Overview

Rationale
Old Mutual plc is a very significant participant in the South African economy through its three subsidiaries Old Mutual (SA) (our life assurance and asset management businesses), Nedcor and Mutual & Federal. Our strategy is to create a powerful international financial services company using our strong South African businesses. The strength of those businesses and the growth of our customer base requires the normalisation of South African society and the establishment of successful black participation in the economy.

Accordingly, Old Mutual plc has been actively addressing various aspects of Black Economic Empowerment (BEE) over the past few years. Today, we announce a crucial milestone on this journey. We are proposing three separate but inter-dependent transactions designed under a common set of principles which will introduce new broad-based black ownership into each of our South African subsidiaries.

Proposal
We propose to issue new ordinary shares to black controlled entities beneficially owned by our black employees (39%), clients and distributors (27%), communities (10%) and our Black Business Partners (24%) to the value of:

13.48% of the value of Old Mutual (SA) (Old Mutual plc shares)
11.50% of the value of Nedcor’s South African business (Nedcor shares)
11.00% of Mutual & Federal (Mutual & Federal shares)

For Old Mutual plc as a whole, shares to the value of 12.75% of the value of its South African business will be placed under direct black ownership. The total value of all the shares to be issued under this proposal is R7.2bn of which R7.1bn will be to black shareholders.

Internal funding arrangements are proposed for each South African subsidiary to allow them to acquire the shares.

The total number of shares to be issued under this proposal will amount to (as a percentage of the enlarged share capital of each entity):

5.64% of Old Mutual plc
9.47% of Nedcor
11.14% of Mutual & Federal

Financial impact
The financial impact of these proposals is a reduction in the embedded value of Old Mutual plc of 3.1p (33c) per share (2.2%) and a 3.3% and 5.7% dilution in adjusted and basic earnings per share respectively. The impact at Nedcor is a 0.10% accretion in NAV per share and a 0.14% dilution in headline earnings per share. At Mutual & Federal, there will be a 0.28% dilution in NAV per share and a 1.05% accretion in headline earnings per share. There will be an additional dilutive impact from the effects of share based payments which will be more apparent when accounts are prepared under new IFRS conventions.

The economic cost for each South African subsidiary is as follows:

	Economic cost as a % of the value of South African business	Economic cost as a % of the value of indicative market capitalisation
The OMSA Transaction	3.15%	-
The Nedcor Transaction	3.66%	3.28%
The Mutual & Federal Transaction	3.13%	3.13%
Old Mutual plc (effect of three transactions)	3.31%	2.49%

We are confident that the cost of this proposal will be amply repaid over its ten year life.

Very Broadly Based
As a result of this proposal, all of our South African employees will have share interests in our companies with the incentivisation that share ownership provides. Uniquely, many of our clients and distributors will also acquire an interest in our shares which will support our strategy greatly.

Quality Partners with Detailed Performance Agreements
We believe that our Black Business Partners will add value to our businesses and we are extremely pleased to have the WIPHOLD and BRIMSTONE Consortia becoming shareholders in our businesses, as well as Mtha at Mutual & Federal. All are leading entrepreneurial BEE groupings with wide spread beneficial ownership. Our agreements with the Black Business Partners include detailed measurable performance agreements with significant financial incentives for delivery, and require a substantial commitment of time and energy.

Summary
In summary, our proposals today, form a transformational deal that secures future returns for all our stakeholders.

The breadth of involvement means that over 500 000 South African’s across all nine provinces, amongst all our stakeholders – employees, clients, distributors, communities, will have an interest in our success.

And our proposals are good business sense – they build our customer base, incentivise our employees, and add the strength of our partners towards the achievement of our strategy.

These transactions are an important investment in our future.

Jim Sutcliffe
Chief Executive, Old Mutual plc