5th Sep 2006 07:01
Old Mutual PLC05 September 2006 Old Mutual plcIncorporated in England and Wales(Registration number: 3591559)ISIN: GB0007389926, JSE share code: OML, NSX share code: OLM,Issuer code: OLOML("Old Mutual plc") Nedbank Group Limited(Incorporated in the Republic of South Africa)(Registration number: 1966/010630/06)JSE share code: NED ISIN: ZAE000004875("Nedbank Group") Mutual & Federal Insurance Company Limited(Incorporated in the Republic of South Africa)(Registration number: 1970/006619/06)JSE share code: MAF, NSX share code: MTFISIN: ZAE000010823("Mutual & Federal") Old Mutual Life Assurance Company (Namibia) Limited(Incorporated in the Republic of Namibia)(Registration number: 97/081)("Old Mutual Namibia") NedNamibia Holdings Limited(Incorporated in the Republic of Namibia)(Registration number: 91/075)("NedNamibia Holdings") Mutual & Federal Insurance Company of Namibia Limited(Incorporated in the Republic of Namibia)(Registration number: 1989/459)("Mutual & Federal Namibia") Empowering the Old Mutual Group businesses in the Republic of Namibia Transformation is a business imperative for the Old Mutual Group's Namibianbusinesses and Black Economic Empowerment is a key requirement for thepromotion of sustainable economic growth and social development in Namibia.Old Mutual Namibia's presence in the country goes back to 1921. Today the Old Mutual Group operates three strong franchises which employ over1 000 people in Namibia, service more than 142 000 clients and manage assetsof some N$16.9 billion. IntroductionAs a major financial force in the economy of the Republic of Namibia("Namibia"), it is important that the interests of the shareholders of OldMutual plc and those of its subsidiaries Nedbank Group and Mutual & Federal(collectively, "the Group"), are aligned with the long-term prosperity andsuccess of Namibia. The businesses in Namibia comprise Old Mutual Namibia,NedNamibia Holdings and Mutual & Federal Namibia and their subsidiaries ("theGroup's Namibian business"). Transformation is a business imperative for the Group's Namibian businessesand Black Economic Empowerment ("BEE") is a key requirement for the promotionof sustainable economic growth and social development in Namibia. Old MutualNamibia's presence in the country goes back to 1921. Today the Group operatesthree strong franchises which employ over 1 000 people in Namibia, servicemore than 142 000 clients and manage assets of some N$16.9 billion. Significant progress has been made over the past decade in implementing BEEinto the Group's Namibian businesses through employment equity, skillsdevelopment, procurement practices, enterprise development and corporatesocial investment programmes. The Group will now introduce black equity ownership through three separate butinterdependent transactions. These transactions are truly broad-based andinclude staff and management, distributors, trade union members and theirfamilies, entrepreneurs, and women's and church groupings across the lengthand breadth of Namibia. The Group's BEE transaction will be the largest ever undertaken in Namibia,being more than three times greater in value than any other deal concluded todate. Moreover, in terms of true transformation, this deal will be the mostbroad-based as over 250 000 black Namibians will be empowered and their livesenhanced, both directly and indirectly, through the transaction. Group TransactionsThe Group proposes three separate transactions which will introduce new broad-based black ownership into each of its Namibian businesses (collectivelyreferred to as the "Group Transactions") which will equate to: • 13.31% of Old Mutual Namibia, through the issue of new ordinary shares inOld Mutual plc. No shareholder approval is required for the issue of theseshares as they are issued under existing authorities previously approved byOld Mutual plc shareholders; • 11.13% of NedNamibia Holdings, through the issue of new ordinary shares inNedbank Group which will amount to 0.15% of the enlarged issued share capital.This issue is deemed a specific issue of shares for cash in terms of theListings Requirements of the JSE Limited and is subject to the approval ofNedbank Group shareholders; and • 11.42% of Mutual & Federal Namibia, through the issue of new ordinary sharesin Mutual & Federal which will amount to 0.26% of the enlarged issued sharecapital of Mutual & Federal. This issue is deemed a specific issue of sharesfor cash in terms of the Listings Requirements of the JSE Limited and issubject to the approval of Mutual & Federal shareholders. Namibians currently hold approximately 0.35% of Old Mutual plc, 0.70% ofNedbank Group and 0.62% of Mutual & Federal respectively. The table below provides a summary of the participants, the value of theshares to be issued to each group of participants and the effective blackshareholding to be acquired in each of the Group companies Namibianoperations: Summary of the effective ownership in the Namibian businesses Total value of Old Mutual Nedbank Group Mutual & Federal shareholding N$m % N$m % N$m % N$m £m Employees andManagement 66.96 4.01 21.40 3.47 7.58 4.25 95.94 7.10StrategicBusinessPartners 33.75 2.05 20.25 3.37 6.75 3.97 60.75 4.50StrategicCommunityPartners 12.50 0.76 7.50 1.24 2.50 1.46 22.50 1.67DistributorsTrust 35.00 2.12 - - - - 35.00 2.59EducationTrust 40.00 2.42 10.00 1.67 - - 50.00 3.70Long-termStrategicAllocation 32.25 1.95 8.25 1.38 2.96 1.74 43.46 3.22Total 220.46 13.31 67.40 11.13 19.79 11.42 307.65 22.78 Notes:1. Percentage of the respective Namibian business value.2. Exchange rate - ZAR1:N$1/£1:N$13.5126 (weighted average exchange rate from25 August 2006 to 31 August 2006). Rationale for the Group TransactionsOld Mutual plc is an international financial services group with significantbusiness interests in Africa, the United States of America, Europe and theUnited Kingdom. Old Mutual plc is listed on the London Stock Exchange plc("LSE") and other stock exchanges in Namibia, the Republic of South Africa("South Africa"), the Republic of Malawi, the Republic of Zimbabwe and theKingdom of Sweden. Namibia represents a portion of the Group's African business and, throughclients' savings, the Group is a significant contributor to the Namibianeconomy. It is therefore important that Old Mutual plc's shareholders' long-term interests are aligned with the success of Namibia as a country. Unlike South Africa, where the Financial Sector Charter ("FSC") and the SouthAfrican Department of Trade and Industry Codes of Good Practice on Broad-BasedBlack Economic Empowerment (the "SA Codes") set out certain BEE ownershiprequirements for South African financial services companies, there iscurrently no such legislation or industry agreement in Namibia. The financialservices industry in Namibia is in the process of establishing a charter forNamibia, with management of the Group's businesses in Namibia havingparticipated in this process. It is expected that such a charter will bederived from the guidelines provided by the Namibian Minister of Finance andto some extent from precedents in South Africa, being the South African FSCand the more recently introduced SA Codes. Notwithstanding the fact that nolegislation or industry charter currently exists in Namibia, the Groupbelieves that BEE in Namibia is imperative for the following reasons: • many financial sector entities have already concluded BEE deals andtherefore have a significant commercial and competitive advantage over theircompetitors who have not concluded BEE deals; • the proposed transaction will help to grow the Namibian businesses throughinteractions with BEE partners; • the Group Transactions will assist in the retention of Namibian businessthat is at risk of being lost if the Namibian businesses do not acquireNamibian BEE ownership credentials; • the deal will improve the profile of the Group's Namibian businesses; • the proposal will assist strategic and holistic transformation of the Groupin Namibia; and • the proposal empowers black staff in Namibia. The Group Transactions have been designed to complement the Group's overallstrategy of implementing broad-based black empowerment into its Namibianbusinesses. The Group Transactions are truly broad-based and include staff andmanagement, distributors, trade union members and their families,entrepreneurs, as well as women's and church groupings throughout Namibia. The owners of shares to be issued in the Group Transactions are set out below: • Employees and Management - The Group recognises the importance of creatingan employee and management complement that is representative of Namibia'sdemographics. Acknowledging that the Group is not yet demographicallyrepresentative at all levels in its Namibian businesses and thattransformation comes from within, the Group proposes to set aside shares witha market value of N$95.94m (£7.10m) to recruit, retain and incentivise blackemployees and management. • Strategic Business Partners - Central Investment Holdings (Proprietary)Limited ("Central Investment"), Manmar Investment Thirty Five (Proprietary)Limited ("Manmar") and Northern Empowerment Investments (Proprietary) Limited("Northern Empowerment Investments") have been chosen as active StrategicBusiness Partners to assist in growing the business and drivingtransformation. These partners will be issued with shares worth N$60.75m(£4.50m) in aggregate. • Strategic Community Partners - Women's Action for Development ("WAD") and aconsortium of some of Namibia's largest churches, whose congregations arepredominantly black, have been chosen as active partners to assist in growingthe business. The churches are the Evangelical Lutheran Church in Namibia("ELCIN"), the Evangelical Lutheran Church in the Republic of Namibia("ELCRN") and the African Methodist Episcopal