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ELLERINES INSIDE NH

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The definitions commencing on page 6 of this document apply throughout this document, with the exception of the sections
containing the scheme (yellow), the order of court and the notice of scheme meeting, which have their own definitions.




           Ellerine Holdings Limited                            African Bank Investments Limited
             (Incorporated in the Republic of South Africa)             (Incorporated in the Republic of South Africa)
                (Registration number 1968/013402/06)                       (Registration number 1946/021193/06)
               Share code: ELH       ISIN: ZAE000022752             Ordinary share code: ABL        ISIN: ZAE000030060
                              (“Ellerines”)                         Preference share code: ABLP      ISIN: ZAE000065215
                                                                                           (“ABIL”)



Documents relating to:

a scheme of arrangement in terms of section 311 of the Companies Act proposed by ABIL between
Ellerines and its shareholders (other than the excluded shareholders), which will result in ABIL
acquiring, subject to the fulfilment of the conditions precedent, all of the Ellerines shares (except
the excluded shares) in the ratio of 255 new ABIL shares for every 100 Ellerines shares held on the
scheme record date, rounded up to the nearest whole number, which will result in Ellerines
becoming a wholly-owned subsidiary of ABIL, after which the listings of Ellerines shares on the JSE,
BSE and NSX will be terminated;
and incorporating:

– the notice of scheme meeting;
– an explanatory statement in terms of section 312(1)(a)(i) of the Companies Act (blue);
– a scheme of arrangement in terms of section 311 of the Companies Act (yellow);
– a valuation statement in terms of section 312(1)(a)(ii) of the Companies Act;
– a statement of directors’ interests in terms of section 312(1)(a)(iii) of the Companies Act;
– additional information required by the JSE and the SRP;
– the Order of Court convening the scheme meeting;
– a form of proxy in respect of the scheme meeting (green) (for use by holders of certificated
  Ellerines shares and dematerialised Ellerines shares with “own-name” registration only); and
– a form of surrender and transfer (for use by holders of certificated Ellerines shares only).

   Investment bank and                 Attorneys to Ellerines   Independent professional               Merchant bank and
    sponsor to Ellerines                                           expert to Ellerines                  sponsor to ABIL




                                                                    Services (Pty) Ltd


     Attorneys to ABIL              Reporting accountants and    Sponsor to Ellerines in              Sponsoring broker to
                                             auditors                  Namibia                        Ellerines in Botswana


                                                                         SIMONIS
                                                                         STORM
                                                                         S e c u r i t i e s




Date of issue: 27 September 2007
CORPORATE INFORMATION AND ADVISORS

Ellerines                                             ABIL
Directors of Ellerines                                Directors of ABIL
Executive:                                            Executive:
P J C Squires (Chief Executive Officer)               G Schachat (Deputy Chairman)
A F F Moca                                            L Kirkinis (Chief Executive Officer)
R A Rawlings                                          A Fourie
R B G Sinclair                                        T M Sokutu
                                                      D F Woollam
Non-executive:                                        Non-executive:
D S McGlashan (Chairman)                              A S Mabogoane (Chairman)
K G M Heil                                            M S Mogase
M E K Nkeli                                           A Tugendhaft
A H Sangqu                                            R Naidoo
I B Skosana                                           D F G Tembe
                                                      G Z Steffens
                                                      B P F Steele
                                                      B D Goba
                                                      D B Gibbon

Ellerines company secretary and registered office   ABIL company secretary and registered office
R B G Sinclair, (CA)SA                              S Martin, BProc, LLB, MBA
Block E, Gillooly’s View Office Park                59, 16th Road
Osborne Lane                                        Midrand,1686
Bedfordview, 2007                                   (Private Bag X170, Midrand, 1685)
(PO Box 122, Bedfordview, 2008)

Transfer secretaries to Ellerines                   Transfer secretaries to ABIL
Computershare Investor Services 2004                Link Market Services SA (Proprietary) Limited
(Proprietary) Limited                               11 Diagonal Street
70 Marshall Street                                  Johannesburg, 2001
Johannesburg, 2001                                  (PO Box 4844, Johannesburg, 2000)
(PO Box 61051, Marshalltown, 2107)

