CONTENTS

Sal ient Features 3 |

Non-execut ive Di rectors 4 |

Report of the Chairman and the Chief Execut ive Off icer 7 |

Execut ive Committee 16 |

Report of the F inancia l Di rector 18 |

Corporate Governance Statement 24 |

Human Resources 32 |

Corporate Socia l Involvement and Sponsorships 36 |

Sanlam Corporate 39 |

Bus iness Reviews 40 |

Sanlam L i fe •

Sanlam Investment Management •

Gensec Bank •

Other bus inesses •

Innof in •

Gensec Property Serv ices •

Tasc Administ rat ion •

Sanlam Namibia •

Annual F inancia l Statements 66 |

Def in i t ions and Glossary of Technical Terms 124 |

Not ice of Annual Genera l Meet ing 125 |

Sharehold ings and Administ rat ion 127 |

HIGHLIGHTS

1

21%growth in operating profit

Operating profit exceeds R2 billion,

growth of 21%

Attributable earnings

exceeds R4 billion

Embedded value of new business

increased by 21%

New business embedded value margin

improved from 9,7% to 13,2%

’01’00’99’98

1 4521 246

949723

Sanlam life:Operating profit

(R million)

’01’00’99’98

29024010157

Embedded valueof new business

(R million)

’01’00’99

353025

Dividends(cents per share)

2

OUR VIS IONOur vision provides the definition of Sanlam as a group of businesses focused onbuilding, preserving and growing wealth for our clients

Building wealth is about providing our clients with access to savings and credit products

Preserving wealth is our traditional business of providing guaranteed products forinvestment market risks and contingency risks such as life, health, property, casualty and liability

Growing wealth comprises investment management through various investment vehicles

OUR BUSINESS STRATEGYOur business strategy is underpinned by the themes of superior client relationships toachieve domestic and international growth

OUR VALUES We are guided by the following values to achieve our vision

Grow shareholder value through innovation and superior performance

Lead with courage

Serve with pride

Care because we respect others

Act with integrity and accountability

“Our vision is to be the

leader in wealth creation”

SALIENT FEATURESfor the year ended 31 December 2001

2001 2000

SANLAM LIMITED GROUP

Operating profit before tax R million 2 011 1 656

Headline earnings based on the LTRR(1) R million 3 534 3 495

Net operating profit per share cents 61,9 46,3

Headline earnings per share based on the LTRR(1) cents 133,2 131,5

New business volumes R million 37 605 37 700

Net (outflow)/inflow of funds R million (1 654) 832

Embedded value of new business R million 290 240

Life insurance new business APE(2) R million 2 204 2 477

New business embedded value margin % 13,2 9,7

Embedded value per share cents 1 167 1 067

Growth from life business % 15,7 22,8

Dividend per share cents 35 30

FINANCIAL RATIOS

Returns

• Operating profit before tax(3) 9,5% 6,7%

• Operating profit after tax(3) 8,1% 6,6%

• Headline earnings based on the LTRR(4) 17,4% 18,7%

• Return on embedded value(5) 12,3% 6,5%

• Return on the Sanlam share price(6) 17,0% 26,6%

Group administration cost ratio(7) 33,4% 32,3%

Group operating margin(8) 17,7% 16,5%

SANLAM LIFE INSURANCE L IMITED

Shareholders’ funds to total policy liabilities % 14 13

Shareholders’ funds to non-market-related policy liabilities % 22 21

Capital adequacy requirements covered(9) times 2,8 2,5

NOTES(1)LTRR = Long term rate of return.(2)APE = Annual premium equivalent and is equal to new recurring premiums (excluding indexed growth premiums) plus 10% of single premiums.(3)Operating profit before and after tax and minorities as a percentage of the average monthly shareholders’ funds for the year.(4)Headline earnings based on the long term rate of return as a percentage of the average monthly shareholders’ funds for the year.(5)Growth in embedded value (before dividends paid) as a percentage of embedded value at the beginning of the year.(6)Annualised growth rate on the Sanlam share price since listing including dividends paid.(7)Administration costs as a percentage of income earned by the shareholders’ funds less sales remuneration.(8)Operating profit as a percentage of income earned by the shareholders’ funds less sales remuneration.(9)Represents the times by which the shareholders’ funds of Sanlam Life Insurance Limited cover the capital adequacy requirements (refer to definitions on page 124).

3

NON-EXECUTIVE DIRECTORS

4

B O A R D C O M M I T T E E S

AUDIT COMMITTEE

JPL Alberts (chairman)GE RudmanProf AC BawaPEI Swartz

HUMAN RESOURCES COMMITTEE

T Vosloo (chairman)DC BrinkJJM van Zyl

NOMINATION COMMITTEE

DC Brink (chairman)DNM MokhoboBP Vundla

SPECIAL COMMITTEE

T Vosloo (chairman)JPL AlbertsProf AC BawaDC BrinkTS GcabasheCE MaynardProf AF PeroldDNM MokhoboPEI SwartzJJM van ZylBP Vundla

T Vosloo (Ton) (64)D Phil (hc) UOFS, DEcon (hc) US

Appointed 1989

Chairman of Sanlam since January2002; Chairman of NaspersLimited, MIH Holdings Limited,MIH Limited, WWF SA and CapePhilharmonic Orchestra

JPL Alberts (Johan) (59)SASS, BCom, CA (SA), IAMP (Geneva)

Appointed 1995

Businessman and director ofSanlam Life Insurance Ltd andvarious other companies

Prof AC Bawa (Ahmed) (47)MSc, PhD

Appointed 1997

Deputy Vice-Chancellor of Univ.of Natal; Director of Sanlam LifeInsurance Ltd and NationalEnergy Corporation of SA;Member of National AdvisoryCouncil on Innovation

Retires 31 March 2002

DC Brink (Dave) (62)MSc Eng (Mining), DCom (hc)

Appointed 1994

Chairman of Murray & RobertsHoldings Ltd and Unitrans Ltd;

Deputy Chairman of Absa; Director of BHP/Billiton Ltd,

BHP/Billiton plc and Sappi Ltd;President of the SA Foundation;

Co-chairman of the Business Trust

AS du Plessis (Attie) (58)BCom, CA (SA), Adv Dip Tax Law, AMP

(Harvard), AEP (Unisa)

Appointed as non-executive director 1 March 2002 after stepping down as

executive director in February 2002.

Director of Absa and variouscompanies in the Sanlam group;

Chairman of Business South Africa

TS Gcabashe (Thulani) (44)BA

Appointed 2001

Director of Eskom Enterprises (Pty) Ltd

5

CE Maynard (Carmen) (49)MCom (Wits)

Appointed 2001

Member of Financial MarketsAdvisory Board and ofPolicy Board for FinancialServices and Regulation

JJM van Zyl (Boetie) (63)Pr Eng, BSc Eng

Appointed 1995

Director of Naspers Ltd, Murray & Roberts Holdings Ltd,Sanlam Life Insurance Ltd andother companies

PEI Swartz (Peter) (60)Ad Ed Dip

Appointed 1994

Director of Absa, Distell Ltd,Ellerine Holdings Ltd,

New Clicks Holdings Ltd,Sancino Project Ltd and

other companies

GE Rudman (George) (58)BSc, FFA, FASSA, ISMP (Harvard)

Appointed 2001

Director of Santam and Sanlam Life Insurance Ltd

DNM Mokhobo (Dawn) (53)BA (Social Sciences)

Appointed 1996

Managing Director of MBMChange Agents (Pty) Ltd;Chairperson of Tsebo OutsourcingGroup; Director of NozalaInvestments (Pty) Ltd, Engen Ltd,Sanlam Life Insurance Ltd andother companies

Prof AF Perold (André) (49)PhD, MSc, BSc (Hons)

Appointed 2001

George Gund Professor of Financeand Banking at Harvard BusinessSchool; Director of Merrill Lynch

Investment Managers Mutual Funds,Stockback Inc.,

Genbel Securities Ltd and Gensec Bank Ltd

BP Vundla (Peter) (54)BA

Appointed 2001

Director of Allianz Insurance andWesbank Advisory Board;Executive Chairman of AfricanMerchant Bank; Chairman ofPamodzi Investment Holdings

MARINUS DALING

6

Marinus Daling, former chairman of Sanlam, passed away peacefully at home

on Friday, 1 February 2002, at the age of 55. He was diagnosed with cancer in

August 2000 and retired as chairman of Sanlam on 31 December last year.

His career spanned 35 years in the Sanlam group where he started in the actuarial

department in 1966. He became chairman in 1993 and executive chairman of Sanlam

in 1997 and of the listed company, Sanlam Limited in 1998. He split the functions in

May last year when Dr Leon Vermaak was appointed as chief executive and he became

non-executive chairman again.

Marinus Daling contributed volumes to the history of Sanlam and the South African

business sector. He was an outstanding leader, someone who commanded respect by virtue

of his extraordinary intellect while at the same time remaining humble, a man with

an incredibly strong sense of fairness, honesty and candour, and an exceptionally

well-developed sense of humour.

He embodied these characteristics in his business career in, among other things,

the expansion and later successful unbundling of Sankorp, the far-reaching initiatives

with Metropolitan in the early nineties that led to the empowerment and

establishment of NAIL, the restructuring of Sanlam into decentralised businesses in

1998 with the associated culture of renewal in the organisation, and the

demutualisation and listing of Sanlam in 1998. He received numerous awards and

citations during his career. The following, a fitting epitaph, was from President

Thabo Mbeki at a commemorative service that was held for Marinus Daling on

6 February 2002.

“One of the last discussions I had with Marinus was about black economic

empowerment. He said what we’ve got to do is to engage in the process of

empowerment that will address the disparities in our society but it must at the same

time make a statement that we are all South Africans together, black and white.

Marinus is gone, what shall we do? I think the best we can do is to make sure

that his dream, his dream of a South Africa that is united, is

prosperous, is peaceful, a South Africa that is a winning nation,

a South Africa that holds its head high among the nations,

that that dream is transformed into reality. I think that is

a common obligation that all of us as South Africans owe to

Marinus Daling. I think it’s the only way we can say to him

thank you for having been what you were. Thank you for what

you did, Marinus.”Marinus Daling

REPORT OF THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER

OVERVIEW OF OUR F INANCIAL RESULTS We are pleased to report that we have

surpassed our Group objective of 10% real growth in earnings and that, aided by the

equity markets, we increased our attributable earnings from R2,2 billion to reach the

R4 billion mark for the first time. We are likewise proud of the significant increase of

21% in our operating profit and pleased to report a significant improvement in the

embedded value of new business margin to 13,2%, moving towards the 15% target we

have set ourselves to achieve in due course. Under difficult circumstances we nevertheless

achieved a growth of 21% to R290 million on a comparable basis, in our embedded

value for new business which is a strong performance – and in line with our prediction at

our interim results last year.

Despite the trying investment conditions during the year, we experienced some

positive results in our investment performance and there are positive recovery signs in our

overall investment performance in an ever-fluctuating investment environment. In this

regard we have improved our position on the Large Manager Watch to a second quartile

performance in the last six months to January 2002. Unfortunately, after a sterling

turnaround of a net outflow of funds in 1999 to a net inflow in 2000, we have again

experienced a net outflow in 2001 of R1 654 million.

We said in 2000 that our results must enable the market to convert to a premium the

discount of our share price to embedded value. We did achieve a premium for a short

period in August 2001 and remain focussed on delivering those results that will convert

that discount.

DEAR SHAREHOLDER,

This is our first report to you in our respective capacities and we dedicate this report to

Sanlam’s former chairman, Marinus Daling who retired on 31 December 2001 because of health

reasons and who passed away earlier this year. Marinus will sorely be missed but his phenomenal

legacy will continue to inspire all of us that worked with

him. He was truly a great man.

Ton Vosloo (left)Chairman

Leon Vermaak (right)Chief Executive Officer

7

REPORT OF THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER(continued)

8

FOCUS AREAS FOR 2002

We have identified six areas that will receive our focused attention in 2002 to

enhance domestic growth. They are:

• Revenue (topline) growth through renewed motivation of all staff and

product innovation to surpass challenging targets.

• Higher productivity and cost efficiency through continuous productivity

improvement agreements between business heads and the Chief Executive

and a benchmarking of our cost structure against best international practice

with corrective steps where required.

• Internal co-operation for growth through idea generation and product

development throughout the Group with particular emphasis on cross selling

between businesses in the short term but also the development of innovative

solutions in the longer term.

• Employer of choice by recruiting, developing and retaining the best

employees in the industry for Sanlam through work challenges, rewards, work

environment, employment equity, company culture and personal fit in order

to differentiate the quality of our staff from that of our competitors.

• Black economic empowerment by exemplary employment equity programmes,

aggressive participation in the economic development of South Africa,

expansion of black empowered procurement and service providers and in

ownership and control structures.

• One vision company by creating a shared mindset among staff to create

wealth for our clients by unlocking synergies through co-operation between

businesses.

DEVELOPMENT OF SUPERIOR CL IENT RELATIONSHIPS This overruling

theme of our business strategy is anchored in providing trusted advice, innovative

solutions and a tailor made customer relationship management (CRM) programme.

Trusted adviser We fully support the ideals of transparency, personal choice and informed

decision making which are promoted through the Policyholders’ Protection Rules and Financial

Advisory and Intermediary Services Bill that were introduced during the past year.

The further regulating of the industry is a fait accompli and

Sanlam will continue to investigate all opportunities for the

development of management aids and for business development.

The financial services industry has always been innovative and

resourceful and the challenge lies in applying the processes of sound

regulation as a business imperative instead of merely complying with

the minimum norms.

Sanlam is and strives to be continuously acknowledged as

the trusted adviser, acting in the interest of its clients under

all circumstances.

CRM The financial services industry is spending vast sums

on customer relationship management systems, very often focusing

so much on the tin and wires and forgetting their customers in the

process. We believe the key to success in a CRM programme is

to understand your customers and their values and we have thus

designated the custodianship for CRM to Sanlam Life as the business has the largest

client interface.

Our CRM strategy rests on four pillars: client knowledge, client experience, enterprise

integration and high performance organisation.

Each of these pillars is subdivided into several tasks that need to be completed in order to

ensure a fully integrated transformation of the organisation and several projects are undertaken

simultaneously throughout Sanlam to ensure deliverance on the integrated CRM strategy. Some

milestones include the formulation of the client knowledge policy, the market segmentation

model, the completion of the client value calculations and the first draft of the client experience

strategy. Completion of the final client experience strategy is expected before the middle of 2002

after which the implementation of the full-blown CRM strategy will gain momentum towards

the end of the year.

In a year that brought

mixed fortunes to the financial

services industry, we are pleased

to announce a dividend of

35 cents per share for 2001.

This dividend increased by 17%

compared with the dividend of

30 cents of 2000.

The report of the financial

director and the reports of the

individual businesses in the

Group outline our financial

results in detail and we report as

follows on the three themes of

our business strategy, the

development of superior client

relationships for domestic and

international growth.

9

We strive to be

the trusted

adviser

REPORT OF THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER(continued)

10

We are encouraging other businesses in the Group to focus on CRM and to align their efforts

in the spirit of our One Vision Company. We also continue to energise the momentum we have

instilled among our staff in living the Sanlam brand in their day to day activities and in strengthening

our positioning as the employer of choice.

DOMESTIC GROWTH We have put a significant number of

building blocks, both organic and structural, in place for improved

operational excellence in our pursuit of our target of 10% real growth.

We believe that, with the number of new and “first” solutions

launched during the year, such as the Cash Management Fund, the

Halala Savings Plan, International Endowment initiative and Direct Axis

credit facilities, we are on track to gain market share.

The merger of Sanlam Personal Finance and Sanlam Employee Benefits in August last year into

Sanlam Life to meet the growing demand in individual choice in employee benefits, is already paying

dividends. The smooth merger also culminated in the launch of a number of successful new life and

investment products by Sanlam Life in the latter part of the year.

Sanlam Investment Management acquired the private client division of ABN-Amro in 2000 and

formed Sanlam Private Investments. It recently obtained approval from the Competition

Commission to acquire the major portion of the Merrill Lynch private client business in South

Africa. Sanlam Private Investments is now one of the biggest private client managers in the country

and we expect a meaningful contribution to our growth from this business.

Other structural changes we undertook to enhance our operational efficiency and growth include

the selling of Sanlam Health to Medscheme in September last year and the division of Gensec

Properties and Sanlam Properties Asset Management – the latter is now incorporated under Sanlam

Investment Management.

We have embarked on a new programme to implement co-operation and cross selling between all

businesses in the Group to further promote our growth and as an element of our customer centric

wealth creation strategy. This will contribute to the immediate improvement in operating profit

through the cross selling of existing solutions and services in the Group, the development of

innovative new solutions across business boundaries and cost synergies.

In establishing superior long term client relationship in pursuance of our vision to be the leader

in wealth creation we need to offer more solutions which include bank products.

In finalising our new vision last year, we came to the conclusion that the traditional

bankassurance model that results in mere cross selling of bank and insurance products did not meet

our needs in becoming the leader in wealth creation. We thus started exploring ways through which

we could own bank products that are essential in creating wealth for our clients.

11

We are therefore at the moment pursuing the further development of Innofin’s

differentiated cash management fund for transactional capability and of our existing

insourced private loan products for selected existing clients.

We will continue to assess the options available for full access to banking products.

INTERNATIONALISATION While we are unconditionally set to further our position as a

truly South African company, we said at our interim results last year that our objective was to

finalise our strategy on internationalisation before the end of 2001 and we report on that progress.

In assessing market attractiveness for Sanlam’s international expansion among a wide

spectrum of countries, each country was evaluated according to set criteria. These included the

size and potential of premium income, savings culture, growth rate and expectations, political,

legal and regulatory business frameworks, market competitiveness and the prospects for Sanlam

to pursue its vision of wealth creation in such countries.

Our research indicates that a regional approach as a strategy for internationalisation is

appropriate and we have identified some attractive niche markets in the United Kingdom and

Western Europe as well as prospective markets in Asia and Africa outside South Africa in which

we could compete successfully. We have created and staffed an appropriate structure to fully

exploit these opportunities so as to deliver on the internationalisation objectives we have set

ourselves and which are captured in our overall need to generate operating profit from new

operations to satisfy our longer term objectives.

Sanlam’s current international exposure through Sanlam Financial Services bv, the

management centre and holding company in the Netherlands for the international activities for

Sanlam Investment Management, experienced successful growth during the year. The Psigma

group achieved the target envisaged at the time of acquisition and Punter Southall & Co, the

actuarial business in the UK, grew its turnover by more than 25% while maintaining operating

profit margins.

ONGOING CHALLENGES We conclude our report by reflecting on the ongoing challenges

in the environment in which our industry operates and the prospects for 2002.

Political environment We are very optimistic about the long-term prospects for the country

through government initiatives like the National Growth Summit, New Partnership for Africa’s

Development (Nepad), Co-operation in Africa for Stability, Social Accord and Moral

Regeneration Summit and for which President Mbeki must be commended.

We can choose between

two alternatives in providing

bank products: we can either

build or buy. Within the buy

option there are a number of

possibilities which may include

insourcing bank products or

buying a bank. The buy option

may or may not include ABSA

as other buy options could also

be considered.

Given the unsatisfactory

events in sectors of the banking

community towards the end of

2001 and early this year, we

have decided to place greater

emphasis on building our own

banking products in the

short term.

A regional approach

as strategy for

internationalisation

REPORT OF THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER(continued)

1 2

SANLAM AND ECONOMIC DEVELOPMENT IN SOUTH AFRICA

Sanlam’s involvement in economic development in South Africa has a two-prongedapproach – investment and capacity building. The latter is promoted through a range of corporate social investment programmes and sponsorships and which arehighlighted on pages 36 to 38 of the report.

Our investment in economic development in South Africa is driven by two majorinitiatives:

The Sanlam Development Fund, managed by Sanlam Investment Management, wasestablished in 1996 and focuses on economic development and the reconstruction ofthe Southern African region through upliftment projects. Since its inception the Fundhas financed projects to the value of more than R2,2 billion. The Fund recently createdan independent Board of Governors to oversee its initiative.

Some of the projects in which the Fund has invested include:

• Small business entrepreneurs (via intermediaries) – Cash Bank, National HousingFinance Corporation and New Farmers.

• Financial instruments (SPVs) to empower previously disadvantaged individuals toacquire ownership of companies –NEC/Johnnic, Sancino/NuClicks and Nitac/PQ Africa.

• Direct investments in black economic empowerment companies – Kunene Finance,Nozala, Worldwide, Sancino and Thebe.

• Infrastructure – the Witbank/Maputo corridor, the new Limpopo Bridge and theBeit Bridge/Bulawayo railway line.

The other initiative of our investment in economic development is the R500 millionCommunity Builder Fund which invests in community infrastructure, the provision ofservices, job creation and economic empowerment. Funds from Community Builder havecontributed to several major Southern African development initiatives, among them theLesotho Highlands Water Project, various projects of the Rand and Umgeni WaterBoards, and electrification and housing projects.

In addition to these two main focus areas of our investment and economicdevelopment, Sanlam is a major contributor to the Business Trust of the NationalBusiness Initiative aiming at job creation by targeting tourism and education.

Through the special demutualisation levy of R278 million in 1998, Sanlam also supportsthe job-creation objectives of the Umsobomvu Fund. This fund forms part of theGovernment’s National Human Resources Development Strategy.

Sanlam also took the lead in investing in entrepreneurial development in the building ofnew shopping centres in areas that were severely neglected in the past. Since thebeginning of the 1990’s, 34 such retail centres have been developed.

1 3

We believe that HIV/aids poses the biggest threat to our society and that it will impact

severely on our national economy and productivity. We have increased our aids reserve

from about R1,5 billion to R1,7 billion to cover expected future claims from existing

business and are adequately covered but the rate with which the pandemic is spreading

calls for drastic government intervention.

A recent UN report revealed that there were 36,1-million people living with HIV/aids at

the end of 2000 of which 25,3-million, or approximately 70%, were from sub-Saharan

Africa. What is worse, the report shows that no less than 83% of the world’s aids-related

deaths have occurred in sub-Saharan Africa.

Closer to home, there were 4,7-million South Africans infected with HIV at the end

of 2000, representing 11,6% of our country’s total population.

The effects of these frightening figures extend far beyond the obvious reduction

in average life expectancies and increasing pressures on the medical infrastructure in

South Africa. Employers will be feeling the effects of the aids pandemic as increased

absenteeism and staff turnover are going to lead to declining productivity and

profitability.

Economic environment Despite the responsible budget for 2002 and for which the

Minister of Finance, Mr Trevor Manual must be congratulated, the South African

economy currently finds itself in a fragile state. The full consequences of the sharp

depreciation in the value of the rand in late 2001 are not yet known, although the rand

has recently stabilised around R11,50/$. Based on economic forces, the rand should

move sideways in the first half of 2002, and should strengthen somewhat in the second

half as the global recovery impacts positively on trade and capital flows to South Africa.

Regional political risk unfortunately remains high.

Inflation is expected to rise sharply in the first half of 2002, peaking above 8% by the

middle of the year. The forces that caused the structural decline in inflation in recent

years are however still in place, and they will in due course reassert their influence.

They include conservative fiscal policies, independent monetary policy, international

disinflation, and greater international competition. Although the SA Reserve Bank will

miss its 6 – 3% CPIX inflation target in 2002, chances are good that the target will be

reached in 2003 (with the aid of a high base in 2002).

The SA Reserve Bank has already raised interest rates by 100 basis points in January

2002, and a further increase in the prime lending rate, unavoidable as it will be, will

dampen job creation and economic growth.

In the shorter term we remain

concerned about the unabating high

levels of crime, the non-delivery of

especially provincial governments, the

continuing government impasse on the

HIV/aids crisis, the lack of progress on

privatisation and on skills development

training.

We have no doubt of the intent of

government to expedite progress on

these issues and we repeat our call for a

focussed public/private partnership to

address these inefficiencies that destroys

national wealth.

Social environment In addition to

the effects that some of our short-term

concerns referred to above have on our

social environment, the inadequacies in

education and poverty are further

constraining sustainable development.

4,7 million

South Africans

were infected with

HIV at the end

of 2000

REPORT OF THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER(continued)

1 4

Household consumption expenditure has been distorted by the rand’s fall, with pre-

emptive buying in order to avoid future price increases the order of the day in December

2001 and January 2002. Higher interest rates, and the fear of further rises, will constrain

spending, and some cooling off in demand should therefore

be expected.

Real disposable income of households will suffer a set-

back because of higher inflation and a higher interest rate,

but lower taxes and wage increases exceeding inflation as a

result of multi-year wage agreements in large sectors of the

economy will have a somewhat stabilising influence.

Investment spending will be constrained by a lack of

confidence in the private sector and government’s delivery problems. Government

consumption expenditure is however set to rise at a healthy real rate, cushioning the

economy. By the second half of 2002, the contribution of net exports to economic

growth should also improve. A growth rate of approximately 2% therefore appears

achievable.

Bond yields will come under pressure in the first half of 2002

because of rising inflation, but the continued short supply of new

government bond issues will cap any rise in yields. By the second half

of the year, declining inflation expectations should support the bond

market and we expect the 10-year yield at approximately 11,5% by

year-end. The equity market should benefit from an improved

cyclical outlook, and possibly also from increased portfolio capital

flows to emerging markets.

In summary, 2002 should be a year of two halves, with economic

conditions set to improve markedly in the second half of the year.

This momentum should be maintained into 2003.

The next year promises to bring some progress in addressing the

structural problems holding back the SA economy. The business

sector will be under pressure to reach a social accord with labour and government. The

opportunities for growth and labour stability need renewed focus in the upcoming Growth

and Development Summit.

PROSPECTS Sanlam has identified six areas that will receive focused attention in 2002

to enhance growth. These are revenue or topline growth, higher productivity and cost

efficiency, internal co-operation between its businesses, becoming the employer of choice,

furthering black economic empowerment and becoming a one vision company.

1 5

In the words of the Report we believe that it will ‘ bring to light all the material

discoverable facts concerning Reserve Bank assistance to Bankorp/Absa and that public

knowledge of them should end the uncertainty and misinterpretation that has been fuelled

by the absence of a rigorous investigation previously’.

We commend Governor Tito Mboweni of the SARB for this initiative.

It is clear from the Report that Sanlam did not fault in the transaction but that it could

have been a beneficiary. It is also clear from the Report that Sanlam has made some

substantial investments in an effort to salvage Bankorp to the benefit of depositors. Since the

“lifeboat” became public knowledge we never shied away from the financial assistance package

to Bankorp and have always been open in all our communication about the transaction.

We are pleased that the cloud of possible restitution which may have lingered in some

minds for so long has been finally cleared by the Panel in its findings that it will be

impractical to do so because of a number of constraining factors, including the ultra vires

actions of the SARB, apportioning of possible benefits and determining the exact class of

beneficiaries.

The conclusions of the Panel should have no further impact and should please our

shareholders.

As a substantial shareholder in Absa, we are likewise pleased that Absa has been finally

cleared of the incorrect perceptions that its shareholders received major benefits from the

financial assistance package to Bankorp.

APPRECIATION We thank our employees for the enthusiasm with which they embraced

and lived our new vision and strategies during the year, for their dedication in striving for our

goals and for their spirit and devotion in our process of branding Sanlam as the employer of

choice. We know we are also envied for the quality of our staff.

Thank you to our shareholders, analysts and brokers for your investment, research and

services. Likewise to our sales brokers and advisers for your contribution to our achievements this

year and to the media for their constructive reporting on our business.

We express our gratitude to our colleagues on Sanlam’s Board and Executive Committee for

their diligence and attentiveness throughout the year, not only in growing the business of Sanlam

and its shareholder value, but also in growing exemplary corporate governance. We are indebted

to your hard work and support.

Albeit belated, we welcome Ms Carmen Maynard and Mr George Rudman who joined us as

non executive directors, Dr Johan van Zyl and Mr Charl le Roux who were appointed as

executive directors on the Board and Messrs Nick Christodoulou, Marius Ferreira, Bonang

Mohale, Angus Samuels and Chris Swanepoel who were appointed alternate directors since our

previous annual report to you.

In the short term indications are

that 2002 will be a difficult year and

that we will be stretched to achieve our

growth targets. Our six focus areas for

domestic growth are aimed at

continuing our growth pattern. In the

longer-term, we are optimistic about

the political and economic growth

prospects for the country which should

stimulate the business climate.

BANKORP L IFEBOAT We

welcome the clarity on the roles of

the various parties in the financial

assistance package to Bankorp from

1985 to 1992 as was spelled out in

the report of the Panel of Experts,

appointed by the Governor of the

SA Reserve Bank (SARB) to

investigate the role of the SARB in

the financial assistance package.

We are envied

for the quality

of our staff

REPORT OF THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER(continued)

1 6

A special word of appreciation goes to Mr Derek Keys who retired from the Board

at the compulsory retirement age of 70 last year. We were fortunate to share in his

experience and insight for the two spells that he served on our Board since 1989.

In the same vein, we thank Mr Anton Botha and Mr Hendrik Bester who retired

as executive directors after 22 and 28 years of service respectively in the Group,

Prof Ahmed Bawa who retired as a non-executive director after almost five years of service

on the Board and Mr Attie du Plessis who stepped down as an executive

director after 16 years of service in the Group. We thank them all for

their commitment and services and wish them well for the future.

We are indeed pleased to welcome Mr Attie du Plessis back on the

Board as a non-executive director.

TON VOSLOO LEON VERMAAK

C H A I R M A N C H I E F E X E C U T I V E O F F I C E R

6 March 2002

L Vermaak (Leon) (40)BCom, MBA, PhD

Chief Executive Officer

Years of service: 8 months

Executive director

M Ferreira (Marius) (47)BCom (Hons)

Chief Executive of Gensec Bank

Years of service: 7

Alternate director

NT Christodoulou(Nick) (53)BSc Eng (Ind), MBA

Chief Executive of Sanlam BusinessDevelopment

Years of service: 6

Alternate director

PC le Roux (Charl) (47)BSc

Chief Executive of Sanlam Life

Years of service: 25

Executive director

EXECUTIVE COMMITTEE

1 7

V van Vuuren (Vic) (44)BJuris (Unisa), AEP (Unisa)

Chief Executive of Human Resources

Years of service: 5

P de V Rademeyer (Flip) (54)CA (SA), SEP (Stanford)

Financial Director

Years of service: 4

Executive director

CG Swanepoel (Chris) (51)BSc (Hons), FIA, FASSA

Chief Actuary

Years of service: 30

Alternate director

JAA Samuels (Angus) (51)

Chief Executive of SanlamInvestment Management

Years of service: 3

Alternate director

BF Mohale (Bonang) (40)CM (SA)

Chief Executive of SanlamCorporate Marketing

Years of service: 4 months

Alternate director

J van Zyl (Johan) (45)PhD, DSc (Agric)

Chief Executive of Santam Ltd

Years of service: 5 months asexecutive director

Executive director

1 8

OVERVIEW This report expands on the financial results and

analysis of the financial information. Shareholders are referred to the

business reviews for detailed performance reviews. Sanlam achieved

sound growth of 21% in operating profit during 2001 increasing its

profit to R2 011 million. Headline earnings, including the investment

return determined on the long term rate of return basis, however

increased by only 1% to R3 534 million. As discussed below, the growth

on a comparable basis amounts to 10%. Earnings per share increased to

133,2 cps compared to 131,5 cps in 2000. Operating earnings after tax

and minorities contributed 61,9 cps to headline earnings (46,3 cps in

2000) whilst investment return contributed 71,3 cps (85,2 cps in 2000).

The earnings and contributions are analysed in more detail below.

New business embedded value of R290 million was achieved,

reflecting growth of 21% on a comparable basis but falling short of the

challenging target of R340 million which required growth of some 63%. Although we are

disappointed in not meeting this objective, our performance in difficult market conditions was

still strong.

Funds flow remains a primary focus and after the success of 2000 when we achieved a net

inflow after the net outflow in 1999, it was a disappointment to register a net outflow of

R1 654 million in 2001. Sanlam Life achieved a net inflow of R1 998 million, primarily due to

a net inflow of R2 399 million to Sanlam Unit Trusts and R1 630 million to Innofin. Santam

achieved a net inflow of R1 393 million. This was offset by a net outflow of Sanlam Investment

Management segregated funds and life licence business of R5 679 million.

Allocation of capital to the

businesses and appropriate

return measures are key

components of the drive

towards improving operational

performance and

optimising capital utilisation

REPORT OF THE F INANCIAL DIRECTOR

The income on the Gensec capital, including underwriting profits and private equity income,

has been incorporated within the investment return to which the long term rate of return is

applied. Previously these results were included with operating return. The effective contribution

by the acquisition of the minority interests diluted Sanlam earnings for 2001 by some

R164 million when compared to the investment return foregone on the net capital applied to

fund the acquisition. In 2001 a provision of R221 million was made for future capital gains tax

which has also impacted comparability. This provision was inflated by the surge in the markets at

the end of 2001. After the long term return adjustment

the effect reduced to R28 million, implying growth of

10% in comparable headline earnings.

