Financial Statements for the year ended 31 December 2008

• Account Policies and Basis of Presentation
• Segmental Reporting
• Application of new and revised standards
• Group Balance Sheet
• Group Income Statement
• Group Statement of Changes in Equity
• Group Cash Flow Statement
• Notes to the Financial Statements
• Segmental Information

ACCOUNTING POLICIES AND BASIS OF PRESENTATION

The accounting policies adopted for the purposes of the financial statements comply with International Financial Reporting Standards and with applicable legislation. The policy liabilities and profit entitlement rules are determined in accordance with prevailing legislation, generally accepted actuarial practice and the stipulations contained in the demutualisation proposal. There have been no material changes in the financial soundness valuation basis since 31 December 2007, apart from changes in the economic assumptions.

The basis of presentation of the results is also consistent with that applied in the 2007 financial statements and shareholders' information, apart from the following:

Segmental reporting

The Group announced the creation of a Sanlam UK cluster during June 2008, which consolidates the Group's operations in the United Kingdom (UK). The following businesses have been transferred from other Group clusters to the Sanlam UK cluster:

• From Sanlam Personal Finance: Merchant Investors;
• From Independent Financial Services: Punter Southall Group, Intrinsic and Nucleus.

The newly acquired UK businesses, Principal and Buckles, also form part of the Sanlam UK cluster.

Responsibility for the remaining businesses formerly included in the Independent Financial Services cluster has been transferred to the Group Finance function. These operations are accordingly not presented separately anymore but included in the Corporate and Other cluster.

Comparative information in the Group's segmental reporting and shareholders' information has been restated to reflect these changes in the Group's operational structure.

The results for MiWay, the Group's direct financial services business launched in February 2008, are included in the Short-term Insurance cluster.

Application of new and revised standards

The following new or revised IFRSs and interpretations are applied in the Group's 2008 financial year:

• IFRIC 11 IFRS 2 Group and Treasury share Transactions
• IFRIC 13 Customer Loyalty Programmes
• IFRIC 14 IAS19 The Limit on Defined Benefit Asset, Minimum Funding Requirement and their Interaction
• IAS 39 Amended Financial Instruments: Recognition and Measurement – Reclassification of financial assets
• IFRS 7 Amended Financial Instruments: Disclosure – Reclassification of financial assets

The application of these standards and interpretations did not have a significant impact on the Group's reported results and cash flows for the year ended 31 December 2008 and the financial position at 31 December 2008. The Group has not applied the reclassification option from fair value to amortised cost measurement allowed in terms of the recently amended IAS 39 to any of its financial instruments.

The following new or revised IFRSs and interpretations have effective dates applicable to future financial years and have not been early adopted:

• IAS 1 Revised Presentation of Financial Statements (effective 1 January 2009)
• IAS 1 Amended Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation (effective 1 January 2009)
• IAS 27 Amended Consolidated and Separate Financial Statements (effective 1 July 2009)
• IAS 32 Amended Financial Instruments: Presentation – Puttable Financial Instruments and Obligations Arising on Liquidation (effective 1 January 2009)
• IAS 39 Amended Financial Instruments: Recognition and Measurement – Eligible Hedged Items (effective 1 July 2009)
• IFRS 2 Amended Share-based Payment – Vesting Conditions and Cancellations (effective 1 January 2009)
• IFRS 3 Revised Business Combinations (effective 1 July 2009)
• May 2008 Improvements to IFRS (mostly effective 1 January 2009)

The application of these revised standards and interpretations in future financial reporting periods is not expected to have a significant impact on the Group's reported results, financial position and cash flows, except for IFRS 3 Revised and IAS 27 Amended for which the impact can not be quantified as it will depend on the nature and structure of a specific business combination, combined with the fact that the revised standards will be applied on a prospective basis.

External audit

The Group financial statements have been extracted from the Group's 2008 annual financial statements, which have been audited by Ernst & Young Inc. and their unqualified audit opinion is available for inspection at the company's registered office. The Shareholders' information has also been subject to external audit by Ernst & Young Inc..

GROUP BALANCE SHEET at 31 December 2008
	2008	2007
	R million	R million
ASSETS
Property and equipment	382	298
Owner-occupied properties	652	650
Goodwill	2 623	2 447
Value of business acquired	1 309	1 000
Deferred acquisition costs	1 970	1 693
Long-term reinsurance assets	506	487
Investments	268 530	290 101
Properties	15 981	15 648
Equity-accounted investments	1 317	1 759
Equities and similar securities	120 284	149 038
Public sector stocks and loans	50 531	49 887
Debentures, insurance policies, preference share     and other loans	35 309	34 091
Cash, deposits and similar securities	45 108	39 678
Deferred tax	712	475
Non-current assets held for sale	–	2 060
Short-term insurance technical assets	2 250	263
Working capital assets	38 974	41 357
Trade and other receivables	28 908	30 538
Cash, deposits and similar securities	10 066	10 819
Total assets	317 908	342 831
EQUITY AND LIABILITIES
Shareholders' fund	27 651	29 334
Minority shareholders' interest	2 596	2 220
Total equity	30 247	31 554
Long-term policy liabilities	229 268	244 660
Insurance contracts	120 879	128 398
Investment contracts	108 389	116 262
Term finance	6 763	6 594
Margin business	2 830	2 687
Other interest-bearing liabilities	3 933	3 907
External investors in consolidated funds	9 822	12 278
Cell owners' interest	447	336
Deferred tax	440	1 354
Non-current liabilities held for sale	-	1 606
Short-term insurance technical provisions	8 229	7 719
Working capital liabilities	32 692	36 730
Trade and other payables	29 325	32 997
Provisions	1 453	973
Taxation	1 914	2 760
Total equity and liabilities	317 908	342 831

2007 comparative Trade and other payables and Trade and other receivables have been increased by R2,6 billion for inappropriate set-off in the prior period.