Attorneys to Ellerines                              Attorneys to ABIL
Cliffe Dekker Inc.                                  Prinsloo, Tindle and Andropoulos Inc.
4th Floor                                           First Floor
1 Protea Place                                      17 Fricker Road
Sandown, Sandton, 2196                              Illovo Boulevard
(Private Bag X7, Benmore, 2010)                     Illovo, 2196
                                                    (PO Box 55024, Northlands, 2116)

Investment bank and sponsor to Ellerines            Merchant bank and sponsor to ABIL
Nedbank Capital                                     Rand Merchant Bank
A division of Nedbank Limited                       A division of FirstRand Bank Limited
135 Rivonia Road                                    1 Merchant Place
Sandown, Sandton, 2196                              Corner Fredman Drive and Rivonia Road
(PO Box 1144, Johannesburg, 2000)                   Sandton, 2196
                                                    (PO Box 786273, Sandton, 2146)

Independent professional expert to Ellerines        Sponsoring broker to Ellerines in Botswana
KPMG Services (Proprietary) Limited                 Stockbrokers Botswana Limited
KPMG Crescent                                       Ground Floor, Barclays House
85 Empire Road                                      Khama Crescent
Parktown, 2193                                      Gaborone, Botswana
(Private Bag X9, Parkview, 2122)                    (Private Bag 00113, Gaborone, Botswana)

Sponsor to Ellerines in Namibia                     Reporting accountants and auditors to Ellerines
Simonis Storm Securities (Proprietary) Limited      Grant Thornton
Suite C152                                          Chartered Accountants (SA)
Robert Mugabe Avenue                                Registered Auditors
Windhoek, Namibia                                   137 Daisy Street, corner Grayston Drive
(PO Box 3970, Windhoek, Namibia)                    Sandown, 2196
                                                    (Private Bag X28, Benmore, 2010)
TABLE OF CONTENTS


                                                                                                         Page

Corporate information and advisors                                                          Inside front cover

Action required by Ellerines shareholders                                                                   3

Salient dates and times                                                                                     4

Definitions                                                                                                 6

Notice of scheme meeting                                                                                   10

Explanatory statement applicable to the scheme of arrangement (blue)
 1. Introduction                                                                                           12
 2. Rationale for the scheme                                                                               12
 3. Requirements and mechanics of the scheme of arrangement                                                13
 4. The scheme                                                                                             14
 5. The scheme meeting                                                                                     14
 6. Court hearing                                                                                          15
 7. The scheme consideration                                                                               15
 8. Settlement of the scheme consideration                                                                 15
 9. Surrender of documents of title                                                                        16
10. Conditions precedent                                                                                   17
11. Dividends                                                                                              17
12. Effects of the scheme                                                                                  17
13. Ellerines share schemes                                                                                17
14. Exchange Control Regulations                                                                           18
15. Opinions and recommendations                                                                           18
16. Special arrangements                                                                                   18
17. Authors                                                                                                19

Scheme of arrangement (yellow)                                                                             20

Valuation statement in terms of section 312(1)(a)(ii) of the Companies Act                                 30

Statement of directors’ interests in terms of section 312(1)(a)(iii) of the Companies Act                  34




                                                                                                             1
                                                                                                                    Page

Additional information required by the JSE and SRP
 1. Suspension and termination of the listing of Ellerines shares and the listing
    of scheme consideration shares on the JSE                                                                         37
 2. Major Ellerines shareholders                                                                                      37
 3. Support for the scheme                                                                                            37
 4. Costs of the scheme                                                                                               37
 5. Consents                                                                                                          38
 6. Material changes                                                                                                  38
 7. Litigation statement                                                                                              38
 8. Material contracts                                                                                                38
 9. Directors’ responsibility statements                                                                              38
10. Documents available for inspection                                                                                39