The Life businesses were merged during the year and

the combined Sanlam Life increased its operating profit

contribution by 17% to R1 452 million, which equals

72% of the Sanlam operating profit. The operating

profit of Sanlam Investment Management declined

marginally to R254 million and contributed 13% to

Sanlam operating profit. The difficult trading conditions

impacted on the operational results of Gensec Bank and

its operating profit contribution declined by 20% to

R191 million, which equalled 9% of Sanlam operating profit. Santam achieved an underwriting

profit of R97 million, which was 3% lower than in 2000 and which contributed 5% to Sanlam

operating profit. Gensec Properties increased its operating profit by 22% to R72 million and

corporate costs declined by 8% to R174 million. In pursuance of our objective to optimise

decentralisation and business autonomy and accountability, costs to the value of R36 million

previously borne by the Corporate centre, were allocated to the life business for embedded value

purposes. These costs have been included in Corporate costs in 2001, but will be borne by the life

business in 2002.

Sanlam disposed of its Health business with effect from 30 September 2001. In this report an

operating profit of R33 million is reported of which R16 million represents operating profit and

an amount of R17 million being the reversal of provisions.

SANTAM The shareholders’ funds hold an equity interest of 42% in Santam. A business

review of Santam is not included in this report as Santam has published its annual report for the

year to 31 December 2001. Santam achieved strong premium growth of 24% in comparable

gross premiums written and achieved an underwriting surplus of R97 million, being 3% lower

than in 2000, despite floods in Mpumalanga and hailstorms in Bloemfontein late in 2001, which

resulted in high claim levels. Unsatisfactory results were experienced in the corporate and crop

insurance market as well as certain segments of personal lines portfolios. Corrective measures

have been implemented and an increased profit contribution is expected for 2002.

Headline earnings increased by 9% to 282 cps and net asset value by 14% to 2 914 cps.

The healthy financial position of the Group was strengthened by cash of R225 million generated

from operating activities. Total dividends of R162 million have been declared and paid, reflecting

a 10% improvement on 2000.

EARNINGS Structural changes and

abnormal items have affected the

comparability of the earnings in 2001

and 2000. The acquisition of the

Gensec minorities in December 2000

caused a net reduction in capital

invested of some R2,5 billion, resulting

in the decline in investment return with

a corresponding increase in operating

earnings. In 2000 deferred tax of

R354 million was reversed and the

balance of the deferred tax liability

amounting to R284 million has been

reversed in 2001. In table 1 on page 21,

the effect of the Gensec acquisition and

the tax reversals are adjusted in respect

of 2000 to illustrate comparable growth.

Following the acquisition of the

Gensec minorities, we report on the

underlying Gensec businesses separately.

The surplus capital that was held within

Gensec is being redeployed within

the Sanlam capital structure as part

of the capital optimisation project.

Flip RademeyerFinancial Director

1 9

REPORT OF THE F INANCIAL DIRECTOR(continued)

2 0

EMBEDDED VALUE Sanlam achieved an embedded value on new business of R290 million,

which is 15% less than the target of R340 million set a year ago. On a comparable basis the new

business embedded value increased by 21% compared to 2000 and the margin improved from

9,7% to 13,2%. The basis of allocating corporate costs has

been amended to distinguish between costs that have a direct

bearing on the life business (R36 million referred to above) and

other corporate costs which relate to the Group as a whole.

This amendment and its effect is set out in more detail in the

Report on Embedded Value on page 118 of this report.

The embedded value of the Group at 31 December 2001

amounted to R30,7 billion (1 167 cps) compared to a restated

R28,1 billion (1 067 cps) at the end of 2000, reflecting a share price

discount to embedded value of 21% at year-end. The growth

in embedded value amounted to 12,3% before ( 9,5% after) the

dividend paid and the growth from life insurance business to 15,7%.

CAPITAL STRUCTURE AND EFFIC IENCY During 1999 Sanlam undertook the allocation

of capital to its businesses as a key component of its drive towards improving operational

performance and optimising capital utilisation. The process was repeated during 2001, but in

greater depth and with increased emphasis on efficiency of capital. As the life business represents

by far the largest single component of the capital requirement, extensive work was done to

determine and confirm its appropriate capital levels. In addition, the integration of Gensec

offered capital efficiency opportunities. The process was completed in the second half of the

year and was provisionally reported on when the interim results were announced.

The businesses of Sanlam Personal Finance and Sanlam Employee Benefits were merged

during the year under review and are now constituted as Sanlam Life. Apart from the business

rationale, the merger will also improve capital efficiency and management. In the 2000 Annual

Report it was indicated that the life businesses would only be responsible for the operational

return on equity and not for the investment return. As the management of Sanlam Life will in

future have a significantly greater influence on the amount and application of its capital, it is

appropriate that the company takes responsibility for the total return earned, including the

investment return. However, it has to be recognised that the capital portfolio has specific

restraints, which reduce the ability to fully optimise application including an overweighting

as well as a lack of liquidity in certain assets, inter alia the investments in Absa, Santam and

property. The longer term objective remains to improve both the balance and the liquidity of the

portfolio, which will enhance our ability to reduce capital. As the Sanlam Life shareholders’ funds

currently do not hold any Sanlam shares, it intends acquiring shares towards its index weighting.

The summarised capital requirements and status when the allocation process was completed,

as well as at the end of the financial year, are illustrated in table 2 on page 21. The capital

requirements of Sanlam Life as determined through modelling of various scenarios of investment

performance in the foreseeable future, as done in the first half of 2001, have been retained as the

minimum requirements.

The current optimal capital level for Sanlam Life is R14,3 billion, assuming a balanced

portfolio with appropriate liquidity level. At 31 December 2001 the total capital of Sanlam Life

had increased to R19,9 billion. This was subsequently reduced by a dividend of R900 million

declared on 28 February 2002, which is equal to 81% of net operating profit. As a result of the

constraints with respect to weighting and liquidity of the current deployment of investments held

21

in the capital of Sanlam Life, it is not prudent to effect a capital

reduction to achieve the optimal level. To the extent that we achieve

an improvement in the portfolio composition in future and subject

to any future statutory or regulatory constraints, it will create the

potential to effect a capital reduction in Sanlam Life. Return on

equity will be measured on the average total capital for both

operational and investment return purposes.

The capital of Gensec Bank of R1,3 billion, which had increased

to R1,4 billion by 31 December 2001 is more than sufficient to meet

regulatory requirements, but backing capital is provided to enable it

to operate effectively in the corporate and wholesale financial

markets. To the extent that Gensec Bank increases its own capital, it

may well release a portion of the backing capital. In terms of its own

capital, Gensec Bank earns an operating return whilst the backing

capital earns an investment return. We will consider alternative

means of providing the required backing capital, such as providing

a guarantee, on an ongoing basis.

Sanlam Investment Management distributes its net South

African cash earnings annually and its international business is

utilising its cash generated to expand its operations.

The deployment of capital is illustrated in table 3, both at

30 June 2001 and at 31 December 2001. These assets are reflected

at fair value. Approximately a third of the Group capital has been

invested in core businesses of the Group, which, if added to the value

of in-force business of the Sanlam Life, implies that slightly less than

half of the embedded value is represented by business investment and

the remainder by the investment portfolio.

The other assets represent largely Sanlam Health (at 30 June

2001 only) and Gensec Properties. The value of Sanlam Unit Trusts

differs from the value in the financial statements due to the transfer

of excess cash of R200 million to Sanlam Limited.

Following on the capital review, a rationalisation proposal to

improve operational and financial effectiveness was approved during

the year under review. This scheme, which will not impact the

different businesses’ overall capital allocation or the aggregate capital

position of the Group, will be implemented with effect from

1 January 2002.

We will continue our efforts in the management and

measurement of capital performance to assist shareholders in

evaluating the performance of Sanlam and its management.

RETURN ON EQUITY Sanlam has set a target of a real return on equity of 10%. This target

requires that the businesses be measured as to their performance whilst taking full cognisance of

risk. More work needs to be done on the setting of targets for the businesses, in particular the

adjustment for risk with the objective of establishing risk-adjusted return measures on an agreed

basis for all businesses. This is a prerequisite for management to evaluate investment propositions

R million 2001 2000 Growth

Published operating earnings (after tax and minorities) 1 643 1 230 34%Gensec minority interests acquired — 190Tax reversal (185) (230)

Comparable operating earnings 1 458 1 190 23%

Net investment return 1 891 2 265 (17%)Investment return on Gensec acquisition — (354)Capital gains tax 28 —Tax reversal (99) (124)

Comparable investment return 1 820 1 787 2%

Comparable headline earnings 3 278 2 977 10%

TABLE 1: COMPARABLE RESULTS

31 December 30 JuneR million 2001 2001

Sanlam Life 19 909 18 232

Capital required 14 280 14 280 Excess capital (after dividend paid) 2 360 2 360 Attributable earnings for the period 3 269 1 592

Gensec Bank 3 000 3 000

Own capital 1 444 1 339 Backing capital 1 556 1 661

Sanlam Investment Management 519 506

TABLE 2: ALLOCATION OF CAPITAL

31 December 30 JuneR million 2001 2001

Balanced portfolio, property and cash 12 031 9 674Illiquid portfolio 4 902 5 063Businesses and strategic 7 466 7 448

Sanlam Investment Management 3 412 3 629Gensec Bank 1 442 1 365Santam 1 709 1 698Sanlam Unit Trusts 674 222Other 229 534

Total 24 399 22 185

TABLE 3: CAPITAL DEPLOYMENT

REPORT OF THE F INANCIAL DIRECTOR(continued)

2 2

better, particularly when we consider international prospects on a wider front than is currently

being pursued. Significant progress has been made by Gensec Bank to measure the performance

and contribution of its business activities on a risk-adjusted return on capital basis.

The net returns after tax achieved by Sanlam and its businesses on average equity in 2001

are set out in table 4.

The total return of 17,4% confirms that we have achieved our target of a 10% real return.

Compared with 18,7% achieved in 2000 it reflects generally more difficult business conditions,

which was also evident in weaker operational profitability in especially Sanlam Investment

Management and Gensec Bank, neither having achieved their targets. If the Gensec Bank returns

were to be calculated on the total capital earmarked, i.e. including its backing capital, the

operating return would decline to 7,0% and the total return to 13,4%. The Gensec Bank

management has set itself a return target on equity of 25%, which together with the investment

return earned on the backing capital, implies a total return on total capital of 18%. Given

favourable market conditions, management is confident that it will achieve its target. The returns

of Sanlam Investment Management should improve as the recent local and offshore acquisitions

and operational improvements deliver the expected contributions. Santam’s operating return is

understated as the return on its free float is included with investment return. Its return measures

will be considered in more depth during 2002 to reflect its returns appropriately.

The refinement of capital efficiency and return measures and targets will enable us to

incorporate these in the performance criteria for incentive remuneration.

GROSS INVESTMENT RETURN BASED ON THE LONG TERM RATE OF RETURN The

motivation for and application of the long term rate of return (LTRR) basis in determining

the investment return on the shareholder capital were dealt with in the 2000 Annual Report.

This practice is gaining support especially in the United Kingdom. We will continue to apply

this methodology with full disclosure to enable the user of the financial statements to evaluate

its impact.

The gross investment return based on the LTRR earned by the Sanlam Group is set out in

table 5.

As indicated in the discussion on earnings, the capital available for investment has declined

by a net amount of some R2,5 billion as a result of the acquisition of the Gensec minorities,

which equals 15% of the total LTRR investments at 31 December 2000. This decline was the

primary reason for the lower investment return as reflected in table 5. Interest rates declined

further during the year, which also impacted on investment income.

Stronger equity markets were responsible for the significant investment surplus of

R1,7 billion compared to a deficit in 2000. Shareholders will recall that an investment surplus

of similar quantum was achieved in 1999. The JSE All Share Index was 28% higher at the end

of 2001 compared to 2000.

On implementation of the LTRR it was decided to determine the rate of return on a longer

term perspective with the intention not to change unless market factors necessitated such action.

Since 2000 we have asssumed a 13% rate of return before tax, based on a balanced portfolio.

The practice in the UK is to determine the rate annually and to adjust for changes in market

conditions. The Board of Sanlam will in future decide annually on the rate for the following year.

The decision will be influenced predominantly by the investment return assumptions used in the

determination of the embedded value. The investment return rate used for 2002 will remain at 13%.

2 3

ABSA RESULTS Sanlam equity accounts its investment in Absaand the earnings contribution is included in the investment return.At 31 December 2001 the Sanlam shareholders’ funds held aninterest of 17,7% in Absa. The investment had a market value ofR4 036 million and our share of net after tax equity accountedearnings amounted to R441 million. On a comparable shareholdingbasis this reflects an increase of some 22% on the contribution in2000. The contribution is determined based on published results, i.e.the contribution to 31 December 2001 reflected the earnings forthe 12 months to 30 September 2001.

On 14 January 2002 Absa announced that it was investigatingthe adequacy of provisions in Unifer, its micro-lending subsidiaryand that it would support a capital injection in Unifer to ensure thatit would have sufficient capital to continue its activities. Shareholdersare referred to a number of announcements by Absa in this regard.The Absa share price declined after the announcement and the value ofSanlam’s investment amounted to R3 237 million on 22 February 2002,which implies a decrease of 20% compared to the 31 December 2001value and a decline of 30 cents per share in the Sanlam net assetvalue and embedded value.

Unifer will impact Absa’s results to 31 March 2002, which will impact the expected contributionto Sanlam for 2002. It has to be borne in mind that the impact has to be considered for both halfyears, i.e. to 31 March 2002 and to 30 September 2002 relative to the 2001 contributions.

CONTINGENCY In the announcement of the interim results to 30 June 2001, shareholderswere advised that the South African Revenue Services (SARS) had issued revised assessments inrespect of the 1997 and 1998 tax years of a subsidiary of Genbel Securities Limited (thecompany) and that a revised assessment would be issued in respect of the 1999 tax year.

Subsequent to the aforegoing SARS issued a revised assessment in respect of the 1999 tax yearand the company lodged objections in respect of all three revised assessments. As was set out inthe interim accounts, in terms of the revised assessments certain significant surpluses arising fromthe disposal of the assets are subjected to full tax, as SARS contends that such surpluses are not ofa capital nature. The company’s objections that these amounts are in fact of a capital nature havebeen disallowed. SARS has afforded the company the opportunity to make representations withrespect to the possible imposition of penalties and interest on the tax payable on the aforegoingamounts. The company proposes to appeal against the disallowance of its objections.

DIVIDENDS The Board has declared a dividend of 35 cents per share payable on15 May 2002 to shareholders registered on 19 April 2002. This represents an increase of 16,7%over the 30 cents per share dividend declared in respect of 2000. The dividend is covered 3,8times by headline earnings. Our dividend policy is included in the directors’ report on page 69.

FLIP RADEMEYER

F I N A N C I A L D I R E C T O R

6 March 2002

Operating Investment Total% return return return

Sanlam Life 8,8 12,0 20,8Sanlam Investment Management 34,4 — 34,4Gensec Bank – own capital 17,4 — 17,4Santam 1,8 13,4 15,2Sanlam Group 8,1 9,3 17,4

TABLE 4: RETURN ON NAV

R million 2001 2000 Variance %

Investment income 735 1 004 (27)Absa equity accounted earnings (pre-tax) 621 423 47Investments surpluses/(deficits) 1 728 (105)

Actual investment return 3 084 1 322 133Adjustment for LTRR (606) 1 598

Gross long term investment return 2 478 2 920 (15)

TABLE 5: GROSS INVESTMENT RETURN

CORPORATE GOVERNANCE STATEMENT

2 4

The Board of Sanlam Limited endorses and is committed to complying with the principles of

integrity, openness, accountability and “performance with conformance” espoused in the King

Report on Corporate Governance. The Group monitors developments in the corporate

governance arena, both nationally and internationally, with a view to reviewing and adapting

corporate governance structures and practices where necessary.

THE BOARD OF DIRECTORS

Composition Details of the Sanlam Board of Directors appear on page 27 of this report.

For the period under review the Board comprised the chairman, 12 non-executive directors

(11 of whom are independent) and five executive directors.

The Board meets at least six times a year to consider strategic issues, set risk parameters, approve

budgets and to monitor that the implementation of delegated responsibilities is properly

executed.

Non-executive directors on the Board of Sanlam are high-calibre individuals with the

necessary integrity, skills and experience to bring judgement to bear on various key issues relevant

to the business of the company, independent of management. Senior members of management

attend board meetings by invitation.

Sanlam is committed to

the highest standardsof integrity and ethical

conduct in dealings with

all its stakeholders

Male Female Total

Black 4 1 5White 12 1 13

Total 16 2 18

BOARD REPRESENTATION BY RACE AND GENDER

• Human Resources Committee Three non-executive directors constitute this committee.The Human Resources Committee is charged with the responsibility of managing the

Group’s intellectual capital and transformation processes. In particular, the committee approvesexecutive appointments and succession planning. The committee is further responsible for theremuneration strategy of the Group, the approval of guidelines for incentive schemes and thedetermination of Sanlam Executive Committee remuneration packages relative to local andinternational industry benchmarks. In doing so, the committee ensures the incentive schemesare in line with good business practice and ensure reward for excellent performance.

• Nominations Committee The Nominations Committee is responsible for identifying andevaluating candidates who could be appointed to the Board. Proposals are then presented to theBoard for a decision.

• Special Committee The Special Committee comprises all non-executive directors exceptany director who was an employee of Sanlam or a related company within the precedingthree years.

This committee is responsible for evaluating the effectiveness of the chairman on an annual basis.

EXECUTIVE COMMITTEE This committee, which functions under the leadership of thechief executive officer, is charged with management responsibility for the day-to-day operationsof the Group.

COMPANY SECRETARY AND PROFESSIONAL ADVICE All directors have unlimitedaccess to the services of the Company Secretary, who is responsible to the Board for ensuring thatproper Board procedures are followed.

All directors are entitled to seek independent professional advice concerning the affairs of theGroup, at the Group’s expense.

RELATIONS WITH SHAREHOLDERS The Board understands the information needs ofshareholders and places great importance on meaningful dialogue with shareholders and ensuresthey are kept appropriately informed of matters affecting the Group and have access to theGroup. Reports and announcements, meetings with analysts and journalists and the Group’s website are used extensively to provide information to shareholders. Open lines of communication aremaintained and the chief executive officer and the business executives meet with shareholders onan ongoing basis.

A comprehensive programme of meetings with shareholders follows the release of final andinterim results. A computer database is utilised to monitor and follow up such meetings andshareholders are encouraged to contact the company directly with questions or concerns and,subject to price sensitivity, management seeks to provide rapid responses.

We are also committed to transparency and disclosure of relevant and appropriateinformation in our Annual Report and through other communication channels to enable allshareholders and potential shareholders access to relevant information. This is aimed at providinga full and proper valuation of Sanlam and its share price and as a means of monitoringmanagement’s performance. Transparency is pursued continuously notwithstanding the complexnature of life insurance business and the challenge of meeting best practice standards, both locallyand internationally.

RISK MANAGEMENT The Board is responsible for the total process of risk managementand internal control, and management is accountable to the Board for designing, implementingand monitoring the process of risk management. The process is regularly reviewed for effectiveness.

The major operating companies inthe Group each have their own boardstructures comprising executive,non-executive and independent directors.Further details on these boards and theirrespective committees are provided inthe business reviews on pages 40 to 65.

BOARD COMMITTEES• Audit Committee The committee

comprises four non-executive directors,all of whom meet the requirements asset out in the King Report.

The committee meets at least threetimes a year. Members of seniormanagement, the head of InternalAudit and the External Audit partnersattend meetings of the committee.

The main responsibilities of thiscommittee are to assist the Board with themonitoring of financial reporting andcompliance with legal and statutoryrequirements, evaluating the managementof risk areas and internal control systemsand the effectiveness of external andinternal auditors. The committee hassatisfied itself that, for the period underreview, it has fulfilled its responsibilitiesin compliance with the terms ofreference that govern its activities.

2 5

CORPORATE GOVERNANCE STATEMENT(continued)

2 6

The Board has approved an overarching strategic risk management policy aimed at ensuring that:

• all risks that could jeopardise/enhance achievement of the Group’s strategic goals are identified;

• appropriate structures, policies, procedures and practices are in place to manage such risks;

• sufficient organisational resources are applied to, and corporate

culture is fully supportive of the effective implementation of these

structures, policies, procedures and practices; and that

• the organisation’s risks are indeed managed in accordance with the

foregoing.

Significant internal and external operational, financial and other

risks have been identified and are assessed on an ongoing basis.

Significant risks include market, currency, credit, liquidity,

underwriting, capital adequacy, legal, compliance, technology

and reputation issues. An adequate and effective system of internal

control is in place to mitigate the significant risks faced by the Group

to an acceptable level. Such system is designed to manage rather than eliminate the risk of failure

and to maximise opportunities to achieve business objectives and can only provide reasonable but

not absolute assurance.

The management of risks is decentralised to the various businesses and compliance is

measured through periodic risk reports that are considered by the various audit committees.

There is a process in place, established by the Board, to review the system of internal control

for effectiveness and efficiency. It is the Board’s opinion that the process of risk management

within the Group is effective.

STATUTORY ACTUARY The statutory actuary is subject to the disciplines of professional

conduct and guidance and reports to the directors of Sanlam Life Insurance Limited and the

regulatory authorities. He has unfettered access to the Board and must report fully and

impartially to these bodies on the financial soundness of Sanlam Life Insurance Limited based on

the actuarial valuation of its assets and policy liabilities.

CODE OF ETHICS Sanlam is committed to the highest standards of integrity and ethical

conduct in dealings with all its stakeholders. A central representative Code of Ethics Committee

monitors adherence to the precepts of the code and investigates and rules on matters brought to

its attention when necessary.

EMPLOYMENT EQUITY Employment equity remains a high priority business imperative

and all the businesses within the Group are in the process of implementing their respective

plans. The plans are reviewed annually to ensure they are aligned with business objectives and

industry needs.

EMPLOYEE PARTIC IPATION The Executive Committee has committed itself to an

ongoing process of transparency, consultation and inclusivity of staff. To this end issues that

materially affect employees follow a participative process that is designed to promote good

employer/employee relations.

Effective communication through various media is continually improved to ensure that

employees are well informed and proactively share their views, thoughts and opinions at all levels

within the Group.

2 7

ALTERNATE DIRECTORS

NT ChristodoulouAppointed 1 August 2001

M FerreiraAppointed 1 August 2001

BF MohaleAppointed 1 September 2001

JAA SamuelsUK Citizen

Appointed 1 August 2001

CG SwanepoelAppointed 1 August 2001

FORMER DIRECTORSwho resigned during the period under review

HSC BesterAlternate director until 31 July 2001; became executive director 1 August 2001; resigned 31 December 2001

AD BothaResigned as alternate executive director 30 April 2001

MH DalingExecutive chairman until 30 April 2001; became non-executive chairman 1 May 2001; resigned 31 December 2001

WM GrindrodResigned as non-executive director 7 March 2001

K JowellResigned as non-executive director 7 March 2001

DL KeysRetired as non-executive director 31 August 2001

P SmitResigned as non-executive director 7 March 2001

EXECUTIVE DIRECTORS

L Vermaak (Chief Executive Officer)

Appointed 1 May 2001

PC le RouxAppointed as alternate director 1 August 2001; became executive director 1 January 2002

P de V RademeyerAlternate director until 31 July 2001; became executive director 1 August 2001

J van ZylAppointed as non-executive director 7 March 2001; became executive director 1 August 2001

NON-EXECUTIVE DIRECTORS

T Vosloo (Chairman)

Appointed 1989

JPL AlbertsAppointed 1995

Prof AC BawaResigning 31 March 2002

DC BrinkAppointed 1994

AS du PlessisAlternate director until 31 July 2001; executive director until 28 February 2002; appointed as non-executive director 1 March 2002

TS GcabasheAppointed 7 March 2001

CE MaynardAppointed 1 August 2001

DNM MokhoboAppointed 1996

Prof AF PeroldUSA Citizen

Appointed 7 March 2001

GE RudmanAlternate director until 31 March 2001; Non-executive director from 1 September 2001

PEI SwartzAppointed 1994

JJM van ZylAppointed 1995

BP VundlaAppointed 7 March 2001

BOARD OF DIRECTORS

CORPORATE GOVERNANCE STATEMENT(continued)

2 8

INTRODUCTION The Group Human Resources

Committee is responsible for the remuneration strategy of

the Group, the approval of mandates for incentive schemes

within the Group and the determination of Sanlam

Executive Directors, Non-executive Directors and Alternate

Directors’ remuneration packages relative to local and

international industry benchmarks.

The establishing of appropriate directors’ remuneration

is inextricably linked to the further development and

retention of executives and to attract people of the highest

calibre.

The following principles are paramount in determining

the proper remuneration levels across all levels of staff:

• All remuneration practices are structured in such a way

that they provide for clear differentiation between

individuals with regard to performance.

• A clear and meaningful distinction is made between high performers, average

performers and under performers and remuneration is distributed accordingly.

• Strong incentives are created for superior performance by individuals and teams.

• Top contributors are awarded significantly higher bonuses.

• Under performers are not rewarded and active steps are taken to either encourage the

individual to improve performance or the individual must leave the Group in line with

accepted practices.

EXECUTIVE AND ALTERNATE DIRECTORS The package for executive and

alternate directors includes a base salary, a variable performance linked bonus and an

allocation of share options. The remuneration is reviewed annually by the Human

Resources Committee in line with the Group’s remuneration philosophy.

NON-EXECUTIVE DIRECTORS Non-executive directors receive a fee for their

contribution to the boards and board committees of which they are members. Fee

structures are recommended to the Group Human Resources Committee and are

reviewed annually. In doing so the Committee takes cognisance of market norms and

practices.

DIRECTORS’ AND OFFICERS’ REMUNERATION

Directors’ and officers’ emoluments for the year ended 31 December 2001

Salary/ Company

Months fees Bonus contributions Total

Name in office R000 R000 R000 R000

Executive directors

HSC Bester 12 1 735 — 259 1 994

AD Botha 4 2 123 — 215 2 338

MH Daling 12 3 054 2 000 439 5 493

AS du Plessis 12 1 489 1 500 236 3 225

P de V Rademeyer 12 1 215 1 000 187 2 402

GE Rudman 3 261 — 39 300

J van Zyl 10 667 48 73 788

L Vermaak(1) 12 1 612 1 000 264 2 876

Total executive directors 12 156 5 548 1 712 19 416

Officers

NT Christodoulou 12 962 1 000 154 2 116

M Ferreira 12 974 800 226 2 000

PC le Roux 12 1 218 1 820 182 3 220

BF Mohale 4 345 200 56 601

CG Swanepoel 12 1 075 800 177 2 052

JAA Samuels(2) 12 2 745 1 022 637 4 404

V van Vuuren 12 634 900 114 1 648

XB Motswai 6 208 49 42 299

Total officers 8 161 6 591 1 588 16 340

In addition to the details of changes in directorships on page 27 the following is relevant to remuneration:

(1)Includes service at Santam (4 months) and Sanlam (8 months).(2)Payment is made in Pound Sterling. Conversion to Rand was done at the applicable exchange rates.

2 9

CORPORATE GOVERNANCE STATEMENT(continued)

3 0

Directors’ and officers’ emoluments for the year ended 31 December 2001 (continued)

Fees from

group

Fees Committees companies Total

R000 R000 R000 R000

Non-executive directors

JPL Alberts 93 76 — 169

AC Bawa 93 74 — 167

DC Brink 93 26 — 119

TS Gcabashe 77 — — 77

WM Grindrod 23 12 — 35

K Jowell 23 69 — 92

DL Keys 56 — — 56

CE Maynard 39 — 22 61

DNM Mokhobo 93 20 — 113

AF Perold* 333 — 444 777

GE Rudman 31 9 68 108

P Smit 23 108 — 131

PEI Swartz 93 27 — 120

JJM van Zyl 93 55 — 148

T Vosloo 139 53 — 192

BP Vundla 77 — — 77

Travel and subsistence 352 — — 352

Total non-executive directors 1 731 529 534 2 794

In addition to the details of changes in directorships on page 27 the following is relevant to remuneration:

*Payment is made in US dollars. Conversion to Rand was done at the applicable exchange rates.

31

DIRECTORS’ AND OFFICERS’ SHARE INCENTIVES Details regarding the directors’ and officers’ restricted shares and share options held

under the Sanlam Limited Share Incentive Scheme and the financial years during which they become unrestricted, as at 31 December 2001,

are as follows (in thousands):

Totals31 Dec 31 Dec Unre- Becoming unrestricted in Strike Average

2000 Released New 2001 stricted 2002 2003 2004 2005 2006 2007 2008 price range price

Executive directors

MH Daling(1)

– restricted fully paid shares 1 170 — 35 1 205 — 212 108 — 857 — 18 10 — —– share options 3 848 17 — 3 831 100 460 1 272 447 955 294 249 54 R6,00 – R8,42 R7,01

HSC Bester(1)

– restricted fully paid shares 336 336 — — — — — — — — — — — —– share options 1 524 555 — 969 433 42 189 116 116 73 — — R6,00 – R8,20 R7,07

AD Botha– restricted fully paid shares 1 006 551 — 455 455 — — — — — — — — —– share options 3 626 697 — 2 929 2 929 — — — — — — — R6,00 – R8,20 R7,89

AS du Plessis– restricted fully paid shares — — — — — — — — — — — — — —– share options 1 122 — — 1 122 — 68 808 104 105 37 — — R6,00 – R8,20 R6,69

P de V Rademeyer– restricted fully paid shares — — — — — — — — — — — — — —– share options 936 — — 936 — 188 261 225 225 37 — — R6,00 – R8,20 R6,68

L Vermaak– restricted fully paid shares — — 329 329 — — 105 182 31 11 — — — —– share options — — 1 260 1 260 — — 151 537 209 267 96 — R9,52 R9,52

Total executive directors– restricted fully paid shares 2 512 887 364 1 989 455 212 213 182 888 11 18 10– share options 11 056 1 269 1 260 11 047 3 462 758 2 681 1 429 1 610 708 345 54

Non-executive directors

GE Rudman(2)

– restricted fully paid shares 306 306 — — — — — — — — — — — —– share options 749 20 — 729 729 — — — — — — — R6,00 – R7,35 R6,38

Officers

NT Christodoulou– restricted fully paid shares 28 9 1 20 — 10 10 — — — — — — —– share options 807 — — 807 104 186 211 147 147 12 — — R6,00 – R8,20 R6,51

M Ferreira– restricted fully paid shares 367 90 166 443 94 64 122 89 41 33 — — — —– share options 1 975 114 785 2 646 410 324 692 580 324 265 51 — R8,20 – R9,23 R8,30

PC le Roux– restricted fully paid shares 271 48 419 642 — 75 220 194 153 — — — — —– share options — — — — — — — — — — — — — —

BF Mohale– restricted fully paid shares — — — — — — — — — — — — — —– share options — — 595 595 — — — 238 119 119 119 — R9,07 R9,07

CG Swanepoel– restricted fully paid shares 132 27 3 108 — 28 52 28 — — — — — —– share options 832 17 — 815 117 133 213 169 146 37 — — R6,00 – R8,20 R6,94

JAA Samuels– restricted fully paid shares 34 — 240 274 — — 110 55 55 54 — — — —– share options 1 021 — 1 346 2 367 — 270 580 590 473 338 116 — R8,20 – R9,23 R8,45

V van Vuuren– restricted fully paid shares 12 3 — 9 — 3 3 3 — — — — — —– share options 330 42 — 288 — 64 93 79 37 15 — — R6,00 –R8,20 R6,67

Total Officers– restricted fully paid shares 844 177 829 1 496 94 180 517 369 249 87 — —– share options 4 965 173 2 726 7 518 631 977 1 789 1 803 1 246 786 286 —

Grand Total– restricted fully paid shares 3 662 1 370 1 193 3 485 549 392 730 551 1 137 98 18 10– share options 16 770 1 462 3 986 19 294 4 822 1 735 4 470 3 232 2 856 1 494 631 54

(1)Following retirement on 31 December 2001 all options have become unrestricted.(2)Options awarded during employment as executive director prior to becoming a non-executive director.

3 2

INTRODUCTION Being the employer of choice is a key factor in the achievement of

Sanlam’s three strategic business objectives. Increased competition for talented employees has

forced companies to appreciate the value of a solid company reputation in the eyes of all of its

stakeholders and in particular its employees and potential employees.

Whilst initiating new human resources interventions, Sanlam is at the same time, building on

the people practices that have been carefully cemented during the past few years and at the same

time reaping the benefits of having done so.