Church in Namibia ("AME"). TheStrategic Community Partners will be issued shares worth N$22.50m (£1.67m) inaggregate. • Distributors Trust - Part of Old Mutual Namibia's strategy is to expand itsclient base by developing black financial advisers and brokers in Namibia. Assuch, an aggregate of N$35.00m (£2.59m) worth of Old Mutual plc shares havebeen set aside to assist in the development of distributors throughoutNamibia. • Education Trust - In aggregate, N$50.00m (£3.70m) of Old Mutual plc andNedbank Group shares are being allocated in order to assist with the educationof black members of trade unions, and their families, who do business with OldMutual Namibia and NedNamibia Holdings. • Long-term Strategic Allocation - An allocation of shares has been made toassist with future long-term strategic initiatives amounting to N$43.46m(£3.22m). These shares will be used by each of the Group companies tocapitalise on strategic opportunities that may arise in the future which couldadd value to the Group companies. Principles of the Group TransactionsIn designing the Group Transactions, the Group developed a set of principlesaimed at sustainable, broad-based empowerment. These principles include: • Transformation - The Group has designed the Group Transactions to accelerateoperational transformation. This extends to employment equity, particularly atthe management level, client acquisition, strategies for underserved markets,profiling the Group and community involvement. The Group Transactions arebeing implemented as part of the Group's comprehensive, overarching approachto rapid transformation in Namibia. • Broad-based approach - The Group Transactions are designed to, directly orindirectly, benefit more than 250 000 black Namibians across the country,including employees and management, women's groupings, trade union members,entrepreneurs and communities. The Group has sought to achieve an equitablebalance between individuals that are internal and external to the Group. Inthe process, the ultimate beneficiaries of the Group Transactions have beenreviewed to ensure that no individual benefits unduly. Employees andmanagement will be the primary beneficiaries of the Group Transactions. • Alignment of value added to benefits received - No one individual orultimate beneficiary will be rewarded out of proportion to the value that theyadd. • Performance agreements have been negotiated with the Strategic BusinessPartners and Strategic Community Partners to ensure mutually beneficial,enduring relationships. • The performance agreements have been designed to incentivise the StrategicBusiness Partners and Strategic Community Partners by aligning their rewardswhich they receive under the performance agreements to the value that they addto the businesses. • The Group Transactions seek to ensure that benefits are earned incrementallyover the term of the agreements. • Full economic benefits and voting rights - From the inception of the GroupTransactions, shareholders and beneficiaries must have the full benefits ofthe voting rights and the economic benefits attached to equity ownership. • Estimated benefits to exceed the estimated costs of the Group Transactions -In designing the Group Transactions, the Group sought to ensure that, overtime, the commercial benefits of implementing the Group Transactions wouldoutweigh the costs and that the costs are in line with other BEE transactionsconcluded to date. • Maximising long-term shareholder value - The overall economic cost of theGroup Transactions equates to approximately 3.70% of the value of the Group'sNamibian businesses. The effective economic cost to Old Mutual plcshareholders, taking into account Old Mutual plc's effective holdings inNedbank Group and Mutual & Federal, is N$76m or approximately 0.06% of OldMutual plc's current market capitalisation. The initial impact is a decreasein embedded value per Old Mutual plc share of less than 1%. Adjusted operatingprofit per Old Mutual plc share (which excludes initial costs of the GroupTransactions) and basic earnings per share (which includes initial costs)decreases by less than 1%. The Group expects the benefits of the different elements of the GroupTransactions to significantly outweigh the costs over the longer term. Transaction summarySubject to the fulfilment of the conditions precedent set out in paragraphs3.11, 4.12 and 5.9 below, which include, inter alia, the approval of NedbankGroup and Mutual & Federal shareholders, the Group proposes to implement threeseparate transactions that will result in black ownership of at least 11% inthe Namibian businesses as a whole, as defined below, including: • the issue of Old Mutual plc's shares resulting in effective blackshareholding worth 13.31% of Old Mutual Namibia (the "Old MutualTransaction"). The Initial Market Value of the Old Mutual Plc shares will beN$21.64 less the Namibian dollar equivalent of any dividend per share that OldMutual plc may declare in respect of its interim results to 30 June 2006.Based on the price of N$21.64 per share, ignoring any interim dividend, thenumber of shares to be issued will equal approximately 0.19% of Old Mutualplc's current issued share capital; • the issue of 0.15% of Nedbank Group's current issued share capital withresulting effective black shareholding worth 11.13% of NedNamibia Holdings(the "Nedbank Group Transaction"); and • the issue of 0.26% of Mutual & Federal's current issued share capital withresulting effective black shareholding worth 11.42% of Mutual & FederalNamibia (the "Mutual & Federal Transaction"). As part of this process, Old Mutual plc, Nedbank Group and Mutual & Federalhave signed detailed Subscription Agreements with the Strategic BusinessPartners and Strategic Community Partners setting out the terms of theirparticipation. Detailed performance agreements have also been entered intobetween the Strategic Business Partners and Strategic Community Partners andOld Mutual Namibia, NedNamibia Holdings and Mutual & Federal Namibia, settingout the required performance criteria together with the implications ofexceeding or not meeting those criteria. In summary, the table below sets out the value of shares which will be issuedthrough the Group Transactions and the respective black ownership portion: Summary of Group Transactions Black ownership portion Value as a % of Namibian business Value of Value of post-issue shares shares of shares N$m £m %Old Mutual Transaction 220.46 16.32 13.31Nedbank Group Transaction 67.40 4.99 11.13Mutual & Federal Transaction 19.79 1.46 11.42 This announcement sets out the details and financial effects of the Old MutualTransaction, the Nedbank Group Transaction and the Mutual & FederalTransaction and the combined financial effects for Old Mutual plcshareholders. 1. Impact of the Group Transactions on Old Mutual plc shareholders 1.1 Accounting treatment of the Group TransactionsIn accordance with the Rules of the UK Listing Authority, the JSE Limited andthe Namibian Stock Exchange ("NSX"), the underlying accounting treatment is inaccordance with the accounting policies set out in the last published auditedfinancial information. In presenting the consolidated impact for Old Mutualplc of the Group Transactions, information is to be presented in accordancewith International Financial Reporting Standards ("IFRS"). The accountingtreatment adopted may require transactions to be accounted for in a differentmanner to their legal substance and form. The following accounting principles are applicable: • Accounting for share-based payments - Costs of the Group Transactions areaccounted for in accordance with IFRS2: Share-based payments. The costs of theservices provided by the employees, Strategic Business Partners and StrategicCommunity Partners are recognised in the income statement over the vestingperiod for the instruments granted, based on the fair value of the servicesprovided. Fair value is determined by reference to the fair value of theinstruments granted. • Consolidation of Special Purpose Vehicles ("SPVs") - Where control is deemedto remain within the Group, the entities established to support the GroupTransactions are regarded as subsidiaries. These SPVs include those relatingto the Distributors Trust and Education Trust. The acquisition of Old Mutualplc shares by the consolidated SPVs are regarded as issues of treasury shares,resulting in a reduction in equity within the consolidated financialstatements. • Earnings per share - The weighted average number of shares is impacted bythe Group Transactions only to the extent that any issue of shares is notregarded as treasury shares for the purpose of the consolidated financialstatements. • Embedded value per share (Old Mutual plc impact only) - The number of sharesin issue will increase to include the Old Mutual plc shares acquired by allSPVs. Where deferred consideration is to be received for the issue of theshares, an adjustment to the embedded value is required to represent thediscounted present value of the consideration. 1.2 Combined pro forma financial effects for Old Mutual plc shareholdersThe Group Transactions do not reduce, on a consolidated basis, Old Mutualplc's consolidated Basic Earnings Per Share ("EPS") and adjusted Operating EPSfor the year ended 31 December 2005 by more than 1%, and do not decreaseAdjusted Embedded Value ("EV") per share at 31 December 2005 by more than 1%.As these do not have a material impact on the financial results of the largerGroup, we have not included the detailed financial effects in thisannouncement. 