Protection on Death

THE OLD MUTUAL PORTFOLIO

REGULAR PREMIUM INVESTMENTS
Using the concept of Unit Trust investment, Old Mutual Company offers medium to long-term savings plans to provide disciplined contractual savings vehicles to accumulate capital over time. Old Mutual Companys return on investment (ROI) for 2003-04 was 63.7%, the highest in the medium-to-long-term investment market. The most versatile of these inflation-beating products are the Regular Premium Savings Benefit, and the Single Premium Investment Benefit, which are invested in the Kenya Stable Fund (60% Equity Market, 20% Money Market and 20% Property) to spread risk and maximize returns. The key features of the Regular Premium Savings Benefit are:

Flexibility increase or decrease amounts as need be Relative affordability of at least Kshs.6, 000 per month; 10% of your gross monthly salary is a prudent amount to consistently save. Access to cash without canceling the investment plan The plans are open-ended contracts. It is recommended that premiums be paid for at least 10 years to provide a good return. No medical underwriting required and no cease age or ineligibility due to age You can also 'kick-start' your investment by paying a start-up lump sum of 6 months or more at the entry date, after which you continue to pay normal monthly premiums.

Premium frequency can be either monthly or annually Ideally suited for childrens education plans, mortgage deposit saving, asset purchases, pension and general medium-to-long-term financial goals.

PER MONTH

5 YEARS

10 YEARS

15 YEARS

20 YEARS

25 YEARS

Kshs.
7,500 10,00 0 15,00 0 20,00 0 25,00 0 30,00 0

Contributio n
538,623 732,612 1,098,918 1,452,224 1,821,530 2,197,836

Fund Worth
585,770 814,136 1,231,154 1,648,158 2,065,164 2,482,182

Contribution
1,367,363 1,912,490 2,868,736 3,824,981 4,781,227 5,737,472

Fund Worth
1,927,338 2,737,162 4,136,346 5,535,494 6,934,670 8,333,908

Contribution
2,642,482 3,812,697 5,719,046 7,625,395 9,531,744 11,438,09 3

Fund Worth
4,761,058 6,903,632 9,676,772 13,949,226 17,472,192 20,995,236

Contribution
4,604,410 6,872,999 10,309,49 9 13,745,99 9 17,182,49 9 20,618,99 9

Fund Worth
10,465,648 15,482,162 23,370,674 31,258,904 39,147,940 47,036,920

Contribution
7,544,281 11,801,647 17,702,470 23,603,294 29,504,117 35,404,941

Fund Worth
21,926,701 32,561,142 49,130,382 65,699,000 82,269,560 98,839,746

35,00 0 40,00 0 45,00 0 50,00 0 75,00 0 100K

2,513,578 2,872,661 3,231,743 3,590,826 5,386,239 7,181,652

2,847,268 3,256,854 3,666,469 4,076,084 6,124,204 8,172,260

6,381,030 7,292,606 8,204,182 9,115,757 13,673,63 6 18,231,51 5

9,352,920 10,697,736 12,042,610 13,020,224 20,112,562 26,837,154

12,331,58 4 14,093,23 9 15,854,89 4 17,616,54 9 26,424,82 4 35,233,09 9

23,071,398 26,387,472 29,703,582 33,020,224 49,602,716 66,184,302

21,487,25 0 24,556,85 7 27,626,46 4 30,696,07 1 46,044,10 7 61,392,14 3

50,651,802 57,929,602 65,207,396 72,486,512 108,880,30 4 145,271,98 0

35,574,376 40,656,430 45,738,483 50,820,537 76,230,806 101,641075

104,383,982 119,377,854 134,371,668 149,368,158 224,347,538 299,322,286

By way of illustration, the above table shows what an investment would be worth on a modest 12% return and net of all charges, at the end of the different periods subject to various annual rates of inflation. A quick glance at the Kshs.10,000 column for 10 years at the above premium escalation of 9% gives a conservative return of Kshs.2,737,162 from a contribution of Kshs.1,912,490, meaning an average monthly fund value of Kshs.22,809 from a monthly average contribution of Kshs.15,937 (taking 9% annual inflationary escalation) over the period. The versatility of the investment is that apart from consistently beating inflation, annual returns of above 15% can be realized; Old Mutuals returns on investment was the highest in the industry at 63% at the last review of 2003-04. The products are designed as flexible vehicles to earn growth on capital, and since they are based on market performance, the value of units will reflect good returns during periods of strong market performance, and it may also reflect weak returns during periods of poor market performance. On the medium-to-long term projection however, with compound interest growth, returns on Old Mutuals Kenya Stable Fund are in the top end of the market.