LEADERSHIP An effective succession planning process has facilitated the quick and efficient

placement of executives in vacancies that occurred during the year. These plans have enabled

strong leaders to be identified and appointed from within the Group and also the concomitant

appointment of new recruits to introduce diversity and skills to the existing workforce.

These succession plans are reviewed regularly throughout the Group in order to ensure optimal

use of top skills.

A management style of inclusivity has been encouraged and created throughout the Group

and consultation processes at all levels are entrenching this culture. The principle of

“boundaryless” management is also being inculcated and is resulting in synergies being

successfully identified and operationalised.

We strive to be the employer

of choice by recruiting,

developing and retaining

the best employees to

differentiate the qualityof our staff from that of

our competitors

HUMAN RESOURCES

INVOLVEMENT OF EXECUTIVE MANAGEMENT The chief executive and his

executive team have continued with the successful practice of holding regular meetings

with employees. These include the running of Group orientation programmes

for all new employees as well as follow up meetings with them six months after

the programme.

In addition to this, and in order to enhance the employment equity programme,

regular meetings are scheduled with a cross section of representative employees who

provide important feedback on the implementation of transformation interventions.

The executive team are directly involved in the Group’s

Executive Development Programme. The Executive Development

Programme is an internationally designed and recognised

development programme which has been customised for Sanlam.

This programme is registered with the Manchester Business School

in the United Kingdom and is in its third year of implementation.

The chief executive also conducts regular strategic sessions with

high potential employees that have been identified within the

broader Group.

KEY HUMAN RESOURCES STRATEGIES

Employer of Choice In striving to be an employer of choice,

Sanlam is effectively managing its “employment brand” and in doing

so emphasising the related and mutual supportive link between the corporate brand and

employment brand. As keepers of the corporate brand, managers are ensuring that the

employment and corporate brands remain consistent and closely linked.

A holistic approach dealing with remuneration, work/life balance, work environment

and corporate culture is being followed.

In doing so care is being taken to ensure that actions are focused and that they

impact positively on employees and other stakeholders.

In the instance of Sanlam its stakeholders include:

• employees;

• clients;

• shareholders; and

• potential employees.

Sanlam conducts regular group surveys and participates in national and international

benchmarking exercises in order to measure the successes of its interventions and to

ensure the correct areas are being focused on.

VIS ION AND VALUES Sanlam

has recently redefined its vision, values

and strategy in line with the long term

strategic direction of the Group.

This vision was communicated to

employees and a new advertising

campaign supporting the vision was

launched.

Typically the action of defining

the vision and launching it into the

Group represents the first phase of a

continuous process whereby the vision

and values both guide behaviour/actions

in the Group and energise the

workforce. A second phase of

the process is now being developed

and implemented and is receiving

commitment from all levels of

management.

3 3

HUMAN RESOURCES(continued)

3 4

TRANSFORMATION

• Employment Equity Each business has its own employment equity plan and all these

plans are reviewed quarterly to ensure that they keep pace with market trends and demands.

The plans continue to be driven as business imperatives.

Businesses are implementing diversity management programmes

in order to ensure that employment equity not only changes the

Group profile but that it also harnesses the strengths of diversity that

accompany the change.

Diversity does not only mean “black/white” issues but also

encompasses issues such as language, gender, religion, sexual

orientation, ethnic origin and internationalisation.

• Aids Sanlam has embarked on a Group wide aids initiative.

The Sanlam Executive Committee has approved an HIV/aids

strategy which focuses on educating employees on the aids issue

and ensuring adequate awareness.

Sanlam funds and supports various essential community aids projects, the most notable

being the HIV/aids counseller at Tygerberg Hospital. Sanlam has also entered into a

partnership with the Nelson Mandela Children’s Fund and the national trade union federation,

Cosatu. The aim of the partnership is to raise funds and thereafter launch HIV/aids awareness

programmes within the community.

SKILLS DEVELOPMENT A specific portfolio has been created at Sanlam Group Human

Resources to effectively manage and co-ordinate skills development across the Group and in so

doing manage the newly introduced Skills Development Act provisions.

MANAGEMENT OF INTELLECTUAL CAPITAL

• Training and Development Executive and senior management training and development

is being implemented at group level in order to best utilise the skills base within the Group and

to create a boundaryless culture. These processes and programmes are co-ordinated and

managed with the respective business heads and human resources managers.

Other training and development initiatives for employees as well as business specific training

and development are managed within the respective businesses.

Executive and Leadership Development currently includes the following programmes which

have been successfully implemented:

– International Training and Development at institutions such as Harvard and the London

Business School;

– Sanlam Executive Development Programme registered with the Manchester Business School;

– High Flyer Programme which includes sessions with the chief executive and input from

internationally acclaimed experts;

3 5

An example of this is the co-sponsoring of the Brightest Young Minds Programme

involving top students from all South African Universities. The programme is

conducted over one week and includes input from the sponsoring companies and local

and international experts from the business environment.

Bursaries The Group bursary scheme is an effective means of identifying and

recruiting top skills from all population groups in order to fulfil its future needs in key

areas. Sanlam annually identifies top learners and students for bursaries in the actuarial

and accountancy disciplines and then mentors and monitors the students for

employment in the Group. The bursary students participating in the scheme are

representative of the South African demographics and are awarded bursaries on merit.

In addition to providing these bursaries, Sanlam also provides scholarships to

matriculants and learners entering high school.

REMUNERATION Although all of the Sanlam businesses are in the financial services

industry there is considerable variation in the manner and structuring of remuneration.

Sanlam recognises this and allows the businesses relative autonomy in positioning

themselves to attract, retain and appropriately reward their employees, while at the same

time ensuring good governance and a common Group philosophy. A Group

remuneration philosophy has been approved and is aligned to the group business

philosophy within this sector.

Ongoing benchmarking and acknowledgement of differentiation according to

business, skills groups and individual performance is conducted. Deliberate interventions

have been embarked upon to differentiate between top performers and poor performers

and to ensure that all forms of remuneration is awarded and distributed in line with this.

The key components of remuneration are:

• base salary;

• incentive schemes; and

• shares.

The businesses ensure that the measurement and rewarding of performers is

adequately addressed whilst group human resources co-ordinates industry survey’s and

initiatives in order to ensure synergy and cost effectiveness within the Group.

EMPLOYEE RECOGNIT ION Reward for exceptional performance is an important

tool in incentivising employees to go the extra mile and creative recognition schemes

have been implemented at both group and business level. An example of this is the

annual Chief Executive Award to employees who achieve excellence at the work place.

– Executive Coaching for executive

managers and selected senior

managers. This coaching is

conducted by external consultants and

is playing an important role in the

development of the Group’s leaders.

A specific intervention is currently

under way to ensure that every

employee has a meaningful training and

development plan in place and that it

is implemented.

• Recruitment and selection

Recruitment processes are

benchmarked against international

leading practice in an attempt to recruit

and retain the best available talent.

Universities/schools In order to

create a climate that is conducive to

attracting top talent, the focus is on

projects and new initiatives at

universities, including business

schools, and schools.

CORPORATE SOCIAL INVOLVEMENT AND SPONSORSHIPS

3 6

In line with Sanlam’s involvement in the economic development of South Africa as

illustrated on page 12, Sanlam extends its corporate citizenship through social involvement

programmes in four main areas – education, entrepreneurship, health and welfare, and

sports development. We are also involved in safety and crime prevention, nature and

environmental conservation, and cultural development. Some of our initiatives in these

fields include the following:

EDUCATION Sanlam sponsors the educational programme Takalani Sesame in partnership

with the National Department of Education, the SABC, SABC Education, Sesame Workshop in

the USA and the United States Agency for International Development (USAID). Our investment

of R31,2 million gives preschoolers in South Africa the chance to improve their school-readiness

levels through this educational programme. Based on the world-renowned Sesame Street,

Takalani (Tshivenda for “to be happy”) Sesame is a truly South African multimedia programme

that brings together television, radio and community outreach.

Sanlam’s World Knowledge Olympiads for high and primary schools give thousands of

learners country-wide the opportunity to test and expand their general knowledge.

The Nelson Mandela Children’s Fund will receive R750 000 from Sanlam over the next

five years.

Promising young mathematicians in Khayelitsha, a previously disadvantaged

community, are being targeted by Sanlam’s

partnership with and investment in the Centre

for Science and Technology (COSAT) of

the Western Cape Education Department in our

bid to expand the training of actuaries and other

mathematics-based professions in South Africa.

COSAT offers specialised training in higher-

grade Mathematics and Information Technology

to learners in Grades 10 to 12.

ENTREPRENEURSHIP One of the most

successful training programmes sponsored by

Sanlam is being run in conjunction with Tjeka,

formerly known as Chebo. This is a programme

that offers people from previously disadvantaged

communities the chance to acquire practical

skills in the building industry and civil

engineering. This enables them to tender

successfully for bigger projects. There are Tjeka

training centres throughout South Africa.

XolisaJonginambo getsa hug fromZuzu, one of theTakalani Sesamecharacters, whenshe and otherpatients from theReach for aDream projectwere treated on atrip aboard theSanlam Rescueroperated by theNational SeaRescue Institute.

HEALTH AND WELFARE Sanlam funds various aids educational and awareness projects,

including a partnership with Cosatu and the Nelson Mandela Children’s Fund to address aids

issues in rural areas, support for aids counselling at Tygerberg Hospital in the Western Cape and

sponsorship of aids Scan, an authoritative aids publication. The Sanlam/Burger Cycle Tour also

donates funds to an aids initiative annually.

Sanlam is involved in a number of fund-raising campaigns to fight serious diseases and to

assist the disabled. The Sanlam Easter

Stamp Campaign in aid of the National

Council for Persons with Physical

Disabilities makes it possible for the

organisation to raise approximately

R2 million a year from a sponsorship of

R150 000 a year. The company’s

involvement with the physically disabled

also saw the funding of a centre for

disabled children in Umtata in the

Eastern Cape. Sanlam has contributed

R1,1 million to this centre, as well as to

ten day-care centres in the Umtata area

served by the centre.

The Sanlam Cancer

Challenge attracts

more than 40 000 golfers annually. Sanlam sponsors this initiative in aid of

the South African National Cancer Association. The company is also the

official sponsor of SA Golf for the Physically Disabled.

SPORTS DEVELOPMENT The Sanlam Halala Cup was launched in

July 2001 and the R15 million sponsorship will ensure that women’s soccer

can now take its rightful place on the sporting calendar. The sponsorship

makes it possible for 339 club teams to compete on an organised basis.

Sanlam’s sponsorship of R2,3 million for golf development exposes children and youngsters

from mainly historically disadvantaged communities to the sport.

In addition to this, Sanlam’s sponsorship of the SA Amateur Championships, in which the

cream of South Africa’s future stars compete, is a natural extension of the company’s involvement

in golf development.

3 7

Mervyn Galant of the South African GolfDevelopment Board at a Sanlam sponsoredgolf development clinic for children frommainly historically disadvantagedcommunities.

CORPORATE SOCIAL INVOLVEMENT AND SPONSORSHIPS(continued)

3 8

OTHER AREAS OF CORPORATE SOCIAL INVOLVEMENT Sanlam’s involvement in safety

and crime prevention includes the donation of mobile charge offices to the SA Police Service

for use in communities where crime levels are particularly high, and support of the Agri Securitas

Project as part of a wider national effort to safeguard farms and rural communities against crime.

We also support various performing arts and literature projects such as the Sanlam Music

Competition for Primary School Learners, the Sanlam Literary Award in conjunction with

the Grahamstown Foundation, the biennial Sanlam Prize for Youth Literature, Cape Town

Opera’s Sanlam Choral Training Programme, Sanlam’s Maestros of Tomorrow, (a cadet

programme of the Cape Philharmonic), and a radio drama scriptwriting competition in

collaboration with RSG.

The Sanlam Art Collection of approximately one

thousand works valued at R10 million is one of the

largest corporate collections of South African fine art

in the country. By collecting sculptures, paintings and

graphic art, the company encourages the development

of local talent. At the same time, South Africa’s cultural

heritage is preserved and an appreciation for the arts and

creativity is nurtured through regular public exhibitions.

Sanlam is also involved in various conservation

projects such as the Southern African Conservation

Education Trust, a WWFSA initiative that was

established to provide funding for education and

training in nature conservation at the Southern African

Wildlife College.

The Sanlam Restoration Award is made annually in conjunction with the South African

Heritage Resources Agency (SAHRA) and the Simon van der Stel Foundation for a restoration

project involving a building that has been declared a provincial heritage site, and where the

project has lasting benefits for the community in which it is situated.

Deo du Plessis,a participant in themusic competition,demonstrates his talentsat a community outreachprogramme that formspart of the competition.

Mr Mpucuqo Mapukata of the MgwaliCommunity in the Eastern Cape withthe Sanlam Restoration Award whichthe community received in 2001 for therestoration of their school and church.

Megan-Geoffrey Prins was the overall winner of

Sanlam’s annual MusicCompetition for primary

school learners.

SANLAM CORPORATE

3 9

ACTUARIAL , R ISK MANAGEMENTAND STRATEGY

CG Swanepoel (Chris) (51)BSc (Hons), FIA, FASSA

Chief Actuary (30 years)

SUPPORT SERVICES

JP Bester (Johan) (49)BCom (Hons), CA (SA), AEP (Unisa)

Support Services (21 years)

GROUP IT

JD Venter (Kobus) (42)BSc

Group IT (18 years)

MARKETING

BF Mohale (Bonang) (40)CM (SA)

Chief Executive: Corporate Marketing (4 months)

HUMAN RESOURCES

V van Vuuren (Vic) (44)BJuris, AEP (Unisa)

Chief Executive: Human Resources (4 years)

FINANCE

P de V Rademeyer (Flip) (54)CA (SA), SEP (Stanford)

Financial Director (4 years)

DG Claassen (Danie) (37)CA (SA), BCom (Hons) (Taxation)

Tax Services (10 years)

L van der Walt (Lukas) (41)CA (SA)

Corporate Finance (3 years)

ML Carstens (ML) (34)CA (SA)

Financial Accounts (8 years)

HS Malherbe (Helet) (32)CA (SA)

Investor Relations (7 years)

AC Nortier (André) (31)CA (SA)

Chief Internal Auditor (6 years)

BUSINESS DEVELOPMENT

NT Christodoulou (Nick) (53)BSc Eng (Ind), MBA

Chief Executive: Business Development (6 years)

SANLAM LIFE

4 2

Growth in operating income

exceeded target for the third

successive year, averaging 25%

growth per annum since 1998.

Charl le RouxCHIEF EXECUTIVE

leadership inproduct innovation once again confirmed

leadership inproduct innovation once again confirmed

INTRODUCTION The activities of Sanlam Personal Finance (SPF) (which focused on the

individual market) and Sanlam Employee Benefits (SEB) (which focused on the group funds and

schemes market) were merged during August 2001 to form Sanlam Life. Previously they operated

as two separate business entities in the Sanlam Group. The main objective for merging these

businesses was to leverage the synergies arising from the trend of group scheme members towards

individual choice.

The first phase of the integration of these businesses, which comprised the integration

of the management and operational structures, was successfully

completed towards the end of 2001. The emphasis now turns

towards strategies to leverage synergies and cross-selling

opportunities.

NATURE OF BUSINESS Sanlam Life incorporates the

individual and group life insurance business of Sanlam Life

Insurance Limited, as well as the activities of:

• Multi-data – money transfer and payroll management (100%).

• Sanlam Unit Trusts – management of Unit Trust products (100%).

• Sanlam Trust – providing trust and estate services to individual

clients (100%).

• Total Care Strategy – group retirement fund

administration (60%).

• Sanlam Direct Axis – personal loans (70%).

• Innofin – linked products and cash management

(67%) – included with Sanlam Life from 2002.

Sanlam Life’s business is to provide and distribute

a portfolio of financial products and services to

individual clients and groups of individuals where the

primary decision is taken collectively.

These products and services include:

• risk cover & guarantees

• investment & savings products

• administration services

• advice/consulting

• loan finance

which are either provided/manufactured or enabled

by Sanlam Life.

4 3

SALIENT FEATURES

Operating profit growsby 17%• Continuing favourable

underwriting results

• Administration costincrease below inflation

21% increase in newbusiness embedded value

• New business embeddedvalue margin increasefrom 9,7% to 13,2%

Successful merger ofindividual and groupbusinesses

SANLAM LIFE(continued)

4 4

VISION AND STRATEGY Sanlam Life shares the

Group’s vision to be the leader in wealth creation. To achieve

our vision we provide trusted advice, innovative solutions

and build long-term relationships with clients.

We foster a culture of passion for

our clients, valuing diversity and

differentiation and encourage

innovation, aiming to create a success

friendly environment.

Our objective is to achieve consistent

bottom line growth by focussing on:

• Top line growth

• Retention of funds

• Cost effectiveness

• Finding new revenue sources

REVIEW OF RESULTS FOR 2001

FINANCIAL YEAR Although the

activities of Sanlam Personal Finance and

Sanlam Employee Benefits were merged in

August 2001 the review of the results for

2001 have been presented separately as they

operated as separate businesses for a large

part of the year.

A summary of the combined Sanlam Life

results is included in the table below.

N O N - E X E C U T I V ED I R E C T O R S

L Vermaak (Chairman)

JPL Alberts

DNM Mokhobo

P de V Rademeyer

GE Rudman

CG Swanepoel

JJM van Zyl

AC Bawa

E X E C U T I V E D I R E C T O R S

PC le Roux (Chief executive)

JP Möller

L Lambrechts

D Lessing

AP Zeeman

A U D I T C O M M I T T E E

JPL Alberts (Chairman)

P de V Rademeyer

GE Rudman

CG Swanepoel

EXECUTIVE COMMITTEE

2001 2000 Variance

New business inflows – life Rm 11 586 12 351 (6%)– unit trust Rm 10 209 9 074 13%

Net inflow of funds Rm 368 38 868%

Operating profit Rm 1 452 1 246 17%

New business embedded value Rm 290 240 21%

New business embedded value margin % 13,2 9,7 36%

SANLAM LIFE – COMBINED RESULTS

JvD du Preez (Johan) (36)MPharm, MBA

Chief ExecutiveInnofin

5 years’ service

A Gildenhuys(Anton) (27)BCom(Hons), FIA

Senior GeneralManager ProductManagement5 years’ service

D Lessing(Deon) (41)DCom

Executive DirectorMarketing

4 years’ service

JP Möller(Kobus) (42)CA(SA), AMP(Harvard)

Executive DirectorFinance

4 years’ service

EA Morkel(Estelle) (33)

BA LLB

Senior GeneralManager HR

4 years’ service

T Siyolo(Themba) (39)

IRDP, SEP(Harvard)

Senior GeneralManager Distribution

3 years’ service

HC Werth(Heinie) (38)CA(SA), MBA

Senior GeneralManager IT

3 years’ service

AP Zeeman(Andrè) (41)

BCom, FIA

Executive DirectorActuarial

20 years’ service

L Lambrechts(Lizè) (38)

BSc(Hons), FIA

Executive DirectorClient Care

16 years’ service

INDIVIDUAL BUSINESS (prev ious ly Sanlam Personal F inance)

Financial review SPF experienced mixed fortunes during 2001. A solid overall operational

performance was somewhat marred by disappointing growth in Life new business volumes.

Inflows into unit trust funds however showed satisfactory growth. Operating profit grew by 21%,

on the back of favourable underwriting results, growth in market related income and the

containment of administration and project expenditure. Notwithstanding a decrease of some

3% in new business volumes, new business embedded value (VNB) grew by 22% and the average

VNB margin improved from 8,8% to 12,0%, reflecting a focus on acquiring better quality

business.

Operating conditions were influenced by the volatile financial markets during the second half

of the year. This led to clients requiring flexibility and investing in more liquid, shorter term

investments, hence the growth in inflows into our unit trust funds as well as the linked products

offered by our fellow group company, Innofin, at the expense of life insurance products.

The graphs below and on page 46 show the trend of new business inflows into Individual Life,

unit trust and linked products and confirms the trend towards non-life products in the second

half of 2001 (inflows into white label and institutional unit trusts and other irregular inflows are

not included in the graphs below).

New recurring premiums increased by 8%

to R1 495 million. (New business premiums

were down by 9% if a special R250 million

premium in respect of an institutional

transaction is included in the 2000

comparison). Inflation linked increases on

existing in-force policies grew by 6% and

contributed some 40% of new business, while

the bulk of the increase in new premiums was

contributed by the popular International

Endowment savings product. Premiums lost

due to first year lapses remained unchanged

from 2000 notwithstanding the increase in

new business. Business received from

independent brokers was up on 2000 as new recurring premiums from this channel grew by

14%. The impact of structural changes early in the year, however, had some disruptive impact

on the advisor channel productivity. The number of advisors declined by 9% to some 1 900.

The strengthening of the black component of the advisors corps was actively pursued during

2001. The effect on production of their appointment should become visible in 2002.

Total

New business(excluding white label and institutional unit trust inflows, group business and other irregular inflows)

0

200

400

600

800

1 000

1 200

1999 2000 2001

12 month average

Jan

Feb

Mar

Apr

May Jun

Jul

Aug Sep

Oct

Nov Dec Jan

Feb

Mar

Apr

May Jun

Jul

Aug Sep

Oct

Nov Dec Jan

Feb

Mar

Apr

May Jun

Jul

Aug Sep

Oct

Nov Dec

4 5

SANLAM LIFE(continued)

4 6

Lower interest rates

impacted on the relative

competitiveness of terms that

could be offered on guarantee

and annuity products. This

affected single premium

income, which was down by

2% on 2000. Continuations

(where clients continue their

policies with Sanlam after they

mature) grew by 22%,

excluding continuations

arising from certain second

hand policies. This reflects

positive results of a drive to

improve the client retention rate. The introduction of capital gains tax made certain second hand

policies unattractive due to double tax implications, and continuations from this source was

down by two thirds, causing total continuations to be down by 2%.

Policy benefits paid increased by only 4% largely due to lower death and annuity benefits,

but also due to a stabilisation of the high growth in the level of maturities experienced over the

past few years. The introduction of 5 year term policies some 8 years ago resulted in an abnormal

concentration of maturing 5 and 10 year policies in recent years. Policy surrenders substantially

contributed to the increase in benefit payments. Although surrenders increased by 13%, a large

component comprises funds that remained with Sanlam (as a policy continuation) for a period

after the policies reached maturity. Certain policyholders continue their policies with Sanlam

while they are considering their investment options. Once decided, these funds are transferred to

other investment products and are then recorded as surrenders. In addition approximately 20%

of total surrenders are due to early retirement. A portion of the retirement benefit is retained by

Sanlam as the majority of policyholders reinvest the compulsory two thirds in annuity policies

with Sanlam.

50% of maturity benefits and policy surrenders due to early retirements are retained in the

Sanlam Group. This is an improvement on the approximate 45% retention rate in 2000 and was

achieved notwithstanding the reduction in second hand policy business.

Sanlam Unit Trusts (SUT) experienced good growth in its net inflows. Cash funds received the

major share of the growth as the volatile equity markets impacted on client investment preferences.

The introduction of Capital Gains Tax resulted in a structural change in the industry, causing

a shift by linked product providers from wrap funds to setting up their own unit trust funds.

New business(exclude white label and institutional unit trust inflows,

group business and other irregular inflows)

0

100

200

300

400

500

600

700

800

2000 2001

Life Non-life

2000 2001

Jan

Feb

Mar

Apr

May Jun

Jul

Aug Sep

Oct

Nov Dec Jan

Feb

Mar

Apr

May Jun

Jul

Aug Sep

Oct

Nov Dec

SUT created a facility to offer white labelled funds to them and received R3,5 billion inflow

from this source. At the same time there was a net outflow of R1,3 billion from linked product

unit trusts during 2001.

As a result of the trend in inflows and benefit payments discussed above, the net outflow of

funds from Life business deteriorated in 2001 whereas unit trust inflows improved. The total net

inflow however improved to R1 212 million from R238 million in 2000.

The growth in operating profit was largely driven by a 14% growth in market related income

and a 44% reduction in exceptional items and system project costs. Market related income

includes, inter alia, net interest received on working capital as well as income attributable to the

4 7

2001 2000 Variance

EV of new business Rm 208 171 22%

EV margin % 12,0 8,8 36%

Value of in-force Rm 6 144 6 152 —

INDIVIDUAL BUSINESS: Embedded value (EV)

2001 2000

Admin cost to income ratio 38,0% 37,7%Operating profit to income 32,3% 27,8%

INDIVIDUAL BUSINESS: F inancia l rat ios

R million 2001 2000 Variance

Administration surplus 116 123 (6%)Risk income 412 404 2%Market related 885 778 14%

Operating profit 1 413 1 305 8%

INDIVIDUAL BUSINESS: Operat ing prof i t before except ional i tems

R million 2001 2000 Variance

Financial services income 4 910 4 802 2%Sales remuneration (989) (1 048) 6%

Income after sales remuneration 3 921 3 754 4%Underwriting policy benefits (1 017) (1 034) 2%Administration costs (1 491) (1 415) (5%)

Profit before exceptional items 1 413 1 305 8%System projects (146) (182) 20%Other exceptional items — (79) 100%

Operating profit before tax 1 267 1 044 21%

INDIVIDUAL BUSINESS: Income statement

R million 2001 2000 Variance

Life (1 187) (267)

• Premiums 15 331 15 630 (2%)• Benefits (16 518) (15 897) (4%)

SUT 2 399 505

• Inflows 10 209 9 074 13%• Outflows (7 810) (8 569) 9%

Net inflow 1 212 238

INDIVIDUAL BUSINESS: Net inf low of funds

R million 2001 2000 Variance

Death and disability 1 549 1 554 —Maturity 7 859 7 526 (4%)Annuities 2 955 3 144 6%Surrenders 4 155 3 673 (13%)

16 518 15 897 (4%)

INDIVIDUAL BUSINESS: Benef i ts paid

R million 2001 2000 Variance

Individual life• Single 4 880 4 989 (2%)• Continuations 2 194 2 240 (2%)• Recurring 8 257 8 401 (2%)

Total individual life 15 331 15 630 (2%)Unit trust inflows 10 209 9 074 13%

Gross funds received 25 540 24 704 3%

New recurring premiums: • before institutional policy 1 495 1 379 8%• after institutional policy 1 495 1 642 (9%)

INDIVIDUAL BUSINESS: Inf low of funds

SANLAM LIFE(continued)

4 8

non profit sharing portfolios where Sanlam carries the underlying investment risk. Income from

working capital increased by 13% largely due to the increased level of capital, offsetting the

negative impact of the decrease in interest rates during 2001. Reported risk profits increased by

2%. Underwriting profits grew by 18% as the favourable underwriting experience of the past few

years continued throughout the year. Net guarantee fee income was down on 2000 as a result of a

provision raised against these fees to strengthen reserves in respect of certain minimum maturity

guarantees. The administration surplus, which is the net result of fee income and other recoveries

received in respect of new and existing business after deducting administration costs, reduced by

6%. The lower levels of new and existing business, as well as the more conservative method of

recognising income in respect of the Stratus range of products, resulted in a reduction in

administration revenue. Sales remuneration, which is largely based on new business, was 6%

lower than 2000. The reduction is due to the lower new business sales volumes, as well as the

impact of the conversion of advisors’ commission to broker scales early in 2001.

The reduction in the administration surplus was contained by limiting the administration

expense increase to 5%, which is below inflation. This is the result of specific efforts to

contain these costs and increase productivity. The majority of system project costs was

focused on Lamda (the Life administration system), a provision for an improvement in

the Sanlam local area network, a new Human Resources administration system, and S.Net,

an electronic intermediary service functionality.

GROUP BUSINESS (Prev ious ly Sanlam Employee Benef i t s )

Financial review Group Business operating profit, before a one off adjustment, grew by

13% over 2000. The major contribution to these results came from positive risk underwriting

results and an improvement in guaranteed investment business and cash management

income. A strengthening in the actuarial reserves in respect of mortality and investment yield

assumptions led to a one off adjustment of R43 million against the operating results,

resulting in a net reduction of 8% in the reported earnings.

Business volumes were affected by a difficult and highly competitive operating

environment. New innovative products such as the new Single Manager policy portfolio,

which offers clients the opportunity to have a policy’s investments managed by outside asset

managers, was introduced successfully towards the end of the year, and an international

structured investment product contributed to new business inflows. A major single premium

transaction concluded in 2000 was not repeated in 2001 and caused a 13% reduction in single

premiums. Excluding this transaction the 2001 single premiums income was 46% higher than

in 2000. The embedded value of new business (VNB) grew by 21% which is largely

attributable to a focus on selling higher quality business and is also reflected in the VNB

margin which increased from 12,9% to 17,6%.

Notwithstanding the difficult business environment, fund

terminations were contained and increased only marginally over

2000, with approximately R500 million of the terminations in 2001

being re-invested in new products within Sanlam.

The relatively small increase in payments to clients could not

compensate for the 9% reduction in total premium income and

resulted in the net outflow of funds deteriorating from R200 million

in 2000 to R844 million in 2001.

PROSPECTS Sanlam Life has set a target to sustain growth in

operating profit of 10 percent real. To achieve such growth in 2002 will

require positive investor sentiment and market conditions conducive

to an improvement in new Life business volumes. The nervous

market sentiment that prevailed at the end of 2001, continued at the

start of the 2002 financial year, with an investor preference for

maximum liquidity and short term investments. This impacts on the

sale of life policy based investment products. Market sentiment is

however expected to improve as the recent

relative stability of the rand, the performance

of equity markets and the positive cash flow

impact for individuals announced in the recent

National Treasury budget, filters through into

investment activities. The process changes

introduced by Sanlam Investment Management

have also started to bear fruit, which will

reaffirm investor confidence in their ability to

over time produce sustained competitive returns.

Internal emphasis will be on improving cost effective operations

and securing stability in the distribution structure and management.

A renewed emphasis on training and support in the Sales advisor

environment should assist in improving the sales productivity.

An innovative and relevant product offering remains essential

for intermediaries to maintain and grow Sanlam’s market share.

The recently launched International Retirement Annuity, another

first for Sanlam, was well received in the market and initial sales

volumes are ahead of expectations.

4 9

R million 2001 2000 Variance

Recurring 2 291 2 355 (3%)Single 2 961 3 399 (13%)

Total premiums 5 252 5 754 (9%)

New recurring premiums 171 195 (12%)

GROUP BUSINESS: Inf low of funds

2001 2000 Variance

EV of new business Rm 82 69 19%EV margin % 17,6 12,9 36%Value of in-force Rm 848 897 (5%)

GROUP BUSINESS: Embedded value (EV)

R million 2001 2000 Variance

Benefits (3 856) (3 740) (3%)Terminations (2 240) (2 214) (1%)

(6 096) (5 954) (2%)

GROUP BUSINESS: Payment to c l ients

R million 2001 2000 Variance

Financial services income 1 556 1 558 —Sales remuneration (45) (43) (3%)

Income after sales remuneration 1 511 1 515 —Underwriting risk benefits (959) (984) 3%Administration costs (322) (301) (7%)

Profit before exceptional items 230 230 —Systems/projects (35) (32) (9%)Other exceptional items (10) 4

Operating profit before tax 185 202 (8%)

GROUP BUSINESS: Income statement

2001 2000

Admin cost to income ratio 21,3% 19,8%Operating profit to income 12,2% 13,3%

GROUP BUSINESS: F inancia l rat ios

R million 2001 2000 Variance

Administration profit 15 19 (21%)Risk 85 80 6%Market related 130 131 (1%)

230 230 —

GROUP BUSINESS: Analysis of operating profit before exceptional items

SANLAM INVESTMENT MANAGEMENT

5 0

internationalbusiness continues toexpand as planned

Our goal remains the delivery of

consistent risk adjusted investment

return over the longer term.

Angus SamuelsCHIEF EXECUTIVE

internationalbusiness continues toexpand as planned

BUSINESS AND STRATEGIC With more than R224,1 billion under management, Sanlam

Investment Management (SIM) is one of the largest investment managers in South Africa.

With a clear vision of “becoming the leader in wealth management”, we offer the full spectrum

of investment management services through various distribution channels for individuals,

intermediaries and institutions.

Our strategic focus areas for 2002 are:

• Investment performance

• Expand distribution

• Operational efficiency

• Leverage talent

• Expand retail proposition

• Expand international platform

• One vision – intra-group initiatives.

BUSINESS ENVIRONMENT AND OPERATIONAL REVIEW Contrary to most market

expectations, 2001 proved to be even more volatile than 2000 and in many key investment

segments volatility reached unprecedented levels. The deterioration of conditions in Zimbabwe,

the financial collapse of Argentina and the World Trade Center disaster all contributed to highly

erratic and difficult financial markets. Locally, the rand declined very sharply and at its lowest

level (R13,84/$1) was 83% below where it started the year (R7,56/$1). Despite these conditions,

the JSE All Share Index rose to record levels towards the end of the year owing almost entirely to

the performance of the rand-hedge resources shares. It is interesting to note that while the market

capitalisation of the five largest shares made up 33,4% of the JSE market capitalisation on

1 January 2001, this had increased to 41,3% by 31 December 2001.

In South Africa, notwithstanding the difficult market conditions, we were disappointed with

our investment results following the commissioning of our new integrated investment process in

January 2001. Implementation issues with the new process retarded our initial progress, with the

benefits only coming through in the final quarter of the year.