2. Black shareholder groupings 2.1 Employee and management schemesCurrent and future employees are a critical component of the Group'stransformation strategy. By reserving a significant portion of shares for thebenefit of current and future black managers and employees, the GroupTransactions will assist in transforming and creating a dynamic, effectiveworkforce. To this end, each of the Group Transactions incorporates a broad-based component which allows for an award of shares to the value of N$8 000(£592) to employees who have not participated in any other employee andmanagement share scheme of the Group. The employee and management schemes alsoprovide the Group with sufficient resources to meet its ongoing employmentequity targets. 2.2 Strategic Business Partners and Strategic Community Partners 2.2.1 Overview of the Strategic Business Partner and Strategic CommunityPartner selection processThe Group has selected Central Investment, Manmar and Northern EmpowermentInvestments as its Strategic Business Partners and WAD and a consortium ofsome of Namibia's largest churches, whose congregations are predominatelyblack, being ELCIN, ELCRN and AME. The selection process involved theassessment of the potential Strategic Business Partners and StrategicCommunity Partners against the following criteria: • Empowerment credentials and broad-based criteria - An assessment of theshareholding and the ultimate beneficiaries of the Strategic Business Partnersand Strategic Community Partners with the specific objective of ensuring thatpotential partner companies are black owned and controlled companies,representing a broad-base of beneficiaries. Consideration was also given as towhether directors, management and leadership of the potential StrategicBusiness Partners and Strategic Community Partners were predominantlycomprised of black people. • Leadership and values - An assessment was made as to whether the potentialStrategic Business Partners and Strategic Community Partners had strong, clearleadership and shared the Group's values. Regard was also given as to whetherthe leadership of the potential Strategic Business Partners and StrategicCommunity Partners would be able to commit sufficient time and resources tofocus on business development and transformation. • Experience - An assessment as to whether the potential Strategic BusinessPartners had a demonstrable track record of transformational ability as wellas relevant business experience. A further assessment of each of the potential Strategic Business Partners' andStrategic Community Partners' ability to assist Old Mutual Namibia, NedNamibiaHoldings and Mutual & Federal Namibia with each of the following objectiveswas undertaken: • the retention of existing business and the attraction of additionalbusiness; • the strategic and holistic transformation of the Group's businesses inNamibia in response to a changing business environment; and • improving the corporate profile and image of the Group's businesses inNamibia and helping to position the businesses. This process assisted the Group to determine the level of participation ofeach of the Strategic Business Partners and Strategic Community Partners inthe Group Transactions. 2.2.2 Performance AgreementsThe Strategic Business Partners and Strategic Community Partners have eachconcluded performance agreements with Old Mutual Namibia, NedNamibia Holdingsand Mutual & Federal Namibia, which will govern the relationship with andperformance and remuneration of the Strategic Business Partners and StrategicCommunity Partners. It is intended that, on an annual basis, the StrategicBusiness Partners and Strategic Community Partners will meet with each of thebusiness units of Old Mutual Namibia, NedNamibia Holdings and Mutual & FederalNamibia, as appropriate, in order to detail the specific tasks to be performedin the following twelve-month period. The Strategic Business Partners andStrategic Community Partners have agreed the first set of performance criteriawith Old Mutual Namibia, NedNamibia Holdings and Mutual & Federal Namibiawhich will benchmark future performance agreements in terms of the type andthe amount of work required and which will apply to the twelve-month periodfrom 1 January 2007. In terms of the performance agreements, the StrategicBusiness Partners and Strategic Community Partners will commit time andresources to the business units of Old Mutual Namibia, NedNamibia Holdings andMutual & Federal Namibia in order to meet the requirements of their respectiveperformance agreements. Progress will be assessed semi-annually. The Strategic Business Partners and Strategic Community Partners will be paidan annual performance fee that will be linked to performance targets achievedin terms of the performance agreements, the annual fee combined for allparties will range between N$ nil (£ nil) and N$3.56m (£0.26m) for Old MutualNamibia, N$ nil (£ nil) and N$2.14m (£0.16m) for NedNamibia Holdings and N$nil (£ nil) and N$0.72m (£0.05m) for Mutual & Federal Namibia. A portion ofthis performance fee will be used to cover pre-agreed working capitalrequirements of the Strategic Business Partners and Strategic CommunityPartners. The balance in the case of the Old Mutual Transaction will beapplied to satisfy the amounts remaining due in respect of the Old Mutualshares issued to the relevant SPV. In the case of the Nedbank GroupTransaction and the Mutual & Federal Transaction, the balance will be utilisedto acquire new Nedbank Group and Mutual & Federal shares, respectively, asdetailed in the paragraphs dealing with the funding arrangements in theseparate Old Mutual, Nedbank Group and Mutual & Federal sections below. 2.2.3 Subscription AgreementsThe Subscription Agreements with the Strategic Business Partners and StrategicCommunity Partners are detailed and contain a number of provisions designed,inter alia, to ensure that the partners: • remain black companies or organisations during the 10 year lock-in period; • do not dispose of any shares acquired as a result of the Group Transactionsduring such lock-in period; and • do not enter into equity transactions or enter into conflictingrelationships with any of the Group's competitors. The Subscription Agreements also contain provisions dealing with certainpossible events such as the transactions not meeting the BEE requirements inNamibia that may be subsequently introduced the potential consolidation of theGroup's businesses in Namibia and a warehousing arrangement of the relevantGroup shares in the event that the participation of one or more parties to theGroup Transaction may be terminated due to breach by that party. 2.2.4 Strategic Business Partners2.2.4.1 Central InvestmentThe consortium consists of four separate groups, namely Fox Investments(Proprietary) Limited (45%), Ripanga Investment Holdings (Proprietary) Limited(25%), Latenda Investment Holdings (Proprietary) Limited (15%) and PrudentInvestments (Proprietary) Limited (15%). All four groups have shareholders ofhigh standing in the business and public sector and are prominent and credibleindividuals who can add significant value to the Group businesses in Namibia.Women's participation equates to 46% of this consortium. 2.2.4.2 ManmarThe consortium comprises key individuals from Namibia's coastal businesscommunity who occupy influential positions in the construction, fishing,media, medical and mining sectors. The consortium intends to expand to includeother groups within the coastal region. This consortium will add value to theNamibian businesses in the corporate and retail areas. 2.2.4.3 Northern Empowerment InvestmentsA group of eight businessmen and women who are prominent in Namibia's northernregions have formed Northern Empowerment Investments as their consortiumvehicle for the Group Transactions. The northern regions of Namibia are hometo more than half of the population of the country and this region is expectedto offer significant growth prospects to the Group's Namibian businesses.Women's participation equates to 25% of this consortium. 2.2.5 Strategic Community Partners2.2.5.1 ChurchesChurches were included due to their strong social focus, their particularfocus on the upliftment of the most disadvantaged Namibians and also toacknowledge the role played by churches in the liberation of Namibia. Thisgroup comprises three of the largest black churches in Namibia. Over 90% ofNamibians consider themselves Christians and, as such, the Group's Namibianbusinesses believe that properly organised church entities can add substantialvalue, especially in the areas of Group-wide marketing, the retail businessesof NedNamibia Holdings and Mutual & Federal Namibia and in Old Mutual NamibiaGroup Schemes. A significant feature of the Group interface with the churcheswill be that the majority of the cooperation will be channelled through thewomen's desks of the respective churches. 2.2.5.2 Women's Action for DevelopmentWAD, a non-profit organisation with a membership base of 15 000 women,represents the interests of predominantly rural women in Namibia and has ahigh profile in many regions of Namibia. WAD was included due to their socialfocus in particular, women's upliftment and skills development which encouragefinancial independence. WAD provides a major development and advocacy platformfor social and developmental issues and promises to be a powerful partner forthe Group. 2.3 Distributors TrustOld Mutual Namibia has established a Black Distributors Trust to support blackpeople wishing to develop brokerage businesses in Namibia as detailed inparagraph 3.4 below. 