Annexure I       Historical financial information on Ellerines                                                        40
Annexure II      Interim report of Ellerines for the six months ended 28 February 2007                                54
Annexure III     Historical financial information on ABIL                                                             72
Annexure IV      Interim report of ABIL for the six months ended 31 March 2007                                        87
Annexure V       Share price histories of Ellerines and ABIL on the JSE                                               95
Annexure VI      Opinion letter from KPMG                                                                             98
Annexure VII     Exchange Control Regulations                                                                        102
Annexure VIII Reporting accountants’ report on the pro forma financial effects                                       103
Annexure IX      Table of entitlement                                                                                105

Order of Court                                                                                                       106

Form of proxy (green)                                                                                          Attached

Form of surrender and transfer                                                                                 Attached

Copies of this document may be obtained in English from the company secretary and transfer secretaries of Ellerines, whose
addresses are set out in the “Corporate information and advisors” section of this document.




2
ACTION REQUIRED BY ELLERINES SHAREHOLDERS


The definitions commencing on page 6 of this document apply throughout this action required by Ellerines shareholders
section.


ACTION REQUIRED

1.   If you are in any doubt as to what action you should take, please consult your CSDP, broker, banker, legal advisor,
     accountant or professional advisor immediately.

2.   If you have disposed of all of your Ellerines shares, this document should be handed to the purchaser of such shares
     or the CSDP, broker, banker or other agent through whom such disposal was effected.

3.   AS REGARDS THE SCHEME
     (a) If you hold certificated Ellerines shares or hold dematerialised Ellerines shares with own-name registration and
         are unable to attend the scheme meeting and wish to be represented thereat, you must complete and return
         the attached form of proxy (green) to the transfer secretaries to be received by no later than 09:00 on
         Monday, 15 October 2007.
     (b) If you hold shares in Ellerines through a nominee, you should advise your nominee timeously of your intention
         to attend and vote at the scheme meeting or to be represented by proxy thereat, in order for your nominee
         to provide you with the necessary authorisation to do so. Should you not wish to attend the scheme meeting
         in person you should provide your nominee timeously with your voting instruction in order for your nominee
         to vote in accordance with your instructions at the scheme meeting.
     (c) If you hold dematerialised Ellerines shares and have not elected “own-name” registration then, should your
         CSDP or broker, as the case may be, not have contacted you to ascertain how you wish to cast your vote at
         the scheme meeting, you should contact your CSDP or broker to enable your vote to be cast in accordance
         with your instructions. Such instructions should be communicated to your CSDP or broker in terms of your
         agreement with your CSDP or broker and these instructions communicated by your CSDP or broker to the
         transfer secretaries by no later than 09:00 on Monday, 15 October 2007. If you wish to attend the scheme
         meeting you must obtain the necessary Letter of Representation from your CSDP or broker and submit same
         to the transfer secretaries by no later than the time stipulated above. This must be done in terms of the
         agreement entered into between you as holder of dematerialised Ellerines shares and your CSDP or broker.
     (d) All Ellerines shareholders are entitled to attend or be represented by Counsel at the Court hearing for the
         sanctioning of the scheme, at 10:00 on Tuesday, 30 October 2007 or as soon thereafter as Counsel may be
         heard in the High Court of South Africa (Witwatersrand Local Division) which is located in the High Court
         Building, Von Brandis Square, corner Pritchard and Von Brandis Streets, Johannesburg, 2001.
     (e) If you hold certificated Ellerines shares and wish to anticipate the scheme becoming operative (which is
         expected to be on Tuesday, 18 December 2007), you should complete the attached form of surrender and
         transfer and return it together with the relevant share certificate(s) or other documents of title in accordance
         with the instructions contained therein.