TERMS, CONDITIONS AND PRIVILEGES

To initialize this superb program, you will need: - Photocopy of your National Identity card (ID); - Photocopy of your Personal Identification Number card (PIN); - The initial premium, either in cash or cheque; - A duly filled and signed contractual form.
P.S: Your final maturity is not taxed in full as is the case with conventional maturity/investment plans as the Old Mutual Kenya Stable Fund where the investments are done falls under the Insurance Act.

Premiums An application can only be accepted as new business once the first premium in full is paid to Old Mutual. Cool-off Period This is the period (after buying a benefit) during which the Investor may cancel his purchase. A request to cancel must reach Old Mutual Kenya in writing within 30 days of receipt of the notice of acceptance of purchase. On cancellation, a portion of the premiums paid may be refunded to the client. A portion may be retained to pay for the cost of investment losses where the investment fund has decreased on the Savings or Retirement Benefit. All funds in any savings or retirement benefits will be disinvested at the price applicable then. Savings Benefit Expiry Although all the savings and retirement benefits including the single premium injections have a specified benefit and premium paying term, the investment term is open-ended. The benefit will not be ended at the end of the benefit or premium term, nor will it result in an automatic benefit payment. 2

At the end of the premium paying term, the Regular Premium Savings Benefits total fund value will still grow with interest but with no contractual premium. The client then has the options: Surrender or part-surrender the savings components Stop paying premiums but keep the savings on the component. Pay premiums on an as-and-when basis into the Single Premium Injection Benefit without further commitment. Take out a new Regular Premium Savings Benefit in the same contract. Alterations The alteration date, the effective date of all alterations, has to be on the contract anniversary. The same new business validation rules also apply during alterations. Eligibility All lives are eligible for the benefit, plus institutions Premium Increases Being an inflation-beating product, the projected maturity values go up every year depending on the Consumer Price Index/Inflation rate. There are therefore corresponding compulsory Annual Premium Increases. Investment Funds There is only one fund the Kenya Stable Fund which is a balanced portfolio of approximately 60% equities, 20% property and 20% money market investments. Benefit Termination Events Termination at Contracting Partys request (inside and outside the cool-off period). Termination due to lack of funds Full disinvestments. Death of Investor The fund benefit is payable or the beneficiary may choose to leave the funds in paid-up status for continued growth. Arrears Processing and Lapse Rules Premiums are payable on the first day of each month when falling due. There is a grace period of 15 days if paid monthly, and one calendar month if paid yearly. If however premiums are not paid within the days of grace, Old Mutual extends the above grace period by inviting the client to pay. The contract will remain on the books provided the payment is received on the last day of the 2 nd month of nonpayment The following apply to contracts that have gone past the two month grace period with non-payment of premiums: - Paid Up A contract that satisfies the arrears process rules will automatically be made paid up. Funds to the value of the plan amendment charge will be sold from the investment accounts on the contract. Full fund management fees will continue to be charged against the accounts on the contract during future renewals. If the unit account is depleted because of these charges the contract will automatically be ended. - Reinstatement or Revivals Revival refers to the reinstatement of a lapsed benefit and the restarting of premium payments on that benefit. A contract that has lapsed may be reinstated provided the revival requirements are met. 3

- Revival Conditions When a client makes a Savings Benefit paid-up or reduces premiums, they have 6 months from the paid-up or reduction date during which to restart payment of premiums. This is known as premium bridging. If the first years premium were not paid in full before the benefit went paid-up or premiums were reduced, all missed premiums will have to be repaid.

