentive schemes. No income statement effect was recognised in terms of SA GAAP, except for administration costs incurred in respect of the schemes.

3. GOODWILL AMORTISATION AND IMPAIRMENTGoodwill in respect of business combinations with an agreement date prior to 31 March 2004 was amortised under SA GAAP and subject to an impairment review. Goodwill is not amortised under IFRS but subject to at least an annual impairment review. Goodwill amortised under SA GAAP during the 2004 financial year has been reversed in terms of IFRS 1. All goodwill has been tested for impairment as at 1 January 2004 and 31 December 2004.

4. REDESIGNATION OF JOINT VENTURES TO FAIR VALUEIn terms of SA GAAP (AC 119) the Company accounted for Joint Ventures using the equity-method of accounting. In terms of IAS 27 this accounting method is no longer allowed in the separate financial statements of the investor. The Company has therefore restated investments in Joint Ventures as at fair value through profit or loss. The resulting investment surpluses are recognised in the income statement and the investor's share of earnings before dividends are reversed and taken to investment surpluses.

5. RECLASSIFICATION OF AVAILABLE FOR SALE INVESTMENTSIn terms of SA GAAP (AC133) the Company classified the majority of its investments as ‘available for sale’ and elected to transfer unrealised investment surpluses directly to equity. In terms of IFRS 1 the Company has reclassified these financial instruments as ‘at fair value through profit or loss’. Unrealised investment surpluses formerly reported directly in equity have been transferred to the income statement.

6. RECLASSIFICATION OF POLICY LOANSLoans granted to policyholders were disclosed as separate assets under AC121. Loans with a legal right of set-off and where the intention is to settle the policy loan and policy liability on a net basis, must be offset in terms of IFRS. The affected loans have been reclassified from investment assets to long-term policy liabilities.

7. RECLASSIFICATION OF LONG-TERM REINSURANCE ASSETSContracts entered into with reinsurers under which the Group is compensated for losses on one or more contracts issued by the Group and that meet the classification requirements for insurance contracts were previously offset against long-term insurance contract liabilities. These reinsurance assets have been reclassified from long-term policy liabilities to a separate asset class in terms of the disclosure requirements of IFRS 4 Insurance Contracts .

8. CHANGE IN NET ASSET VALUE OF SUBSIDIARYInvestment contracts issued by Sanlam Life Insurance Limited's subsidiary, Sanlam Life Namibia Limited, were measured using bases similar to the Financial Soundness Valuation (FSV) method. These contracts are valued at fair value in terms of IFRS, requiring an adjustment to their carrying value and replacing the FSV cost allowance by a deferred acquisition costs (DAC) asset in terms of IAS 18 Revenue. As a result of the change in the investment policy contracts, the net asset value of Sanlam Life Insurance Limited's investment in Sanlam Life Namibia Limited is adjusted with the resulting DAC effect.

Restatement Note9. CHANGE IN VALUATION METHOD OF SUBSIDIARIES

Sanlam Life Insurance Limited's investments in its subsidiaries, Multi-Data (Pty) Ltd, Sanlam Trust Limited, Consolidated Financial Services Holdings Limited and Sanlam Life Namibia Limited were previously measured at fair value using the net asset valuation method. The valuation method was changed to the discounted cash flow and/or embedded value model as applicable, as this was considered a more appropriate valuation method. The resulting investment surpluses are taken through profit and loss.

64

% 2005 2005 2004 2005 2004interest R million R million R million R million R million