2.4 Education TrustOld Mutual Namibia and NedNamibia Holdings have established an Education Trustto assist with the education of black members trade unions and their familieswho do business with Old Mutual Namibia and NedNamibia Holdings as detailed inparagraphs 3.5 and 4.6 below. Key features:• Resultant black ownership at 13.31% of Old Mutual Namibia • Key black shareholders including: Employees and Management, Distributors,Education Trust, Strategic Business Partners and Strategic Community Partners • Aimed at 325 black employees • Distributors Trust to include black distributors and an Education Trust toassist with the educational needs of union members and their dependents • Performance agreements with broad-based Strategic Business Partners andStrategic Community Partners • Aligned with empowerment strategy to preserve and grow business 3.1 Proposed Old Mutual Transaction structureSee graph in press announcement 3.2 Black shareholding as a result of the Old Mutual TransactionAs part of Old Mutual Namibia's ongoing commitment to transformation, OldMutual Namibia is proposing a number of schemes aimed at benefiting a widegroup of stakeholders including employees and management, distributors, tradeunion members and their families, communities, Strategic Business Partners andStrategic Community Partners. Shares in Old Mutual plc, the UK-listed entity, will be issued in order tofacilitate the Old Mutual Transaction. Old Mutual Namibia is a 100% heldNamibian subsidiary of Old Mutual plc. The value of the shares to be issued in respect of the various employee andmanagement schemes and to the various SPVs who are party to the Old MutualNamibia Transaction total N$220.46m, which represents 13.36% of the value ofOld Mutual Namibia. The Initial Market Value will be N$21.64 per share, which represents the 10- dayvolume weighted average price of Old Mutual plc shares to 31 August 2006 on theLSE converted to Namibian dollars, less any dividend per share (in Namibiandollars), that Old Mutual plc may declare in respect of its interim results to30 June 2006. As Old Mutual plc has yet to release its interim results andtherefore no announcement has been made regarding the dividend per share thatOld Mutual plc may declare in respect of its interim results to 30 June 2006,the number of shares to be issued has yet to be finally determined. Based on the10-day volume weighted average price of N$21.64 per share, ignoring any interimdividend, the number of shares to be issued will equal approximately 0.20% ofOld Mutual plc's current issued share capital. The table below sets out the total deal size as well as the black ownership atOld Mutual Namibia using Old Mutual plc shares to facilitate the Old MutualTransaction: Using Old Mutual plc shares At Old Mutual Namibia level Total Black deal ownership Shareholding Issue Deal (post-issue value value of new shares) N$m £m %Employee andManagement Schemes 66.96 4.95 4.01Old Mutual NamibiaManagement Scheme 47.67 3.53 2.89Old Mutual NamibiaSenior BlackManagement Scheme 15.83 1.16 0.96Old Mutual NamibiaBroad-based Scheme 3.46 0.26 0.16Strategic BusinessPartners 33.75 2.50 2.05Central Investment 20.00 1.48 1.21Manmar 7.50 0.56 0.46Northern EmpowermentInvestments 6.25 0.46 0.38Strategic CommunityPartners 12.50 0.93 0.76WAD 6.25 0.46 0.38Churches 6.25 0.46 0.38Black Distributors Trust 35.00 2.59 2.12Education Trust 40.00 2.96 2.42Long-term StrategicAllocation 32.25 2.39 1.95Total 220.46 16.32 13.31 Notes:1. Exchange rate ZAR1:N$1/£1:N$13.5126 (weighted average exchange rate from25 August to 31 August 2006).2. Total effective new shareholding in Old Mutual Namibia post-issue of newshares, is 13.36% with effective black ownership in Old Mutual Namibia post-issue of new shares being 13.31%.3.3 The Old Mutual Namibia Employee and Management Component (worth 4.06% ofOld Mutual Namibia) Old Mutual Namibia firmly believes that its employees and management arecritical catalysts in transforming its business. Allocations to Old MutualNamibia employees and management will be made under the existing managementscheme established at the time of the South African BEE transaction. Threedifferent components are planned for Namibian employees and management: 3.3.1 The Old Mutual Namibia Management Component (2.89% of Old MutualNamibia) The existing Old Mutual Management Scheme's primary purpose is to attract,reward and retain senior and middle management. Old Mutual plc will issue newordinary shares to the Old Mutual Management Scheme share trust which is a newemployee share trust that will be funded by employer companies within OldMutual Namibia. The Old Mutual Namibia Management Scheme share trust will ownshares in Old Mutual plc at a deal value of N$47.67m (£3.53m) (which equatesto 2.89% of Old Mutual Namibia). This new employee share trust will be used to fund the long-term shareincentives that Old Mutual Namibia expects to allocate to black management inthe normal course of business until 2016. By reserving a significant portionof the Old Mutual plc shares for black management, Old Mutual Namibia isdemonstrating its unequivocal commitment to transform its businessfundamentally. Share allocations for white management will also be made in terms of the OldMutual Management Scheme, but will only be matched by the existing employeeshare trust at the time that the allocations are made. Shares will be allocated in terms of Old Mutual's current allocation policy,subject to regular market testing and individual performance. The currentpolicy is to make allocations in a combination of Restricted Share Plan("RSP") share awards and share options. The RSP share awards will vestimmediately (subject to the condition that the participant remains employed byOld Mutual Namibia for a period of time), while the share options will beexercisable after three years (and expire after six years). Participants are to be paid the dividends in respect of the RSP share awardsand will be entitled to exercise the voting rights in respect of the relevantOld Mutual plc shares, but will have no dividend or voting rights in respectof the unexercised share options. 3.3.2 The Old Mutual Namibia Senior Black Management Component (0.96% of OldMutual Namibia)Senior black management employed by Old Mutual Namibia will participate in theexisting Old Mutual senior black management scheme. A new trust will be formedto operate the scheme. Old Mutual plc will issue new ordinary shares to this trust, to be funded bymeans of a grant, from employer companies within the Old Mutual Group such that the trust will own shares in Old Mutual plc at a deal value of N$15.83m(£1.16m) (which equates to 0.96% of Old Mutual Namibia). The trustees, on instruction from the Old Mutual plc Remuneration Committee,will make awards to existing and future participants. The scheme will comprisea once-off allocation with the possibility of an increase in allocation onpromotion. This allocation will be in addition to the normal allocations madein terms of the Old Mutual Management Scheme and will be made by means of RSPshare awards over Old Mutual plc shares. The RSP share awards will vest immediately but participants will only takedelivery of the relevant Old Mutual plc shares after three years (one-third),four years (one-third) and five years (one-third). The RSP share awards will be based on individual performance and subject to amultiple of annual remuneration with participants having to remain in OldMutual Namibia's employment for a period of time. 3.3.3 Old Mutual Namibia Broad-based Component (0.21% of Old Mutual Namibia)All Old Mutual Namibia employees who do not participate in any other sharescheme of the Group will participate in the existing Old Mutual Broad-basedScheme. This scheme will thus operate for the benefit of both black and whiteemployees employed by Old Mutual Namibia, 75% of which are black. The sametrust that operates the Old Mutual Namibia Senior Black Management Componentwill operate the Old Mutual Namibia Broad-based Component. This trust will ownshares in Old Mutual plc at a deal value of N$3.46m (£0.26m) (which equates to0.21% of Old Mutual Namibia), to be funded from employer companies within theOld Mutual Namibia Group. An RSP share award of N$8 000 (£592) per employee will be made upfront to allqualifying employees, subject to a five-year delivery period. 3.4 Old Mutual Namibia Distributor Schemes (2.12% of Old Mutual Namibia)The Old Mutual Namibia Distributor Scheme allows Old Mutual Namibia todemonstrate its commitment to its current and future black distributors. The objective of the Black Distributors Trust will be to provide or securefinance for black brokers and agents, as well as distribution businesses ownedand managed by black Namibians. The finance or security made available by thetrust will be utilised by such black distributors to acquire assets requiredin order to commence operations in a productive manner. The SPV owned by the trust will acquire shares in Old Mutual plc at a dealvalue of N$35.00m (£2.59m) (which equates to 2.12% of Old Mutual Namibia). There is a clear and present need for the development of a network of blackdistributors in order to serve previously underserved markets. The BlackDistributors Trust will assist black distributors to acquire relevantoperational assets (which are often hard to obtain especially given thevariable nature of distribution income) and will ensure and fast track theproductive entry by black distributors into the market. The Black Distributors Trust will be funded using the same funding mechanismas the Strategic Business Partners as detailed in paragraph 3.7 below. 