Our goal remains the delivery of consistent risk-adjusted investment returns over the longer

term. The recent surge in volatility experienced in all markets only serves to reinforce our

commitment to focusing on sustainability and consistency.

We won some important new business during the year, predominantly in the bond and

indexed equity arena. Significant progress was made in expanding our “alternative product”

capabilities, which also experienced significant positive flows.

51

SANLAM INVESTMENT MANAGEMENT(continued)

5 2

We successfully bedded down the acquisition of the private

client division of ABN-AMRO early in the year. This gave us

a meaningful launch platform for future growth (R2,5 billion

under management in eight of the largest cities and towns in

the country). Expanding on this key growth initiative we

recently received Competition Board

approval for the acquisition of the major

portion of the Merrill Lynch private client

business in South Africa.

Total private client assets under

management are now in excess of

R11 billion. As one of the biggest private

client managers in South Africa, linked to

one of the largest distribution forces in

the country, we are positive that this area

will start making significant contributions

to Group profits.

Sanlam Financial Services bv is the

management centre and holding company

for the international activities of SIM.

This group comprises the former international investment

businesses of SIM and since January 2001, the PSigma group

of consulting companies. A great deal of effort has gone into the

revision of the various business structures over the last year in

order to create an integrated group positioned to take advantage of the strategic opportunities

it was designed to address. This has already enabled us to rapidly strengthen the distribution

platform, most notably PSFM (personal financial advice), the newly established PSolve (asset

solutions consulting), and private client stockbroking and wealth management, where the

acquisition of Hichens Harrison has recently been completed .

During the year the international investment management businesses were repositioned

around the “io” brand, which will be used throughout the Sanlam Group for manager of manager

investment activities. This rebranding is a key step in the process of marketing the London and

Dublin businesses to institutional and retail clients throughout Europe.

N O N - E X E C U T I V ED I R E C T O R S

L Vermaak

AD Botha

PJ Cook [Alt]

AS du Plessis

DR Geeringh

D Ladds

R Masson

CE Maynard

E X E C U T I V E D I R E C T O R S

JAA Samuels*

JD Punter*

AA Raath

A U D I T C O M M I T T E E

AS du Plessis

D Ladds

DR Geeringh

*UK Citizen

S Mills (Steve) (44)BSc (Eng), BCom (Hons),MBA

Head of Retail

2 months’ service

CG Greyling (Chris) (41)

BCom (Hons) (Economics)

Chief InvestmentOfficer

3 years’ service

RR Goldblatt(Raymond) (42)

CFA

Managing Director –Alternate Products

4 years’ service

T Mhlambiso(Thando) (40)AB, MBA, Juris Doctorate

Chief of Strategy,Governance andPrivate Equity Groups6 months’ service

RT Schkolne(Raymond) (44)

BBus Sc (Hons), BSc

Head of HumanResources

2 years’ service

TI Mvusi (Temba) (47)

BA, MAP, PDP

Head of ExternalInterface

3 years’ service

UJ van der Walt(Banus) (52)

BEcon (Hons)

Managing DirectorSanlam Property

Asset Management33 years’ service

EXECUTIVE COMMITTEE

AA Raath (Anton) (46)

BCom CA(SA)

Deputy ManagingDirector and ChiefOperating Officer

2 years’ service

The complete international structure is as follows:

In parallel there was an active recruitment process to build client support, marketing and

business development functions for both the institutional and retail sectors. The io range of

investment funds is also being revised and expanded to meet the needs of the various target client

segments. During 2001 io investors Alternative Investment Strategies plc was established in

Dublin as the umbrella for a planned range of hedge funds. The first of these funds, the Low

Volatility Fund, was introduced from 1 October.

SIM Namibia, while not attracting new mandates during the year in a very quiet and

lacklustre market, continues to be the largest asset manager in that country with N$6,7 billion

under management.

FINANCIAL REVIEW Operating profit before exceptional items was 2% lower than in 2000.

The segmental analysis shows a decline in the after-tax profits of the South African operation of

11%, while the international operation contribution decreased by 15%.

The South African operation experienced a decline in fee income, mainly as a result of the

inflows in segregated funds replacing outflows from the high-margin pooled policy products.

The expenses of SIM’s South African wholesale operation increased by 9% and if the effect of an

adjustment in the incentive structure is excluded, underlying operational expenses remained at

the same levels as in 2000.

5 3

I N T E R N A T I O N A LE X E C U T I V E C O M M I T T E E

JD PunterChief Executive OfficerSanlam Financial Services bv

KJ McKelveyChief Operating OfficerSanlam Financial Services bv

WP WormleyChief Investment OfficerSanlam Financial Services bv

GC GonzenbachChief Financial OfficerSanlam Financial Services bv

SM SouthallChairmanPunter Southall & Co

C TeagueDirectorio investors Ltd

E BattamsDirectorPunter Southall & Co

M BathejaDirectorPunter Southall & Co

J Howard-SmithDirectorHichens Investment Management Ltd

A AllisonDirectorPunter Southall Financial Management(PSFM)

Sanlam PSigmaHoldings Ltd

io FundManagement

Ltd(Dublin)

io investorsLtd

PSolve

PSigma Group Ltd

PunterSouthall &

CoPSFM

Hichens &Harrison

HichensInvestment

ManagementLtd

Sanlam Financial Services bv

SANLAM INVESTMENT MANAGEMENT(continued)

5 4

The results of the South African operation include a small loss from Sanlam Private

Investments. The market volatility described in the operational review impacted on

trading volumes on the JSE and also affected Sanlam Private

Investments, which experienced a decline in volumes and fee

income. The actions by management of closing loss-making

offices and the critical mass achieved with the Merrill Lynch

transaction should ensure that this division will make a positive

contribution to profits under all market conditions in future.

Within Sanlam Financial Services bv, the PSigma group

experienced a year of successful growth and achieved the targets

envisaged at the time of acquisition. Punter Southall & Co, the

actuarial business in the UK, grew its turnover by more than

25% while maintaining operating profit margins, and PSFM

more than doubled its turnover while also maintaining historic

levels of operating profit margin.

The past year saw a downward adjustment in fees in respect

of a significant portion of the international fund management operation’s (io) assets in

line with market trends. This, together with declines in investment markets, resulted in a

concomitant revenue reduction for the io business. In order to pursue the strategic

objectives as defined at the time of the PSigma group acquisition, deliberate investments

were made in the marketing and business development of the io as well as consulting

operations. While the devaluation of the rand translated into a relatively stable rand value

for assets under management, the aforementioned factors resulted in a net decline in

profits compared with 2000. However, the reorganisation of the international businesses

is now substantially complete and we look forward to growth in profit from the

present levels.

Exceptional items include the cost of the integration of Punter Southall and the

io operation. SIM was also responsible for the full cost of implementation of the required

software and systems to calculate capital gains tax for the Sanlam Group. This is included

in exceptional items.

The tax and minority charge increased owing to the higher effective tax rate in the

UK, where the PSigma group operations are located. In addition, the previous owners of

the PSigma group accepted a significant minority equity stake in the new business in part

consideration, which increased the minority share of profits.

South Africa

International

0

30

60

90

120

150

180

210

’00’01

Geographical profitcontribution

93

86

104

101

PROSPECTS FOR 2002 The groundwork has been laid for

improved investment performance and the investments in new

products, services and in our private client business have positioned

us well for the future. While 2001 has made us more humble about

predicting the future, we are confident that 2002 will be a better year

for the SIM group of companies. Our focus on unlocking synergies,

group cost-saving structures, cross-selling opportunities and a will to

share intra-group client data is gaining momentum, and will deliver

benefits to SIM.

Domestic With the investment process now tried, tested and

improved, we should see the consistent returns we have promised

our clients. We are going to be marketing a number of new products

this year, notably in the alternative product area and the Sanlam

Development Investment Range. We are also confident that the

Satrix range, now comprising Satrix 40, Satrix INDI and Satrix

FINDI, will attract good inflows.

Based on our experience in integrating ABN-AMRO into Sanlam

Private Investments last year and the quality of the professionals and

clients involved with Merrill Lynch, we are confident that this

acquisition will be quickly and effectively bedded down.

The incorporation of Sanlam Property Asset Management (previously Gensec Property Asset

Management) into SIM will add significant value to the performance of the property portfolio,

and also assist with the opportunities that may arise from the securitisation of properties.

International We will continue to develop our platform with a clear emphasis on realising

and expanding our distribution capabilities along with continuing growth in the actuarial

business in the UK, Europe and the USA. Our business model incorporates a “build and buy”

strategy to accelerate the flow of funds from the actuarial and consulting business into our io

funds range, while the io businesses will continue to develop their own marketing and

distribution capabilities through other established channels as well.

In addition, the new initiatives on the private client investment management side are

expected to build an attractive new stream of high-quality assets under management.

5 5

R million 2001 2000

Market value – beginning of year 201 987 197 867Net contributions 1 979 2 263

Segregated and pooled funds (6 588) (3 983)Sanlam portfolios (2 686) (2 624)Sanlam Private Investments 2 623 77Investment income 8 630 8 773

Market value appreciation 20 134 1 857

Market value – end of year 224 100 201 987

FUNDS UNDER MANAGEMENT

R million 2001 2000 Variance

Fee income 710 455 56%Investment profits 28 19 47%Net interest income 16 20 (20%)

Financial services income 754 494 53%Administration costs (482) (217) 122%

Profit before exceptional items 272 277 (2%)Exceptional items (18) (14) 29%

Profit after exceptional items 254 263 (3%)Tax (62) (58) 7%Minorities (13) —

Operating profit after tax 179 205 (13%)

INCOME STATEMENT

GENSEC BANK

5 6

the internationalisation of Gensec Bank made good progress during 2001

the internationalisation of Gensec Bank made good progress during 2001

Our strategies paid off to the

extent that we were able to

manage through the market

volatility of the second half of

2001 without suffering any

trading losses and without any

funding pressures for the Bank.

Marius FerreiraCHIEF EXECUTIVE

NATURE OF BUSINESS The Gensec Bank group conducts business within the Genbel

Securities Ltd group, the latter being wholly owned by the Sanlam group. The financial

information in this report includes the operating results of Gensec Bank Ltd and Gensec Trading

(Pty) Ltd. Also included are the Gensec Bank group’s interest in the operations of Genbel

Securities Ltd and Gensec Ireland Ltd. Gensec Bank is a specialist banker providing professional

services, products and skills to the South African savings industry and corporate market.

BUSINESS ENVIRONMENT The past year commenced with

a high degree of optimism in both local and global markets.

However, as the year progressed, economic conditions deteriorated.

The US economy moved into recession during the second quarter of

2001 and the events of September 11th exacerbated the economic

decline. Accordingly, the mood of the markets became gloomier and

conditions in the international financial markets and for the

investment banking industry deteriorated.

Initially it seemed as if South Africa might escape the whiplash

of global financial market traumas, but the rand increasingly became

the focus of short selling strategies and suffered its worst depreciation

since the debt standstill of 1986. Investor confidence suffered and local market conditions

became progressively more difficult. The knock-on effects of rand depreciation, particularly in

depressing economic activity, will probably continue to be felt well into this year.

Under these conditions, Gensec Bank had to be increasingly flexible in reacting to high

market risk. Our strategies paid off to the extent that we were able to manage through the market

volatility of the second half of 2001 without suffering any trading losses and without any funding

pressures for the Bank.

A key part of the defensive strategy which Gensec

Bank adopted in 2001 in order to adapt to increased

market stresses, was to diversify our income base and

to seek additional businesses. To this end:

• the debt finance business was expanded

significantly with the acquisition of a number of

experienced people and a positive growth in

business was experienced;

5 7

SALIENT FEATURES

Growth in revenue of 6%

Expansion of internationaloperations

Further diversificationof revenue

Continued growth ofdebt business

GENSEC BANK(continued)

5 8

• the equity derivatives team refocused its business model and contributed 30 percent of

the Bank’s revenues;

• the structured products division recovered from the loss of experienced personnel and

showed good results in the second half of the year; and

• the treasury operations and stockbroking business did well despite the difficult trading

conditions in local markets.

OPERATIONAL REVIEW

Treasury and market activity Gensec Bank, consistent with the approach adopted

during 2000, has continued to progressively move away from a proprietary based trading

model to one based on providing clients with risk management solutions. The market

activity has been restructured to focus on providing liquidity for client transactions

sourced by the Bank and the maintenance of the margins received for implementing the

transactions.

During the course of 2001 the equity derivative unit entered the warrant market

utilising the successful Satrix 40 product to provide product differentiation.

Risk management control and measurements continue to be an integral part of

evolution of market activity and significant resource is devoted to this area. As market

activity has evolved, the risk management process has been adapted accordingly to ensure

that all risks continue to be taken within the risk interest of the Bank. We believe that the

flexibility of our overall risk management approach will continue to allow us to

participate in new opportunities as they arise.

Investment banking The corporate finance arena was extremely tough with a

significant decrease in Merger and Acquisition (M&A) activities and new listings.

This reduced the potential for fee income from advisory services as well as profitable

underwriting opportunities. The events of September 11th had a negative impact on

underwriting positions at the time. The past year was used to consolidate the equity and

corporate finance units into a single advisory business as well as to set up a corporate

finance capability in London to focus on cross-border M&A transactions and support

Sanlam Group activities.

The private equity division gained new funds under management through the

creation of Archway 2 (R160 million) and the Bio-Ventures Fund (R80 million) as well

as the take over of the management of the Real Equity Trust (R150 million). Total private

equity assets under management now amount to R2,1 billion.

D I R E C T O R S

AD Botha (Chairman)

DR Geeringh (Vice-Chairman)

PJ Cook

TL de Beer

AS du Plessis

M Ferreira

D Ladds

P Mabena

AF Perold

P de V Rademeyer

L Vermaak

S Vil-Nkomo

A L T E R N A T E D I R E C T O R S

M Murning

SH Müller

The general shortage of corporate debt as well as the decline in the interest rates and the

narrowing of credit spreads assisted in the creation of a bull market in fixed interest instruments,

facilitating the growth of our debt and structured finance business. The division significantly

expanded its securitisation capabilities and participated in a number of transactions as well as

establishing a presence in London. A property-structuring unit was also initiated and is working

actively within the Sanlam Group to exploit opportunities.

Overall, the Investment Banking business now has all the building blocks in place to provide

for the corporate and public sector’s financing and structuring needs.

Risk management solutions The structured products team has

focused on expanding the product base from primarily an equity

franchise, to also include fixed interest, foreign exchange and

commodity based products. The skill base has been broadened to

include derivative skills across the broad spectrum of markets in

combination with legal, regulatory, actuarial and taxation skills.

The unique resource base enables the Bank to provide pioneering

products for the South African markets by seeking cross-market

opportunities, the utilisation of derivatives and structuring across

different regulatory environments.

Arbitrage The arbitrage business again showed good growth in revenue numbers.

New businesses were created through the establishment of an international presence as well

as the cross-market arbitrage business. After initial teething problems the international operation

gained momentum and contributed satisfactorily to revenue. The cross-market arbitrage business

was established and good growth is expected in the current financial year. The South African hedge

book again delivered a sturdy performance.

INTERNATIONALISATION The internationalisation of Gensec Bank made good progress

during 2001. We appointed a CEO of international operations, who joined the international team

in London and was instrumental in securing the Fieldstone transaction, thereby giving the Bank

focused advisory and project finance capabilities in the US, Europe and Africa. In addition,

Gensec acquired a London-based structured finance team and thereby established Gensec (UK).

Our business in Dublin suffered as a result of the lower level of capital raising and the collapse of

the IPO market. The business was however expanded by establishing an arbitrage unit and the

broadening of the treasury function.

5 9

GENSEC BANK(continued)

6 0

FINANCIAL REVIEW Overall the results were below

expectations. Despite a 6% increase in revenue, net operating

profit declined by 20% from the previous year. The process of

diversifying revenue streams was successful and will be built

upon in the forthcoming year.

Costs rose by 31% to R317 million, driven mainly by

higher office and corporate expenses incurred in foreign

acquisitions and through investment in new technology for

risk management and trading systems.

Return on Equity was 17% against

a longer-term objective of 25%.

The depressed investment banking

environment has resulted in a significant

reduction in deal flow in the corporate

finance and equity finance business

units. Operational efficiency will

continue to be a focus area and

the objective is not to exceed a cost to

revenue ratio of 50%.

PROSPECTS FOR 2002 We have

adopted the following strategies for the

coming year:

• Strengthening and evolving our core

business model by further diversifying

and growing our income base through

selective acquisitions and organic

growth.

• Further expansion of our business

internationally is imperative as it

needs to add to our future growth

potential and provide diversification

of income.

C R E D I T C O M M I T T E E

PJ Cook (Chairman)

TL de Beer

AS du Plessis

M Ferreira

D Ladds

A U D I T C O M M I T T E E

AS du Plessis (Chairman)

TL de Beer

DR Geeringh

D Ladds

P de V Rademeyer

G Erasmus(Gerhard) (37)CA(SA)

Structured Projects

6 years’ service

MF Brown (Mike) (53)BA (Hons)

Marketing andDistribution

3 years’ service

PJ Cook(Peter) (55)

BSc Eng (Mining)

Deputy CEO

4 years’ service

S de Bruyn(Steve) (41)CA(SA)

Debt Finance

2 years’ service

J Latsky (Johan) (46)

BA LLB

Special Projects

3 years’ service

KN Magwentshu(Khanyisa) (36)BJuris, LLB

Public Sector andEmpowermentFinance2 years’ service

MS Murning(Mark) (42)

BCom

Risk ManagementSolutions and Market

Activity19 years’ service

AI Goveia (Tony) (34)

CA(SA) MSc(Mathematics)

Chief Risk Officer

7 years’ service

SH Müller(Steve) (41)

CA(SA)

Investment Banking

7 years’ service

FJ Oosthuizen(Francois) (42)

BCom (Hons)

Arbitrage

16 years’ service

NA Siebrits (Nico) (41)

CA(SA)

Chief FinancialOfficer

10 years’ service

EXECUTIVE COMMITTEE

• Following the take out of the minorities of Gensec, the Bank

became firmly entrenched in the Sanlam stable. Opportunities

exist for the Bank and the Sanlam Group to extract synergies

that are present between the product provider and distributor

of the product.

• Operational excellence will ensure that there is seamless

integration of various systems and operations in the Bank

in order to provide a platform for revenue growth.

• To operate successfully in the South African environment, the

Bank needs to become a truly South African company, reflecting

the country’s population demographics in terms of ownership,

governance, management, general staff and suppliers.

• Implementing a human resources strategy to ensure that the diverse talents of each of the

Bank’s employees are utilised to the maximum possible extent and their aspirations are fulfilled

in achieving the Bank’s vision

of becoming an employer

of choice.

We believe that the effect

of the past year on the

international business

environment and the

catastrophic events that

occurred will be negative in

as much as uncertainty has

increased. We therefore

anticipate that 2002 will

again be a tough year for

investment banks.

61

Revenue per businessfor the year 2000

50%

20%

27%

3%

Revenue per businessfor the year 2001

Investment banking

Arbitrage

Risk management solutions

Market activity

25%

9%

15%

51%

Investment banking

Arbitrage

Risk management solutions

Market activity

R million 2001 2000 Variance

Operating income 462 472 2%Net interest income 46 9 411%

Financial services income 508 481 6%Administration costs (317) (242) 31%

Net operating profit 191 239 (20%)

INCOME STATEMENT

2001 2000

ROE % 17 23Cost to revenue % 62 51Revenue per average number of employees (R 000) 1 658 2 004

FINANCIAL RATIOS

REVENUE DISTRIBUTION

OTHER BUSINESSES

6 2

INNOFINDESCRIPT ION OF THE BUSINESS, BROAD STRATEGIES

AND FOCUS AREAS Innofin is a joint venture between

Sanlam and Macquarie Bank of Australia. Innofin’s objective is to

establish an investment and portfolio management service business

providing innovative financial products and services to the affluent

South African market. Innofin will provide the means by which financial advisers will be enabled to

manage their clients’ total investment portfolios and provide expert advice and service.

BUSINESS ENVIRONMENT AND OPERATIONAL REVIEW Innofin’s first product launched

in May was a Cash Management Fund (CMF), the first of its kind in South Africa, providing some

of the convenience and flexibility of a bank account, but with interest rates similar to money market

unit trusts. The CMF had

R129 million in funds under

management at year-end. This

was followed by a money market

fund in September, which can

only be accessed via linked

product investments. This money

market fund had R190 million

funds under management at

year-end.

During 2001 Innofin

acquired Sanlam Personal

Portfolios (SP2), Sanlam’s linked

product business, with an

effective date of 1 July 2001.

This is seen as an important step

in Innofin’s quest to become the provider of choice in the high net worth market.

Linked product gross inflows increased by 30% to more than R3 billion. Net inflows increased

strongly by 40%. An industry first was launched during the year whereby the monthly fees payable by

clients can be fully recovered from money market funds in the clients’ portfolios.

During 2001 there was an increased demand from clients for offshore investment products. An

international hedge fund, denominated in US$, was launched during the last quarter of 2001. This

US$10 million fund was sold in less than six weeks.

FINANCIAL REVIEW Innofin has not yet achieved break-even, but is making sound

progress towards its target of break-even in 2003, when the required critical funds under

management will be reached.

PROSPECTS FOR 2002 Innofin will continue to broaden its innovative range of products

and services to the affluent South African market.

One of Innofin’s cornerstones is the quality of its staff. Training and retention of key players

are a priority. A programme of employment equity, that is supporting Innofin’s business

initiatives, proactively encourages diversity in employment.

SALIENT FEATURES

First Cash Management Fund launched inSouth Africa

Net inflows increase by 40%

R million 2001 2000 Variance

Fee income 38 — —Net interest income 6 3 100%

Financial services income 44 3 1 367%Fee to sales organisation (11) — —

Income after fee to sales organisation 33 3 1 000%Administration costs (54) (15) 260%

Loss before exceptional items (21) (12) 75%Systems/projects — (7) —

Operational loss before tax (21) (19) 11%Tax 8 4 100%

Operating loss after tax (13) (15) (13%)

INCOME STATEMENT

JvD du Preez (Johan) (36)MPharm, MBA

Chief Executive

5 years’ service

GENSEC PROPERTY SERVICESNATURE OF BUSINESS Gensec Property Services is a property

management company whose activities include letting, rental

collection and marketing, through to contracting and administration.

Other services include asset management, investment analysis,

investment structuring, project management, lease administration,

market research and Geographical Information Systems (GIS).

FINANCIAL AND OPERATIONAL REVIEW The existing and

future anticipated oversupply of retail and commercial space, along

with the general nervousness in the economy and property market,

put pressure on vacancies and rental levels.

This resulted in reduced income, which was fortunately

countered by a profit share received from Sanlam for outperforming

the property industry as measured by the South African Property

Information Exchange.

The bulk of Gensec Property Services’ revenue is generated from

the management of the Sanlam property portfolio. However, our

continued drive to obtain business from other sources resulted in an

increase in our revenue from external sources.

During the year we sold R639 million worth of Sanlam’s

properties on which we earned additional commission and handling

fees. Unfortunately this puts pressure on our future fee income.

Operating profit before tax of R72 million was 22% higher than

the 2000 operating profit before tax, and exceeded our target of

R38 million.

OUTLOOK FOR 2002 Prospects for the property market during

2002 are still unfavourable and the increase in interest rates will have

a further negative impact. Competitive opportunistic investors are building

up-market properties in new development nodes and are attracting tenants

from existing properties. Sanlam’s strategy of reducing its exposure to

property investments has placed more pressure on the property portfolio

and therefore on Gensec Property Services’ profitability.

The Sanlam group has been restructured and with effect from 2002

the structure of the companies will be as follows:

• Gensec Property Services Ltd will be a property management company,

with its focus on the day-to-day management of properties, tenant

administration, marketing of space, renewals, budgeting, procurement,

rent collection, cash-flow management, tenant liaison and facilities

management.

• Sanlam Property Asset Management (Pty) Ltd will focus on the

strategic management of the portfolio, providing investment advice,

sales, valuations and securitisation. This company will be integrated

with Sanlam Investment Management.

6 3

R million 2001 2000 Variance

Fee income 187 170 10%Net interest income 14 14 —

Financial services income 201 184 9%Administration costs (120) (111) 8%

Operating profit before exceptional items 81 73 11%Exceptional items (9) (14) (4%)

Operating profit before tax 72 59 22%Tax (21) (20) 5%

Net profit after tax 51 39 31%

INCOME STATEMENT

2001 2000

Admin cost to income 60% 60%

Recurring income 70% 70%

FINANCIAL RATIOS

Breakdown ofrecurring income

Property management fee

Net asset management fee

Other management fees

Net rental commission

Interest Sanlam portfolio

Other income

40%

12%

11%

4%

25%

8%

G van Zyl(Gerhard) (42)BSc Eng (Hons), MBA

Managing director10 years’ service

SALIENT FEATURES

• Increase of 22%in operating profitbefore tax

• Successful restructuring ofgroup completed

OTHER BUSINESSES(continued)

6 4

TASC ADMINISTRATION

Tasc’s main focus is portfolio administration and investment

accounting for group investments as well as third party clients.

It provides integrated investments administration services to the

local and international markets.

BUSINESS ENVIRONMENT AND OPERATIONAL REVIEW As a service provider to the

local investment community, Tasc was affected by the tough market conditions and resulting cost

pressures on both its own business and that of its clients.

On the operational front, Tasc experienced a successful year with good growth in its third

party client base. Much effort was expanded in improving the automation of activities and

processes as well as improving controls.

FINANCIAL REVIEW As a growing business the profitability was impacted by ongoing new

business development expenditure, resulting in a loss of R0,8 million for the year.

New clients were gained during the year in the institutional business. A third party broker

settlement administration business was commenced with Sanlam Private Investments, as the first

client. This business also experienced good client growth during the year.

PROSPECTS FOR 2002 2002 will see Tasc assume the investment administration of

Sanlam Investment Management’s offshore operations through an office established in Dublin.

Opportunities exist for further growth in both the South African as well as the international third

party administration business.

H Pienaar(Hank) (51)CA(SA)

Managing Director5 years’ service

SANLAM NAMIBIA DESCRIPT ION OF THE BUSINESS Sanlam Namibia Limited

(SNL) provides a full spectrum of financial services to the Namibian

market. This includes the administration of Sanlam’s Namibian

business and underwriting its own insurance business from

1 April 1998.

STRATEGY Within the context of the vision of the Sanlam Group, “to be the leader in

wealth creation”, SNL has declared its operative vision “to be the benchmark of excellence for the

Namibian financial industry.” SNL actively pursues the following major strategic themes in a

highly competitive and overtraded Namibian financial services industry:

• Transformation and repositioning

• Topline growth

• Improved profitability

FINANCIAL REVIEW Satisfactory progress was made during the period under review and

SNL’s profitability improved beyond expectations. A profit of N$4 million was posted which

exceeds the profit target with 84%.

The gross inflow of N$928,2 million and the sales of equity products (for alliance partners)

to the amount of N$443 million brought the inflows generated by SNL to N$1 371,2 million for

the year, which is a pleasing performance considering the business environment.

The value of in-force business amounted to N$33,3 million (N$18,8 million for 2000).

PROSPECTS FOR 2002 SNL is now well positioned with its

own product portfolio and independent product platform to make

inroads into new market segments and to capitalise on

the existing ones.

This is in line with SNL’s drive to search for changes, which

will be beneficial for its clients, and other stakeholders.

6 5

R million 2001 2000 Variance

Financial services income 102 88 16%Sales remuneration (40) (36) 11%

Income after sales remuneration 62 52 20%Underwriting policy benefits (3) (4) (25%)Administration costs (53) (46) 16%

Operational profit before tax 6 2 300%Tax (2) (2) —

Operational profit after tax 4 — —

INCOME STATEMENT

VR Rukoro(Vekuii) (47)LLM

Managing Director2 years’ service

ANNUAL F INANCIAL STATEMENTS

6 6

SANLAM LIMITED AND SANLAM LIFE INSURANCE L IMITED

CONTENTS

Directors ’ Respons ib i l i ty for F inancia l Report ing 67 |

Cert i f icate by Company Secretary 67 |

Report of the Statutory Actuary 68 |

Report of the Independent Auditors 68 |

D i rectors ’ Report 69 |

Bas is of Presentat ion and Account ing Pol ic ies 70 |

Group Income Statements 76 |

Group Balance Sheets 77 |

Group Statements of Changes in Equity 78 |

Group Cash F low Statements 79 |

Notes to the Group F inancia l Statements 80 |

Pr inc ipal Subs id iar ies 101 |

Sanlam L imited F inancia l Statements 102 |

F inancia l Informat ion for the Shareholders ’ Funds 104 |

Report on the Sanlam Group Embedded Value 118 |

DIRECTORS’ RESPONSIBIL ITY FOR F INANCIAL REPORTING

6 7

The Boards of Sanlam Limited and Sanlam Life Insurance Limited accept responsibility for the integrity, objectivity and reliability

of the Group and company financial statements of Sanlam Limited and Sanlam Life Insurance Limited respectively. Adequate

accounting records have been maintained. The Boards endorse the principle of transparency in financial reporting. The responsibility

for the preparation and presentation of the financial statements has been delegated to management.

The responsibility of the external auditors is to express an independent opinion on the fair presentation of the financial

statements based on their audit of Sanlam Limited, Sanlam Life Insurance Limited and their subsidiaries.

The audit committees have confirmed that adequate internal financial control systems are being maintained. There were no

material breakdowns in the functioning of the internal financial control systems during the year. The Boards are satisfied that the

financial statements fairly present the financial position, the results of operations and cash flows in accordance with relevant

accounting policies, based on South African Statements of Generally Accepted Accounting Practice.

The Boards are of the opinion that Sanlam Limited and Sanlam Life Insurance Limited are financially sound and operate as

going concerns. The financial statements have accordingly been prepared on this basis.

The financial statements on pages 69 to 115 were approved by the Boards and signed on their behalf by:

LEON VERMAAK FLIP RADEMEYERC H I E F E X E C U T I V E O F F I C E R F I N A N C I A L D I R E C T O R

6 March 2002

CERTIF ICATE BY COMPANY SECRETARY

In my capacity as Company Secretary, I hereby certify, in terms of the Companies Act, that for the year ended 31 December 2001, the

company has lodged with the Registrar of Companies all such returns as are required of a public company in terms of this Act,

and that all such returns are, to the best of my knowledge and belief, true, correct and up to date.

XOLISWA MOTSWAIC O M P A N Y S E C R E T A R Y

6 March 2002

REPORT OF THE STATUTORY ACTUARY

6 8

FINANCIAL SOUNDNESS VALUATIONSI have valued the policy liabilities on bases (set out on pages 73 to 75 and note 21 on pages 90 to 93) consistent with the fair value of the corresponding assets. The valuation was conducted in accordance with the applicable guidelines of the Actuarial Society of South Africa. As at 31 December 2001, the operations of Sanlam Life Insurance Limited were financially sound and the excessof the assets over the liabilities of Sanlam Life Insurance Limited was more than sufficient to cover its capital adequacy requirements.In my view, the financial statements fairly present the financial position of Sanlam Life Insurance Limited as at 31 December 2001.

EMBEDDED VALUEIn my view, the Sanlam Group embedded value and the value of new life insurance business as set out on pages 118 to 122, fairlypresent these values as defined. The embedded value and the value of new life insurance business were calculated in accordancewith the applicable guidelines of the Actuarial Society of South Africa.

CHRIS SWANEPOEL FIA, FASSA

S T A T U T O R Y A C T U A R Y

S A N L A M L I F E I N S U R A N C E L I M I T E D

6 March 2002

REPORT OF THE INDEPENDENT AUDITORS

TO THE MEMBERS OF SANLAM LIMITED AND SANLAM LIFE INSURANCE L IMITED

We have audited the annual financial statements of Sanlam Limited and the Group annual financial statements of Sanlam Limitedand Sanlam Life Insurance Limited for the year ended 31 December 2001 as set out on pages 69 to 115. These annual financialstatements are the responsibility of the directors of Sanlam Limited and Sanlam Life Insurance Limited. It is our responsibility toexpress an opinion on these financial statements based on our audit.

SCOPEWe conducted our audit in accordance with statements of South African Auditing Standards. These standards require that we planand perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement.An audit includes:● examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements;● assessing the accounting principles used and significant estimates made by management; and● evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.