Investment companiesU.R.D. Investments (Proprietary) Limited RSA 100 81,0 23 826 22 817 (22 969) (18 336) Electra Investments (South Africa) Limited RSA 100 76,0 6 586 6 517 (6 437) (6 304) Sanlam Universal Fund plc Ireland 92 (1) 15 912 13 811 - - Property investment companyRycklof Investments (Proprietary) Limited RSA 100 (2) 1 464 1 504 (1 344) ( 599) Vukile Property Fund Limited RSA (3) - 239 - - Speculation company in negotiable securitiesEdimed (Pty) Ltd RSA 14 - 84 - Electra Share Ventures (Proprietary) Limited RSA 100 0,1 212 96 566 640 Asset ManagementSanlam Investment Management (Proprietary) Limited RSA 100 (4) 2 740 2 245 (1 355) (1 401) Money transfer businessMulti-Data (Proprietary) Limited RSA 100 (5) 60 59 ( 60) ( 3) Trust servicesSanlam Trust Limited RSA 100 1,0 84 76 ( 7) 3 Life InsuranceSanlam Life Namibia Limited Namibia 100 35,0 567 481 70 199 Consolidated Financial Services Holdings (Proprietary) Limited

Namibia36 (6) 156 101 89 - -

Sanlam Customised Insurance Limited RSA 100 10,0 13 11 - - Safrican Insurance Company Limited RSA 55 21 - 11 - African Life Assurance Company Limited RSA 100 2 813 - - - Dormant companiesSankorp Limited RSA 100 (7) 692 692 ( 376) ( 376) Sanlam ou Sankorp Limited RSA 100 (8) 2 556 2 556 (2 872) (2 872) Other 246 151 47 200

Total 57 907 51 344 (34 642) (28 849)

(3) Sanlam Life Insurance Limited held indirectly 56% interest in Vukile Property Fund Limited during 2004.

(6) Sanlam Life Insurance Limited holds indirectly 55% interest in Consolidated Financial Services Holdings Limited.

SANLAM LIFE INSURANCE LIMITEDPRINCIPAL SUBSIDIARIES

YEAR ENDED 31 DECEMBER 2005

A register of all subsidiary companies is available for inspection at the registered office of Sanlam Life Insurance Limited. All investments above, except Sanlam Universal Fund plc and Vukile Property Fund Limited, are unlisted.

(2) Issued share capital is R2000.

(4) Issued share capital is R100.(5) Issued share capital is R2.

(7) Issued share capital is R7.(8) Issued share capital is R10 220.

Country of incorporation

Issued ordinary capital Fair value of interest in subsidiaries

(1) Issued share capital can vary, as this is an open-ended investment company.

Shares Loans

65

% interest held by Sanlam Life Insurance Ltd Country of

Company Name in company registration

SUBSIDIARIESAfrican Life Assurance Company Ltd 100% RSAAnson Holdings (Pty) Ltd 100% RSAEdimed (Pty) Ltd 100% RSAElectra Investments (South Africa) Limited 100% RSAElectra Share Ventures (Pty) Ltd 100% RSAGiyani Plaza Share Block (Pty) Ltd 100% RSAI-Compli (PTY) LTD 100% RSARycklof-Beleggings (Pty) Ltd 100% RSASanlam Customised Insurance Limited 100% RSASanlam Endowment Options (Pty) Ltd 100% RSASanlam Fundshares Nominee (Pty) Ltd 100% RSASanlam Investment Management (Pty) Ltd 100% RSASanlam Share Account (Pty) Ltd 100% RSASanlam Trust Limited 100% RSASanlam Umbrella Fund Administrators 100% RSASanso Properties Pretoria Road (Pty) Ltd 100% RSAU.R.D. Beleggings (Pty) Ltd 100% RSASanlam Life Namibia Limited 100% NamibiaSafrican Insurance Company Ltd 55% RSAGensec Umbrella Fund Fund IrelandSanlam Investors Alternative Strategies Plc Fund IrelandSanlam Universal Funds Plc (a) IrelandConsolidated Financial Services Holdings (Pty) Ltd (b) Namibia

(a) Issued share capital can vary, as this is an open-ended investment company.(b) Sanlam Life Insurance Limited holds 55% indirectly in this company.