3.5 Old Mutual Namibia Education Trust (2.42% of Old Mutual Namibia)The Old Mutual Namibia Education Trust allows Old Mutual Namibia todemonstrate its commitment to its trade union customer base. Complementing Old Mutual Namibia's current focus on training and education,the purpose of the Education Trust is to provide meaningful benefits to blacktrade union members who are clients and important stakeholders of Old MutualNamibia. The SPV owned by the trust will acquire shares in Old Mutual plc to adeal value of N$40.00m (£2.96m) (which equates to 2.42% of Old MutualNamibia). The Education Trust will be established in conjunction withNedNamibia Holdings. The overall focus of the Education Trust will be to assist with the educationneeds of black members of participating unions. Given the need for andimportance of education in Namibia, especially amongst the black communities,the Education Trust will provide tertiary education scholarships to blackmembers of participating unions and their dependents. A number of trade unions with which Old Mutual Namibia has businessrelationship will be invited to participate in the initiative and blackmembers of such participating unions will benefit directly from the EducationTrust. The following trade unions, which represent a membership of more than600 000, have already registered their support for the Education Trustinitiative: - Mine Workers' Union of Namibia (MUN);- Metal and Allied Namibian Workers' Union (MANWU);- Teachers' Union of Namibia (TUN);- Namibia Food and Allied Workers' Union (NAFAU);- Public Service Union of Namibia (PSUN);- National Union of Namibian Workers (NUNW);- Namibia Transport and Allied Workers' Union (NATAU);- Namibia National Teachers' Union (NANTU);- Namibia Public Workers' Union (NAMPWU); and- Namibia Financial Institutions Union (NAFINU). The Education Trust will be funded using the same funding mechanism as theStrategic Business Partners as detailed in paragraph 3.7 below. 3.6 Old Mutual Namibia Strategic Business Partners and Strategic CommunityPartners (2.81% of Old Mutual Namibia) The Strategic Business Partners and Strategic Community Partners will acquireshares in Old Mutual plc at a deal value of N$46.25m (£3.42m), representing2.81% of the value of Old Mutual Namibia and will be funded on the basisdetailed in paragraph 3.7 below. 3.7 Mechanism to implement the Old Mutual TransactionFor Old Mutual Namibia employees and management components, black-controlledtrusts will be created and funded directly by Old Mutual Namibia employercompanies. For all the other schemes, the Old Mutual plc shares will be issued to eightNamibian incorporated SPVs (set up for and wholly owned by each of the OldMutual Namibia Black Distributors Trust, the Old Mutual and Nedbank NamibiaEducation Trust, Long-term Strategic Allocation, Central Investment, Manmar,Northern Empowerment Investments, WAD and the Churches consortium,respectively) in consideration for the Namibian dollar equivalent of 10 penceper share (the par value of the Old Mutual plc shares) in cash (paid on orbefore the completion date on which the shares are issued) and an undertakinggiven by the SPVs to pay the Interim Payments (as defined below) and to make acash payment (in Namibian dollars) to Old Mutual plc on 31 December 2016determined according to a set formula (the "cash undertaking"). These amountswill together form the subscription price for the new Old Mutual plc shares.The Strategic Business Partners will each make a capital contribution of 2.5%of the value of the shares to the relevant Namibian SPVs, with the balance ofthe par value funded by the SPVs from Namibian dollar denominated loans. Inthe case of the SPVs owned by the Strategic Community Partners, BlackDistributors Trust and the Education Trust, Namibian dollar denominated loanswill fund the entire par value. Dividends received by the SPVs from their holdings of Old Mutual plc sharesand the major portion of the performance fees earned by the Strategic BusinessPartners and Strategic Community Partners and injected into the SPVs ascapital contributions, will be used first to repay the third party loans (inthe case of the Black Distributors Trust and the Education Trust, a portion ofthese dividends will be applied to fund the objectives of these trusts) andthereafter such amounts (the "Interim Payments") will be paid to Old Mutualplc towards satisfaction of the SPVs' obligations under the cash undertaking(part of the subscription price). The payment by the SPV due on 31 December 2016 to discharge the balance of thecash undertaking will be (subject to a minimum of one Namibian dollar) thelesser of: - the difference between the Initial Market Value as described in paragraph3.2 above and the Namibian dollar equivalent of 10 pence par value per sharemultiplied by the number of shares issued to the relevant SPV plus anescalation factor and less any amounts paid by the SPVs in partialsatisfaction of the undertaking. This amount will be calculated on an annualbasis and will be increased annually by 2.5% of the Initial Market Value(except in the case of the Education Trust and Distributors Trust SPVs); and - the Namibian dollar equivalent of the market value of the Old Mutual plcshares at the highest price quoted on the LSE during the period between1 September 2016 and the business day before 31 December 2016 multiplied bythe number of shares issued to the relevant SPV.The funding structure is similar to that in the South African BEE transaction.The table below displays the salient features of the terms of the shareissues: Black Strategic Strategic Distributors Education Business Community Trust Trust Partners PartnersIssue priceof shares Par value and Par value and Par value and Par value and cash undertaking cash undertaking cash undertaking cashundertakingUpfront amount 2.5% of valuepaid by SPV Nil Nil of shares NilDate onwhich cashundertakingis 31 December 31 December 31 December 31 Decemberpayable 2016 2016 2016 2016Escalationfactor(fixed)on cashundertaking 9.73% 9.73% 9.73% 9.73% 3.8 Value of the Old Mutual TransactionThe value of Old Mutual Namibia Transaction is based on the valuation of OldMutual Namibia. The value of Old Mutual Namibia has been derived at N$1 650m(£122.11m) for this business, which translates into approximately 1.40% of themarket capitalisation of Old Mutual plc. 3.9 Estimated economic cost of the Old Mutual TransactionThe estimated economic cost of the Old Mutual Transaction to Old Mutual isN$57.31 (£4.24m). This translates into 3.47% of the value of Old MutualNamibia. 3.10 Measuring the black ownership of the Old Mutual Transaction N$m £mValue of Old Mutual Namibia 1 650.00 122.11Value of Old Mutual Namibia Transaction 220.46 16.32Less: White employee component of Old MutualNamibia Broad-based Scheme 0.87 0.06Black ownership portion of Old Mutual Transaction 219.59 16.26Black ownership portion of Old Mutual Transactionas a % of the value of Old Mutual Namibia 13.31% Note: Exchange rate £1:N$13.5126. 3.11 Conditions precedent to the Old Mutual TransactionThe conditions precedent to the Old Mutual plc shares being issued include thefollowing: - no breach of certain clauses of the subscription agreement having beencommitted by any SPV or any of Central Investment, Manmar and NorthernEmpowerment Investments and any of the Strategic Community Partners; - funding is obtained by Central Investment, Manmar and Northern EmpowermentInvestments to fund the payment of the balance of the par value of the OldMutual plc shares; - the admission of the Old Mutual plc shares to the Official List of the LSEin accordance with paragraph 7.1 of the UK Listing Rules and the admission ofthe shares to trading becoming effective in accordance with paragraph 2.1 ofthe Admission and Disclosure Standard produced by the LSE; - the adoption by the SPVs, their holding companies or the shareholders (asthe case may be) of their constitutional documents and any shareholders'agreement in such form as Old Mutual plc may approve in writing; - the approval of the transaction by the Bank of Namibia and other relevantauthorities; - any other regulatory approvals required by Old Mutual plc or the SPVs inorder to implement the Old Mutual Transaction; and - Old Mutual plc being satisfied that each feature of the Nedbank GroupTransaction and Mutual & Federal Transaction shall have received all consents,sanctions and approvals to which such feature is subject and that such featurewill be implemented in accordance with its terms. Old Mutual plc can waivethis condition in whole or in part. If any of the conditions precedent are notfulfilled or (where capable) waived on or before 31 December 2006 (or suchlater date as the partner may agree) either Old Mutual plc or the relevant SPVmay terminate the Subscription Agreements. Transaction advisor to Old Mutual plcNEDBANK CAPITAL Sponsor to Old Mutual plcMerrill Lynch InternationalRegistered in EnglandRegistration number 231079Regulated in the United Kingdom by The Financial Sercvices Authority Corporate law advisors to Old Mutual plcEDWARD NATHAN (Proprietary) LimitedRegistration No. 2004/005665/07 Legal advisors as to English law to Old Mutual plcSLAUGHTER AND MAY NEDBANK GROUP • Resultant black ownership at 11.13% in NedNamibia Holdings• Key black shareholders include: Employees and management; Strategic BusinessPartners; Strategic Community Partners andan Education Trust• Benefits 381 black Namibian employees• Performance agreements with broad-based Strategic Business Partners andStrategic Community Partners• Aligned with empowerment strategy to preserve and grow business Key features:• Resultant black ownership at 11.13% in NedNamibia Holdings• Key black shareholders include: Employees and Management, Strategic BusinessPartners, Strategic Community Partners and an Education Trust• Benefits 381 black Namibian employees• Performance agreements with broad-based Strategic Business Partners andStrategic Community Partners• Aligned with empowerment strategy to preserve and grow business Following the conclusion of the Transaction, Nedbank Group will initiate aprocess to list Nedbank Group on the Namibian Stock Exchange ("NSX") in orderto facilitate easier trade in Nedbank Group shares within Namibia. 