AUDIT OPINIONIn our opinion, the annual financial statements of Sanlam Limited and the Group annual financial statements of Sanlam Limitedand Sanlam Life Insurance Limited fairly present in all material respects the financial position of the company and groups at 31 December 2001 and the results of their operations and cash flows for the year then ended in accordance with South AfricanStatements of Generally Accepted Accounting Practice, and in the manner required by the Companies Act in South Africa.

ERNST & YOUNG C H A R T E R E D A C C O U N T A N T S ( S A ) PRICEWATERHOUSECOOPERS INC.R E G I S T E R E D A C C O U N T A N T S A N D A U D I T O R S

Cape Town6 March 2002

DIRECTORS’ REPORTfor the year ended 31 December 2001

6 9

NATURE OF BUSINESS

The Sanlam Group is one of the largest established financial

services groups in South Africa. Its core activities are set out

on the inside front cover.

CORPORATE GOVERNANCE

The Board of Sanlam endorses the Code of Corporate

Practice and Conduct recommended in the King Report on

Corporate Governance and has satisfied itself that Sanlam

consistently complied with the Code during 2001.

GROUP RESULTS

Headline earnings based on the long term rate of return basis

increased from R3 495 million (131,5 cents per share) in

2000 to R3 534 million (133,2 cents per share) in 2001.

Further details regarding the Group’s results are included in

the report of the financial director and the business reviews.

SHARE CAPITAL

There were no changes in the authorised and issued share

capital of the company during the financial year.

DIVIDENDS AND DIVIDEND POLICY

It is the Board’s intention to declare only annual dividends

and to maintain a three and a half to four and a half times

dividend cover on headline earnings based on the long term

rate of return. The objective of the Board is to achieve stable

growth in dividend payments and the dividend pattern will

therefore not strictly follow the earnings pattern. The Board

has declared a dividend of 35 cents per share payable on

15 May 2002 to shareholders registered on 19 April 2002.

In accordance with Generally Accepted Accounting Practice

(AC107) dividends are now provided for in the financial

year in which they are declared.

SUBSIDIARIES

Details of the company’s principal subsidiaries are set out on

page 101.

DIRECTORS’ INTEREST IN CONTRACTS

No material contracts involving directors’ interest were

entered into in the year under review.

INTEREST OF DIRECTORS AND OFFICERS

IN SHARE CAPITAL

The shareholdings, direct and indirect, of the directors and

officers holding office at the date of this report are as follows:

Ordinary sharesNon-

Beneficial beneficial Options

Number of shares 2 656 986 139 601 11 566 668

ComprisingNon-executive directors 275 898 90 000 728 750

Executive directors 407 129 — 3 318 027

Officers 1 973 959 49 601 7 519 891

Disclosures by the directors indicate that at 31 December 2001

and at the date of this report, their interests did not, in

aggregate, exceed 1% in respect of either the share capital or

voting control of the company. No material change in the

foregoing interests has taken place between 31 December 2001

and the date of this report.

DIRECTORS AND SECRETARY

Particulars of the directors and secretary of the company are

set out on pages 27 and 128.

POST-BALANCE SHEET EVENTS

The rationalisation of the companies in the Group to

ensure operational and financial effectiveness was approved

during the year under review. The effective date of the

rationalisation scheme is 1 January 2002. The scheme will

not impact the capital position of the Group.

No other material facts or circumstances have arisen

between the dates of the balance sheet and this report which

affect the financial position of the Sanlam Limited group

and the Sanlam Life Insurance Limited group as reflected in

these financial statements.

By order of the Board

XOLISWA MOTSWAIS E C R E T A R Y

6 March 2002

BASIS OF PRESENTATION AND ACCOUNTING POLICIES

70

BASIS OF PRESENTATIONPOLICYHOLDERS’ AND SHAREHOLDERS’ ACTIVIT IES

The activities of the policyholders and shareholders in respect

of life insurance business are conducted in Sanlam Life

Insurance Limited. The assets, liabilities and activities of

these two groups of stakeholders 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, generally accepted actuarial practice

and the stipulations contained in the demutualisation proposal.

The valuation bases in respect of policy liabilities and profit

entitlement of shareholders are set out on pages 73 to 75.

The group financial statements set out on pages 76 to

100 include the consolidated activities of the policyholders

and shareholders. Separate financial information on the

activities of the shareholders of the Sanlam Limited Group is

disclosed on pages 105 to 122.

FUNDS RECEIVED FROM CLIENTS

Funds received from clients consist of single and recurring

long and general insurance premium income, which is

included in the financial statements as well as unit trust

contributions, inflow for assets managed and administered

on behalf of clients and non-life insurance linked-product

contributions, which are not included in the financial

statements as they are funds held on behalf of and at the risk

of clients. Transfers between the various types of business,

other than those transacted at arm’s length, are eliminated.

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

premiums, asset mismatch profits or losses and income

earned on working capital;

● income from general insurance business;

● income from banking activities such as realised and

unrealised gains or losses on money market assets and

liabilities and unsecured bonds, other securities related

income and fees, and commissions;

● income from other financial services such as unit trust

administration, trust services, linked-product business and

health care administration.

SEGREGATED FUNDS

Sanlam also manages and administers assets for the account

of and at the risk of clients. As these are not the assets of the

Sanlam Group, they are not reflected in the Sanlam Group

balance sheet but are disclosed in a footnote to the balance sheet.

TERM FINANCE

The portion of term finance which is repayable within oneyear is not transferred to current liabilities. This is consistentwith the treatment of investments redeemable within oneyear that are not included in current assets.

COMPARATIVES

Where necessary, comparative figures have been adjusted toconform with changes in presentation in the current year.

GENSEC ACTIVIT IES

The Gensec Bank, Sanlam Investment Management (SIM)and Gensec Property Services activities have been integrated ascore businesses of the Sanlam Group. The Gensec privateequity, underwriting and corporate cash activities have beendiscontinued and the underlying investments of these activitiesare included in the shareholders’ investments. The investmentreturn on these assets (after adjusting for the long term rate ofreturn (LTRR)) is included in the LTRR investment return inthe income statement. Previously these results were included innet operating profit. Comparatives have been restated to reflectthe change in the activities. The impact on the 2000 LTRRheadline earnings due to this restatement is not material.

DISCONTINUANCE OF HEALTH CARE ACTIVIT IES

Sanlam disposed of its health care business during 2001.Operating results before the effective date are included inoperating income and disclosed separately in the analysis ofthe operating profit.

DIVIDENDS

Dividends proposed or declared after the balance sheet date arenot recognised at the balance sheet date. Comparative figureshave been restated to exclude dividends previously provided for.

ACCOUNTING POLICIESThe Sanlam Limited Group and Sanlam Life InsuranceLimited Group financial statements are prepared applyingthe principal accounting policies below, which are inaccordance with and comply with South African Statementsof Generally Accepted Accounting Practice, and some ofwhich apply specifically to the life insurance industry. Theaccounting policies applied in preparing the financialstatements are consistent with those of the previous year,except for the change in the accounting for dividendsproposed or declared after the balance sheet date.

BASIS OF CONSOLIDATION

The results of consolidated subsidiaries are included from theeffective dates of acquisition to the effective dates of disposal.

71

Inter-company profits and losses are eliminated from the

Group results. Inter-company transactions at arm’s length,

which do not influence the Group’s net earnings, are not

eliminated from the results.

Sanlam Limited and its subsidiaries acquired all of the

shares in Gensec which it and its subsidiaries did not already

own with effect from 31 December 2000. As a result, Sanlam

Life Insurance Limited holds a controlling interest in Gensec.

This controlling interest was intended to be temporary pursuant

to the integration of the Gensec operations into the Sanlam

Group and was sold to Sanlam Limited on 1 January 2002.

Therefore Gensec has not been consolidated in the Sanlam

Life Insurance Limited group financial statements and is

treated as an unlisted associated company.

Shares held in Sanlam Limited by subsidiary companies

are eliminated on consolidation where these shares are held

by the shareholders’ funds of the Sanlam Limited Group.

Where these shares are held as investments for policyholder

benefits they are not eliminated on consolidation but reflected

at fair value as equity investments in the balance sheet.

ASSOCIATED COMPANIES

An associated company is a company, not being a

subsidiary, in which the Sanlam Group has a long term

investment and over which it has the ability, because of the

extent of its investment, to exercise significant influence.

The results of associated companies have been

accounted for using the equity method of accounting,

where the Group’s share of the associated companies

earnings before dividends is included in earnings. Where

the associate is held as an investment the equity-accounted

earnings are included in investment income with a

corresponding adjustment to the carrying value of the

investment in associated companies. This carrying value is

adjusted to fair value with a corresponding adjustment to

investment surpluses on the investment in associated

companies in the income statement.

The above policy has been applied by Sanlam Limited

Group in respect of Absa and by Sanlam Life Insurance

Limited Group in respect of its interest in Santam, Gensec

and Absa.

GOODWILL

Goodwill may arise on the acquisition or change in the holding

(“adjustment”) in a subsidiary company. It represents the

excess of the cost of an acquisition or adjustment over the

fair value of the Group’s share of the net assets of the subsidiary

at the date of acquisition or adjustment. Goodwill is written

off on a straight-line basis over the lesser of its estimated

useful life or twenty years. The carrying amount of goodwill

is reviewed annually and is written down for impairment

where this is considered necessary.

In certain instances, a portion of the Sanlam Group’s

interest in consolidated subsidiaries is held by the

policyholders’ fund of Sanlam Life Insurance Limited to

fund future benefits in terms of its policyholders’ contracts.

The excess of the fair value of the policyholders’ interest in

these consolidated subsidiaries over their proportionate

share of the subsidiaries’ net assets is recognised in the

group balance sheet as equity investments.

INTANGIBLE ASSETS

No value is attributed to internally developed trademarks or

similar rights and assets. Costs incurred on these items, whether

purchased or created by the Group, are charged to the income

statement in the period in which they are incurred.

INVESTMENTS

Investments are reflected at fair value, which has been

determined on the following bases:

● The value of fixed property, which generates income, is

determined by discounting expected future cash flows at

appropriate market interest rates. Other fixed property is

valued at cost less provision for impairment in value,

where appropriate;

● Listed shares and units in unit trusts are valued at the stock

exchange and repurchase prices respectively. The value of

unlisted shares is determined by the directors using

appropriate valuation bases;

● Interest-bearing investments are valued by discounting

expected future cash flows at appropriate market interest

rates;

● 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;

● Loans of investment scrip to and from third parties are not

treated as sales and purchases.

INVESTMENT RESERVE

Net realised and unrealised investment surpluses on the

revaluation or sale of investments attributable to

shareholders are transferred to an investment reserve.

However, the Board may transfer realised investment

surpluses to retained income. A negative investment

reserve will not be created. Realised and unrealised

investment surpluses attributable to policyholders are

included in policyholders’ liabilities.

BASIS OF PRESENTATION AND ACCOUNTING POLICIES(continued)

7 2

TRADING ACCOUNT AND MONEY MARKET

ASSETS AND L IABIL IT IES

Trading account and money market assets and liabilities are

reflected at fair value, which is determined on the bases set

out above for investments.

FIXED ASSETS

Fixed assets are reflected at their depreciated cost prices.

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.

INVESTMENT RETURNS

Investment income

Rental income, including rentals in respect of space occupied

in owned buildings, is reflected net of property expenditure.

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 income earned on working capital is included

in operating profit.

Investment surpluses

Investment surpluses consist of net realised surpluses on the

sale of investments and net unrealised surpluses on the

valuation of investments to fair value. These surpluses are

recognised in the income statement and policy liabilities on

the date of sale or on the valuation to fair value date.

LONG TERM RATE OF RETURN ADJUSTMENT

The long term rate of return adjustment represents the

difference between the actual investment return earned on

shareholders’ funds during the year and the long term

investment return calculated on the basis described below.

The long term investment return is determined by the

directors and is based on historical experience and current

market conditions having regard to inflation expectations

and consensus economic and investment forecasts.

The long term investment return is calculated on a

monthly basis on the fair value of the investments held in the

shareholders’ funds, excluding holdings in subsidiaries and

associated companies. The directors are of the opinion that

this rate of return is prudent and has been selected with a view

to ensuring that investment returns credited to headline earnings

are consistent with the actual returns expected to be earned

over the long term.

PREMIUM INCOME

The full annual premiums on individual insurance policies

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 premiums are accounted for when

receivable. Where premiums are not determined in advance

they are accounted for upon receipt.

General insurance premiums are accounted for when

receivable, net after a provision for unearned premiums

relating to risk periods that extend to the following year.

Gross premium income is reduced by reinsurance

premiums applicable to the same period.

POLICY BENEFITS

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 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 also include the movement

in the actuarial liabilities backing the risk underwriting

business.

Policy benefits are reflected net of amounts recovered

from reinsurers.

SALES REMUNERATION

Sales remuneration consists of commission payable to non

salaried sales staff on long and general insurance business,

and expenses directly related thereto, bonuses payable to

sales staff and the Group’s contribution to their retirement

and medical aid funds.

Commission is accounted for in the financial period

during which it is incurred.

ADMINISTRATION COSTS

Administration costs include, inter alia, indirect taxes

such as revenue stamps payable on insurance policy

contracts and VAT, rental of space occupied in own

buildings, which are held mainly as property investments

of policyholders, property and investment expenses

related to the management of the policyholders’

investments, product development and training costs.

Internal systems development costs and purchased

systems costs are included in administration expenses

when incurred.

7 3

DEFERRED INCOME TAX

Deferred income tax is provided at current tax rates using

the liability method for all temporary differences arising

between the tax bases of assets and liabilities and their

carrying values for financial reporting purposes. 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 capital gains tax balances are reflected at current

values and have not been discounted. Deferred capital gains

tax relating to the assets underlying the policyholders’ funds

is included in the policy liabilities.

FOREIGN CURRENCIES

Transactions and balances

Assets and liabilities in foreign currencies are converted to

South African rand at exchange rates ruling at the financial

period end. Differences arising from this translation are

included in investment surpluses as substantially all foreign

assets and liabilities are in respect of investments. Foreign

currency income items are translated at the weighted average

exchange rates for the period.

Foreign operations

Income statement items of foreign operations are

translated into South African rand at the rates of

exchange ruling at the dates the income, expenses and

cash flows are incurred. The rate of exchange ruling at the

transaction date is used for non-monetary balance sheet

items and the closing rate for monetary items.

Differences arising on translation of foreign operations

that are integral to the Group’s operations are recognised

in the income statement in the year in which they arise.

Exchange differences arising on translation of foreign

entities’ results are transferred to a non-distributable

reserve until the disposal of the net investment when it is

released to the income statement.

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 Group. The retirement plans are funded by

payments from employees and the relevant group companies,

taking into account the recommendations of the pension fund

valuator. The Group’s contributions to the defined contribution

and defined benefit funds are charged to the income statement

in the year in which they are incurred. Actuarial valuations

are performed on a date which does not coincide with the

balance sheet date. Consideration is given to any event

that could impact the funds up to 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 these

increased amounts. Therefore pensioners will fund post-

retirement medical contributions from the increased

pensions. The Group has provided in full for its medical

contribution commitments in respect of a small number

of pensioners and disabled members who are not covered

by the last mentioned. 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 Group’s

contributions to medical funds are charged to the

income statement in the year in which they are incurred.

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.

EQUIVALENT CASH FLOWS

Unrealised investment surpluses arising on the valuation to

fair value of investments have the same nature and

financial effect as realised investment surpluses, as

investments are reflected at fair value in the financial

statements. For the purposes of the cash flow statement

and consistent with the treatment of realised investment

surpluses, unrealised investment surpluses arising on the

valuation to fair value of investments are treated as

equivalent cash flows.

POLICY L IABIL IT IES AND PROFITENTITLEMENTINTRODUCTION

The valuation bases 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.

The actuarial valuation of the policy liabilities is

determined using the financial soundness valuation

method. Under this method either a retrospective or

prospective approach can be used. The underlying

philosophy is to recognise profits prudently over the

term of each contract consistent with the work done

and risk borne.

Policy liabilities are valued on bases consistent with

the fair value of assets. The liabilities exceeded the minimum

requirements in terms of actuarial guidance note PGN 104

issued by the Actuarial Society of South Africa (“ASSA”).

BASIS OF PRESENTATION AND ACCOUNTING POLICIES(continued)

7 4

In the valuation of liabilities, provision is made for:

● The best estimate of future experience;

● The margins prescribed in the ASSA guidelines; and

● Second-tier margins determined to release profits to share-

holders consistent with policy design and company policy.

APPLICATION OF VALUATION METHODOLOGY

The valuation methodology has been consistently applied for

2000 and 2001. Allowance has been made for the effect of

Capital Gains Tax as introduced in 2001. This and other changes

in the discount rates, bonus rates and other assumptions in

general did not have a material effect on the total liabilities

and earnings reported for 2001.

BEST EST IMATE OF FUTURE EXPERIENCE

The best estimate of future experience is determined as follows:

● Unit expenses are based on the recent experience of Sanlam

Life Insurance Limited on a going-concern basis and

escalated at estimated expense inflation rates per annum;

● Assumptions with regard to future surrender, lapse,

mortality, disability and disability payment termination

rates are consistent with the rates experienced over the

recent past, adjusted for our expectations of the future

experience, for example to allow for the effect of Aids; and

● Future investment return assumptions are consistent with

market-related interest rates.

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 a bonus rate supportable by the

underlying assets and expected future investment returns,

and allowing for the shareholders’ share of a maximum 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 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 AND MARKET-RELATED

BUSINESS

For investment policies for which 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 at the present value

of expected future benefits and expenses less future premiums

at market-related interest rates, net of expected income tax.

The prospective liabilities provide for bonus rates which are

supportable by the underlying assets and expected future

investment returns.

To the extent that the retrospective liabilities exceed the

prospective liabilities, the basis contains second-tier margins.

The valuation methodology results in the release of these margins

to shareholders on a fees minus expenses basis consistent with

the work done and risks borne over the lifetime of the policies.

GROUP STABLE BONUS AND L INKED BUSINESS

In the case of group linked business and group policies where

bonuses are stabilised, the liabilities are equated to the fair

value of the retrospectively accumulated underlying assets.

To the extent that future fees exceed expenses, including

allowance for the prescribed ASSA margins, the basis

contains second-tier margins. These margins are released to

shareholders consistent with the work done and risks borne

over the lifetime of the policies.

PARTIC IPATING ANNUIT IES

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

growth in annuity instalments supportable by the underlying

assets and expected future investment returns. This approach

implicitly allows for the effect of the margins prescribed in

the ASSA guidelines.

Shareholder entitlements emerge on a fees minus expenses

basis consistent with work done and risks borne over the

lifetime of the annuities.

NON-PARTIC IPATING ANNUITY BUSINESS

Non-participating life and term annuity instalments and

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 maturities are discounted at market-related

interest rates. All profits or losses accrue to the shareholders

when incurred.

OTHER NON-PARTIC IPATING BUSINESS

The majority of the other non-participating business liabilities

is valued on a retrospective basis. The remainder (less than

1% of Sanlam Life Insurance Limited’s liabilities) is valued

7 5

prospectively and contains second-tier margins via an explicit

interest rate deduction of approximately 2,75% on average.

For non-participating business other than life and term

annuity business and guaranteed plans, 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 underlying assets. 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.

HIV/AIDS

A specific provision for HIV/aids-related claims is

maintained. The provision for individual policies (more

than 85% of the total HIV/aids provision) 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 attributable to HIV/aids.

This retrospectively built-up provision is higher than a

prospective calculation done according to the ASSA

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 of Sanlam Life

Insurance Limited to re-rate premiums as experience

develops.

Premium rates for group business are reviewed more

frequently. The HIV/aids provision is based on the expected

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.

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. This could be viewed as a second-tier margin.

ASSET FUNDS

Separate asset funds are maintained for each of the major

lines of business.

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.

BONUS STABIL ISATION 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 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 net premiums invested

plus declared bonuses, a negative bonus stabilisation reserve

is created. A negative bonus stabilisation reserve will be limited

to the amount that will be recovered through the distribution

of lower bonuses during the ensuing three years, provided

that the Statutory Actuary is satisfied that, if market values

of assets do not recover, future bonuses will be reduced to

the extent necessary.

CAPITAL ADEQUACY REQUIREMENTS

The excess of assets over liabilities of Sanlam Life Insurance

Limited’s operations is sufficient to cover its capital adequacy

requirements in terms of the actuarial guidance note PGN

104. The capital adequacy requirements provide a buffer

against experience worse than that assumed in the financial

soundness valuation. Consistent with an assumed fall in the

fair value of the assets, which is prescribed in the ASSA

guidance notes, the calculation of the capital adequacy

requirements takes into account a reduction in non-vesting

bonuses and future bonus rates. The assumed reduction in

bonuses and other assumed management actions varied at the

2000 and 2001 year-ends, according to the level of the fair

value of assets at these dates relative to the expected asset values.

The largest element of the capital adequacy requirements

relates to stabilised bonus business.

For individual stabilised bonus business the assumed

management actions will be to eliminate within three years

the larger of (in absolute terms):

● any negative bonus stabilisation reserve; and

● 35% of the aggregate value of the bonus stabilisation

reserve plus the effect of the assumed asset drop where the

assumed asset drop is taken as a negative figure.

No such management action will apply if the positive

bonus stabilisation reserve exceeds the assumed asset drop.

For group stabilised bonus business the aim is to eliminate

within three years the absolute value of any negative bonus

stabilisation reserve, including the increase that results from

the resilience scenario, by way of a reduction in future bonus

rates. The extent to which reductions in future bonuses can

be used for management actions is assumed to be limited to

60% of the expected long term bonus rate declared for

a fully funded position.

GROUP INCOME STATEMENTSfor the year ended 31 December 2001

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000Note R million R million R million R million

7 6

Funds received from clients 1 47 148 46 926 24 333 25 493

Net operating profit

Financial services income 2 13 069 11 614 6 417 6 340

Sales remuneration (1 686) (1 553) (1 044) (1 100)

Income after sales remuneration 11 383 10 061 5 373 5 240

Underwriting policy benefits 3 (5 346) (4 785) (1 979) (2 022)

Administration costs 4 (3 802) (3 252) (1 914) (1 879)

Profit before exceptional items 2 235 2 024 1 480 1 339

Exceptional items 5 (224) (368) (186) (277)

Operating profit before tax 6 2 011 1 656 1 294 1 062

Tax on operating profit 7.2 (303) (180) (188) (93)

Operating profit from ordinary activities after tax 1 708 1 476 1 106 969

Minority shareholders’ interest (65) (246) — —

Net operating profit 1 643 1 230 1 106 969

Net investment return based on the long term rate of return

Investment return 8 3 084 1 322 2 656 1 349

Tax on investment return 7.2 (454) (202) (422) (157)

Minority shareholders’ interest (310) (33) — —

Net long term rate of return adjustment 9 (429) 1 178 (384) 835

Net investment return based on the long term rate of return 1 891 2 265 1 850 2 027

Headline earnings based on the long term rate of return 3 534 3 495 2 956 2 996

Short term investment fluctuations 9 429 (1 178) 384 (835)

Net investment surpluses/(deficits) on investment in associated companies 10 323 (108) (71) (1 015)

Accounting policy change by subsidiary 11 (62) — — —

Amortisation of goodwill 16 (215) — — —

Attributable earnings 4 009 2 209 3 269 1 146

Diluted earnings per share: cents cents

• Net operating profit from ordinary activities 13 61,9 46,3

• Headline earnings based on the long term rate of return 13 133,2 131,5

Attributable earnings per share 13 151,1 83,1

Dividend per share 14 35,0 30,0

The financial statements of Sanlam Limited are included on pages 102 and 103.

GROUP BALANCE SHEETSat 31 December 2001

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000Note R million R million R million R million

7 7

ASSETS

Non-current assets

Fixed assets 15 294 256 106 103

Goodwill 16 1 840 1 711 — —

Investments 17 167 647 153 753 165 426 151 830

Properties 11 671 12 453 11 668 12 452

Equities 97 194 88 103 100 212 91 036

Public sector stocks and loans 32 713 28 469 32 015 27 365

Mortgages, debentures and other loans 9 323 8 974 7 515 7 400

Cash, deposits and similar securities 16 746 15 754 14 016 13 577

Deferred tax 26 146 115 — —

General reinsurance provisions 23 1 718 1 274 — —

Current assets 18 28 561 22 230 8 844 9 143

Total assets 200 206 179 339 174 376 161 076

EQUITY AND L IABIL IT IES

Capital and reserves

Share capital and premium 19 3 514 3 514 5 000 5 000

Non-distributable reserves 9 415 9 415 5 429 5 429

Investment reserve 2 145 487 3 839 2 914

Retained income 7 157 5 596 5 641 3 957

Shareholders’ funds 22 231 19 012 19 909 17 300

Minority shareholders’ interest 1 503 1 215 — —

Non-current liabilities

Policy liabilities 21 145 248 133 952 145 248 133 952

Term finance 22 4 936 4 698 4 330 4 796

Deferred tax 26 346 284 230 284

General insurance provisions 23 3 376 3 067 — —

Current liabilities 24 22 566 17 111 4 659 4 744

Total equity and liabilities 200 206 179 339 174 376 161 076

Segregated funds not included in the above balance sheet 53 337 45 572

Total assets under management and administration 253 543 224 911

Tangible net asset value per share (cents) 28 927 831

SANLAM LIMITED GROUP STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2001

Non-Share Share Investment distributable Retained

R million Note capital premium reserve reserve(1) income Total

7 8

Balance at 1 January 2000 27 3 487 592 10 289 3 680 18 075

Attributable earnings for the year — — — — 2 209 2 209

Transfer from investment reserve 12 — — (105) — 105 —

Transfer to goodwill — — — (874) — (874)

Dividends paid — — — — (398) (398)

Balance at 31 December 2000 27 3 487 487 9 415 5 596 19 012

Attributable earnings for the year — — — — 4 009 4 009

Transfer to investment reserve 12 — — 1 658 — (1 658) —

Dividends paid — — — — (790) (790)

Balance at 31 December 2001 27 3 487 2 145 9 415 7 157 22 231

(1)Non-distributable reserve arising on acquisition of subsidiaries.

Non-Share Share Investment distributable Retained

R million Note capital premium reserve reserve(1) income Total

Balance at 1 January 2000 1 4 999 3 834 5 429 2 241 16 504

Attributable earnings for the year — — — — 1 146 1 146

Transfer from investment reserve 12 — — (920) — 920 —

Dividends paid — — — — (350) (350)

Balance at 31 December 2000 1 4 999 2 914 5 429 3 957 17 300

Attributable earnings for the year — — — — 3 269 3 269

Transfer to investment reserve 12 — — 925 — (925) —

Dividends paid — — — — (660) (660)

Balance at 31 December 2001 1 4 999 3 839 5 429 5 641 19 909

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

SANLAM LIFE INSURANCE L IMITED GROUP STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2001

GROUP CASH FLOW STATEMENTSfor the year ended 31 December 2001

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000Note R million R million R million R million

7 9

Net cash flow from operating activities 16 230 4 707 13 974 1 268

Cash utilised in operations 33.1 (10 930) (8 169) (11 091) (9 659)

Decrease in net current assets 33.2 1 557 3 384 17 942

Fixed assets – additions and replacements (142) (20) (45) (52)

Cash flow from operations (9 515) (4 805) (11 119) (8 769)

Cash flow from investment return 33.3 26 316 11 082 25 753 10 387

Cash flow from operating activities 16 801 6 277 14 634 1 618

Increase/(decrease) in minority shareholders’ interest 219 (1 172) — —

Dividend paid (790) (398) (660) (350)

Cash flow from investment activities (13 919) (2 515) (13 595) (803)

Net sale of investments 3 436 4 705 2 895 624

Net realised and unrealised growth in investments(1) 33.4 (17 330) (2 242) (16 490) (1 427)

Acquisition of subsidiary/Gensec minorities (25) (4 978) — —

Cash flow from financing activities

Net term finance (repaid)/raised (169) 628 (466) (11)

Net increase/(decrease) in cash and cash equivalents 2 142 2 820 (87) 454

Cash, deposits and similar securities at beginning of year 7 036 4 216 2 612 2 158

Cash, deposits and similar securities at end of year 18 9 178 7 036 2 525 2 612

(1)Refer to the Basis of Presentation and Accounting Policies on page 73 regarding the treatment of unrealised growth in investments as equivalent cash flows.

NOTES TO THE GROUP F INANCIAL STATEMENTSfor the year ended 31 December 2001

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

8 0

1. FUNDS RECEIVED FROM CLIENTS

Analysis per product (Refer to page 110 for analysis per Sanlam business.)

Insurance business – premium income 27 600 27 256 22 915 23 806

Long term insurance (note 21.2) 22 915 23 806 22 915 23 806

Transfer from segregated funds (75) (386) — —

General insurance 4 760 3 836 — —

Other business 19 548 19 670 1 418 1 687

Unit trusts 10 772 9 342 — —

Segregated funds 6 318 7 973 — —

Linked products 1 911 1 687 1 418 1 687

Health Care 547 668 — —

Total funds received from clients 47 148 46 926 24 333 25 493

The funds received from clients are disclosed net of the following reinsurance premiums:

• Life business 160 154 160 154

• General insurance 1 632 803 — —

2. F INANCIAL SERVICES INCOME

Analysis per product

Long term insurance 6 770 6 667 6 283 6 237

General insurance 4 828 3 886 — —

Other financial services 1 471 1 061 134 103

Total financial services income 13 069 11 614 6 417 6 340

Included in financial services income is

Dividend income 140 130 — 1

Interest received 1 537 1 122 749 808

Interest paid and term finance costs (1 155) (757) (500) (544)

522 495 249 265

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

81

3. UNDERWRIT ING POLICY BENEFITS

Long term insurance: death, disability and cash bonuses 1 979 2 022 1 979 2 022

Individual insurance 1 020 1 038 1 020 1 038

Group Life insurance 959 984 959 984

General insurance 3 367 2 763 — —

Total underwriting policy benefits 5 346 4 785 1 979 2 022

4. ADMINISTRATION COSTS AND EXCEPTIONAL ITEMS INCLUDE:

Directors’ remuneration

Total remuneration paid by Sanlam Limited and its consolidated subsidiaries to its present, retired and previous directors:

Directors’ fees 2,9 2,4

Other services (basic remuneration, pensions and bonuses) 23,6 20,5

Total directors’ remuneration 26,5 22,9

Analysis of directors’ remuneration

Executive directors 23,7 20,9

Non-executive directors 2,8 2,0

Total directors’ remuneration 26,5 22,9

Directors’ remuneration paid by subsidiaries 23,6 20,8

Auditors’ remuneration

Audit fees 20,5 14,2 9,4 9,0

Other services 8,1 10,6 0,9 5,5

Total auditors’ remuneration 28,6 24,8 10,3 14,5

Depreciation 107 101 41 51

Operating leases 124 76 18 8

Consultancy fees 276 249 245 237

Technical, administrative and secretarial fees 62 86 12 16

Office staff costs 1 916 1 666 809 828

Office staff (number of persons) 10 024 9 709 5 198 5 326

5. EXCEPTIONAL ITEMS

Restructuring of businesses 17 112 — 79

Systems and projects 188 231 175 201

Other 19 25 11 (3)

Total exceptional items 224 368 186 277

NOTES TO THE GROUP F INANCIAL STATEMENTSfor the year ended 31 December 2001 (continued)

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

8 2

6. ANALYSIS OF OPERATING PROFIT

Sanlam Life 1 452 1 246 1 372 1 150

Individual business (previously SPF) 1 267 1 044 1 186 944

Group business (previously SEB) 185 202 186 206

Sanlam Investment Management 254 263 — —

Gensec Bank 191 239 — —

Santam 97 100 — —

Gensec Properties 72 59 — —

Corporate income 98 121 98 103

Corporate costs (174) (190) (171) (188)

Other (12) (51) (5) (3)

Sanlam Health 33 15 — —

Gensec corporate and trading — (146) — —

Total operating profit 2 011 1 656 1 294 1 062

7. TAXATION: SHAREHOLDERS

7.1 Income tax

Normal income tax 703 538 423 411

RSA 686 538 417 411

Foreign 17 — 6 —

Deferred tax (114) (267) (54) (304)

Normal tax

current year (67) 88 — 50

prior year (278) (355) (284) (354)

Capital gains tax 231 — 230 —

Share of associate companies’ tax charge 178 111 259 143

Taxation 767 382 628 250

In addition, the shareholders’ funds paid the following indirecttaxes and levies which are included in the appropriate items in the income statements:

Included in administration costs 178 195 174 191

Included elsewhere 40 52 39 52

218 247 213 243

Indirect taxes and levies include value-added tax, revenue stamps paid on insurance policy contracts and statutory leviespayable to the Regional Services Councils and the Financial Services Board.

Tax of R433 million (2000: R283 million) was also paid on policyholders’ funds (refer note 21.5).

