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FINANCIAL HIGHLIGHTS CHAIRMAN'S STATEMENT CHIEF EXECUTIVE'S STATEMENT BROADENING OUR INTERNATIONAL PROFILE GROUP FINANCE DIRECTOR'S REPORT BOARD OF DIRECTORS CORPORATE CITIZENSHIP CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 Accounting policies 2 Foreign currencies 3 Segment information 4 Operating profit adjusting items 5 Income tax expense 6 Minority interests - Income statement 7 Earnings and earnings per share 8 Investment income (net of investment losses) 9 Banking interest and similar income 10 Fee and commission income, and income from service activities 11 Finance costs (including interest and similar expenses) 12 Banking interest expense 13 Fees and commission expense, and other acquisition costs 14 Other operating and administrative expenses 15 Acquisition of subsidiaries 16 Goodwill and other intangible assets 17 Investments in associated undertakings 18 Investment property 19 Property, plant and equipment 20 Operating lease arrangements 21 Finance lease arrangements 22 Deferred tax assets and liabilities 23 Insurance contract provisions 24 Deferred acquisition costs 25 Loans, receivables and advances 26 Derivative financial instruments - assets and liabilities 27 Financial assets fair valued through income statement 28 Other financial assets 29 Short-term securities 30 Other assets 31 Assets and liabilities held-for-sale 32 Financial liabilities fair valued through income statement 33 Borrowed funds 34 Provisions 35 Deferred revenue 36 Amounts owed to depositors 37 Other liabilities 38 Equity 39 Minority interests - balance sheet 40 Post balance sheet events 41 Post employment benefits 42 Share-based payments 43 Dividends 44 Contingent liabilities 45 Commitments 46 Related parties 47 Principal subsidiaries and Group enterprises 48 Financial risk 49 Insurance risk
COMPANY FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS EUROPEAN EMBEDDED VALUE SUPPLEMENTARY INFORMATION NOTICE OF ANNUAL GENERAL MEETING SHAREHOLDER INFORMATION

Notes to the consolidated financial statements

For the year ended 31 December 2006

46 Related parties

The Group provides certain pension fund, insurance, banking and financial services to related parties. These are conducted on an arm's length basis and are not material to the Group's results.

(i) Transactions with key management personnel, remuneration and other compensation
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Group. Details of the compensation paid to the Board of directors as well as their shareholdings in the Company are disclosed in the Remuneration Report.

(ii) Key management personnel remuneration and other compensation

 
2006
2005
 
Number of
personnel
Value
£000s
Number of
personnel
Value
£000s
Directors' fees
11
963
9
836
Remuneration
13,533
9,228
Cash remuneration
15
9,022
9
5,969
Short-term employee benefits
17
865
8
541
Other long-term benefits
15
849
8
448
Share-based payments
11
2,797
9
2,270
 
 
 
 
 
14,496
10,064

 

 
2006
2005
 
Number of
personnel
Number of
options/shares
'000s
Number of
personnel
Number of
options/shares
'000s
Share options
Outstanding at beginning of the year
9
16,061
9
17,018
New appointments
4
2,366
-
-
Granted during the year
7
1,104
6
1,442
Exercised during the year
10
(3,313)
2
(27)
Lapsed during the year
3
(760)
6
(2,372)
Outstanding at end of the year
11
15,458
9
16,061

 

 
2006
2005
 
Number of
personnel
Number of
options/shares
'000s
Number of
personnel
Number of
options/shares
'000s
Restricted shares
Outstanding at beginning of the year
8
2,603
6
1,485
New appointments
5
183
-
-
Granted during the year
11
1,942
8
1,457
Released during the year
3
(471)
3
(231)
Lapsed during the year
-
-
2
(108)
Outstanding at end of the year
13
4,257
8
2,603

(iii) Key management personnel transactions
Key management personnel and members of their close family have undertaken transactions with Old Mutual plc and its subsidiaries, jointly controlled entities and associated undertakings in the normal course of business, details of which are given below. For current accounts positive values indicate assets of the individual whilst for credit cards and mortgages positive values indicate liabilities of the individual.