SINGLE PREMIUM INJECTION PLAN

Flexibility in joining or withdrawing Relative affordability (Minimum 200,000/= lump sum investment) Access to cash without canceling the investment plan The plans are open-ended contracts. It is recommended that the fund is run for at least 3 years to start providing a substantial return. No medical underwriting required No Cease Age or ineligibility due to age Ability to switch to a different product at any time so long as minimum requirements are met.

AMOUNT IN

Kshs.
200,000 250,000 300,000 350,000 400,000 450,000 500,000 650,000 700,000 750,000 1,000,000

5 YEARS Fund Value 322,098 404,278 486,460 568,640 583,318 732,876 828,142 1,078,612 1,162,102 1,245,654 1,689,212

10 YEARS Fund Value 553,132 696,524 839,914 983304 1,126,696 1,269,694 1,435,918 1,872,942 2,018,616 2,164,484 2,938,330

15 YEARS Fund Value 953,248 1,203,906 1,453,634 1,703,882 1,954,018 2,203,294 2,493.324 3,255,850 3,510,028 3,764,656 5,114,764

20 YEARS Fund Value 1,647,364 2,083,906 2,520,442 2,956,980 3,935,226 3,828,162 4,334,212 5,664,686 6,108,180 6,552,604 8,908,154

25 YEARS Fund Value 2,853,094 3,614,784 4,376,458 5,138,140 5,899,840 6,657,794 7,540,760 9,862,200 10,636,018 11,411,656 15,521,470

By way of illustration, the above table shows what an investment would be worth on a modest 8 - 12% return and net of all charges, at the end of the different periods. As the minimum projection (8%) is always above the prevailing inflation rate, the versatility of the investment is that annual returns of above 15% can be realized, bearing in mind that the exceptional year of 2003 realized an annual return of up to 96% for our clients. The product is designed as a flexible vehicle to earn growth on capital, and since it is based on market performance, the value of units will reflect good returns during periods of strong market performance, and it may also reflect weak returns during periods of poor market performance. On the medium-to-long term projection however, with compound interest growth, returns on Old Mutuals Unit Trust/Single Premium Injection Benefit are some of the best in the market. TERMS, CONDITIONS AND PRIVILEGES To initialize this superb program, you will need: 4

Photocopy of your National Identity card (ID); Photocopy of your Personal Identification Number card (PIN); The lump sum being invested, preferably in cheque; A duly filled and signed contractual form.

Single Premium Injection Benefit is open to individuals as well as formal and informal groups with no limit to the number, as well as to institutions. Cool-off Period This is the period (after buying a benefit) during which the Investor may cancel their purchase. A request to cancel must reach Old Mutual Kenya in writing within 30 days of receipt of the notice of acceptance of purchase. On cancellation, a portion of the amount paid may be refunded to the client. A portion may be retained to pay for the cost of investment losses where the investment fund has decreased on the Benefit. All funds in the Single Premium Injection Benefit will be disinvested at the price applicable then. Top Up/ Increment An investor may not make an injection into an existing lump sum injection benefit, but can take another Single Premium Injection component within the same contract. Termination Although all the savings and retirement benefits including the single premium injections have a specified benefit and premium paying term, the investment term is open-ended. The benefit will not be ended at the end of the benefit or premium term, nor will it result in an automatic benefit payment. At the end of the premium paying term, the Regular Premium Savings Benefits total fund value will still grow with interest but with no contractual premium. The client specifies when they want to disinvest their units, and can thereby surrender or part-surrender the benefits. Benefit Termination Events Termination at Contracting Partys request (inside and outside the cool-off period). Termination due to lack of funds Full disinvestments. Death of Investor The fund benefit is payable or the beneficiary may choose to leave the funds invested for continued growth.

THE OLD MUTUAL UNIT TRUSTS

What is a Unit Trust? A unit trust is a pool of savings by like-minded serious investors. Old Mutual invests their pool of money in a spread of investments (a combination of interest bearing securities, company shares & cash) on the Nairobi Stock Exchange. This assortment of securities is called a portfolio. Each person receives units depending on his/her investment. Each unit has the same value and is an undivided share of the portfolio. A unit trust is like a cake made from various ingredients, i.e. butter, eggs, flour, water, etc; likewise a portfolio is made up of different securities. A unit on the other hand can be compared to a slice of that cake. THE OLD MUTUAL FUNDS
Old Mutual Money Market Fund Investments are made in short-term debt instruments and typically produce higher interest rates than what a bank offers in a current or savings account. This fund provides a permanent conservative element to any investment portfolio, making it a safe parking place for your investments. The money market fund is ideal during times of stock market turbulence, and provides the investor a high amount of liquidity (ability to cash out quickly). Returns are calculated on a daily basis, and credited to the clients account monthly. It is recommended that the income is reinvested into the fund so as to maximize investment returns through compounded growth. The recommended minimum investment period is one year.