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

8 3

7. TAXATION: SHAREHOLDERS (continued)

7.2 Analysis of income tax on earnings of shareholders

Operating profit 303 180 188 93

current year 488 407 373 322

prior year (185) (227) (185) (229)

Investment return 454 202 422 157

Investment income 37 94 (49) 14

current year 136 217 50 137

prior year (99) (123) (99) (123)

Net investment surpluses – normal 18 (3) — —

– capital gains tax 221 — 212 —

Equity accounted earnings 178 111 259 143

Investment surpluses on investment in associated companies – capital gains tax 10 — 18 —

Income tax on earnings 767 382 628 250

Reconciliation of tax rate on operating profit % % % %

Standard rate of taxation 30,0 30,0 30,0 30,0

Adjusted for:

Non-taxable income (4,5) (3,5) — —

Prior year adjustments (9,5) (14,2) (14,3) (21,7)

Foreign tax rate differential (3,0) (4,6) — —

Other 2,1 3,2 (1,2) 0,5

Effective tax rate on operating profit 15,1 10,9 14,5 8,8

Reconciliation of tax rate on long term investment return

Standard rate of taxation 30,0 30,0 30,0 30,0

Adjusted for:

Non-taxable income (2,8) (2,8) (1,6) (1,9)

Investment surpluses (11,2) 1,0 (6,7) (1,3)

Prior year adjustments (4,0) (4,2) (4,4) (5,6)

Equity accounted earnings (0,3) (0,5) — (2,4)

Long term rate of return adjustment 2,1 (12,9) (4,0) (9,8)

Other (0,1) (0,1) 4,3 0,1

Effective tax rate on long term investment return 13,7 10,5 17,6 9,1

NOTES TO THE GROUP F INANCIAL STATEMENTSfor the year ended 31 December 2001 (continued)

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

8 4

8. INVESTMENT RETURN: SHAREHOLDERS

Interest bearing investments 407 716 71 370Equities 248 219 133 157Properties 80 69 80 69Equity-accounted earnings 621 423 1 164 658

Investment income 1 356 1 427 1 448 1 254Net investment surpluses/(deficits) 1 728 (105) 1 208 95

Investment return: shareholders 3 084 1 322 2 656 1 349

9. NET LONG TERM RATE OF RETURN ADJUSTMENT

Analysis of net long term rate of return adjustmentGross investment return (606) 1 598 (410) 881

Equities (550) 1 617 (704) 730Interest bearing investments (144) (34) 208 135Properties 88 15 86 16

Tax 116 (105) 26 (46)Minority shareholders’ interest 61 (315) — —

Net long term rate of return adjustment (429) 1 178 (384) 835

A comparison of the aggregate actual and calculated longer term returns (after tax and minorities) since 1 January 1999 is set out below.Actual returns 5 908 3 588 6 055 3 821Longer term returns 5 810 3 919 5 475 3 625

Excess/(deficit) aggregate short term fluctuations 98 (331) 580 196

A reconciliation of the investments included in the calculation of the long term rate of return is as follows:Investments per shareholders’ balance sheet (refer page 106) 26 219 24 224 23 455 21 620Less: Investment in Absa 4 036 2 751 4 033 2 740

Investment in Gensec — — 4 833 4 906Investment in Santam — — 858 508Investments held in respect of term finance 4 029 4 369 4 369 4 344Investments held in respect of banking activity 897 1 101 — —Free float assets of subsidiary 1 762 1 814 — —Other 366 473 35 571

Long term rate of return investments 15 129 13 716 9 327 8 551

Analysis of long term rate of return investmentsEquities 9 694 8 598 6 225 5 510Public sector stocks and loans 2 413 2 111 1 715 1 696Other interest bearing investments 2 001 1 933 369 271Properties 1 021 1 074 1 018 1 074

Long term rate of return investments 15 129 13 716 9 327 8 551

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

8 5

10. NET INVESTMENT SURPLUSES/(DEFIC ITS) ON INVESTMENT IN ASSOCIATED COMPANIES

Gross investment surpluses and dividends received 776 204 852 (214)Equity accounted earnings (443) (312) (905) (801)

Investment surpluses/(deficits) 333 (108) (53) (1 015)Capital gains tax (10) — (18) —

Net investment surpluses/(deficits) 323 (108) (71) (1 015)

11. ACCOUNTING POLICY CHANGE BY SUBSIDIARY

Accumulated prior years effect of change (149) — — —Minority shareholders’ interest 87 — — —

(62) — — —

Santam changed its accounting policy in respect of deferred taxation on its contingency reserve. Previously transfers to thereserve were deductible for income tax purposes. The effect of this change on Sanlam’s current and previous years’ results isimmaterial and consequently the prior years’ results have not been restated for this change in policy.

12. TRANSFER TO/(FROM) INVESTMENT RESERVE

Net investment surpluses/(deficits) (note 8) 1 728 (105) 1 208 95Tax on net investment surpluses (note 7) (239) 3 (212) —Minority interest in net investment (surpluses)/deficits (154) 105 — —

Net investment surpluses 1 335 3 996 95Net investment surpluses/(deficits) on investment in associated companies 323 (108) (71) (1 015)

Transfer to/(from) investment reserve 1 658 (105) 925 (920)

13. DILUTED EARNINGS PER SHARE

For the diluted earnings per share the weighted average number of ordinary shares is adjusted for the shares not yet issuedunder the Sanlam share incentive scheme. Diluted earnings per share is calculated by dividing earnings by the adjustedweighted average number of shares in issue.

Sanlam Limited

2001 2000

Net operating profit from ordinary activities R million 1 643 1 230

Headline earnings based on the long term rate of return R million 3 534 3 495

Attributable earnings R million 4 009 2 209

Number of ordinary shares in issue million 2 655 2 655Add: Incentive shares not issued million 20 24Less: Sanlam shares held by subsidiary company (note 19) million (22) (22)

Adjusted weighted average number of shares million 2 653 2 657

Diluted earnings per shareNet operating profit from ordinary activities cents 61,9 46,3Headline earnings based on the long term rate of return cents 133,2 131,5

Attributable earnings per share cents 151,1 83,1

NOTES TO THE GROUP F INANCIAL STATEMENTSfor the year ended 31 December 2001 (continued)

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

8 6

14. DIVIDENDS

A dividend of 35,0 cents per share (2000: 30,0 cents per share) was declared in March 2002 (2000: March 2001). In accordancewith AC107, dividends are recognised in the period in which they are declared. The 2000 results have been restated accordingly.

15. F IXED ASSETS

Land and buildings 75 37 — —

Computer equipment 82 114 40 58

Cost 306 385 160 165

Accumulated depreciation (224) (271) (120) (107)

Furniture, equipment and vehicles 137 105 66 45

Cost 281 236 151 127

Accumulated depreciation (144) (131) (85) (82)

Total fixed assets 294 256 106 103

The reconciliation of the movement in the book value of fixed assets is not provided, as it is not considered material inrelation to the Groups’ activities.

16. GOODWILL

Balance at beginning of year 1 711 — — —

Additions during the year 344 1 711 — —

Net cash consideration paid 365 4 978 — —

Fair value of net assets acquired (21) (2 393) — —

Transfer from non-distributable reserve — (874) — —

Amortisations (215) — — —

Balance at end of year 1 840 1 711 — —

The Sanlam shareholders’ funds acquired the remaining shares in Gensec, which it and its subsidiaries did not already own,for a consideration of R37 per share with effect from 31 December 2000 for financial statement purposes. This gave rise togoodwill of R1 711 million.

The estimated useful life of this goodwill is ten years and it is amortised with effect from 1 January 2001.

The Sanlam shareholders’ funds also acquired the private client business of ABN AMRO and the UK based actuarialconsulting firm Punter Southall during 2001. This goodwill is amortised over their useful lives of 5 and 7 years respectively.

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000

8 7

17. INVESTMENTS

Spread of investments in equities by sector(1) (2) (2) (3) (3)

Industrial 31% 40% 31% 40%

Financial 36% 38% 35% 38%

Resources 33% 22% 34% 22%

100% 100% 100% 100%

(1)Excludes offshore equities, derivatives, unit trusts and unlisted investments.(2)Includes the appropriate underlying investments of Santam.(3)Investment in Santam and Gensec excluded.

Unlisted equity investments

As a percentage of the total investment in equities 3% 4% 2%(1) 3%(1)

(1)Excludes unlisted interest in Gensec.

R million R million R million R million

Offshore investments

Equities 21 999 14 895 21 814 14 791

Interest bearing investments 11 342 9 532 10 128 8 610

Total offshore investments 33 341 24 427 31 942 23 401

Shares held in holding company

Sanlam Limited shares held by policyholders’ funds

Number million 140 159 140 159

Fair value R million 1 288 1 523 1 288 1 523

Investment in associated companies(1)

Absa

Fair value of interest R million 5 248 4 277 5 245 4 266

Number of shares held 000s 149 512 149 532 149 437 149 162

Interest in issued share capital %

Shareholders 17,7 14,8 17,7 14,4

Policyholders 5,4 8,2 5,4 8,2

Share of earnings after tax for current year R million

Shareholders 441 309 441 309

Policyholders 172 200 172 200

Distributions received R million

Shareholders 136 96 136 96

Policyholders 67 72 67 72

Aggregate post-acquisition reservesattributable to shareholders R million 895 590 895 590

The financial year-end of Absa is 31 March. The equity accounted earnings for Absa included in the Sanlam Limited groupresults are for the twelve month period ended 30 September and were derived from their published annual financialstatements and their interim results. The Sanlam Group’s share of these earnings is included in investment income.

(1)Interest in associated companies exclude segregated funds’ interest.

NOTES TO THE GROUP F INANCIAL STATEMENTSfor the year ended 31 December 2001 (continued)

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

8 8

17. INVESTMENTS (continued)

Investment in associated companies (continued)

Santam

Fair value of interest R million 1 539 1 321

Number of shares held 000s 42 285 41 294

Interest in issued share capital %

Shareholders 21,3 14,4

Policyholders 16,8 23,2

Share of earnings after tax for current year R million

Shareholders 88 59

Policyholders 89 98

Distributions received R million

Shareholders 30 15

Policyholders 35 31

Gensec

Fair value of interest R million 4 833 4 906

Number of shares held 000s 151 031 151 031

Interest in issued share capital %

Shareholders 57,9 57,9

Share of earnings after tax for current year R million

Shareholders 376 147

Policyholders — 90

Distributions received R million

Shareholders — 67

Policyholders — 53

Register of investments

A register containing details of all investments including fixed property investments is available for inspection at theregistered office of Sanlam Limited.

18. CURRENT ASSETS

Premiums receivable 4 366 4 704 4 041 4 314

Accrued investment income 1 093 1 118 1 035 1 059

Trading account and money market investments 10 335 7 498 — —

Accounts receivable 3 589 1 874 800 726

Amounts owing by group companies — — 443 432

Cash, deposits and similar securities 9 178 7 036 2 525 2 612

Total current assets 28 561 22 230 8 844 9 143

Cash, deposits and similar securities of R681 million (2000: R793 million) and trading account investments of R1 261 million (2000: R316 million) are encumbered as detailed in note 24.

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

8 9

19. SHARE CAPITAL AND PREMIUM

Authorised share capital

4 000 million ordinary shares of 1 cent each 40 40

100 million ordinary shares of 1 cent each 1 1

Issued share capital and premium

Number of ordinary shares in issue

Total shares in issue million 2 654,6 2 654,6 50 50

Shares held by subsidiary million (22,2) (22,2) — —

Balance at end of year million 2 632,4 2 632,4 50 50

Nominal value and share premium

Nominal value of 1 cent per share R million 27 27 1 1

Share premium R million 3 487 3 487 4 999 4 999

Total nominal value and share premium R million 3 514 3 514 5 000 5 000

Authorised and unissued shares

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

Sanlam Limited

2001 2000000s 000s

Executive share incentive scheme

Restricted shares and share options at the beginning of the year 137 197 55 544

New options granted 30 334 18 359

Restricted shares (cancelled)/purchased and options granted for the conversionof the Gensec share scheme (3 811) 75 962

Unconditional options and shares released, available for release, or taken up (24 375) (12 324)

Options lapsed or cancelled (9 300) (510)

Cash dividends received on restricted shares and converted into shares 150 166

Restricted shares and share options at the end of the year 130 195 137 197

Restricted and unrestricted share options as a percentage of total issued shares 5,2% 4,8%

NOTES TO THE GROUP F INANCIAL STATEMENTSfor the year ended 31 December 2001 (continued)

9 0

19. SHARE CAPITAL AND PREMIUM (continued)

Executive share incentive scheme (continued)

Details regarding the restricted shares and share options outstanding on 31 December 2001 and the financial years duringwhich they become unconditional, are as follows:

Unconditional during Number of` Averageyear ended Shares Options option price

000s 000s R

31 December 2002 2 989 22 123 7,21

31 December 2003 3 767 28 631 7,51

31 December 2004 2 875 32 148 7,92

31 December 2005 1 967 19 415 7,92

31 December 2006 393 10 821 8,52

31 December 2007 and later 32 5 033 8,51

20. CONTINGENCY RESERVES

Contingency reserves in respect of short term insurance business of R189 million are included in shareholders’ reserves(2000: R208 million) and R75 million (2000: R90 million) in the net assets underlying policy liabilities.

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

21. POLICY L IABIL IT IES

21.1 Analysis of movement in policy liabilities

Income 46 389 33 842 46 389 33 842

Premium income (note 21.2) 22 915 23 806 22 915 23 806

Investment return (note 21.3) 23 474 10 036 23 474 10 036

Outflow 35 093 34 209 35 093 34 209

Policy benefits (note 21.4) 20 569 20 019 20 569 20 019

Retirement fund terminations 6 385 6 585 6 385 6 585

Transfer to segregated assets 1 412 1 093 1 412 1 093

Taxation (note 21.5) 433 283 433 283

Fees, risk premiums and other payments to shareholders 6 294 6 229 6 294 6 229

Net income/(outflow) for the year 11 296 (367) 11 296 (367)

Balance at beginning of the year 133 952 134 319 133 952 134 319

Balance at end of the year 145 248 133 952 145 248 133 952

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

91

21.2 Analysis of premium income

Individual insurance 16 539 16 576 16 539 16 576

Recurring 8 336 8 455 8 336 8 455

Single 6 009 5 881 6 009 5 881

Continuations 2 194 2 240 2 194 2 240

Group business 6 376 7 230 6 376 7 230

Recurring 2 910 3 050 2 910 3 050

Single 3 466 4 180 3 466 4 180

Total premium income 22 915 23 806 22 915 23 806

21.3 Investment return: policyholders

Investment income

Net interest bearing investments 4 561 4 512 4 561 4 512

Equities 2 035 1 445 2 035 1 445

Properties 1 230 1 238 1 230 1 238

Total investment income 7 826 7 195 7 826 7 195

Equity accounted earnings 349 494 349 494

Net investment surpluses 15 299 2 347 15 299 2 347

Total investment return 23 474 10 036 23 474 10 036

21.4 Analysis of long term insurance policy benefits

Individual insurance 15 802 15 080 15 802 15 080

Maturity benefits 7 866 7 539 7 866 7 539

Surrenders 4 186 3 714 4 186 3 714

Life and term annuities 3 011 3 103 3 011 3 103

Death and disability benefits(1) 605 576 605 576

Cash bonuses(1) 134 148 134 148

Group business 4 767 4 939 4 767 4 939

Withdrawal benefits 2 152 2 263 2 152 2 263

Pensions 1 310 1 175 1 310 1 175

Lump-sum retirement benefits 1 010 1 232 1 010 1 232

Taxation paid on behalf of certain retirement funds 167 164 167 164

Death and disability benefits(1) 85 69 85 69

Cash bonuses(1) 43 36 43 36

Total long term insurance policy benefits 20 569 20 019 20 569 20 019

(1)Excludes death and disability benefits and cash bonuses underwritten by the shareholders (refer note 3).

NOTES TO THE GROUP F INANCIAL STATEMENTSfor the year ended 31 December 2001 (continued)

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

9 2

21.5 Taxation: policyholders

Normal tax – RSA 70 — 70 —

– Foreign 9 8 9 8

Deferred – prior year — (74) — (74)

Share of associated companies’ tax charge 88 106 88 106

Other 266 243 266 243

Taxation on retirement funds 196 187 196 187

Withholding tax on foreign investments 46 39 46 39

Indirect taxation 24 17 24 17

Total taxation: policyholders 433 283 433 283

A deferred tax asset has not been recognised for estimated assessed losses in the policyholders’ tax funds as it is uncertainwhether and when these losses will be utilised.

21.6 Composition of policy liabilities

Individual insurance 101 427 89 775 101 427 89 775

Market-related liabilities 32 549 28 085 32 549 28 085

Stable bonus fund 32 235 30 266 32 235 30 266

Reversionary bonus policies 10 294 9 614 10 294 9 614

Non-participating annuities 11 923 10 823 11 923 10 823

Other non-market-related liabilities 14 426 10 987 14 426 10 987

Group business 43 821 44 177 43 821 44 177

Market-related liabilities 20 421 24 457 20 421 24 457

Stable bonus portfolios 12 596 10 283 12 596 10 283

Participating annuities 8 044 7 272 8 044 7 272

Other non-market-related liabilities 2 760 2 165 2 760 2 165

Total policy liabilities 145 248 133 952 145 248 133 952

21.7 Capital adequacy and ratios

Capital adequacy requirements (CAR) R million 7 102 6 996

Shareholders’ funds(1) R million 19 909 17 300

Times CAR covered by shareholders’ funds times 2,8 2,5

Shareholders’ funds as percentage of:

Policy liabilities % 14 13

Non-market-related liabilities % 22 21

(1)Assets of the shareholders’ funds include an investment in Gensec of R4 833 million (2000: R4 906 million).

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000% % % %

9 3

21.8 Discount rates used in calculating prospective

policy liabilities

Reversionary bonus business

Retirement annuity business 11,7 12,9 11,7 12,9

Taxable business 11,1 12,7 11,1 12,7

Individual stable bonus business

Retirement annuity business 11,6 12,8 11,6 12,8

Individual policyholder business 11,0 12,6 11,0 12,6

Corporate policyholder business 10,5 12,6 10,5 12,6

Individual market-related business

Retirement annuity business 12,0 13,2 12,0 13,2

Individual policyholder business 11,3 13,0 11,3 13,0

Corporate policyholder business 10,8 13,0 10,8 13,0

Participating annuity business 11,6 12,6 11,6 12,6

Non-participating annuity business 12,8 11,5 12,8 11,5

Guaranteed plans 10,4 11,3 10,4 11,3

Future expense inflation rate assumptions (including margin) 8,0 7,3 8,0 7,3

R million R million R million R million

21.9 Provisions included in policy liabilities

HIV/aids provision 1 711 1 465 1 711 1 465

Reduction in earnings caused by using a retrospectiveHIV/aids provision instead of a prospective provision (22) (136) (22) (136)

Asset mismatch provision 651 532 651 532

Deferred capital gains tax provision 498 — 498 —

NOTES TO THE GROUP F INANCIAL STATEMENTSfor the year ended 31 December 2001 (continued)

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

9 4

22. TERM FINANCE

Redeemable cumulative non-voting preference sharesissued by subsidiary companies with dividend terms which are linked to prime interest rates and with different redemption dates up to 2005 3 905 3 886 4 245 4 311

Obligation for post-retirement medical fund contributions in respect of clients 78 176 78 176

Unsecured loan from an associated company at 17% per annum interest and repaid on 30 September 2001 — 300 — 300

Secured bank loans at interest rates of between 8,45%and 19,85% (2000: 8,45% and 19,85%) andrepayable in equal monthly and six-monthly instalments over four to fourteen (2000: five to fifteen) years.Secured by term loans and deposits included ininvestments 546 327 — —

Secured loan notes at 3,3% interest repayable on31 December 2003 400 — — —

Other 7 9 7 9

Total term finance 4 936 4 698 4 330 4 796

Portion potentially repayable within one year included above 2 087 2 532 2 182 2 761

23. GENERAL INSURANCE PROVIS IONS

General insurance provisions 3 376 3 067 — —

Gross outstanding claims 2 230 1 979 — —

Gross provision for unearned premiums 1 046 1 027 — —

Deferred reinsurance acquisition revenue 100 61 — —

General reinsurance provisions 1 718 1 274 — —

Outstanding claims 1 172 913 — —

Unearned premiums 451 245 — —

Deferred acquisition cost 95 116 — —

Net general insurance provisions 1 658 1 793 — —

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

9 5

24. CURRENT L IABIL IT IES

Trading account and money market liabilities 12 793 8 645 — —

Accounts payable 7 080 5 704 2 031 2 116

Policy benefits payable 1 500 1 534 1 500 1 534

Claims incurred but not reported 649 706 650 597

Taxation 544 522 478 497

Total current liabilities 22 566 17 111 4 659 4 744

Trading assets with a total value of R1 261 million (2000: R316 million) and cash of R681 million (2000: R793 million)have been pledged as security for trading account liability positions of Gensec Bank (refer note 18).

25. PAYMENTS TO CL IENTS

Analysis per product (Refer to page 111 for analysis per Sanlam business.)

Insurance benefits paid 25 915 24 804 22 548 22 041

Long term insurance

Underwriting (note 3) 1 979 2 022 1 979 2 022

Other (note 21.4) 20 569 20 019 20 569 20 019

General insurance (note 3) 3 367 2 763 — —

Other payments 16 502 14 705 758 987

Unit trust repurchases 8 094 8 728 — —

Segregated funds withdrawn 6 979 4 350 — —

Linked products withdrawn 942 987 758 987

Health care 487 640 — —

Total payments 42 417 39 509 23 306 23 028

Retirement fund terminations (note 21.1) 6 385 6 585 6 385 6 585

Total payments to clients 48 802 46 094 29 691 29 613

The payments to clients are disclosed net of the following reinsurance claims:

• Life business 112 147 112 147

• General insurance 1 631 733 — —

NOTES TO THE GROUP F INANCIAL STATEMENTSfor the year ended 31 December 2001 (continued)

9 6

26. DEFERRED TAX AND PROVIS IONS

Details of the deferred tax balances and provisions of the Sanlam Limited group are as follows:

Deferred taxAsset Liability Provisions

R million R million R million

Balance at 1 January 2000 37 (693) (292)

Charged to income statement (68) 335 (60)

Additional provisions (68) (20) (60)

Unused amounts reversed — 355 —

Utilised during the year — — 46

Unused amounts reversed to policy liabilities — 74 —

Arising on acquisition of subsidiary 146 — —

Balance at 31 December 2000 115 (284) (306)

Charged to income statement 31 (62) (125)

Additional provisions – normal 31 33 (125)

– capital gains tax — (230) —

Unused amounts reversed — 284 —

Prior year adjustment by subsidiary — (149) —

Utilised during the year — — 56

Balance at 31 December 2001 146 (346) (375)

None of the items included in the provisions is individually material. The total balance is included in current liabilities.

27. F INANCIAL INSTRUMENTS

Derivative financial instruments

Derivative financial instruments are used by the Sanlam Group for hedging purposes to mitigate risk.

Gensec Bank, in its trading activities, acts as a dealer in derivative instruments to satisfy the risk management needs of itsclients and assume trading positions based on its market expectations, and to benefit from price differentials betweeninstruments and markets.

Securities lending

The Sanlam Group conducts securities lending activities in respect of some of its listed equities and bonds. The exposure tothese activities was limited to less than 25% of the shareholders’ funds of Sanlam Life Insurance Limited and collateralsecurity and guarantees of between 105% and 150% of the value of the loaned securities are held.

Market risk – interest and equities

Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices or changes inmarket interest rates.

Policyholders’ and shareholders’ investments in equities are valued at fair value and are therefore susceptible to marketfluctuations. Shareholders’ investments in listed subsidiaries are reflected at net asset value based on the market value of theunderlying investments. Investments subject to equity risk are analysed in the balance sheet and in note 17.

The acquisition of policyholders’ assets is based on the contract entered into and the preferences expressed by thepolicyholder. Within these parameters, investments are managed with the aim of maximising policyholder returns whilelimiting risk to acceptable levels within the framework of statutory requirements.

Continuous monitoring takes place to ensure that appropriate assets are held where the liabilities are dependent upon theperformance of specific portfolios of assets and that a suitable match of assets exists for all non-market-related liabilities.

9 7

Currency risk

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

The Group’s exposure to currency risk is mainly in respect of foreign investments made on behalf of policyholders andshareholders for the purpose of seeking desirable international diversification of investments. Exposure to different foreigncurrencies is benchmarked against the currency composition of the Morgan Stanley Capital International World EquityIndex and the JP Morgan Government Bond Index.

Credit risk

Credit risk arises from the inability or unwillingness of a counter party to a financial instrument to discharge its contractualobligations.

The Sanlam Group’s financial instruments do not represent a concentration of credit risk because the Group deals witha variety of major banks and its accounts receivable and loans are spread among a number of major industries, customersand geographic areas.

Amounts receivable in terms of long term insurance business are secured by the underlying value of the unpaid policybenefits in terms of the policy contract.

An appropriate level of provision is maintained. Exposure to outside financial institutions concerning deposits and similartransactions is monitored against approved limits.

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in raising funds to meet commitments associated with financialinstruments.

Approximately 90% of term finance liabilities are backed by appropriate assets with the same maturity profile. Details ofterm finance liabilities are provided in note 22, and current liabilities in note 24. The Group has significant liquid resourcesand substantial unutilised banking facilities.

Underwriting risk

Underwriting risk is the risk that the actual exposure to mortality, disability and medical risks in respect of policyholder benefitswill exceed prudent exposure.

The statutory actuary of Sanlam Life Insurance Limited reports annually on the actuarial soundness of the premium ratesin use and the profitability of the business taking into consideration the reasonable benefit expectation of policyholders.All new rate tables are approved and authorised by the statutory actuary prior to being issued. Regular investigations intomortality and morbidity experience are conducted. Catastrophe insurance is in place for single-event disasters.

All applications for risk cover in excess of specified limits are reviewed by experienced underwriters and evaluated againstestablished standards. Specific testing for HIV/aids is carried out in all cases where the applications for risk cover exceeda set limit. All risk-related liabilities in excess of specified monetary or impairment limits are reinsured.

Legal risk

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

During the development stage of any new product and for material transactions entered into by the Group, the legalresources of the Group monitor the drafting of the contract document to ensure that rights and obligations of all partiesare clearly set out.

Capital adequacy risk

Capital adequacy risk is the risk that there are insufficient reserves to provide for variations in actual future experience worse thanthat which has been assumed in the financial soundness valuation.

Capital adequacy requirements were covered 2,8 times at 31 December 2001 (2000: 2,5 times).

28. TANGIBLE NET ASSET VALUE PER SHARE: SANLAM LIMITED GROUP

Tangible net asset value per share is calculated on the group shareholders’ funds of R24 399 million (2000: R21 874 million),after adjusting for the shareholders’ interest in Santam, Gensec and Sanlam Unit Trust from net asset value to fair value,divided by 2 632 million (2000: 2 632 million) shares issued at the year-end.

NOTES TO THE GROUP F INANCIAL STATEMENTSfor the year ended 31 December 2001 (continued)

9 8

29. RETIREMENT BENEFITS FOR EMPLOYEES

Retirement provision

The Sanlam Limited Group provides for the retirement benefits of full-time employees and for certain part-time employeesby means of defined benefit and defined contribution pension and provident funds. These funds are governed by thePension Funds Act.

Defined contribution funds

There are separate defined contribution funds for advisers, full-time and part-time office staff. The Sanlam Limited Groupcontributed R133 million to these funds during 2001 (2000: R171 million).

Defined benefit funds

Sanlam has two defined benefit funds. These funds relate to the office staff and advisers who did not elect to transfer to thedefined contribution funds. These funds are closed to new entrants. The Sanlam Limited Group contributed R7 million tothese funds during 2001 (2000: R8 million). According to the latest annual actuarial valuations as at 1 April 2001 thefunds were financially sound. No material transactions or other material changes in circumstances have occurred since thevaluation date necessitating additional bridging valuations between financial year-ends of the funds and that of the Group.

Principal actuarial assumptions at 1 April 2001 were as follows:

Pre-retirement discount rate 12% per annum

Post-retirement discount rate 5% per annum

Future salary increases 10% per annum

Expected return on assets 12% per annum

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

Medical funds

The Group contributes to medical funds for the benefit of permanent employees and their dependants. The contributionscharged against income amounted to R91 million (2000: R86 million). The actuarially determined present value of medicalaid obligations for disabled members and certain pensioners is fully provided for at year-end. The Group has no furtherunprovided post-retirement medical aid obligations for current or retired employees.

Funded status

The funded status of the two defined benefit funds at 1 April was as follows:Defined Benefit Funds

2001 2000R million R million

Actuarial value of fund assets 585 782

Present value of accrued retirement benefits 554 747

Present value of unfunded obligation — —

Net asset 31 35

Unrecognised surplus (31) (35)

Net liability as per balance sheet — —

The actual return on the actuarial value of the assets as at 1 April 2001 was 23,9%.

The above value of fund assets includes an investment of R15 million in Sanlam shares.

The actuarial surplus is currently not recognised as an asset by the Group, as the present value of economic benefits, as a resultof the surplus, cannot be determined with certainty.

30. BORROWING POWERS

In terms of the articles of association of Sanlam Limited, the directors may at their discretion raise or borrow money forthe purpose of the business of the company without limitation.

The directors of Sanlam Life Insurance Limited have the same discretion as Sanlam Limited, subject to the prior approvalof the Registrar of Long term Insurance.

Material borrowings of the Sanlam Limited group are disclosed in note 22.

9 9

31. COMMITMENTS AND CONTINGENCIES

• Gensec has a commitment in respect of underwriting and private equity investments amounting to R150 million (2000: R185 million).

• The Group has future operating lease commitments of R391 million, of which R84 million is due within one year.

• The South African Revenue Services (“SARS”) has issued revised assessments in respect of the 1997, 1998 and 1999 taxyears of a subsidiary of Genbel Securities Limited (“the company”).

The company lodged objections in respect of all three revised assessments. In terms of the revised assessments certainsignificant surpluses arising from the disposal of the assets are subjected to full tax as SARS contends that such surpluses are not of a capital nature. The company’s objections that these amounts are in fact of a capital nature have been disallowed. SARS has afforded the company the opportunity to make representations with respect to the possible impositionof penalties and interest on the tax payable. The company proposes to appeal against the disallowance of its objections.

• There are no other material commitments or contingencies.

32. RELATED PARTY TRANSACTIONS

During the year the company and its subsidiaries in the ordinary course of business entered into various transactions withother group companies, associated companies and other stakeholders. These transactions occurred under terms that are noless favourable than those arranged with third parties.

Associated companies

Details of investments in associated companies are disclosed in note 17.

Subsidiaries

Details of investments in subsidiaries are disclosed on page 101.

Other stakeholders

Details of transactions between the policyholders of Sanlam Life Insurance Limited and the shareholders’ funds of theSanlam Limited Group are disclosed in notes 2 and 21.1.

Directors

All directors of Sanlam Limited and Sanlam Life Insurance Limited have notified that they did not have a material interestin any contract of significance with the companies or any of its subsidiaries, which could have given rise to a conflict ofinterests during the year.

Details relating to directors’ emoluments are included in note 4 and shareholdings in the company are disclosed in thedirectors’ report on page 69.