                                                                                                                       3
SALIENT DATES AND TIMES


The definitions commencing on page 6 of this document apply to these salient dates and times.
                                                                                                                  2007
Last day to trade Ellerines shares in order to be recorded in the share register on
the record date of the scheme (see note 1 below) on                                                   Friday, 5 October
Record date on which Ellerines shareholders must be recorded in the Ellerines share
register in order to vote at the scheme meeting on                                                   Friday, 12 October
Last day to lodge forms of proxy for the scheme meeting by 09:00 on (see note 2 below)             Monday, 15 October
Scheme meeting to be held at 09:00 on                                                              Tuesday, 16 October
Results of the scheme meeting released on SENS on                                                  Tuesday, 16 October
Results of the scheme meeting published in the press on                                         Wednesday, 17 October
Scheme chairperson’s report lies for inspection from                                            Wednesday, 17 October
Court hearing to sanction the scheme at 10:00 or as soon thereafter as Counsel
may be heard on                                                                                    Tuesday, 30 October
Results of the Court hearing released on SENS on                                                   Tuesday, 30 October
Results of the Court hearing published in the press on                                          Wednesday, 31 October
The dates below are subject to the fulfilment of the conditions precedent. To the
extent that the conditions precedent are not fulfilled by Friday, 30 November 2007,
the dates set out below will be delayed accordingly and any such changes will be
released on SENS and published in the press. This is likely in view of the length of
time it is anticipated will be necessary to obtain the approval of the Competition
Authorities. To the extent that the conditions precedent are fulfilled prior to
30 November 2007, the salient dates and times may be accelerated by agreement of
both Ellerines and ABIL.
Order of Court sanctioning the scheme registered by the Registrar on or about
(if the scheme is sanctioned and all other conditions have been fulfilled)                         Friday, 30 November
Finalisation date on                                                                               Friday, 30 November
Finalisation date announcements to be released on SENS on                                          Friday, 30 November
Finalisation date announcements to be published in the press on                                    Monday, 3 December
Last day to trade Ellerines shares on the JSE, NSX and BSE in order to be recorded in
the register on the record date of the scheme on                                                    Friday, 7 December
Date of suspension of Ellerines’ listings on the JSE, NSX and BSE from the commencement
of business on                                                                                   Monday, 10 December
Record date of the scheme to determine participation in the scheme on                              Friday, 14 December
Date from which the scheme consideration will be made available or posted to
certificated scheme participants (if the form of surrender and transfer and the
documents of title are received by the transfer secretaries on or prior to 12:00 on
the record date of the scheme, or, failing that, within five business days of receipt of the
form of surrender and transfer and relevant documents of title by the transfer
secretaries). Dematerialised scheme participants will have the scheme consideration
credited to their account held at their CSDP or broker on the operative date on                  Tuesday, 18 December
Operative date of the scheme from the commencement of business on                                Tuesday, 18 December
Termination of listings of Ellerines shares from the JSE, NSX and BSE on                       Wednesday, 19 December


4
Notes:
1. Ellerines shareholders should note that, as Ellerines is trading in the Strate environment, settlement for trade takes place five business days after
   the relevant trade has taken place. Therefore, Ellerines shareholders who acquire Ellerines shares after the last day to trade for the scheme
   meeting, being Friday, 5 October 2007, will not be eligible to vote at the scheme meeting.
2. “Own-name” shareholders will be entitled to attend the scheme meeting in person or if they are unable to attend and wish to be represented
   thereat may complete and return the attached form of proxy (green) to the transfer secretaries in accordance with the time specified on that
   form of proxy.
3. A beneficial owner of Ellerines shares should timeously inform his nominee or, if applicable, his CSDP or broker of his intention to attend and vote
   at the scheme meeting or to be represented by proxy thereat in order for his nominee or, if applicable, his CSDP or broker to issue him with the
   necessary authorisation to do so or should provide his nominee or, if applicable, his CSDP or broker timeously with his voting instruction should
   he not wish to attend the scheme meeting in person in order for his nominee or, if applicable, his CSDP or broker to vote in accordance with his
   instruction at the scheme meeting.
4. No dematerialisation or rematerialisation of Ellerines shares will take place after the last date to trade in order to be recorded in the register on
   the record date of the scheme which is expected to be Friday, 7 December 2007.
5. All times indicated above are South African times.
6. Certificated scheme participants are required to complete their forms of surrender and transfer to be received by the transfer secretaries by the
   record date of the scheme.
7. Any change to the above dates and times will be agreed upon by ABIL, Ellerines and the JSE and will be advised to Ellerines shareholders by release
   on SENS and will be published in the press.
   Furthermore, the following principles will be adhered to at all times regarding the timetable:
   •     the last date to trade by an Ellerines shareholder to participate in the scheme will never be earlier than the last date to trade by an Ellerines
         shareholder for the Ellerines 2007 final dividend declaration, if any, announced at the time of the announcement by Ellerines of its results for
         the 2007 financial year;
   •     the operative date of the scheme (i.e. the date on which ABIL acquires the Ellerines shares) will never be before the first business day after
         the last date to trade by an Ellerines shareholder to become entitled to the Ellerines 2007 final dividend, if any, announced at the time of the
         announcement by Ellerines of its results for the 2007 financial year; and
   •     the last date to trade by an ABIL shareholder to become entitled to participate in the 2007 final dividend declaration by ABIL, if any,
         announced at the time of the announcement by ABIL of its results for the 2007 financial year, shall always be before the operative date of
         the scheme, namely the date on which ABIL issues ABIL ordinary shares to Ellerines shareholders.