4.1 Proposed Nedbank Group Transaction structureSee graph in press announcement 4.2 Black shareholding as a result of the Nedbank Group TransactionNedbank Group is pleased to announce that, as part of its ongoing programme oftransformation, and subject to the fulfilment of the conditions precedent setout in paragraph 4.12 below, Nedbank Group is proposing the introduction ofbroad-based black ownership into its 94% held Namibian subsidiary, NedNamibiaHoldings. NedNamibia Holdings is the vehicle through which Nedbank Groupconducts its business in Namibia. The introduction of broad-based blackownership into NedNamibia Holdings will be by way of the issue of new ordinaryshares in the share capital of Nedbank Group ranking pari passu in allrespects with the existing issued ordinary shares of Nedbank Group.Accordingly, a diverse group of black stakeholders consisting of Employees andManagement, Strategic Business Partners, Strategic Community Partners and anEducation Trust have been selected to participate as shareholders. The proposed transaction achieves strong alignment with the overall strategicobjectives of NedNamibia Holdings in a number of key respects. These include: - positioning of Nedbank Namibia as a bank which is accessible to allNamibians; - repositioning of the Nedbank brand in the retail segment with a potentialincrease in retail clients in Namibia; - assisting in the attainment of employment equity targets, particularly atsenior employee levels; - repositioning the bank internally and culturally to better serve therequirements of a changing external market; - growing market share in the Namibian public sector; - protecting existing business and market share by meeting and exceeding theownership and control requirements of the impending Namibian FSC; - participating in a meaningful way in the development of emerging BEEcorporates and securing future growth together with these corporates; and - aligning with Nedbank Group's overall goals of promotion of women'sinterests. The table below sets out the total deal size at Nedbank Group as well as theeffective black ownership at NedNamibia Holdings utilising the enlarged issuedshare capital of Nedbank Group to facilitate the Nedbank Group Transaction: Using Nedbank Group shares Effective Shareholding Black in ownership in Nedbank NedNamibia Total deal Group Holdings Shareholding Shareholding Number Deal (post-issue of (post-issue of of shares value new shares) new shares) (N$m/Rm) % %Employee andManagementSchemes 211 283 21.40 0.05 3.47NedNamibiaHoldingsLong-termIncentivePlan 81 749 8.28 0.02 1.38NedNamibiaHoldingsBlackManagementScheme 95 176 9.64 0.02 1.61NedNamibiaHoldingsBroad-basedScheme 34 358 3.48 0.01 0.48StrategicBusinessPartners 199 929 20.25 0.04 3.37CentralInvestment 118 476 12.00 0.02 2.00 Manmar 44 429 4.50 0.01 0.75NorthernEmpowermentInvestments 37 024 3.75 0.01 0.62StrategicCommunityPartners 74 048 7.50 0.02 1.24WAD 37 024 3.75 0.01 0.62Churches 37 024 3.75 0.01 0.62EducationTrust 98 730 10.00 0.02 1.67Long-termStrategicAllocation 81 452 8.25 0.02 1.38Total 665 442 67.40 0.15 11.13 Notes 1. Exchange rate: ZAR1:N$1.2. Total new effective shareholding in NedNamibia Holdings post-issue of newshares, is 11.23% with effective Black ownership in NedNamibia Holdings, post-issue of new shares, being 11.13%.3. The number of shares was calculated using the 10-day volume weightedaverage price (ex dividend) to 31 August 2006 of R101.29 per share. 4.3 The NedNamibia Holdings Employee and Management Schemes(3.47% of NedNamibia Holdings)NedNamibia Holdings Employee and Management schemes are comprised of threeelements, details of which appear below: 4.3.1 The NedNamibia Holdings Long-term Incentive Plan (1.38% of NedNamibiaHoldings)The NedNamibia Holdings Long-term Incentive Plan ("LTIP") will operate for thebenefit of permanent employees, both black and white, presently earning inexcess of N$289 454 per annum. Allocations will be made on appointment and onan annual basis. The LTIP will comprise two components, namely, a share optionelement and a Restricted Share Plan component. Participation in the LTIP willbe based on individual performance ratings and subject to any additionalcriteria deemed fit by the NedNamibia Holdings Executive Committee and subjectto the approval of the Nedbank Group Remuneration Committee. Options will vestafter three years and participants will have five years from date of issue inwhich to exercise their options. The LTIP is being introduced as NedNamibiaHoldings did not previously have a long-term incentive plan in place and toenable its employment policies to be in line with those of Nedbank Group. TheLTIP size shown in the table above relates only to the black component of thescheme. 4.3.2 The NedNamibia Holdings Black Management Scheme (1.61% of NedNamibiaHoldings)The NedNamibia Holdings Black Management Scheme will operate for the benefitof black senior and middle management of NedNamibia Holdings presently earningmore than N$289 454 per annum. Nedbank Group will issue new ordinary shares tothe NedNamibia Black Management Scheme Trust ("the Management Trust") partlyon a grant basis (50%) and partly on an interest-free loan basis (50%), suchthat the Management Trust will own approximately 0.02% of the enlarged issuedshare capital of Nedbank Group (which equates to 1.61% of NedNamibiaHoldings).The trustees, on instruction from the NedNamibia Holdings Remuneration Committee, will make awards to existing and future qualifying participants forretention and attraction purposes, respectively. Awards will be made on aonce-off basis to qualifying existing black employees and on appointment toqualifying future employees and will be subject to four, five and six-yearvesting periods in equal tranches. 4.3.3 The NedNamibia Holdings Broad-based Scheme (0.58% of NedNamibiaHoldings)The NedNamibia Holdings Broad-based Scheme will operate for the benefit of allqualifying employees of NedNamibia Holdings who do not participate in anyother share scheme. This scheme will thus operate for the benefit of bothblack and white employees of NedNamibia Holdings. 82% of the schemeparticipants will be black. The NedNamibia Holdings; Broad-based Scheme willown approximately 0.58% of the value of NedNamibia Holdings (blackparticipation equates to 0.48% of NedNamibia Holdings). An award of N$8 000per employee will be made upfront to all qualifying participants, subject tofulfilment of a five-year holding period. 4.4 NedNamibia Holdings Strategic Business Partners (3.37% of NedNamibiaHoldings)Central Investment, Manmar and Northern Empowerment Investments will,collectively, acquire an effective 0.04% of the enlarged issued share capitalof Nedbank Group (which equates to 3.37% of the value of NedNamibia Holdings),which will be funded on the basis as detailed in paragraph 4.7 below. To this end, Central Investment, Manmar and Northern Empowerment Investmentshave each entered into a detailed Subscription Agreement with Nedbank Groupand a detailed Performance Agreement with NedNamibia Holdings setting out theterms of their participation as well as related performance criteria togetherwith the implications of not meeting or exceeding those criteria. 4.5 NedNamibia Holdings Strategic Community Partners (1.24% of NedNamibiaHoldings)The Strategic Community Partners, namely WAD and the churches will,collectively, acquire an effective 0.02% of the enlarged issued share capitalof Nedbank Group (which equates to 1.24% of NedNamibia Holdings), which willbe funded on the basis as detailed in paragraph 4.7 below. To this end, WAD and the churches have each entered into detailed SubscriptionAgreements with Nedbank Group and detailed Performance Agreements withNedNamibia Holdings, setting out the terms of their participation as well asrelated performance criteria together with the implications of not meeting orexceeding those criteria. 4.6 Education Trust (1.67% of NedNamibia Holdings)In recognition of the role played by certain trade unions and other groups inthe Namibian economy and the potentially positive influence of these groups onthe business of NedNamibia Holdings, an Education Trust will be established inconjunction with Old Mutual Namibia which will have an initial duration of tenyears. Due to the importance of education in Namibia amongst the blackcommunities, the Education Trust will provide meaningful benefits to membersof such groups and complement the community focus of the Group's Namibianbusinesses on training and education. More detail on this trust has been dealtwith in paragraph 3.5 above. The Education Trust will subscribe for NedbankGroup shares with a value of N$10 million, which is equivalent to 1.67% of thevalue of NedNamibia Holdings. The trust will be funded on the basis describedin paragraph 4.7 below. 