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

33. NOTES TO THE CASH FLOW STATEMENTS

33.1 Cash utilised in operations

Operating profit on ordinary activities 1 643 1 230 1 106 969

Decrease in policy liabilities before investment return (12 178) (10 403) (12 178) (10 403)

Net increase/(decrease) (note 21.1) 11 296 (367) 11 296 (367)

Less: Investment return (note 21.3) (23 474) (10 036) (23 474) (10 036)

Adjustment for non-cash items (395) 1 004 (19) (225)

Cash utilised in operations (10 930) (8 169) (11 091) (9 659)

NOTES TO THE GROUP F INANCIAL STATEMENTSfor the year ended 31 December 2001 (continued)

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

10 0

33. NOTES TO THE CASH FLOW STATEMENTS (continued)

33.2 Decrease in net current assets and

general insurance provisions

Current assets (3 646) (514) 162 573

Premiums receivable 338 (148) 274 141

Trading account and money market investments (2 500) (93) — —

Accounts receivable (1 019) 842 (101) 759

General reinsurance provisions (465) (1 115) — —

Amounts owing by group companies — — (11) (327)

Current liabilities 5 203 3 898 (145) 369

Trading account and money market liabilities 4 148 1 382 — —

Accounts payable 852 (66) (145) 14

Policy benefits payable and claims incurred but not reported (90) 278 19 304

General reinsurance provisions 271 2 298 — —

Taxation 22 6 (19) 51

Decrease in net current assets 1 557 3 384 17 942

33.3 Cash flow from investment return

Per income statement

• Net investment return 1 891 2 265 1 850 2 027

• Adjustment for net long term rate of return 429 (1 178) 384 (835)

• Other net investment surpluses/(deficits) 323 (108) (71) (1 015)

Net investment return attributable to shareholders 2 643 979 2 163 177

Net investment return attributable to policyholders (note 21.3) 23 474 10 036 23 474 10 036

Decrease/(increase) in accrued investment income 13 (183) (5) (46)

Non-cash items 186 250 121 220

Cash flow from investment return 26 316 11 082 25 753 10 387

33.4 Net realised and unrealised growth in investments

Net investment surpluses/(deficits) attributable to shareholders (note 12) 1 658 (105) 925 (920)

Net investment surpluses attributable to policyholders (note 21.3) 15 299 2 347 15 299 2 347

Non-cash items 373 — 266 —

Net realised and unrealised growth in investments 17 330 2 242 16 490 1 427

PRINCIPAL SUBSIDIARIESfor the year ended 31 December 2001

101

Issued Fair value ofordinary interest in subsidiaries

capital Shares Loans% 2001 2001 2000 2001 2000

interest R million R million R million R million R million

SANLAM LIMITEDLong term insuranceSanlam Life Insurance Limited 100 5 000 19 909 17 300 (147) (85)Asset management, equity activities and bankingGenbel Securities Limited (Gensec) 100 1 952,5 (1) (1) (1) (1)

General insuranceSantam Limited (listed) 59 1 069,9 (1) (1) (1) (1)

Investment companyBeldiv Investments (Proprietary) Limited 100 (2) 404 499 3 331 3 278Sanlam Health (Proprietary) Limited(3) 100 (2) 396 237 1 34Money transfer businessMulti-Data (Proprietary) Limited 100 (4) — — 68 48Management of unit trust schemesSanlam Trust Managers Limited 100 2,6 874 961 (228) (184)Trust servicesSanlam Trust Limited 100 1,0 — — 2 —

Total 21 583 18 997 3 027 3 091

SANLAM LIFE INSURANCE L IMITEDInvestment companiesU.R.D. Investments (Proprietary) Limited 100 81,0 38 332 32 821 (20 120) (14 096)Electra Investments (South Africa) Limited 100 76,0 9 001 8 825 (5 632) (5 216)Gensec Universal Fund plc 93 35 012(5) 30 562 23 108 — —Property investment companyRycklof Investments (Proprietary) Limited 100 (6) 3 609 3 902 3 948 4 202Management of Namibian businessSanlam Namibia Limited 100 35,0 88 77 45 (9)Other 146 529 284 268

Total 81 738 69 262 (21 475) (14 851)

(1)The interest in Santam and Gensec is held indirectly by Sanlam Life Insurance Limited and Beldiv Investments (Pty) Limited.(2)Issued share capital is R100.(3)The fair value of the shares and loan account represents the value of the underlying companies in the Sanlam Health (Pty) Limited group.

Previously these companies carried out the business of managed health care. Subsequent to the sale of this business, the remaining assets are held as investment assets.(4)Issued share capital is R2.(5)Issued share capital can vary, as this is an open-ended investment company.(6)Issued share capital is R2 000.A register of all subsidiary companies is available for inspection at the registered office of Sanlam Limited. All investments above are unlisted unless otherwiseindicated.

Gensec Santam

Analysis of the Group’s holding in Santam and Gensec 2001 2000 2001 2000

Shareholders• Sanlam Life Insurance Limited 58% 58% 21% 14%• Sanlam Limited 42% 42% 21% 22%

Policyholders• Sanlam Life Insurance Limited — — 17% 23%

100% 100% 59% 59%

SANLAM LIMITED F INANCIAL STATEMENTSfor the year ended 31 December 2001

BALANCE SHEET AT 31 DECEMBER 20012001 2000

Note R million R million

102

ASSETS

Non-current assets

Investment in group companies 2 13 771 13 750

Investment in joint venture 30 20

Current assets 511 452

Loans to subsidiaries 502 452

Accounts receivable 9 —

Total assets 14 312 14 222

EQUITY AND L IABIL IT IES

Share capital and premium 3 3 514 3 514

Non-distributable reserves 4 9 342 9 342

Retained income 980 967

Shareholders’ funds 13 836 13 823

Current liabilities 476 399

Loans from subsidiaries 442 367

Accounts payable 34 32

Total equity and liabilities 14 312 14 222

INCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2001Unlisted dividends received 812 582

Dividends paid 5 (797) (398)

Expenditure (2) (2)

Retained income for the year 13 182

Retained income at beginning of the year 967 785

Retained income at end of the year 980 967

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2001Cash flow from operating activities

Cash utilised in operations 7 (9) (38)

Dividends received 812 582

Dividends paid (797) (398)

Cash flow from investing activities

Investment in subsidiary companies (21) (1 203)

Investment in joint venture (10) (40)

Decrease in cash and cash equivalents (25) (1 097)

Net loans to subsidiaries – beginning of the year 85 1 182

Net loans to subsidiaries – end of the year 60 85

NOTES TO THE F INANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2001

10 3

1. ACCOUNTING POLIC IES

The accounting policies of the Sanlam Limited Group as set out on pages 70 to 73 are also applicable to Sanlam Limited exceptfor investments in subsidiary companies which are reflected at book value or at a lower value if there is an impairment in value.

2001 2000R million R million

2. SUBSIDIARY COMPANIES

Investment in group companies

Shares at cost 10 373 10 374

Amounts owing by subsidiaries 3 398 3 376

Total investment in group companies 13 771 13 750

Current loans with group companies

Loans to subsidiaries 502 452

Loans from subsidiaries (442) (367)

Book value of interest in subsidiaries 13 831 13 835

Fair value of investment in subsidiaries 24 610 22 088

The loans to subsidiaries are unsecured and not subject to any fixed terms of repayment. No interest is charged but thesearrangements are subject to revision from time to time. Details regarding the principal subsidiaries of Sanlam Limited areset out on page 101 of the Sanlam Limited Group financial statements.

3. SHARE CAPITAL AND PREMIUM

Details of share capital and premium are reflected in note 19 on page 89 of the Sanlam Limited Group financial statements.

4. NON-DISTRIBUTABLE RESERVES

Pre-acquisition reserves arising on acquisition of subsidiaries 9 342 9 342

5. DIVIDENDS

Details of dividends paid are reflected in the directors’ report on page 69 of the Sanlam Limited Group financial statementsand note 14 of the Sanlam Limited Group financial statements.

6. REPORT OF THE DIRECTORS

The directors’ report is included on page 69 of the Sanlam Limited Group financial statements.

7. CASH FLOW FROM OPERATING ACTIVIT IES

Retained income for the year 13 182

Non-cash items – provision against investment — 20

Items separately disclosed – dividends received (812) (582)

– dividends paid 797 398

Increase in accounts receivable (9) —

Increase/(decrease) in accounts payable 2 (56)

Cash utilised in operations (9) (38)

8. STATEMENT OF CHANGES IN EQUITY

A separate statement of changes in equity is not presented, as the earnings attributable to shareholders reflected in the income statement and the dividend of R797 million (2000: R398 million) paid during the year, are the only changes in the shareholders’ equity in the period under review.

FINANCIAL INFORMATION FOR THE SHAREHOLDERS’ FUNDSfor the year ended 31 December 2001

10 4

CONTENTS

Operat ing Prof i t per Bus iness 105 |

Investment Return per Bus iness 105 |

Balance Sheets with a l l Bus inesses Consol idated at Net Asset Value 106 |

Balance Sheet with Bus inesses not Consol idated , but Ref lected at Fa i r Value 107 |

Cash F low Statements 108 |

Notes to the F inancia l Statements 109 |

Seven-Year Review 116 |

Stock Exchange Performance 117 |

Report on the Sanlam Group Embedded Value 118 |

SANLAM LIMITED SHAREHOLDERS’ FUNDS – OPERATING PROFIT PER BUSINESSfor the year ended 31 December 2001

Investment Gensec Gensec Sanlam CorporateLife Management Bank Properties Santam Health & other(1) Total

R million 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000

10 5

Financial services income 6 466 6 360 754 494 508 481 201 184 4 760 3 836 147 143 233 116 13 069 11 614

Sales remuneration (1 034) (1 091) — — — — — — (636) (444) — — (16) (18) (1 686) (1 553)

Income after sales remuneration 5 432 5 269 754 494 508 481 201 184 4 124 3 392 147 143 217 98 11 383 10 061

Underwriting policy benefits (1 976) (2 018) — — — — — — (3 367) (2 763) — — (3) (4) (5 346) (4 785)

Administration costs (1 813) (1 716) (482) (217) (317) (238) (120) (111) (660) (529) (114) (128) (296) (313) (3 802) (3 252)

Profit before exceptionals 1 643 1 535 272 277 191 243 81 73 97 100 33 15 (82) (219) 2 235 2 024

Exceptional items (191) (289) (18) (14) — (4) (9) (14) — — — — (6) (47) (224) (368)

Operating profit before tax 1 452 1 246 254 263 191 239 72 59 97 100 33 15 (88) (266) 2 011 1 656

Tax on operating profit (202) (110) (62) (58) 18 (5) (21) (20) (30) (21) — — (6) 34 (303) (180)

Operating profit after tax 1 250 1 136 192 205 209 234 51 39 67 (79) 33 15 (94) (232) 1 708 1 476

Minority interest — — (13) (102) — (117) — (19) (52) (56) — — — 48 (65) (246)

Net operating profit 1 250 1 136 179 103 209 117 51 20 15 23 33 15 (94) (184) 1 643 1 230

Ratios

Admin ratio(2) 33,4% 32,6% 63,9% 43,9% 62,4% 49,5% 59,7% 60,3% 16,0% 15,6% 77,6% 89,5% — — 33,4% 32,3%

Operating margin(2) 26,7% 23,6% 33,7% 53,2% 37,6% 49,7% 35,8% 32,1% 2,4% 2,9% 22,4% 10,5% — — 17,7% 16,5%

Operating profit eps (cents)

Net operating profitbefore tax one-offs 40,1 33,8 6,7 3,9 7,9 4,4 1,9 0,8 0,6 0,9 1,2 0,6 (3,5) (6,7) 55,0 37,6

Net operating profitafter tax one-offs 47,1 42,8 6,7 3,9 7,9 4,4 1,9 0,8 0,6 0,9 1,2 0,6 (3,5) (6,7) 61,9 46,3

Return on equity

Operating profit before tax — — — — — — — — — — — — — — 9,5% 6,7%

Operating profit after tax — — — — — — — — — — — — — — 8,1% 6,6%

(1)Corporate and other includes Corporate income and expenses, the previous Gensec corporate and other smaller businesses.(2)Calculated as a percentage of income earned by the shareholders less sales remuneration.

SANLAM LIMITED SHAREHOLDERS’ FUNDS – INVESTMENT RETURN PER BUSINESSfor the year ended 31 December 2001

SanlamLife Gensec(1) Santam Health Total

R million 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000

Investment return 2 108 1 176 303 (26) 630 155 43 17 3 084 1 322

Investment income 307 665 90 54 321 238 17 47 735 1 004

Equity accounting 619 420 — — 2 3 — — 621 423

Investment surpluses 1 182 91 213 (80) 307 (86) 26 (30) 1 728 (105)

Tax on investment return (349) (130) 6 23 (111) (95) — — (454) (202)

Investment income (129) (130) (25) (15) (61) (60) — — (215) (205)

Normal tax (228) (254) (25) (15) (61) (60) — — (314) (329)

Deferred tax reversal 99 124 — — — — — — 99 124

Investment surpluses (220) — 31 38 (50) (35) — — (239) 3

Minorities — — — 3 (310) (36) — — (310) (33)

Net actual investment return 1 759 1 046 309 — 209 24 43 17 2 320 1 087

Long term rate of return (LTRR) adjustment (256) 887 (111) 129 (50) 92 (12) 70 (429) 1 178

NET LTRR INVESTMENT RETURN 1 503 1 933 198 129 159 116 31 87 1 891 2 265

(1)Includes the net investment return of the Gensec private and underwriting equity and corporate cash portfolios.

SHAREHOLDERS’ FUNDS BALANCE SHEETS(ALL BUSINESSES CONSOLIDATED AT NET ASSET VALUE)

at 31 December 2001

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000Note R million R million R million R million

10 6

ASSETS

Non-current assets

Fixed assets 294 256 106 103

Goodwill 1 840 1 711 — —

Investments 7 26 219 24 224 23 455 21 620

Properties 1 021 1 074 1 018 1 074

Equities 13 509 11 413 15 982 13 664

Public sector stocks and loans 2 479 2 958 1 781 1 854

Mortgages, debentures and other loans 3 192 3 344 1 385 1 770

Cash, deposits and similar securities 6 018 5 435 3 289 3 258

Deferred tax 146 115 — —

General reinsurance provisions 8 1 718 1 274 — —

Current assets 9 24 261 17 641 4 541 4 554

Total assets 54 478 45 221 28 102 26 277

EQUITY AND L IABIL IT IES

Capital and reserves

Share capital and premium 10 3 514 3 514 5 000 5 000

Non-distributable reserves 9 415 9 415 5 429 5 429

Investment reserve 2 145 487 3 839 2 914

Retained income 7 157 5 596 5 641 3 957

Shareholders’ funds 22 231 19 012 19 909 17 300

Minority interest 2 049 1 897 — —

Outside shareholders 1 503 1 215 — —

Sanlam policyholders 546 682 — —

Non-current liabilities

Term finance 4 936 4 698 4 330 4 796

Deferred tax 346 284 230 284

Gross general insurance provisions 8 3 376 3 067 — —

Current liabilities 11 21 540 16 263 3 633 3 897

Total equity and liabilities 54 478 45 221 28 102 26 277

SHAREHOLDERS’ FUNDS BALANCE SHEET AT FAIR VALUEat 31 December 2001

Sanlam Limited

2001 2000Note R million R million

107

Santam, Sanlam Unit Trusts, Sanlam Investment Management,Gensec Bank and Gensec Properties not consolidated, but reflectedas investments at fair value.

ASSETS

Fixed assets 157 144

Investments 6 28 460 26 607

Sanlam businesses

• SIM 3 412 3 588

• Gensec Bank 1 442 1 600

• Gensec Properties 175 225

• Sanlam Unit Trusts 874 961

Strategic investment – Santam 1 709 1 274

Associated company – Absa 4 036 2 751

Other Investments

• Other equities 7 250 6 741

• Public sector stocks and loans 1 859 1 909

• Properties 1 018 1 074

• Other interest bearing investments 6 685 6 484

Deferred tax 88 146

Current assets 4 485 4 580

Total assets 33 190 31 477

EQUITY AND L IABIL IT IES

Shareholders’ funds 24 399 21 874

Term Finance 4 331 4 711

Deferred Tax 244 284

Current Liabilities 4 216 4 608

Total equity and liabilities 33 190 31 477

SHAREHOLDERS’ FUNDS CASH FLOW STATEMENTSfor the year ended 31 December 2001

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000Note R million R million R million R million

10 8

Net cash flow from operating activities 4 331 3 587 2 213 631

Cash generated by operations 12.1 1 248 2 309 1 088 819

Decrease/(increase) in net current assets 12.2 1 212 2 280 (343) (155)

Fixed assets – additions and replacements (142) (20) (45) (52)

Cash flow from operations 2 318 4 569 700 612

Cash flow from investment return 12.3 2 721 1 062 2 173 369

Cash flow from operating activities before 5 039 5 631 2 873 981

Increase/(decrease) in minority shareholders’ interest 82 (1 646) — —

Dividend paid (790) (398) (660) (350)

Cash flow from investment activities (2 020) (1 395) (1 834) (166)

Net sales/(purchases) of investments — 3 478 (679) (1 086)

Net realised and unrealised growth in investments 12.4 (1 995) 105 (1 155) 920

Acquisition of subsidiary/Gensec minorities (25) (4 978) — —

Cash flow from financing activities

Net term finance (repaid)/raised (169) 628 (466) (11)

Net increase/(decrease) in cash and cash equivalents 2 142 2 820 (87) 454

Cash, deposits and similar securities at beginning of year 7 036 4 216 2 612 2 158

Cash, deposits and similar securities at end of year 9 9 178 7 036 2 525 2 612

NOTES TO THE SHAREHOLDERS’ FUNDS F INANCIAL STATEMENTSfor the year ended 31 December 2001

10 9

1. BASIS OF PRESENTATION AND ACCOUNTING POLIC IES

The basis of presentation and accounting policies in respect of the financial statements for the shareholders’ funds of theSanlam Life Insurance Limited Group and Sanlam Limited Group are the same as set out on pages 70 to 75.

Basis of consolidation

Santam, Sanlam Unit Trusts and Gensec are consolidated in the Sanlam Limited Group shareholders’ financial statements at net asset value. The policyholders’ and outside shareholders’ interests in these companies are treated as minorityshareholders’ interest on consolidation. A separate balance sheet reflecting the investment in these companies at fair valueis presented for information purposes.

Total Life insurance* Life licence* Other

R million 2001 2000 2001 2000 2001 2000 2001 2000

2. ANALYSIS OF NEW BUSINESS

Sanlam Life 21 910 21 539 11 701 12 465 — — 10 209 9 074

Individual Life 8 569 8 871 8 569 8 871 — — — —

Recurring 1 495 1 642 1 495 1 642 — — — —

Single 4 880 4 989 4 880 4 989 — — — —

Continuations 2 194 2 240 2 194 2 240 — — — —

Unit Trust 10 209 9 074 — — — — 10 209 9 074

Group Life 3 132 3 594 3 132 3 594 — — — —

Recurring 171 195 171 195 — — — —

Single 2 961 3 399 2 961 3 399 — — — —

SIM 6 702 8 778 — — 384 805 6 318 7 973

Life 384 805 — — 384 805 — —

Recurring — 24 — — — 24 — —

Single 459 781 — — 459 781 — —

Less: Inter groupswitches (75) — — — (75) — — —

Segregated 6 318 7 973 — — — — 6 318 7 973

Total inflow 7 657 9 066 — — — — 7 657 9 066

Less: Inter groupswitches (1 339) (1 093) — — — — (1 339) (1 093)

Innofin 2 771 2 449 — — 860 762 1 911 1 687

Sanlam Health 547 668 — — — — 547 668

Santam 4 760 3 836 — — — — 4 760 3 836

Other 915 430 247 162 105 — 563 268

37 605 37 700 11 948 12 627 1 349 1 567 24 308 23 506

*Life license business relates to investment products provided by Sanlam Investment Management and Innofin by means of a life insurance policy wherethere is very little or no insurance risk. The group life investment products provided by means of an insurance policy was previously reported as grouplife business. With effect from 1 January 2001, the responsibility for the bulk of this business was transferred to Sanlam Investment Management.For comparative purposes the 2000 new business figures were restated to reflect a reasonable approximation of the split in this business.

NOTES TO THE SHAREHOLDERS’ FUNDS F INANCIAL STATEMENTSfor the year ended 31 December 2001 (continued)

Total Life insurance* Life licence* Other

R million 2001 2000 2001 2000 2001 2000 2001 2000

110

3. ANALYSIS OF GROSS FUNDS RECEIVED FROM CLIENTS

Sanlam Life 30 792 30 458 20 583 21 384 — — 10 209 9 074

Individual Life 15 331 15 630 15 331 15 630 — — — —

Recurring 8 257 8 401 8 257 8 401 — — — —

Single 7 074 7 229 7 074 7 229 — — — —

Unit Trust 10 209 9 074 — — — — 10 209 9 074

Group Life 5 252 5 754 5 252 5 754 — — — —

Recurring 2 291 2 355 2 291 2 355 — — — —

Single 2 961 3 399 2 961 3 399 — — — —

SIM 7 307 9 063 — — 989 1 090 6 318 7 973

Life 989 1 090 — — 989 1 090 — —

Recurring 605 695 — — 605 695 — —

Single 459 781 — — 459 781 — —

Less: Inter groupswitches (75) (386) — — (75) (386) — —

Segregated 6 318 7 973 — — — — 6 318 7 973

Total inflow 7 657 9 066 — — — — 7 657 9 066

Less: Inter groupswitches (1 339) (1 093) — — — — (1 339) (1 093)

Innofin 2 771 2 449 — — 860 762 1 911 1 687

Linked products 2 561 2 449 — — 860 762 1 701 1 687

Cash management 210 — — — — — 210 —

Sanlam Health 547 668 — — — — 547 668

Santam 4 760 3 836 — — — — 4 760 3 836

Other 971 452 303 184 105 — 563 268

47 148 46 926 20 886 21 568 1 954 1 852 24 308 23 506

*Life license business relates to investment products provided by Sanlam Investment Management and Innofin by means of a life insurance policy wherethere is very little or no insurance risk. The group life investment products provided by means of an insurance policy was previously reported as grouplife business. With effect from 1 January 2001, the responsibility for the bulk of this business was transferred to Sanlam Investment Management.For comparative purposes the 2000 gross funds received from clients figures were restated to reflect a reasonable approximation of the split in this business.

Total Life insurance(1) Life licence(1) Other

R million 2001 2000 2001 2000 2001 2000 2001 2000

111

4. ANALYSIS OF PAYMENTSTO CLIENTS

Sanlam Life 30 424 30 420 22 614 21 851 — — 7 810 8 569

Individual Life 16 518 15 897 16 518 15 897 — — — —

Surrenders 4 155 3 672 4 155 3 672 — — — —

Other 12 363 12 225 12 363 12 225 — — — —

Unit Trust 7 810 8 569 — — — — 7 810 8 569

Group Life 6 096 5 954 6 096 5 954 — — — —

Terminations(2) 2 240 2 214 2 240 2 214 — — — —

Other benefits 3 856 3 740 3 856 3 740 — — — —

SIM 12 986 10 900 — — 6 007 6 550 6 979 4 350

Life 6 007 6 550 — — 6 007 6 550 — —

Terminations(2) 5 863 5 782 — — 5 863 5 782 — —

Other benefits 1 556 1 861 — — 1 556 1 861 — —

Less: Inter groupswitches(3) (1 412) (1 093) — — (1 412) (1 093) — —

Segregated 6 979 4 350 — — — — 6 979 4 350

Total outflow 6 979 4 736 — — — — 6 979 4 736

Less: Inter groupswitches — (386) — — — — — (386)

Innofin 1 141 1 133 — — 199 142 942 991

Sanlam Health 487 640 — — — — 487 640

Santam 3 367 2 763 — — — — 3 367 2 763

Other 397 238 87 79 27 — 283 159

48 802 46 094 22 701 21 930 6 233 6 692 19 868 17 472

(1)Life license business relates to investment products provided by Sanlam Investment Management and Innofin by means of a life insurance policy wherethere is very little or no insurance risk. The group life investment products provided by means of an insurance policy was previously reported as grouplife business. With effect from 1 January 2001, the responsibility for the bulk of this business was transferred to Sanlam Investment Management.For comparative purposes the 2000 gross funds paid to clients figures were restated to reflect a reasonable approximation of the split in this business.

(2)Includes taxation paid on behalf of certain retirement funds.(3)Included in terminations.

NOTES TO THE SHAREHOLDERS’ FUNDS F INANCIAL STATEMENTSfor the year ended 31 December 2001 (continued)

Total Life insurance* Life licence* Other

R million 2001 2000 2001 2000 2001 2000 2001 2000

11 2

5. ANALYSIS OF NET INFLOW OF FUNDS

Sanlam Life 368 38 (2 031) (467) — — 2 399 505

Individual Life (1 187) (267) (1 187) (267) — — — —

Unit Trust 2 399 505 — — — — 2 399 505

Group Life (844) (200) (844) (200) — — — —

SIM (5 679) (1 837) — — (5 018) (5 460) (661) 3 623

Life (5 018) (5 460) — — (5 018) (5 460) — —

Total (6 355) (6 167) — — (6 355) (6 167) — —

Less: Inter groupswitches 1 337 707 — — 1 337 707 — —

Segregated (661) 3 623 — — — — (661) 3 623

Total 678 4 330 — — — — 678 4 330

Less: Inter groupswitches (1 339) (707) — — — — (1 339) (707)

Innofin 1 630 1 316 — — 661 620 969 696

Sanlam Health 60 28 — — — — 60 28

Santam 1 393 1 073 — — — — 1 393 1 073

Other 574 214 216 105 78 — 280 109

(1 654) 832 (1 815) (362) (4 279) (4 840) 4 440 6 034

*Life license business relates to investment products provided by Sanlam Investment Management and Innofin by means of a life insurance policy wherethere is very little or no insurance risk. The group life investment products provided by means of an insurance policy was previously reported as grouplife business. With effect from 1 January 2001, the responsibility for the bulk of this business was transferred to Sanlam Investment Management.For comparative purposes the 2000 net inflow of funds’ figures were restated to reflect a reasonable approximation of the split in this business.

Sanlam Limited

2001 2000R million R million

11 3

6. EXCESS OF FAIR VALUE OVER NET ASSET VALUE OF SUBSIDIARIES

The shareholders’ funds balance sheet at fair value include the value of the companies below based on directors’ valuation, apart from Santam which is valued accordingto ruling share prices.

Fair value businesses per the fair value balance sheet 7 612 7 648

Less: Tangible Net Asset Value 3 904 3 074

Santam 1 387 1 066

Sanlam Unit Trusts 462 389

Sanlam Investment Management 519 323

Gensec Bank 1 444 1 234

Gensec Properties 92 62

Less: Goodwill in respect of above businesses 1 540 1 711

Revaluation adjustment of interest in businesses to fair value 2 168 2 863

NOTE

Previously Sanlam Unit Trusts was reflected at net asset value in the balance sheet. Comparatives have been restated to reflect this new policy.

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

7. INVESTMENTS

Spread of investments in equities by sector(1) (2) (2) (3) (3)

Industrial 23% 30% 16% 23%

Financial 55% 54% 63% 61%

Resources 22% 16% 21% 16%

100% 100% 100% 100%

(1)Excludes offshore equities, derivatives, unit trusts and unlisted investments.(2)Includes the appropriate underlying investments of Santam.(3)Investment in Santam and Gensec excluded.

Offshore investments

Equities 2 696 1 987 2 510 1 883

Interest bearing investments 2 372 1 987 1 158 1 065

Total offshore investments 5 068 3 974 3 668 2 948

Unlisted equity investments

As a percentage of total investment in equities 6% 6% 2%(1) 2%(1)

(1)Excludes unlisted interest in Gensec.

NOTES TO THE SHAREHOLDERS’ FUNDS F INANCIAL STATEMENTSfor the year ended 31 December 2001 (continued)

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

11 4

8. GENERAL INSURANCE PROVIS IONS

Details of general insurance provisions are reflected in note 23 on page 94.

9. CURRENT ASSETS

Premiums receivable 615 930 289 540

Accrued investment income 339 242 281 183

Trading account and money market investments 10 335 7 498 — —

Accounts receivable 3 794 1 935 1 004 787

Amounts owing by group companies — — 442 432

Cash, deposits and similar securities 9 178 7 036 2 525 2 612

Total current assets 24 261 17 641 4 541 4 554

10. SHARE CAPITAL AND PREMIUM

Details of share capital and premium are reflected in note 19 on page 89 of the Sanlam Limited Group financial statements.

11. CURRENT L IABIL IT IES

Trading account and money market liabilities 12 793 8 645 — —

Accounts payable 6 705 5 453 1 655 1 866

Policy benefits payable 1 500 1 534 1 500 1 534

Claims incurred but not reported — 109 — —

Taxation 542 522 478 497

Total current liabilities 21 540 16 263 3 633 3 897

12. NOTES TO THE CASH FLOW STATEMENTS

12.1 Cash generated by operations per income statement 1 643 1 230 1 106 969

Adjustment for non-cash items (395) 1 079 (18) (150)

Cash generated by operations 1 248 2 309 1 088 819

Sanlam LifeSanlam Limited Insurance Limited

2001 2000 2001 2000R million R million R million R million

11 5

12. NOTES TO THE CASH FLOW STATEMENTS (continued)

12.2 Decrease/(increase) in net current assets and

general insurance provisions

Current assets (3 812) (1 552) (19) (455)

Premiums receivable 315 (519) 251 (230)

Trading account and money market investments (2 500) (93) — —

Accounts receivable (1 162) 175 (259) 102

General reinsurance provisions (465) (1 115) — —

Amounts owing by group companies — — (11) (327)

Current liabilities 5 024 3 832 (324) 300

Trading account and money market liabilities 4 148 1 382 — —

Accounts payable 406 35 (271) 112

Policy benefits payable and claims incurredbut not reported 179 186 (34) 212

General insurance provisions 271 2 298 — —

Taxation 20 (69) (19) (24)

Decrease/(increase) in net current assets 1 212 2 280 (343) (155)

12.3 Cash flow from investment return

Per income statement

• Net investment return 1 891 2 265 1 850 2 027

• Adjustment for net long term rate of return 429 (1 178) 384 (835)

• Other net investment surpluses/(deficits) 323 (108) (71) (1 015)

Net investment return attributable to shareholders 2 643 979 2 163 177

Increase in accrued investment income (97) (109) (121) (26)

Non-cash items 175 192 131 218

Cash flow from investment return 2 721 1 062 2 173 369

12.4 Net realised and unrealised growth in investments

Net investment surpluses/(deficits) (note 12 on page 85) 1 658 (105) 925 (920)

Non-cash items 337 — 230 —

Net realised and unrealised growth in investments 1 995 (105) 1 155 (920)

SEVEN-YEAR REVIEW

Averageannual

2001 2000 1999 1998 1997(1) 1996(1) 1995(1) growthR million R million R million R million R million R million R million rate %

11 6

EXTRACTS FROM FINANCIALSTATEMENTSOperating profit 2 011 1 656 1 722 1 237 1 026 1 070 1 079 11%Headline earnings based on long-term rate of return 3 534 3 495 2 721 — — — — —Shareholders’ funds 22 231 19 012 18 075 14 904 10 172 9 005 7 182 21%Policy liabilities 145 248 133 952 134 319 114 176 119 506 114 647 107 839 5%Total assets under management 253 543 224 911 215 924 176 792 166 382 147 969 135 984 11%Net tangible asset value per share (cents)(2) 927 831 810 630 528 466 376 16%Group administration cost ratio (%) 33,4% 32,3% 29,8% 27,8% — — — —Group operating margin (%) 17,7% 16,5% 17,9% 12,9% — — — —

NEW BUSINESSLong term insurance businessIndividual insurance 9 735 9 795 7 704 6 319 7 743 6 733 7 244 5%

• Recurring premiums– indexed growth 558 525 527 500 500 425 385 6%– other 974 1 149 749 830 1 039 1 301 1 366 -5%

• Single premiums 6 009 5 881 4 804 3 107 5 458 4 376 4 862 4%• Continuations 2 194 2 240 1 624 1 882 746 631 631 23%

Group Life 3 562 4 399 2 633 5 247 5 154 3 503 2 252 8%

• Recurring premiums 171 219 139 137 — (3) — (3) — (3) —• Single premiums

– gross 3 466 4 180 2 494 5 110 5 154 3 503 2 252 7%– inter-group switches (75) — — — — — — —

Total long term insurance business 13 297 14 194 10 337 11 566 12 897 10 236 9 496 6%Other business 24 308 23 506 15 473 18 280 12 214 8 757 5 978 26%

• Unit trusts 10 772 9 342 8 154 8 266 2 957 1 164 890 52%• Segregated funds 6 318 7 973 2 310 4 498 5 519 4 666 2 714 15%• Linked products 1 911 1 687 1 706 1 423 431 — — 45%• Short term insurance 5 307 4 504 3 303 4 093 3 307 2 927 2 374 14%

Total new business 37 605 37 700 25 810 29 846 25 111 18 993 15 474 16%

RECURRING PREMIUMSLong term insurance business

Individual insurance 8 336 8 455 8 344 8 496 8 354 7 781 6 961 3%Group Life 2 910 3 050 3 029 2 740 3 000 2 958 2 579 2%

Total recurring premiums 11 246 11 505 11 373 11 236 11 354 10 739 9 540 3%

STAFFOffice staff (excluding marketing staff ) 10 024 9 709 10 159 11 669 12 756 12 635 12 406 -3%

(1)Pro forma figures to reflect the demutualisation and restructuring of Sanlam in 1998.(2)Shareholders’ interest in Santam and Gensec adjusted from net asset value to fair value.(3)Figures not readily available as the definition of new business was only introduced in 1999.

STOCK EXCHANGE PERFORMANCE

2001 2000 1999 1998(1)

Number of shares traded (million) 1 118 1 030 1 463 350

Value of shares traded (R million) 10 780 8 578 9 451 2 035

Percentage of issued shares traded (%) 42 39 55 13

Price : earnings ratio (times) 6,9 7,3 8,4 —

Return on Sanlam share price since listing(2) (%) 17 27 41 —

Headline earnings return on equity (%) 17,4 18,7 16,3 —

Market price per share (cents)

• Year-end closing price 919 956 860 585

• Highest closing price 1 145 1 000 890 599

• Lowest closing price 830 675 440 567

Net asset value per share (cents) 927 831 810 630

Embedded value per share (cents) 1 167 1 067 1 004 827

Market capitalisation at year end (R million) 24 192 25 381 22 833 15 531

Sanlam share price relative to

• Financial index 9,71 8,87 8,02 6,94

• Life insurance index 8,83 7,92 7,07 6,85

(1)Sanlam Limited was listed on 30 November 1998.(2)Annualised growth in the Sanlam share price since listing plus dividends paid.