                                                                                                                                                        5
DEFINITIONS


In this document, excluding the scheme (yellow) appearing on pages 20 to 29, unless otherwise stated or clearly
indicated by the context, the words in the first column have the meanings stated opposite them in the second column;
words in the singular include the plural and vice versa; words importing one gender include the other genders and
references to a person include reference to a body corporate and vice versa:
“ABIL”                                 African Bank Investments Limited (registration number 1946/021193/06), a
                                       limited liability public company duly incorporated in South Africa, the shares of
                                       which are listed on the JSE;
“ABIL board”                           the board of directors of ABIL;
“ABIL group”                           ABIL and its subsidiaries, from time to time;
“ABIL shares”                          ordinary shares with a par value of 2,5 cents each in the issued share capital
                                       of ABIL;
“BEE”                                  Black Economic Empowerment;
“BEE reserved shares”                  11 557 109 new ABIL shares equating to 3,75% of the scheme consideration
                                       (based on the gross exchange ratio of 265 ABIL shares for every 100 Ellerine
                                       shares) to be used to facilitate a BEE programme (similar to ABIL’s Eyomhlaba
                                       programme) targeted at the Ellerines business, its preferred BEE partners and
                                       its other stakeholders, which will be implemented shortly after the
                                       implementation of the scheme;
“Botswana”                             the Republic of Botswana;
“BSE”                                  Botswana Stock Exchange;
“business day”                         any day other than a Saturday, Sunday or public holiday in South Africa;
“broker”                               any person registered as a “broking member (equities)” in terms of the Rules of
                                       the JSE made in accordance with the provisions of the Securities Services Act,
                                       2004;
“cents”                                South African cents in the official currency of South Africa;
“certificated Ellerines shares”        Ellerines shares which have not yet been dematerialised, title to which is
                                       represented by a share certificate or other document of title;
“certificated scheme members”          scheme members who hold certificated Ellerines shares;
“certificated scheme participants”     scheme participants who hold certificated Ellerines shares;
“CGT”                                  Capital Gains Tax levied in terms of Schedule 8 to the Income Tax Act, 1962;
“common monetary area”                 South Africa, Namibia and the Kingdoms of Swaziland and Lesotho;
“Companies Act”                        the Companies Act (Act 61 of 1973), as amended;
“Competition Act”                      the Competition Act (Act 89 of 1998), as amended;
“Competition Authorities”              the Competition Commission and the Competition Tribunal;
“Competition Commission”               the Commission established in terms of the Competition Act and which is
                                       responsible for the investigation, control and evaluation of restrictive practices,
                                       abuse of dominant position and mergers;
“Competition Tribunal”                 the Tribunal established in terms of the Competition Act and which is
                                       responsible to adjudicate on matters referred to it by the Competition
                                       Commission;
“conditions precedent”                 the conditions precedent to which the scheme is subject, as set out in
                                       paragraph 10 on page 17 of this document;