 
2006
2005
 
Number of
personnel
Value
£000s
Number of
personnel
Value
£000s
Current accounts
Balance at beginning of the year
2
(116)
3
40
Net movement during the year
2,415
(156)
Foreign exchange movement
24
-
Balance at end of the year
7
2,323
2
(116)
Retired during year: balance at time of retirement
-
-
(1)
30
Credit cards
Balance at beginning of the year
2
8
2
5
Net movement during the year
6
3
Foreign exchange movement
(2)
-
Balance at end of the year
4
12
2
8
 
Mortgages
Balance at beginning of the year
1
79
1
87
Net movement during the year
1,943
-
Interest charged
93
7
Less repayments
(299)
(15)
Foreign exchange movement
(173)
-
Balance at end of the year
5
1,643
1
79
 
General insurance contracts
Total premium paid during the year
5
25
5
17
Claims paid during the year
1
3
-
-
 
Life insurance products
Total premium paid during the year
-
-
2
2
Total sum assured/value of investment at end of the year
7
1,927
2
1,454
 
Pensions, termination benefits paid
Value of pension plan as at end of the year
12
8,501
8
4,322

Various members of key management personnel hold, and/or have at various times during the year held, investments managed by asset management businesses of the Group. These include unit trusts, mutual funds and hedge funds. None of the amounts concerned are material in the context of the funds managed by the Group business concerned, and all of the investments have been made by the individuals concerned either on terms which are the same as those available to external clients generally or, where that is not the case, on the same preferential terms as were available to employees of the business generally.

(iv) Skandia Liv
Livfösäkringsaktiebolaget Skandia (publ) (Skandia Liv), is a related party to the Old Mutual Group. Skandia Liv is a wholly owned subsidiary of Skandia and its business is conducted on a mutual basis. For the reasons given in the accounting policies Skandia Liv's result is not consolidated in these financial statements.

Material transactions between the Group and the Skandia Liv Group in eleven months ended 31 December 2006 were as follows:

1 Agreement in principle and framework agreement on co-operation covering market-related functions and certain staff functions - this involves distribution and distribution support, customer service, market communication, administration of Group insurance products, and staff and service functions. In the eleven months ended 31 December 2006 Skandia Liv paid £104 million for services rendered under this agreement.

2 Joint occupational pensions - the Group and Skandia Liv have a joint occupational pensions concept that is administered by Skandia Liv, which pays all distribution costs. For the part that is invested in the Group's unit linked funds, Skandia Liv receives compensation from the Group, based on premiums and funds under management paid over the life of the insurance contracts. The Group paid Skandia Liv £17 million under this arrangement in the eleven months to 31 December 2006.

3 Premises - the Group rents office premises from Skandia Liv. The Group paid market rents of £13 million for these premises in the eleven months to 31 December 2006.

4 Occupational pensions - Skandia Liv provides occupational pensions for the employees of the Group, for which the Group paid £12 million in the eleven months to 31 December 2006.

5 Agreement on IT services - the Group provides IT services to Skandia Liv. The amount charged to Skandia Liv was £7 million in the eleven months to 31 December 2006.

The balance outstanding at 31 December 2006 due from Skandia Liv was £37 million.

Various other arrangements exist between the Group and Skandia Liv, principally in respect of provision of accounting, legal and treasury functions, all of which are transacted on an arm's length basis.

(v) AKA Capital (Pty) Ltd
A Group subsidiary, Nedbank Ltd, sold its 20% interest in Aka Capital (Proprietary) Limited ("Aka Capital") at arm's length, in August 2006, to the other existing Aka Capital shareholders. These included Mr RJ Khoza, who is a non-executive director of Old Mutual plc, who acquired an additional 4.2% of Aka Capital through a special purpose vehicle (SPV) for R11.0 million. Nedbank Ltd's Capital Investment Committee approved this transaction in line with its mandate in the normal course of business. The funding for the acquisition by Mr Khoza's SPV was financed by Nedbank Ltd on arm's length terms, with R11.4 million of such funding being outstanding at year-end.


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