For Example: Assume an investor puts kshs.1, 000,000 in the Money Market Fund and on the first day of the month the funds are available for investment:

Day 1 2 3

Amount 1,000,000.00

Annual Interest rate 4% 6% 5%

Days Interest 109.59 164.38 136.99

4 5 6 7 8 9 10

4% 5% 6% 4% 6% 5% 5%

109.59 136.99 164.38 109.59 164.38 136.99 136.99 1369.87

The table above shows an amount of Kshs.1, 000,000 invested with us for 10 days earning various interest rates on a daily basis. The interest rates shown above are always quoted in the Daily Nation and The East Africa Standard Newspapers of Tuesday to Saturday, and are net of administration charges and government taxes. Old Mutual Equity Fund The easiest way of having a professionally managed portfolio on the stock exchange. The Old Mutual Equity Fund invests in professionally selected common shares or stocks of companies, of good repute, and sound financial track record. Dividends received from the investments are shared proportionately among all unit holders of the fund. The Old Mutual Equity Fund is suitable for investors seeking long-term growth through capital gains. The recommended minimum investment period is 5 years as this fund does better over long periods of time. Our portfolio management team is dedicated to ensuring that the stringent investment objectives, and policies of this fund are met and that the investor gets the best possible returns at minimized risks. Income from the Old Mutual Equity Fund consists of an interest and a dividend portion. Returns are done half-yearly, in June and December. This is reinvested in the fund so as to maximize returns through compounded growth. How It Works: Assume an investment of Kshs.1, 000,000 in April 2003. A unit at that time was Kshs.100 therefore that amount would purchase 10,000 units. Assume one would like to dispose all the units, Old Mutual would redeem at Kshs.173 as at Friday 16th January 2004. This would give a total value of Kshs.1, 730,000 in nine months.

Old Mutual Balanced Fund The Old Mutual Balanced Fund is a mixed portfolio of Money Market, Equity and Offshore Funds, and seeks total return from this asset diversification. It is most suitable for medium risk investors and offers medium term growth, aimed at investors looking for a mixture of safety, income, and capital appreciation. Dividends received from the investments are shared proportionately among all unit holders of the fund every three months (quarterly), and consist of a dividend and interest portion. Unit price of Old Mutual Balanced Fund changes on a daily basis, and the underlying movement of prices of the shares held determines the unit price. This Fund is suitable for investors seeking medium to long-term growth through capital gains and prudent money-market and offshore returns. The recommended minimum investment period is 3 to 5 years. WHY INVEST IN THE OLD MUTUAL FUNDS Pooled resources Savings from a number of investors are pooled together to form a fund. All the investors in the Old Mutual Funds share proportionately in the gains and losses of the fund. Ease Access to the Nairobi Stock Exchange through Old Mutual Unit Trust funds is guaranteed even for the unsophisticated investors. Diversified Portfolio One reason why small investors have always been unable to invest directly on the Nairobi Stock Exchange is due to limited funds to establish a diversified portfolio and consequently, to limit risk. With Old Mutual Unit Trust funds, investors obtain a stake in a diversified portfolio with a corresponding lessening of risk. Secondly there is no limit to the number of investors who can hold units in any of our funds. The more investors there are in the fund, the greater the resources available for investment leading to greater diversification of the portfolio. Reduced Risk Access to the stock exchange through the Old Mutual funds means automatic diversification of your investment and, hence, less risk for you, the investor. Diversification of the funds ultimately means that the risks are cushioned because buying a unit in a unit trust means that is another layer of fund management involved, as opposed to the investor buying individual securities in the stock market. Professional Management The Old Mutual unit trust funds are managed by Old Mutual Asset Managers who are professional portfolio managers and have a solid understanding of the market, its conditions and trends. All securities are regularly analyzed by a qualified team of experts on a daily basis and decisions made on behalf of the investor, the aim at all times being to maximize the investors' returns. These decisions are based on thorough research and ongoing analysis of the market conditions and the securities being traded. Active portfolio management is a very important characteristic of unit trusts, and one, which makes it very attractive to the smaller investor who lacks the expertise to "play" the stock market.