6
“Court”                               the High Court of South Africa (Witwatersrand Local Division), which is located
                                      at High Court Building, Von Brandis Square, corner Pritchard and Von Brandis
                                      Streets, Johannesburg, 2001;
“Cliffe Dekker”                       Cliffe Dekker Incorporated (registration number 1998/018173/21), a firm of
                                      attorneys duly incorporated as a private company in South Africa, and acting as
                                      attorneys to Ellerines;
“CSDP”                                Central Securities Depository Participant;
“dematerialised Ellerines shares”     Ellerines shares which have been incorporated into the Strate system and
                                      which are no longer evidenced by physical documents of title;
“dematerialised scheme members”       scheme members who hold dematerialised Ellerines shares;
“dematerialised scheme participants” scheme participants who hold dematerialised Ellerines shares;
“documents of title”                  valid share certificate(s), certificated transfer deed(s), balance receipts or any
                                      other documents of title acceptable to ABIL and Ellerines in respect of
                                      Ellerines shares;
“this document”                       this document and all annexures and attachments hereto;
“Ellerines” or “the company”          Ellerine Holdings Limited (registration number 1968/013402/06), a limited
                                      liability public company duly incorporated in South Africa, the shares of which
                                      are listed on the JSE, BSE and NSX;
“Ellerines board”                     the board of directors of Ellerines;
“Ellerines group”                     Ellerines and its subsidiaries, from time to time;
“Ellerine Properties”                 Ellerine Properties (Proprietary) Limited (registration number
                                      1967/003465/07), a limited liability private company duly incorporated in
                                      South Africa, a wholly-owned subsidiary of Ellerines which owns 9 090 685
                                      Ellerines shares as treasury shares;
“Ellerines shareholders”              registered holders of Ellerines shares, from time to time;
“Ellerines shares”                    ordinary shares with a par value of 5 cents each in the issued share capital of
                                      Ellerines;
“Ellerines Trust”                     The Ellerine Employees Share Trust, which owns 561 448 Ellerines shares;
“EPS”                                 earnings per share;
“Eyomhlaba programme”                 the black equity ownership programme that was designed to place ABIL shares
                                      in the hands of a broad base of historically disadvantaged individuals;
“Exchange Control Regulations”        the Exchange Control Regulations, 1961, made in terms of section 9 of the
                                      Currency and Exchanges Act, 1933;
“excluded shareholders”               Ellerine Properties and the Relyant Share Trust;
“excluded shares”                     the 9 404 643 Ellerine shares held by the excluded shareholders;
“explanatory statement”               the explanatory statement envisaged in terms of section 312(1)(a)(i) of the
                                      Companies Act in relation to the scheme;

“finalisation date”                   means Friday, 30 November 2007, unless otherwise released on SENS (which
                                      announcement will not be made until all the conditions precedent other than
                                      the registration of the Order of the Court with the Registrar are fulfilled);
“form of surrender and transfer”      form of surrender and transfer for use by holders of certificated Ellerines shares,
                                      to be completed and to accompany surrendered documents of title;
“Grant Thornton”                      Grant Thornton, Chartered Accountants (SA), Registered Auditors
                                      (practice number 903485), reporting accountants to Ellerines;
“HEPS”                                headline earnings per share;
“joint cautionary announcement”       the joint cautionary announcement released by ABIL and Ellerines on SENS on
                                      Monday, 20 August 2007;