GROUP INCOME STATEMENT for the year ended 31 December 2008
	2008	2007
	R million	R million
Net income	19 700	52 504
Financial services income	28 578	26 715
Reinsurance premiums paid	(2 990)	(2 685)
Reinsurance commission received	401	373
Investment income	17 044	14 740
Investment surpluses	(24 672)	15 885
Finance cost – margin business	(244)	(246)
Change in fair value of external investors liability	1 583	(2 278)
Net insurance and investment contract benefits and claims	(4 352)	(33 414)
Long-term insurance and investment contract benefits	3 062	(26 413)
Short-term insurance claims	(9 189)	(8 533)
Reinsurance claims received	1 775	1 532
Expenses	(11 134)	(9 939)
Sales remuneration	(4 189)	(3 554)
Administration costs	(6 945)	(6 385)
Impairment of investments and goodwill	(247)	(7)
Amortisation of value of business acquired	(77)	(51)
Net operating result	3 890	9 093
Equity-accounted earnings	34	228
Finance cost – other	(391)	(281)
Profit before tax	3 533	9 040
Taxation	(621)	(2 493)
Shareholders' fund	(428)	(1 678)
Policyholders' fund	(193)	(815)
Profit from continued operations	2 912	6 547
Discontinued operations	25	(168)
Profit for the year	2 937	6 379
Attributable to:
Shareholders' fund	2 494	5 494
Minority shareholders' interest	443	885
	2 937	6 379
Earnings attributable to shareholders of the company (cents):
Basic earnings per share	125,0	256,6
Diluted earnings per share	122,0	250,9
Earnings attributable to shareholders of the company from continuing operations (cents):
Basic earnings per share	126,1	260,8
Diluted earnings per share	123,1	255,1

GROUP STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2008
	2008	2007
	R million	R million
Shareholders' fund:
Balance at beginning of the period	29 334	29 121
Total recognised income	2 554	5 395
Profit for the period	2 494	5 494
Movement in foreign currency translation reserve	60	(99)
Net movement in treasury shares	17	(3 551)
Net realised investment surpluses on treasury shares	(307)	(288)
Cost of net treasury shares acquired (1)	324	(3 263)
Share-based payments	134	74
Dividends paid (2)	(1 907)	(1 705)
Shares cancelled	(2 481)	–
Balance at end of the period	27 651	29 334
Minority shareholders' interest:
Balance at beginning of the period	2 220	3 934
Total recognised income	537	858
Profit for the period	443	885
Movement in foreign currency translation reserve	94	(27)
Net movement in treasury shares	(48)	(527)
Net realised investment surpluses on treasury shares	(28)	24
Cost of net treasury shares disposed/(acquired) (1)	(20)	(551)
Share-based payments	23	10
Dividends paid	(366)	(1 474)
Acquisitions, disposals and other movements in minority interests	230	(581)
Balance at end of the period	2 596	2 220
Shareholders' fund	29 334	29 121
Minority shareholders' interest	2 220	3 934
Total equity at beginning of the period	31 554	33 055
Shareholders' fund	27 651	29 334
Minority shareholders' interest	2 596	2 220
Total equity at end of the period	30 247	31 554
(1)    Comprises movement in cost of shares held by subsidiaries and the share incentive trust.
(2)    Dividend of 93 cents per share paid during 2008 (2007: 77 cents per share) in respect of the 2007 financial year.

GROUP CASH FLOW STATEMENT for the year ended 31 December 2008
	2008	2007
	R million	R million
Net cash inflow from operating activities	6 810	30
Net cash inflow from investment activities	(404)	9 859
Net cash outflow from financing activities	(2 570)	(3 227)
Net increase in cash and cash equivalents	3 836	6 662
Cash, deposits and similar securities at beginning of the period	51 309	44 647
Cash, deposits and similar securities at end of the period	55 145	51 309
Cash, deposits and similar securities classified as held for sale	–	(812)
Cash, deposits and similar securities at end of the period – continuing operations	55 145	50 497
Cash inflow from discontinued operations	(812)	4
Cash, deposits and similar securities at beginning of the period	812	808
Cash, deposits and similar securities at end of the period – discontinued operations	–	812

NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2008
		2008	2007
		cents	cents
1.	EARNINGS PER SHARE
	Basic earnings per share:
	Headline earnings	135,4	225,7
	Profit attributable to shareholders' fund	125,0	256,6
	Diluted earnings per share:
	Headline earnings	132,2	220,8
	Profit attributable to shareholders' fund	122,0	250,9
		R million	R million
	Analysis of earnings:
	Profit attributable to shareholders	2 494	5 494
	Less: Net profit on disposal of subsidiaries	(3)	(44)
	Less: Net profit on disposal of associates	–	(624)
	Less: Equity-accounted non-headline earnings	(33)	–
	Plus: Impairment of investments and goodwill	244	7
	Headline earnings	2 702	4 833
		million	million
	Number of shares:
	Number of ordinary shares in issue at beginning of period	2 303,6	2 303,6
	Less: Weighted average number of shares cancelled	(64,3)	–
	Less: Weighted average Sanlam shares held by subsidiaries (including policyholders)	(243,5)	(162,4)
	Weighted average number of shares for basic earnings per share	1 995,8	2 141,2
	Add: Weighted conversion of deferred shares	14,9	12,1
	Add: Total number of shares and options	45,5	43,3
	Less: Number of shares (under option) that would have been issued at fair value	(12,7)	(7,3)
	Weighted average number of shares for diluted earnings per share	2 043,5	2 189,3