Legal Protection Unit Trust funds are statutorily entrusted to the Capital Markets Authority and controlled by the Collective Investment Schemes Regulation aimed at protecting the investor. These regulations relate to the activities of the Unit Trust management companies. Convenience Unit Trusts are easy to buy and easy to sell from either our offices, through an agent, or through a bank. An investor can change the asset allocation depending on their circumstances - one can change from equity-based investments (shares) to fixed income securities (Treasury Bills and Bonds) as required. Flexibility (liquidity) You can invest for as long or as briefly as you like. This means you can keep going without formally committing to any period of time. Not only are you able to decide the day you wish to sell but also, the money due to you is available in the very short term. Since investing is a long-term exercise, investors are advised to have a long-term view of the market. Affordability So often when you discover something that sounds really good, the snag is that it's too expensive or illegal. Within reason, unit trusts are designed for use by the ordinary investor. Having an Asset to Offer as Security Unit trust investments are recognized as an asset that has value when it comes to providing security. If you need cash in the short term, you can offer part or all of your unit trust up as security rather than sell it. Don't immediately think, "sell" and forfeit your long-term financial future. Unit trusts are highly regarded because they are so liquid. Is borrowing and paying interest a good idea? It depends. But think carefully Important Tip The power of the unit trust to create wealth has a lot to do with compounding growth. Investors will have a choice to reinvest income in the fund or received it in cash. To achieve the highest capital gains, interest and dividend income is reinvested into the fund. RISK AND VOLATILITY The risk of an investment can be defined as the uncertainty of its future returns. Fluctuations (i.e. volatility) in an investment's market value make its return uncertain, increasing its risk. Investors, however, want the highest possible return with the lowest possible risk - in other words, high returns without the uncertainty of acquiring them. Maximum profit and low risk, however, are not compatible attributes; they are in conflict. Risk and return (or profit or reward) are rather positively correlated: the greater the risk, the greater the potential return from the investment, the lower the risk, the lower the return. Risk in unit trusts is reduced because they invest in a range of shares (instead of only one or two). It is important to remember; buying individual shares means a direct investment in the stock market, whereas buying a unit in a unit trust means that is another layer of fund management involved. A unit trust should be considered as a longer-term investment, of at least 5 years. This will enable the investor get the most in terms of returns. Old Mutual Money Market risk factor: The Money market fund is considered to be a low risk investment as investments are made in short term fixed interest securities, cash and call deposits and they will seek to prevent losses to an investor's capital. It will accumulate any interest accrued. It is considered to be a 'parking place' in the markets that are falling.

Old Mutual Equity fund risk factor: This fund is suitable for the investors who are not averse to short term volatility or losses. This fund provides long-term capital growth, by investing predominantly in shares and stocks. This involves holding a higher risk than the money market fund. REMEMBER THAT

Past performance is not necessarily a guide to future performance. Value from investments and the income are not guaranteed. Price of units can go down as well as up as a result of changes in the value of the underlying investments and currency movements. A small fee is levied for the advice and professional administration of your investment. The value of unit trusts will fluctuate in line with the movements on the stock market. The relationship between risks and returns rise together: the higher the risks, the higher the returns. The longer the investment, the higher the returns.