                                                                                                                       7
“JSE”                                 JSE Limited (registration number 2005/022939/06), a public company
                                      registered and incorporated in South Africa, licensed as an exchange under the
                                      Securities Services Act (Act 36 of 2004), as amended;
“KPMG”                                KPMG Services (Proprietary) Limited (registration number 1999/012876/07), a
                                      limited liability private company duly incorporated in South Africa, and which
                                      has been appointed by the Ellerines board as an independent professional
                                      expert to advise Ellerines as to the fairness and reasonableness of the terms of
                                      the scheme and the scheme consideration;
“last day to trade for the scheme”    the last day to trade in Ellerines shares, which is expected to be Friday,
                                      7 December 2007, in order to be recorded in the register of Ellerines
                                      shareholders by the record date of the scheme in order to be eligible to
                                      participate in the scheme;
“last day to trade for the            the last day to trade in Ellerines shares, which is expected to be Friday,
  scheme meeting”                     5 October 2007, in order to be recorded in the register of Ellerines shareholders
                                      by the voting record date in order to be eligible to vote at the scheme meeting;
“last practicable date”               Thursday, 13 September 2007, being the last practicable date prior to the
                                      finalisation of this document;
“management”                          executive management of Ellerines;
“Namibia”                             the Republic of Namibia;
“NAV”                                 net asset value;
“NCA”                                 National Credit Act (Act 34 of 2005);
“Nedbank Capital”                     Nedbank Capital, a division of Nedbank Limited (registration number
                                      1951/000009/06), a limited liability public company duly incorporated in
                                      South Africa and acting as investment bank and sponsor to Ellerines;
“NSX”                                 Namibian Stock Exchange;
“NTAV”                                net tangible asset value;
“operative date”                      the first business day following the scheme record date, which operative date
                                      is expected to be Tuesday, 18 December 2007, or such other date as released
                                      on SENS and published in the press;
“own-name registration”               the registration of dematerialised Ellerines shares in the name of the beneficial
                                      owner thereof (as opposed to in the name of a nominee for the beneficial
                                      owner) in a sub-register;
“Prinsloo, Tindle and Andropoulos”    Prinsloo, Tindle and Andropoulos Incorporated (registration number
                                      1998/021593/21), a firm of attorneys duly incorporated as a private company
                                      in South Africa, and acting as attorneys to ABIL;
“Rand” or “R”                         South African Rand, the official currency of South Africa;
“Registrar”                           the Registrar of Companies in South Africa;
“Relyant Share Trust”                 The Relyant Share Trust, which owns 313 958 Ellerines shares;
“RMB”                                 Rand Merchant Bank, a division of FirstRand Bank Limited (registration number
                                      1966/010753/06), a limited liability public company duly incorporated in
                                      South Africa, and acting as merchant bank and sponsor to ABIL;
“scheme” or “scheme of arrangement” the scheme of arrangement in terms of section 311 of the Companies Act
                                    proposed by ABIL between Ellerines and its shareholders (other than the
                                    excluded shareholders), in terms of which ABIL will acquire the scheme shares
                                    in exchange for the scheme consideration, subject to any modification or
                                    amendment to which Ellerines and ABIL agree in writing and which is
                                    sanctioned by the Court;