11 7

Share price Embedded value

400

500

600

700

800

900

1 000

1 100

1 200

Dec’01

Aug’01

Apr’01

Dec’00

Aug’00

Apr’00

Dec’99

Aug’99

Apr’99

Dec’98

Share price vs embedded value

*30 day moving average

5

6

7

8

9

10

11

Dec’01

Aug’01

Apr’01

Dec’00

Aug’00

Apr’00

Dec’99

Aug’99

Apr’99

Dec’98

Sanlam share price relative to FINDI30*

REPORT ON THE SANLAM GROUP EMBEDDED VALUEfor the year ended 31 December 2001

11 8

DEFINIT IONS

In estimating the economic value of a life insurance company,

it is common to use a concept known as the “embedded

value” of the company. The embedded value (EV) represents

the shareholders’ net assets plus the value of the life insurance

business in force (VIF), net of the cost of holding prudential

reserves (CPR) in relation to this business. The economic

value of the company is then derived by adding to the

embedded value an estimate of the value of future sales of

new life insurance business, sometimes calculated by applying

a multiple to the value of one year’s sales. The value of one

year’s sales is a measure of the economic value added by a life

insurance company during the course of the year as a result of

writing new business.

This report presents the embedded value of the Sanlam

group, rather than that of Sanlam Life Insurance Limited. In

addition, the report also presents the net value of new life

insurance business (VNB).

The VIF is calculated as the discounted value, using a

risk-adjusted discount rate, of the projected stream of future

after-tax profits determined on the financial soundness

valuation (FSV) basis for business in force at the valuation

date. This value excludes the discounted value of the release

of prudential reserves over the life of the in-force business.

The CPR with respect to the in-force life insurance

business is calculated as follows:

• the amount of prudential reserves as at the valuation

date, less

• the discounted value, using a risk-adjusted discount rate, of

the expected annual release of these reserves over the life of

the in-force business, allowing for the after-tax investment

return on the expected level of reserves held in each year.

The VNB is calculated as the discounted value at point of

sale, using a risk-adjusted discount rate, of the projected stream

of after-tax FSV profits for new business issued during the

relevant period prior to the valuation date. The VNB is

reduced by the CPR over the life of this cohort of business, to

obtain the net VNB.

MATERIAL CHANGES TO EMBEDDED VALUE

METHODOLOGY

The treatment of corporate expenses has been amended.

In 2000 the impact of corporate expenses was shown by

deducting from VIF the present value of recurring corporate

expenses using the expected run-off of the in-force business

block in the determination of the annuity factor. Similarly,

the VNB was reduced by a proportion of the corporate

expenses allocated to the procurement of new business,

consisting of an upfront deduction and a reduction as above

from VIF in respect of recurring corporate expenses.

For 2001 the above approach was followed for corporate

expenses relating explicitly to the running of the life business.

The effect of other corporate expenses has been removed

from the VIF and is shown as a reduction in net worth.

This reduction has been calculated by applying the ratio of the

market price per share (or embedded value per share if lower)

to the headline earnings per share based on the long term rate

of return as at 31 December 2001 to the net of tax expense.

The comparative figures for 2000 have been restated in

this report for the above mentioned changes in embedded

value methodology and for the valuation of Sanlam Unit

Trusts (SUT) to fair value. Previously SUT was included at

net asset value.

SANLAM GROUP EMBEDDED VALUE (EV)

The 2000 values do not contain an allowance for capital

gains tax.

Table 1 2001 2000 2000Restated Published

Risk discount rate 14,3% 15,6% 15,6%

(R million)

Sanlam Group shareholders’ assets at fair value(1) 24 399 21 874 20 512

Adjustment for discounting capital gains tax(2) 61 —

Present value of other corporateexpenses(3) (664) (778)

Sanlam Group shareholders’ adjusted assets 23 796 21 096 20 512

Net VIF 6 941 6 982 6 726

Gross VIF 8 756 8 156(4) 7 900

Less: CPR (1 815)(5) (1 174) (1 174)

Sanlam Group EV 30 737 28 078 27 238

EV per share (cents) 1 167 1 067 1 035

Number of shares (million) 2 632 2 632 2 632

The above values are net of company tax and do not

allow for the tax position of an investor in Sanlam Limited.

(1)Per the shareholders’ fund balance sheet at fair value on page 107.(2)Adjustment to allow for the delay before incurring the capital gains tax

liability included in the fair value.(3)The value was calculated by multiplying the other corporate costs after tax

of R96 million (2000: R107 million) by the market price per share of919c (2000: 956c) and divided by the headline earnings per share basedon the long term rate of return of 133,2c (2000: 131,5c).

(4)The restated Gross VIF for 2000 includes an increase of R256 million,which relates to the removal of other corporate expenses from the VIF of R48 million, multiplied by an annuity factor.

(5)The increase in the cost of holding prudential reserves is largely due to the effect of capital gains tax that was introduced on 1 October 2001.

11 9

VALUE OF NEW LIFE INSURANCE BUSINESS (VNB)

Table 2 2001 2000 2000

(R million) Restated Published

Net VNB(1) 290 240(2) 209

Gross VNB 359 276 245

Less: CPR (69) (36) (36)

The above values are net of company tax and do not allow for

the tax position of an investor in Sanlam Limited.

(1)VNB as at point of sale and based on sales volumes, business mix andacquisition expenses for the year and assumptions at the end of the year.

(2)The increase in the restated VNB for 2000 results from the removal ofother corporate expenses.

ANALYSIS OF VALUE OF L IFE INSURANCE BUSINESSIN FORCE (VIF)

Table 3 2001Gross Net

(R million) VIF CPR VIF

Individual business 7 354 (1 210) 6 144

Group business 1 453 (605) 848

Corporate (51) — (51)

Sanlam Group 8 756 (1 815) 6 941

2000Restated

Gross Net(R million) VIF CPR VIF

Individual business 7 036 (884) 6 152

Group business 1 187 (290) 897

Corporate (67) — (67)

Sanlam Group 8 156 (1 174) 6 982

2000Published

Gross Net(R million) VIF CPR VIF

Individual business 7 036 (884) 6 152

Group business 1 187 (290) 897

Corporate (323) — (323)

Sanlam Group 7 900 (1 174) 6 726

ANALYSIS OF VALUE OF NEW LIFE INSURANCEBUSINESS (VNB)

Table 4 2001Gross Net

(R million) VNB CPR VNB

Individual business 228 (20) 208

Group business 131 (49) 82

Sanlam Group 359 (69) 290

2000Restated

Gross Net(R million) VNB CPR VNB

Individual business 179 (8) 171

Group business 97 (28) 69

Sanlam Group 276 (36) 240

MARGINS

Profitability of new business can be measured by the ratio

of the net value of new business to the annual premium

equivalent (APE). For the Sanlam Group this profit ratio

increased from 9,7% at 31 December 2000 to 13,2% at

31 December 2001.

NET VNB AS A PERCENTAGE OF APE

Table 5 2001Net

(R million) RP SP APE(1) VNB Margin(2)

Individual business 1 013 7 237 1 737 208 12,0%

Group business 171 2 961 467 82 17,6%

Sanlam Group 1 184 10 198 2 204 290 13,2%

2000Restated

Net(R million) RP SP APE(1) VNB Margin(2)

Individual business 1 203 7 393 1 942 171 8,8%

Group business 195 3 399 535 69 12,9%

Sanlam Group 1 398 10 792 2 477 240 9,7%

(1)Annual Premium Equivalent (APE) is calculated as new recurringpremiums excluding indexed growth premiums (RP), plus 10% of singlepremiums (SP).

(2)The APE definition changed and the 2000 figures have been restated.Life license business which previously formed part of APE, is nowexcluded as a very small portion of its value relates to life business. This business relates to investment products provided by SIM and Innofin by means of life insurance policies.

REPORT ON THE SANLAM GROUP EMBEDDED VALUEfor the year ended 31 December 2001 (continued)

1 2 0

EMBEDDED VALUE EARNINGS

Table 6 2001 2000 2000(R million) Restated Published

Net VNB 290 240 209

Earnings from existing life insurance business 1 111 1 279 1 330

• Expected return 1 204 1 214 1 173

• Operating experience variations 32 (1) 45 137

• Operating assumption changes (125)(2) 20 20

Embedded value earningsfrom operations 1 401 1 519 1 539

Economic and other assumption changes 105 289 289

Tax changes (613)(3) (22) (22)

Investment variances 200 (304) (304)

Growth from life insurance business 1 093 1 482 1 502

Adjusted investment return on net assets 2 356 (4) 332 (130)

Total embedded value earnings 3 449 1 814 1 372

Dividends paid or proposed (790) (398) (790)

Increase in Sanlam Groupembedded value 2 659 1 416 582

Return on embedded value 12,3% (5) 6,5% 5,0%

(1)The main contributors to the operating experience were positive riskexperience of R220 million, offset by negatives in respect of a reserve set upfor the possible cost of maturity guarantees, a strengthening of the assetdefault provision and once-off expenses.

(2)Changes to the allowance for future expenses made a negative contributionof R34 million. Termination of reinsurance had a negative impact ofR52 million. Strengthening the mortality assumptions of the non-profitannuity portfolio contributed a negative R43 million.

(3)Allowing for capital gains tax reduced the EV by R613 million. Thisreduction was due to lower net of tax investment return both on assetssupporting prudential reserves which increased CPR (by R478 million),and on policyholders’ fund assets which decreased future fund charges(reduction of R135 million).

(4)The investment return experience includes the effect of realised andunrealised investment surpluses which were positively influenced by thestock market conditions in 2001.

(5)The return on embedded value is the embedded value earnings asa percentage of the embedded value at the beginning of the year.

GROWTH FROM LIFE BUSINESS

The growth in life business before releasing the net

operating profit into the net worth is shown below.

Table 7 2001 2000 2000(R million) Restated Published

VIF at end of accounting period 6 941 6 982 6 726

Plus: net operating profit transferredto current period’s earnings(1) 1 134 998 969

Less: VIF at beginning ofaccounting period (6 982) (6 498) (6 193)

Growth in life business 1 093 1 482 1 502

% growth in life business(2) 15,7% 22,8% 24,3%

(1)Net operating profit after tax with other corporate expenses less corporateincome of R28 million added back.

(2)Percentage growth from life business expressed as a percentage of VIF atthe beginning of the year.

PRINCIPAL BASES AND ASSUMPTIONS

The embedded values as calculated above comply in allmaterial aspects with the professional guidance as set out inProfessional Guidance Note (PGN) 107.

The assessment of VIF, CPR and VNB is based on the “bestestimate” assumptions (i.e. excluding any margins) used fordetermining the FSV policy liabilities.

The principal bases and assumptions used in the calculationsare described below:

Investment return and inflation

The assumed pre-tax investment returns by major assetcategory and assumed inflation were based on the marketyield of fixed-interest securities, and are as follows:

GROSS INVESTMENT RETURN AND INFLATIONASSUMPTIONS

Table 8 2001 2000% p.a. % p.a.

Fixed-interest securities 11,8 13,1

Equities and off-shore investments 13,8 15,1

Hedged equities(1) 10,8 12,1

Property 12,8 14,1

Cash 9,8 11,1

Risk discount rate 14,3 15,6

Prudential reserves asset returns(2) 12,7 14,1

Unit cost and salary inflation 7,3 6,6Consumer Price Index inflation(3) 5,8 6,6

(1)The assumed future return for these assets is lower than that of equities whichare not hedged, reflecting the cost of the derivative instruments.

(2)The investment return on assets supporting the prudential reserves is based onthe long term asset mix for these funds (as shown in Table 9).

(3)Premium indexation inflation for Individual business is assumed to be equalto Consumer Price Index inflation, whilst that for Group business is assumedto equal salary inflation.

1 21

Prudential reserving

The following asset mix was assumed for funds supporting

Sanlam Life Insurance Limited’s prudential reserves.

ASSUMED LONG TERM ASSET MIX FOR FUNDS

SUPPORTING PRUDENTIAL RESERVES

Table 9 2001 2000% %

Equities and off-shore investments 54 54

Hedged equities 18 18

Property 16 16

Fixed-interest securities 10 10

Cash 2 2

Total 100 100

Sanlam is satisfied that its capital adequacy requirement cover

allows it to maintain the risk profile of the assets underlying

the prudential reserves.

Assets held in the shareholders’ fund of Sanlam Life

Insurance in excess of the prudential reserves are invested in

local equities or in foreign assets.

It was assumed that the current prudential reserving basis

would be maintained in the future and has not changed since

the 2000 valuation.

Other decrements and bonuses bases

The bases for these elements were as follows:

• Future mortality, morbidity and discontinuance rates and

future expense levels were based on recent experience where

appropriate.

• Future rates of bonuses for traditional participating

business, stable bonus business and participating annuities

were set at levels which were supportable by the assets

backing the respective product sub-funds at the respective

valuation dates.

• Sanlam Life Insurance’s current surrender and paid-up

bases were assumed to be maintained in the future.

HIV/Aids

Allowance was made, where appropriate, for the impact of

expected HIV/aids-related claims, consistent with the

recommendations of the Actuarial Society of South Africa as

set out in its Professional Guidance Note (PGN) 105.

Premiums were assumed to be re-rated, where applicable, in

line with deterioration in mortality, with a three-year delay

from the point where mortality losses would be experienced.

Recurring expenses and project costs

The expense bases were as follows:

• Future investment expenses were based on the current

scale of fees in place between Sanlam Investment

Management and Sanlam Life Insurance Limited. To

the extent that this scale of fees includes profit margins

for Sanlam Investment Management, these margins

have not been included in the assessment of the VIF and

the VNB.

• In determining the VIF, the value of expenses for certain

planned projects focusing on both administration and

distribution aspects of the life insurance business has been

deducted. These projects are of a short term nature,

although similar projects may be undertaken from time to

time. No allowance has been made for the expected

positive impact these projects may have on the future

operating experience of Sanlam Life Insurance.

New business premiums

Table 10 Single Recurring(R million) premiums Premiums

Total long term insurance businessTotal premiums used in APE 10 198(1) 1 184(1)

Less: Optional reductions inpremiums (39)

Plus: Other Life business 1 396(2)

New business premiums on page 116of the financial statements 11 594 1 145

Consisting ofIndividual insuranceRecurring premiums – other 974

Single premiums 6 009

Continuations 2 194

Group businessRecurring premiums 171

Single premiums – gross 3 466

Inter-group switches (75)

(1)These premium figures are used in the calculation of the Annual PremiumEquivalent used in deriving the profit margin for new business embeddedvalue in the EV report.

(2)The majority of profits in respect of these premiums accrue to SanlamInvestment Management and Innofin.

• In determining VNB with regard to new recurring

premiums, increases in existing recurring premium

contracts associated with indexation arrangements were not

included, but instead were allowed for in the VIF business.

• VNB includes the expected value of future premium

increases resulting from premium indexation on the new

recurring premium business written during the period.

REPORT ON THE SANLAM GROUP EMBEDDED VALUEfor the year ended 31 December 2001 (continued)

1 2 2

Taxation

• Projected corporate tax was allowed for at a rate of 30% for

both 2000 and 2001.

• Allowance was made for capital gains tax that was

introduced on 1 October 2001 in the 2001 figures. The

assumed roll-over period for realisation of investments is

five years for property and equity assets supporting

prudential reserves and policy reserves. For strategic equity

assets the assumed roll-over period is ten years.

• Allowance for Secondary Tax on Companies was made by

placing a present value on the tax liability generated by the

net cash dividends paid out that are attributable to the life

company. It was assumed that over the long term the

proportion of cash dividends paid out would fall to a level

of 50% from the current 100% level.

Other factors

• The embedded values do not include an allowance for the

cost of the share incentive scheme. In respect of share

options, where shares have not yet been issued, the number

of shares used to calculate the embedded value per share

will be increased as and when these options are granted.

Granting share options will therefore influence the

embedded value per share negatively in future.

SENSIT IV ITY ANALYSIS

To illustrate the effect of using different assumptions, the

sensitivity of the values is shown in Table 11. Sensitivities

have been determined at the indicated risk discount rate. The

risk discount rate appropriate to an investor will depend on

the investor’s own requirements, tax position and perception

of the risks associated with the realisation of the future profits

of Sanlam Life Insurance. For each sensitivity, all other

assumptions have been left unchanged. Note that the

different sensitivities do not indicate that they have a similar

chance of occurring.

SENSIT IV ITY ANALYSIS – 31 December 2001

Table 11Value of in-force Gross Net(R million) VIF CPR VIF %

Base value 8 756 (1 815) 6 941

Increase risk discount rateby 1,5% to 15,8% 8 106 (2 353) 5 753 (17%)

Decrease risk discount rate by 1,5% to 12,8% 9 501 (1 172) 8 329 20%

Increase investment return(and inflation) by 1,5%, coupled with an increase in risk discount rate of 1,5% to 15,8%, and with bonus rates changing commensurately 8 713 (2 103) 6 610 (5%)

Increase expense inflationby 1,5%, without adjustmentto nominal investment return 8 743 (1 832) 6 911 0%

Non-commission expenses (excluding investmentexpenses) increase by 10% 8 526 (1 811) 6 715 (3%)

Discontinuance ratesincrease by 10% 8 572 (1 750) 6 822 (2%)

Increase mortality of products providing death benefits by 10%(1) 8 473 (1 801) 6 672 (4%)

Value of new business Gross Net(R million) VNB CPR VNB %

Base value 359 (69) 290

Increase risk discount rate by 1,5% to 15,8% 313 (89) 224 (23%)

Decrease risk discount rate by 1,5% to 12,8% 411 (44) 367 27%

Increase investment return(and inflation) by 1,5%, coupled with an increase in risk discount rate of 1,5% to 15,8%, and with bonus rates changing commensurately 343 (79) 264 (9%)

Increase expense inflationby 1,5%, without adjustmentto nominal investment return 356 (69) 287 (1%)

Non-commission expenses (excluding investmentexpenses) increase by 10% 300 (69) 231 (20%)

New business volumesdecrease by 10% 293 (62) 231 (20%)

Increase mortality of productsproviding death benefits by 10%(1) 325 (64) 261 (10%)

(1)Risk premiums are assumed to be increased accordingly (whereappropriate), but only after a 3 year lag. Mortality of annuities is assumedunchanged, because a decrease, rather than an increase, in mortalityincreases the mortality risk on annuities.

CONSULTING ACTUARIES REPORT for the year ended 31 December 2001

1 2 3

6 March 2002

The Directors

Sanlam Limited

2 Strand Road

Bellville

Ladies and Gentlemen

Embedded Value of the Sanlam Group

The embedded value of the Sanlam Group, an analysis of the change in this embedded value over the twelve months to

31 December 2001 and the value of one year’s new life insurance business, are set out on pages 118 to 122 of these accounts.

We have reviewed the calculation of the Sanlam Group embedded value and the value of one year’s new life insurance business

and the methodology and assumptions underlying those calculations. The scope of our work entailed an assessment of whether

the methodology and assumptions adopted conformed with the requirements of PGN 107, issued by the Actuarial Society of

South Africa, and the reasonableness of the aggregate results presented. Based on this work, we are satisfied that the results have

been prepared in accordance with the requirements of PGN 107, and the methodology has been consistently applied at each

valuation date. Further, the analysis of change in embedded value is a fair representation of the experience over 2001.

It is noted that usage has been made of paragraph 5.4 of PGN 107, enabling corporate overhead expenses to be covered by a

commensurate reduction in shareholders’ net assets.

In performing our work, we have relied on audited and unaudited information supplied to us by, or on behalf of, Sanlam

Limited for periods up to 31 December 2001 and on information from other sources. The information included the amount of

the adjusted shareholders’ net assets of the Sanlam Group as shown on page 118 of this report, and statistical data relating to

current and recent operating experience. We have reviewed this information for overall reasonableness and consistency with our

knowledge of the industry but we have not carried out independent checks of the data and other information supplied to us.

Yours faithfully

ANTHONY DARDIS JOANNE ATKINSON

F E L L O W O F T H E I N S T I T U T E O F A C T U A R I E S F E L L O W O F T H E I N S T I T U T E O F A C T U A R I E S

F E L L O W O F T H E A C T U A R I A L S O C I E T Y O F S O U T H A F R I C A F E L L O W O F T H E A C T U A R I A L S O C I E T Y O F S O U T H A F R I C A

Towers, Perrin, Forster & Crosby (Inc in Pennsylvania, USA)Registered in South Africa, Registration number 97/20979/10

3rd Floor, Safmarine House, 22 Riebeek Street, Cape Town 8001, South Africa

DEFINIT ION AND GLOSSARY OF TECHNICAL TERMS

1 2 4

“billion” – one thousand million;

“bonus pension” – a bonus pension is a policy which provides immediate annuities, the benefits of which

are increased annually by the bonuses declared;

“capital adequacy” – capital adequacy implies the existence of a buffer against experience worse than that

assumed in the financial soundness valuation. The sufficiency of the buffer is

measured by comparing available capital with the capital adequacy requirement. The

main element in the calculation of the capital adequacy requirement is the

determination of the effect of an assumed fall in asset values on the excess of assets

over liabilities;

“embedded value” – embedded value represents the net assets of a life company together with the value of

the portfolio of business in force, net of the cost of holding prudential reserves in

relation to this business;

“immediate annuity” – a policy which provides that, in consideration for a single premium, a series of regular

benefit payments will be made for a defined period;

“linked policy” – a non-participating policy which is allotted units in an investment portfolio. The

value of the policy at any stage is equal to the number of units multiplied by the unit

price at that stage;

“market-related policy” – a participating policy which participates in non-vesting investment growth. This

growth reflects the volatility of the market value of the underlying assets of the policy;

“non-participating policy” – a policy which provides benefits that are fixed contractually, either in monetary terms

or by linking them to the return of a particular investment portfolio, eg a linked or

fixed-benefit policy;

“participating policy” – a policy which provides guaranteed benefits as well as discretionary bonuses. The

declaration of such bonuses will take into account the return of a particular

investment portfolio. Reversionary bonus, stable bonus, market related and bonus

pension policies are participating policies;

“policy” – unless the context indicates otherwise, a reference to a policy in this report means an

insurance policy issued by Sanlam Life Insurance Limited in accordance with the

Long Term Insurance Act;

“reversionary bonus policy” – a conventional participating policy which participates in reversionary bonuses, ie

bonuses of which the face amounts are only payable at maturity or on earlier death or

disability. The present value of such bonuses is less than their face amounts;

“Sanlam Life” – a business consisting of Sanlam Life Insurance Limited, Sanlam Unit Trusts, Sanlam

Trust and Multi Data;

“Sanlam Life – a wholly-owned subsidiary of Sanlam Limited conducting mainly life insurance

Insurance Limited” business;

“Sanlam Limited” – the holding company listed on the JSE Securities Exchange South Africa and the

Namibian Stock Exchange;

“Sanlam” and “Sanlam Group” – Sanlam Limited and its subsidiaries;

“stable bonus policy” – a participating policy under which bonuses tend to stabilise short term volatility in

investment performance;

“surrender value” – the surrender value of a policy is the cash value, if any, which is payable in respect of

that policy upon cancellation by the policyholder.

NOTICE OF ANNUAL GENERAL MEETING

1 2 5

SANLAM LIMITED(Incorporated in the Republic of South Africa)

(Registration No 1959/001562/06)

Notice is hereby given that the fourth Annual General

Meeting of the Members of Sanlam Limited

(“the company”) will be held on Wednesday 5 June 2002 at

09:00 in the CR Louw Auditorium, Sanlam Head Office,

2 Strand Road, Bellville, for the following purposes:

1. To consider and adopt the annual financial statements

and the Group annual financial statements of the

company for the year ended 31 December 2001.

2. To re-appoint the auditors of the company.

3. To elect the following directors of the company, retiring

in terms of article 14 of the company’s articles of

association (“the articles”), and who are eligible and offer

themselves for re-election:

JPL Alberts AS du Plessis PC le Roux

CE Maynard P de V Rademeyer GE Rudman

4. To authorise the Board of Directors of the company

(“the Board”) to determine the remuneration of the auditors.

5. To table and approve the total amount of directors’

remuneration.

6. To consider and, if approved, to pass, with or without

modification, the following ordinary resolution

number 1:

“Resolved that the authorised but unissued ordinary

shares in the share capital of the company be and are

hereby placed at the disposal and under the control of the

Board, and such directors are hereby authorised and

empowered to allot, issue or otherwise dispose thereof to

such person or persons and on such terms and conditions

as the directors may from time to time determine, but

subject to the provisions of the Companies Act, No 61 of

1973, as amended (“the Companies Act”), the

requirements of the JSE Securities Exchange South Africa

(“the Securities Exchange”) and any other stock exchange

upon which the shares of the company may be quoted or

listed from time to time”.

7. To consider and, if approved, to pass, with or without

modification, the following special resolution number 1:

“Resolved that the boards of directors of the company

and any subsidiary of the company be authorised by way

of a general authority, up to and including the date of the

following annual general meeting of the company, to

approve

(a) the purchase of any of its securities by the company

or its subsidiaries, including ordinary shares of R0,01

each in the capital of the company; and

(b) the purchase of such securities by the company in

any holding company of the company, if any, and

any subsidiary of any such holding company,

subject to the provisions of the Companies Act and the

requirements of the Securities Exchange and any other

stock exchange upon which the shares of the company

may be quoted or listed from time to time, and subject to

such other conditions as may be imposed by any other

relevant authority, provided that:

• the general authority shall only be valid until the

company’s next annual general meeting, provided

that it does not extend beyond 15 months from the

date of this resolution;

• the general authority to repurchase be limited to a

maximum of 10% of the relevant company’s issued

share capital of that class at the time the authority is

granted; and

• repurchases must not be made at a price more than

5% above the weighted average of the market value

of the securities for the five business days

immediately preceding the date of the repurchases.”

The reason for and effect of special resolution

number 1 is to grant the directors a general authority

to enable the company, or its subsidiaries, to acquire

shares which have been issued by it, or its holding

company, if any, and any subsidiary of any such

holding company.

NOTICE OF ANNUAL GENERAL MEETING(continued)

1 2 6

STATEMENT OF INTENT

The Board shall implement a general repurchase of the

company’s shares, only if prevailing circumstances

(including the tax dispensation and market conditions)

warrant same, and should they be of the opinion, after

considering the effect of such repurchase of shares, that

the following requirements have been and will be met:

• the company will be able to pay its debts in the

ordinary course of business;

• the consolidated assets of the company, fairly valued in

accordance with generally accepted accounting practice,

are in excess of the consolidated liabilities of the company;

• the company will have adequate capital; and

• the working capital of the company will be sufficient

for the company’s requirements for the year ahead.

8. To consider and, if approved, to pass, with or without

modification, the following special resolution number 2:

“Resolved that, subject to the provisions of the

Companies Act and the requirements of the Securities

Exchange, the articles of the company be and are hereby

amended by the insertion of the following new Article

31.12 after the existing Article 31.11:

“31.12 Notwithstanding anything to the contrary

contained in these articles, and subject to the

provisions of the Companies Act and the

requirements of the Securities Exchange, and any

other stock exchange upon which the shares of

the company may be quoted or listed from time

to time, the company be and is hereby authorised

to deliver, issue, distribute, register, lodge,

publish and make available all returns,

certificates, registers, notices and other

information relevent to members, such as

circulars, annual reports, financial statements,

accounts, interim and other reports, listing

particulars, dividend notices, meeting notices and

proxy forms, and to facilitate online proxy voting

by way of electronic media, which include

facsimiles, electronic mail, bulletin boards,

Internet Websites and computer networks.” ”

The reason for and effect of special resolution number

2 is to amend the articles of the company to allow for the

electronic delivery and availability of notices, reports and

other information to members of the company, thereby

facilitating electronic communication with its members

including online proxy solicitation and voting.

PROXIES AND REPRESENTATIVES

1. A member entitled to attend and vote at the meeting may

appoint a proxy to attend, speak and vote in his/her

stead. A proxy includes a person appointed under a

general or special power of attorney. A notarially certified

copy of such power of attorney or other documentary

evidence establishing the authority of the person signing

as proxy must be attached to the proxy form.

2. A proxy form is enclosed for use by members who are

unable to attend the meeting. Same is also obtainable

from the registered office of the company. Duly

completed proxy forms must be lodged with or posted to

the company’s registered office at 2 Strand Road, Bellville

7530 (PO Box 1, Sanlamhof 7532), or at Mercantile

Registrars Limited, 11 Diagonal Street, Johannesburg

2001 (PO Box 1053, Johannesburg 2000). The said

proxy forms must be received by the company no later

than 48 hours before the time of holding the meeting.

3. The proxy need not be a member of the company.

4. A person representing a corporation/company is not

deemed to be a proxy as such corporation/company can

only attend a meeting through a person, duly authorised

by way of a resolution to act as representative. Such

person enjoys the same rights at the meeting as the

shareholding company and must at least 48 hours before

the meeting provide the company with satisfactory

documentary evidence (the resolution) that he or she is

entitled to act.

5. A member whose shares are held by Sanlam Share

Account (Proprietary) Limited or Sanlam Fundshare

Nominee (Proprietary) Limited is empowered by such

relevant nominee company to act and vote at the

meeting.

By order of the Board

XB MOTSWAI

C O M P A N Y S E C R E T A R Y

Bellville

11 March 2002

SHAREHOLDING AND ADMINISTRATION

1 2 7

ANALYSIS OF SHAREHOLDERS ON 31 DECEMBER 2001

Shareholders Shares heldNumber % Number %

DISTRIBUTION OF SHAREHOLDING

1 – 1 000 619 673 81,64 256 628 618 9,67

1 001 – 5 000 122 295 16,11 244 186 779 9,20

5 001 – 10 000 11 013 1,45 75 357 671 2,84

10 001 – 50 000 4 762 0,63 83 109 810 3,13

50 001 – 100 000 294 0,04 21 075 732 0,79

100 001 –1 000 000 774 0,10 260 580 901 9,82

1 000 000 and over 245 0,03 1 713 631 156 64,55

759 056 100,00 2 654 570 667 100,00

PUBLIC AND NON-PUBLIC SHAREHOLDERS %

Public shareholders 98,77

Non-public shareholders

• Directors’ interest 0,11

• Employee pension fund 0,42

• Sanlam Limited Share Incentive Trust 0,70

100,00

SHAREHOLDER STRUCTURE %

Institutional shareholding 69,67

• Offshore 19,28

• South Africa 50,39

Individuals 22,98

Demutualisation Trust 2,77

Other SA shareholding 4,58

100,00

HOLDINGS OF F IVE PERCENT OR MORE %

Public Investment Commissioner (SA) 7,75

SHAREHOLDING AND ADMINISTRATION(continued)

1 2 8

SHAREHOLDERS’ DIARY

FINANCIAL YEAR-END 31 December

ANNUAL GENERAL MEETING 5 June 2002

REPORTS

• Interim report for 30 June 2002 September 2002

• Announcement of the resultsfor the year ended 31 December 2002 March 2003

• Annual report for year ended 31 December 2002 April 2003

DIVIDENDS

• Dividend for 2001 declared 6 March 2002

• LDR for 2001 dividend 19 April 2002

• Payment of dividend for 2001 15 May 2002

• Declaration of dividend for 2002 March 2003

• Payment of dividend for 2002 May 2003

To allow for the dividend calculation, Sanlam’s share register will be closed for

all transfers and dematerialisation between 6 April 2002 and 19 April 2002

both dates included. During the same period Sanlam’s two nominee companies

namely Sanlam Share Account (Pty) Ltd and Sanlam FundShare Nominee

(Pty) Ltd will be closed for all off market transactions and rematerialisations.

Transactions on the JSE transacted via STRATE, will not be affected by this

arrangement.

The last date of trade to qualify for this dividend will be 12 April 2002

and shares will trade ex div from 15 April 2002.

ADMINISTRATION

SANLAM LIMITED

Registration no 1959/001562/06

SANLAM LIFE INSURANCE L IMITED

Registration no 1998/021121/06

GROUP SECRETARY

XB Motswai

REGISTERED OFFICE

2 Strand Road, Bellville

Telephone (021) 947-9111

Fax (021) 947-3670

POSTAL ADDRESS

PO Box 1

Sanlamhof

7532

South Africa

INTERNET ADDRESS

http://www.sanlam.co.zawebmaster@sanlam.co.za

TRANSFER SECRETARIES

Mercantile Registrars Limited

(Registration no 1987/003382/06)

10th Floor

11 Diagonal Street

Johannesburg

2001

South Africa

PO Box 1053

Johannesburg

2000

South Africa

Telephone (011) 370-5320

Fax (011) 370-5486