4.7 Mechanism to implement the Nedbank Group TransactionFor the NedNamibia Holdings Employee and Management schemes, black-controlledemployee trusts will be created and funded by Nedbank Group or its subsidiary,either by way of an interest-free loan or a grant as discussed in paragraph 4.3 above. Dividends will be applied to paying down the capital portion of theloan, or distributed to beneficiaries in the case of grant-funded shares. Cashreceived on the exercise of share options will be applied to paying down thecapital portion of the loan. For all the other schemes, Nedbank Group has developed a mechanism whichinvolves Nedbank Group issuing the scheme shares at or about par value to thevarious scheme participants. On the applicable termination dates for eachscheme, Nedbank Group will be entitled to call back as many of the schemeshares as, based on their then market value, equate in value to the terminalbalance of a notional calculation model. The notional calculation model willcalculate at pre-agreed notional rates. Further detail on the proposed structure will be furnished to shareholders inthe circular to shareholders, but the essential features of the structure are: - creation of separate black-controlled vehicles as appropriate for therespective participants ("SPVs"); - the subscription by those SPVs for ordinary shares in Nedbank Group at parvalue of R1.00 per share (in the case of the Strategic Business Partner SPVs,at a small premium to par value representing a 2.5% initial contribution bythe Strategic Business Partners). The par value payment in respect of theStrategic Community Partner SPVs and the Education Trust will be funded by wayof separate loans; - the grant to Nedbank Group of a call option against the SPVs for a number ofNedbank Group ordinary shares, determined by formula, held in the SPVs,exercisable on the termination date of the particular scheme at the same priceper share at which the shares were issued to the SPVs; - the SPVs will be granted a call option to acquire the same number of sharesas acquired by Nedbank Group exercising its call option at the then marketvalue; and - the effective obligatory re-investment of cash receipts (dividends and aportion of performance fees in the case of Strategic Business Partners andStrategic Community Partners and dividends only in the case of the EducationTrust) by recipients into Nedbank Group shares. In the case of dividends,Nedbank Group will, through the period of the schemes, undertake semi-annualcapitalisation awards with a cash dividend election and the participants willwaive their cash dividend election upfront. In the case of performance fees,the Strategic Business Partners and Strategic Community Partners will beobliged to re-invest a portion in subscribing for new Nedbank Group shares. The funding structure is similar to that in the South African BEE transaction. 4.8 Value of the Nedbank Group TransactionThe value of the Nedbank Group Transaction is based on the valuation ofNedNamibia Holdings. Nedbank Group shares will be issued in respect of theTransaction using the 10-day volume weighted average price (ex dividend) to 31August 2006 of R101.29 per share. 4.9 Estimated economic cost of the Nedbank Group TransactionThe estimated economic cost of the Nedbank Group Transaction to Nedbank Groupis R24.75 million. This translates into 0.05% of the value of Nedbank Group. 4.10 Pro forma financial effects of the Nedbank Group TransactionThe Nedbank Group Transaction does not on a consolidated basis reduce NedbankGroup's consolidated Basic EPS and Headline EPS for the year ended 31 December2005 and the interim period ended 30 June 2006 by more than 0.9%, The IFRSshare-based payments charge in respect of the transaction amounts to R14.88million. 4.11 Measuring the black ownership of the Nedbank Group Transaction N$m/RmValue of NedNamibia Holdings 600.00Value of Nedbank Group Transaction 67.40Less: White employee component of NedNamibia HoldingsBroad-based Scheme (0.63)Black ownership portion of Nedbank Group Transaction 66.77Black ownership portion of Nedbank Group Transaction as apercentage of the value of NedNamibia Holdings 11.13% 4.12 Conditions precedent to the Nedbank Group TransactionThe implementation of the Nedbank Group Transaction is subject to thefulfilment of the following conditions precedent: - approval by the requisite majority of Nedbank Group shareholders in generalmeeting to the issue of new Nedbank Group shares to each of the SPVs. In thisregard, the required circular is expected to be posted to ordinaryshareholders of Nedbank Group in due course; and - obtaining of the necessary regulatory approvals. 4.13 Opinions and recommendations for the Nedbank Group Transaction4.13.1 Directors' recommendationThe board of Nedbank Group recommend that the shareholders of Nedbank Groupvote in favour of the Nedbank Group Transaction and the resolutions to beproposed at the general meeting to be held to consider the Nedbank GroupTransaction. In respect of their beneficial holdings in Nedbank Group, therelevant board members intend to vote in favour of the resolutions to beproposed at the aforementioned general meeting. 4.13.2 Position of Old Mutual plcOld Mutual plc (a 51.02% shareholder in Nedbank Group) intends voting itsshares in favour of the Nedbank Group Transaction and the resolutions to beproposed at the general meeting of Nedbank Group shareholders to be held toconsider the Nedbank Group Transaction. 4.14 Timetable and documentationNedbank Group shareholders will be advised in due course as to the importantdates and times relevant to the Nedbank Group Transaction. A circular settingout the full details of the proposed introduction of direct black ownership,including details of the Nedbank Group Transaction and the meetings requiredto implement it will be forwarded to shareholders in due course. Transaction advisor and sponsor to Nedbank GroupNEDBANK CAPITAL Sponsor to Nedbank GroupMerrill Lynch South Africa (Pty) LtdRegistration number 1995/001805/07Registered Sponsor and Member of the JSE Limited Corporate law advisors to Nedbank GroupEDWARD NATHAN (Proprietary) LimitedRegistration No. 2004/005665/07 MUTUAL & FEDERAL • Resultant black ownership of 11.42% in Mutual & Federal Namibia• Key black stakeholders include:Employees and Management, Strategic Business Partners and Strategic CommunityPartners• Aimed at 60 black employee participants• Performance agreements with broad-based Strategic Business Partners andStrategic Community Partners• Aligned with empowerment strategy to preserve and grow business Key features:• Resultant black ownership of 11.42% in Mutual & Federal Namibia• Key black shareholders include: Employees and Management, Strategic BusinessPartners and Strategic Community Partners• Aimed at 60 black employee participants• Performance agreements with broad-based Strategic Business Partners andStrategic Community Partners• Aligned with empowerment strategy to preserve and grow business 5.1 Proposed Mutual & Federal Transaction structureSee graph in press announcement. 5.2 Black shareholding in Mutual & Federal Namibia as a result of the Mutual &Federal Transaction Mutual & Federal is pleased to announce that, as part of its ongoingcommitment to transformation of its Namibian business, and subject to thefulfilment of the conditions precedent set out in paragraph 5.9 below, Mutual& Federal is proposing the introduction of broad-based black ownership intoMutual & Federal Namibia by way of the issue of new ordinary shares in theshare capital of Mutual & Federal ranking pari passu in all respects with theexisting issued ordinary shares of Mutual & Federal. The table below sets out the total deal size at Mutual & Federal as well asthe effective black ownership at Mutual & Federal Namibia utilising theenlarged issued share capital of Mutual & Federal to facilitate the Mutual &Federal Transaction: Using Mutual & Federal shares Effective Shareholding Black in ownership in Mutual & Mutual & Federal Total deal Federal Namibia Shareholding Shareholding Number Deal (post-issue of (post-issue of of shares value new shares) new shares) (N$m/Rm) % %Employee and ManagementSchemes 279 157 7.58 0.10 4.25Mutual & FederalManagementScheme 142 746 3.88 0.05 2.28Mutual & FederalSenior BlackManagement Scheme 110 484 3.00 0.04 1.77Mutual & FederalBroad-based Scheme 25 927 0.70 0.01 0.20StrategicBusiness Partners 248 590 6.75 0.09 3.97Central Investment 147 313 4.00 0.05 2.35Manmar 55 242 1.50 0.02 0.88Northern EmpowermentInvestments 46 035 1.25 0.02 0.74StrategicCommunity Partners 92 070 2.50 0.04 1.46Churches 46 035 1.25 0.02 0.73WAD 46 035 1.25 0.02 0.73Long-term StrategicAllocation 108 864 2.96 0.03 1.74Total 728 681 19.79 0.26 11.42 Notes:1. Exchange rate: ZAR1:N$1.2. Total new effective shareholding in Mutual & Federal Namibia, post-issueof new shares, is 11.64% with effective Black ownership in Mutual & FederalNamibia post-issue of new shares being 11.42%3. The number of shares was calculated using the 10-day volume weightedaverage price (ex dividend) to 31 August 2006 of R27.15 per share. 5.3 Mutual & Federal Namibia Employee and Management SchemesThe Mutual & Federal Namibia Employee and Management schemes comprise threedifferent elements: 5.3.1 Mutual & Federal Namibia Management Scheme (2.28% of Mutual & FederalNamibia)Mutual & Federal will issue new ordinary shares to a new employee share trustwhich will be funded by interest-free loans and/or grants from Mutual &Federal, the purpose of which is to attract, reward and retain senior andmiddle management in its Namibian business. The new employee share trust willown 0.05% of the enlarged issued share capital of Mutual & Federal. This new employee share trust will be used to fund the long-term shareincentives that Mutual & Federal Namibia expects to allocate to blackmanagement in the normal course of business until 2016. By reserving asignificant portion of the Mutual & Federal shares for black management,Mutual & Federal is demonstrating its unequivocal commitment to transform itsNamibian business fundamentally. Shares will be allocated in terms of Mutual & Federal's current allocationpolicy subject to regular market testing and individual performance. Thecurrent policy is to make allocations in a combination of Restricted SharePlan ("RSP") share awards and share options. The RSP share awards will vestimmediately (subject to the condition that the participant remains in Mutual &Federal Namibia's employment for a period of time), while the share optionswill be exercisable commencing after three years (but within six years).Participants are to be paid the dividends in respect of the RSP share awardsand will be entitled to exercise the voting rights in respect of the relevantMutual & Federal shares, but will have no dividend or voting rights in respectof the unexercised share options. Accordingly, the entire interest of 2.28% inMutual & Federal shares held by the new employee share trust will count forblack ownership. 