ASSOCIATESSantam Ltd 47% RSAPeermont Global Ltd 26% RSAVukile Property Fund Ltd 28.5% RSA

JOINT VENTURESSanlam-Direct Axis (Pty) Ltd 70% RSASanlam Home Loans (Pty) Ltd 50% RSAShriram Life Insurance Ltd 26% IndiaEncoresa (Pty) Ltd 50% RSAStratoscience (Pty) Ltd 50% RSA

SPECIAL PURPOSE VEHICLESAccurate Trading 8 (Pty) Ltd 100% RSABusiness Venture Investments No 127 (Pty) Ltd 87% RSARiver Wild Investments (Pty) Ltd 100% RSAHighonLife Investments (Pty) Ltd 100% RSARecent Investments (Pty) Ltd 87.5% RSAMalesela Investments No. 9 (Pty) Ltd 100% RSAMarlebone Investments (Pty) Ltd 100% RSAMoneyline 716 (Pty) Ltd 100% RSANewshelf 228 (Pty) Ltd 100% RSASancino Projects Ltd 100% RSATrakprops 141 (Pty) Ltd 100% RSAUpfront Investments 55 (Pty) Ltd 100% RSAUpfront Investments 68 (Pty) Ltd 100% RSA

SANLAM LIFE INSURANCE LIMITEDRELATED PARTIES


66

% interest held by Sanlam Life Insurance Ltd Country of

Company Name in company registration

SPECIAL PURPOSE VEHICLESUpfront Investments 70 (Pty) Ltd 100% RSAUpfront Investments 71 (Pty) Ltd 100% RSAUpfront Investments 92 (Pty) Ltd 100% RSAGensec NSA Equity Fund 65% RSA

SUBSIDIARIES OF SUBSIDIARIESSubsidiary of Rycklof-Beleggings (Pty) LtdTralee Court (Pty) Ltd 100% RSA

Subsidiaries of Langeler Park (Pty) LtdPhoenix Industriële Park (Pty) Ltd 100% RSASan Lameer (Pty) Ltd 100% RSA

Subsidiaries of Sannamib Investments (Ptyd) LtdOshkup Properties (Pty) Ltd 100% NamibiaBrukaros Investments (Pty) Ltd 100% Namibia

Subsidiaries of Consolidated Financial Services Holdings (Pty) LtdSanlam Namibia Ltd 100% NamibiaSanlam Trust Managers Namibia Ltd 100% NamibiaBank Windhoek Financial Advisors (Pty) Ltd 100% NamibiaCapricon Unit Trust Management Company (Pty) Ltd 100% NamibiaCapricorn Life 75% Namibia

Subsidiaries of Sanlam Investment Management (Pty) LtdCape Partners Capital (Pty) Ltd 100% RSASanlam International Investment Services (Pty) Ltd 100% RSASanlam Multi Manager Portfolios (Pty) Ltd 100% RSASanlam Private Investments (Pty) Ltd 100% RSASanlam Properties (Pty) Ltd 100% RSASanlam Investment Management Namibia Ltd 71% Namibia

Subsidiaries of Sanlam Properties (Pty) LtdTswelena Developers (Pty) Ltd 100% RSANdawu Investors (Pty) Ltd 100% RSAMCH Properties (Pty) Ltd 70% RSA

Subsidiary of MCH Properties (Pty) LtdDusty Gold Trading 42 (Pty) Ltd 100% RSA

Collective Investment SchemesInnofin International Multi-currency Fund 54% RSASanlam General Institutional Fund 86% RSASanlam Global Equity Fund 53% RSASanlam Institutional Growth Fund 100% RSASanlam Institutional Long Bond Fund 100% RSASanlam Institutional Special Opportunities Fund 99% RSASanlam International Bond Fund of Funds 53% RSASanlam Multi Managed Institutional All Bond One 87% RSASanlam Multi Managed Institutional All Bond Three 100% RSASanlam Multi Managed Institutional All Bond Two 100% RSASanlam Multi Managed Institutional General Equity 73% RSASanlam Multi Managed Institutional General Equity Two 100% RSASanlam Multi Managed Institutional Positive Return 75% RSASanlam Multi Managed Institutional Positive Return Three 68% RSASanlam Multi Managed Institutional Positive Return Two 65% RSASanlam Property Fund 78% RSASanlam Value Institutional Fund 100% RSA

SANLAM LIFE INSURANCE LIMITEDRELATED PARTIES


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