Old Mutual Balanced Fund risk factor: The Balanced Fund is considered to be a medium-risk investment as the diversified holdings ensure that these funds will manage downturns in the stock market without too much of a loss; the flip side, of course, is that balanced funds will usually increase less than an all-shares fund during a bull market. FUND OBJECTIVES Each unit trust fund has different objectives to suit the needs of a wide range of investors. These objectives can be found in the fund's trust deed and investment agreements (these are available at our offices for your perusal as a unit holder). The objectives include: income - generating a constant flow of income through dividends, interest etc., and/or growth - increasing the capital value of investments. The goals of the fund will place the fund in a high, medium or low risk category. A general assumption in the financial markets is that the higher the risk of an investment, the greater the potential gains or losses may be. The goals of the fund should help the investor in choosing a fund that best suits the investors' needs and risk appetite (the amount of risk that the investor is willing to take). Open Ended Fund The Old Mutual Unit Trust funds are open-ended funds. This means that there are no limits to the amount of investors that can invest in a particular fund, there are no limits to the size of the fund, and there are no limits to the amount of units per fund. If new investors invest in a fund, there is simply more money to invest by the portfolio manager. The opposite is also true, if investors want to sell their units, the unit trust might have to sell some of its assets to pay the investors, and the amount of units in a fund might decrease. BENEFITS OF INVEST ING Time value of money Savings need to "work", i.e. earn a return for its owner. Money, therefore, has a time value - in other words, Kshs 1 today is not equal to Kshs.1 yesterday, because it should have yielded a return. Money that is left idle, that is, not invested in some suitable way, incurs an opportunity cost for its owner. In other words, by leaving money un-invested, the holder not only foregoes a possible return but his money's buying power is eroded by inflation (continuous rise in prices).

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Unit Trusts and Inflation Inflation is probably the most important consideration for any long-term investor. Inflation has become an accepted yardstick in the evaluation of most investments and to beat inflation has become the goal of almost all investors. Inflation is a prominent factor, which you as a client, must take into account when planning your investments. Clearly, if you were only to invest in low-risk investments with institutions such as banks, building societies and the post office, in inflationary times, you could expect a negative rate of return because the rate of return on your investment is lower than the rate of inflation. In other words, the purchasing power of your money would be steadily decreasing because of the rising cost of goods and the general effects of inflation. As stated earlier, Unit prices fluctuate in accordance with the prices of the equities underlying the portfolio, the medium-term to long-term trend of unit trusts has always been upwards. Historically, therefore, returns on unit trusts have exceeded the inflation rate over the medium term to long term. Obviously this will always depend on the type of unit trust and the investments held by it. HOW TO INVEST Fill out the Application Form and attach a copy of your ID/Passport particulars, and banking details. NB: Old Mutual requires the original copy of the Application Form. The minimum investment lump sum for Old Mutual Unit Trust Funds is Kshs.500, 000 and payment instructions are contained in the application form, notes section. FUND CHARGES A service fee charge of 2% p.a. is applicable to the Money Market Fund, Equity Fund, and Balanced Fund, for the professional management of the funds. Amounts of Kshs.10, 000,000 and above invested in the Money Market Fund have a discounted charge of 1.75% p.a. An initial fee is chargeable to the Old Mutual Equity Fund and Old Mutual Balanced Fund, as per the following table.

INVESTMENT AMOUNT First kshs.500,000 kshs.999,999 Next kshs.1,000,000 kshs.2,999,999 Next kshs.3,000,000 kshs.4,999,999 Any amount above kshs.5,000,000 Equity Fund Top Holdings

INITIAL FEE EQF 5% 4.75% 4.5% 4%

INITIAL FEE BF 4% 3.75% 3.5% 3%

B.A.T, Bamburi, Barclays Bank, East African Breweries, NIC, Kenya Airways, Firestone E.A, Nation Media Group, ICDC Investment, Standard Chartered, Total Kenya, George Williamson, KCB, BOC. More details are available through an Old Mutual Personal Financial Advisor and from the prospectus, which can be found at http://www.oldmutualkenya.com/omis/equity.asp or
http://www.oldmutualkenya.com/omis/products.asp#market

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SAVING OR INVESTING FOR FUTURE GOALS it is true that it will be difficult to construct a sound diversified portfolio when investing offshore unless you have a lot of time, money and expertise. We can get around this challenge, to a large extent, by investing in managed funds, which can be actively or passively managed. Most individuals would invest their savings to achieve a future goal, may it be long term or short term e.g. Education for children, retirement plan, etc. ------------------------ o --------------------------- ---

RAFIKI HALISI

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