5.3.2 Mutual & Federal Namibia Senior Black Management Scheme (1.77% of Mutual& Federal Namibia)The Mutual & Federal Namibia Senior Black Management Scheme will operate forthe benefit of selected senior black management of Mutual & Federal Namibia. A new trust will be formed to operate the Mutual & Federal Namibia SeniorBlack Management Scheme. This new trust will acquire upfront 0.04% of theenlarged issued share capital of Mutual & Federal and will be funded by meansof a grant from Mutual & Federal. The trustees, on instruction from the Mutual & Federal Namibia RemunerationCommittee, will make awards to existing (25%) and future (75%) participantsfor retention and attraction purposes, respectively. The scheme will comprisea once-off allocation with the possibility of an increase on promotion. Thisallocation will be in addition to the normal allocations made in terms of theMutual & Federal Namibia Management Scheme and will be made by means of an RSPaward. 5.3.3 Mutual & Federal Namibia Broad-based Scheme (0.41% of Mutual & FederalNamibia)This scheme will operate for the benefit of all employees of Mutual & FederalNamibia who do not participate in either the management scheme or the Mutual &Federal Namibia Senior Black Management Scheme. This scheme will thus operatefor the benefit of both black and white employees employed by Mutual & FederalNamibia, of which 47% are black. The allocation will be made by means of anRSP share award over Mutual & Federal shares of N$8 000 per participant. The same trust that operates the Mutual & Federal Namibia Senior BlackManagement Scheme will operate the Mutual & Federal Namibia Broad-basedScheme. The trust will acquire upfront 0.01% of the enlarged issued sharecapital of Mutual & Federal and will be funded by means of a grant from Mutual& Federal. 5.4 Mutual & Federal Namibia Strategic Business Partners (3.97% ofMutual & Federal Namibia)Central Investment, Manmar and Northern Empowerment Investments will eachacquire an effective 0.05%, 0.02% and 0.02%, respectively, of the enlargedissued share capital of Mutual & Federal (which equates to 3.97% in aggregateof the value of Mutual & Federal Namibia), which will be funded on the basisas detailed in paragraph 5.6 below. To this end, Central Investment, Manmar and Northern Empowerment Investmentshave each entered into a detailed Subscription Agreement with Mutual & Federaland a detailed Performance Agreement with Mutual & Federal Namibia setting outthe terms of their participation as well as related performance criteriatogether with the implications of not meeting or exceeding those criteria. 5.5 Mutual & Federal Namibia Strategic Community Partners (1.46% of Mutual &Federal Namibia)The Strategic Community Partners, namely WAD and the churches, will eachacquire an effective 0.02% of the enlarged issued share capital of Mutual &Federal (which equates to 1.46% of Mutual & Federal Namibia), which will befunded on the basis as detailed in paragraph 5.6 below. To this end, WAD and the churches have each entered into detailed SubscriptionAgreements with Mutual & Federal and detailed Performance Agreements withMutual & Federal Namibia setting out the terms of their participation as wellas related performance criteria together with the implications of not meetingor exceeding those criteria. 5.6 Mechanism to implement the Mutual & Federal TransactionFor the employee schemes, comprising 0.10% of the enlarged issued sharecapital of Mutual & Federal, black-controlled employee trusts will be createdand will be funded, directly, by Mutual & Federal, either by way of aninterest-free loan or a grant as discussed in paragraph 5.3 above.For the Strategic Business Partner scheme and Strategic Community Partnerscheme, comprising 0.09% and 0.04% of the enlarged issued share capital ofMutual & Federal, respectively, Mutual & Federal has developed a mechanismwhich involves Mutual & Federal issuing the scheme shares at or about parvalue to the various scheme participants. On the applicable termination datesfor each scheme, Mutual & Federal will be entitled to call back as many of thescheme shares as, based on their then market value, are equal in value to theterminal balance on a notional calculation model. The notional calculationmodel will calculate at pre-agreed notional rates. Further detail on the proposed structure will be furnished in the circular toshareholders, but the essential features of the Strategic Business Partnerscheme and Strategic Community Partner schemes are: - creation of the separate black Namibian controlled vehicles as appropriatefor the respective participants ("SPVs"); - the subscription by the SPVs for ordinary shares in Mutual & Federal at parvalue of 10 cents per share (in the case of the Strategic Business PartnerSPVs, at a small premium to par value representing a 2.5% initial contributionby the Strategic Business Partners), in the case of the Strategic CommunityPartners, the par value will be funded by way of separate loans; - the grant to Mutual & Federal of a call option against the SPVs for aformulaically determined number of Mutual & Federal ordinary shares held inthe SPVs, exercisable on the termination date of the particular scheme at thesame price per share at which the shares were issued to the SPVs; - the SPVs will be granted a call option to acquire the same number of sharesas acquired by Mutual & Federal exercising its call option at the then marketvalue; and - the effective obligatory re-investment of cash receipts (dividends andportion of performance fees in the case of Strategic Business Partners and theStrategic Community Partners) by recipients into Mutual & Federal shares. Inthe case of dividends, Mutual & Federal will through the period of theschemes, undertake semi-annual capitalisation awards with a cash dividendelection, and the SPVs, in the case of the Strategic Business Partners and theStrategic Community Partners have waived 100% of their cash dividend electionupfront. In the case of performance fees, the Strategic Business Partners andStrategic Community Partners will be obliged to re-invest a portion insubscribing for new Mutual & Federal shares. The funding structure is similar to that in the South African BEE transaction. 5.7 Value of the Mutual & Federal TransactionThe value of the Mutual & Federal Transaction is based on the valuation ofMutual & Federal Namibia. Mutual & Federal shares will be issued using the 10day volume weighted average price (ex dividend) to 31 August 2006, of R27.15per share. 5.7.1 Estimated economic costs of the Mutual & Federal TransactionMutual & Federal has estimated the economic cost of the Mutual & FederalTransaction to be R7.42 million. This translates to 0.07% of the value ofMutual & Federal. 5.7.2 Pro forma financial effects of the Mutual & Federal TransactionThe Mutual & Federal Transaction does not on a consolidated basis, reduceMutual & Federal's consolidated Basic EPS and Headline EPS for the year ended31 December 2005 and the interim period ended 30 June 2006 by more than 1.2%,The IFRS share based payments charge in respect of the Mutual & FederalTransaction amounts to R3.60 million 5.8 Measuring the black ownership of the Mutual & Federal Transaction N$m/RmValue of Mutual & Federal Namibia 170.00Value of Mutual & Federal Transaction 19.79Less: white employee component of Mutual & Federal NamibiaBroad-based Scheme (0.37)Black ownership portion of Mutual & Federal Transaction 19.42Black ownership portion of Mutual & Federal Transaction as apercentage of the value of Mutual & Federal Namibia 11.42% 5.9 Conditions precedent to the Mutual & Federal TransactionThe implementation of the Mutual & Federal transaction is subject to thefulfilment of the following conditions precedent: - approval by the requisite majority of Mutual & Federal ordinary shareholdersin general meeting of the issue of new Mutual & Federal shares to each of theSPVs. In this regard, the required circular is expected to be posted toordinary shareholders of Mutual & Federal in due course; and -obtaining of the necessary regulatory approvals. 5.10 Opinions and recommendations for the Mutual & Federal Transaction5.10.1 Directors' recommendationThe board of Mutual & Federal recommend that the shareholders of Mutual &Federal vote in favour of the Mutual & Federal Transaction and the resolutionsto be proposed at the general meeting to be held to consider the Mutual &Federal Transaction. In respect of their beneficial holdings in Mutual &Federal, the relevant board members intend to vote their shares in favour ofthe Mutual & Federal Transaction and the resolutions to be proposed at theaforementioned general meeting. 5.10.2 Position of Old Mutual plcOld Mutual (SA) a 77% shareholder in Mutual & Federal intends voting itsshares in favour of the Mutual & Federal Transaction and the resolutions to beproposed at the general meeting of Mutual & Federal ordinary shareholders tobe held to consider the Mutual & Federal Transaction. 5.11 Timetable and documentationMutual & Federal shareholders will be advised in due course as to theimportant dates and times relevant to the Mutual & Federal Transaction. Acircular setting out the full details of the proposed introduction of directblack ownership, including details of the Mutual & Federal Transaction and themeetings required to implement it will be forwarded to shareholders in duecourse. Transaction advisor and sponsor to Mutual & FederalNEDBANK CAPITAL Sponsor to Mutual & FederalMerrill Lynch South Africa (Pty) LtdRegistration number 1995/001805/07Registered Sponsor and Member of the JSE Limited Corporate law advisors to Mutual & FederalEDWARD NATHAN (Proprietary Limited)Registration No. 2004/005665/07 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Old Mutual PLC