8
“scheme consideration”          the consideration payable to each scheme participant in terms of the scheme,
                                being 255 new ABIL shares for every 100 scheme shares held, which scheme
                                consideration is based on the gross exchange ratio of 265 ABIL shares per
                                100 Ellerines shares adjusted for the BEE reserved shares;
“scheme consideration shares”   the new ABIL shares to be allotted and issued as the scheme consideration;
“scheme meeting”                the meeting of scheme members to be held at the registered office of Ellerines,
                                Block E, Gillooly’s View Office Park, Osborne Lane, Bedfordview, 2007 at 09:00
                                on Tuesday, 16 October 2007, to consider and, if deemed fit, approve the
                                scheme;
“scheme members”                Ellerines shareholders (other than the excluded shareholders), recorded in the
                                Ellerines share register as such on the voting record date, who are entitled to
                                attend and vote at the scheme meeting;
“scheme record date”            the latest time and date for holders of scheme shares to be recorded in the
                                Ellerines share register as such in order to receive the scheme consideration,
                                which date is expected, subject to the fulfilment of the conditions precedent,
                                to be the close of business on Friday, 14 December 2007, or such other date as
                                released on SENS and published in the press;
“scheme participants”           Ellerines shareholders (other than the excluded shareholders), recorded in the
                                Ellerines share register as such at 17:00 on the scheme record date, who are
                                entitled to receive the scheme consideration;
“scheme shares”                 Ellerines shares held by scheme participants at the close of business on the
                                scheme record date;
“SENS”                          Securities Exchange News Service of the JSE;
“share certificates”            shares which are held and represented by a paper share certificate or other
                                documents of title, which shares have not been dematerialised in terms of the
                                requirements of Strate;
“South Africa”                  the Republic of South Africa;
“SRP”                           the Securities Regulation Panel established in terms of section 440B of the
                                Companies Act;
“Strate”                        Strate Limited (registration number 1998/022242/06), a public company
                                registered and incorporated in South Africa and the electronic clearing and
                                settlement system used by the JSE to settle trades;
“transaction”                   the proposed acquisition by ABIL of the entire issued share capital of Ellerines
                                (other than the excluded shares);
“transfer secretaries”          Computershare Investor Services 2004 (Proprietary) Limited (registration
                                number 2004/003647/07), a limited liability private company duly
                                incorporated in South Africa, whose address is 70 Marshall Street,
                                Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), being the transfer
                                secretaries to Ellerines;
“valuation statement”           the statement envisaged in terms of section 312(1)(a)(ii) of the Companies
                                Act, applicable to the scheme;
“VAT”                           value added tax, levied in terms of the provisions of the Value Added Tax Act,
                                1991 (Act 89 of 1991), as amended;
“voting record date”            the close of business on Friday, 12 October 2007, or such other date as may be
                                released on SENS and published in the press, being the last date to be recorded
                                in Ellerines’ register of members in order to be eligible to vote at the scheme
                                meeting; and
“VWAP”                          volume weighted average price.




                                                                                                              9
NOTICE OF SCHEME MEETING


IN THE HIGH COURT OF SOUTH AFRICA
(WITWATERSRAND LOCAL DIVISION)                                                            Case number: 07/22727

BEFORE THE HONOURABLE JUSTICE LAMONT

In the ex parte application of:

ELLERINE HOLDINGS LIMITED                                                                 Applicant
(Incorporated in the Republic of South Africa)
(Registration number 1968/013402/06)



Under authority of an Order of the High Court of South Africa (Witwatersrand Local Division) (“Court”) issued in the
above matter on Tuesday, 25 September 2007, this notice serves to convene a meeting (“scheme meeting”) of
shareholders of the Applicant who are registered as such as at the close of business on Friday, 12 October 2007,
excluding Ellerine Properties (Proprietary) Limited and The Relyant Share Trust (“scheme members”).
The scheme meeting is to be held at 09:00 on Tuesday, 16 October 2007 (or any adjourned date), at the registered
office of Ellerines, Block E, Gillooly’s View Office Park, Osborne Lane, Bedfordview, 2007, under the chairmanship of
Mr S Slom, or failing him, Mr P Vallet (“chairperson”).
The purpose of the scheme meeting is to consider and, if deemed fit, to agree to (with or without modification) a
scheme of arrangement (“scheme”) in terms of section 311 of the Companies Act, 1973 (“Companies Act”), proposed
by African Bank Investments Limited (“ABIL”) between the Applicant and the shareholders of the Applicant (other than
Ellerine Properties (Proprietary) Limited and The Relyant Share Trust) registered as such on the record date of the
scheme which is expected to be on Friday, 14 December 2007 (“scheme participants”). The basic characteristic of
the scheme is that, subject to the fulfilment of certain conditions precedent to which the scheme is subject, ABIL will
acquire all of the ordinary shares in the Applicant held by the scheme participants (“scheme shares”) for a consideration
of 255 ABIL shares for each 100 scheme shares held, which is payable on the operative date of the scheme, which is
expected to be on Tuesday, 18 December 2007.

Copies of this notice, the form of proxy to be used at the scheme meeting or any adjourned scheme meeting, the
scheme, the explanatory statement in terms of section 312(1)(a)(i) of the Companies Act explaining the scheme and
the Order of Court authorising the convening of the scheme meeting, may be inspected or obtained, free of charge,
during normal business hours, at any time prior to the scheme meeting, at the registered office of the Applicant, being
Block E, Gillooly’s View Office Park, Osborne Lane, Bedfordview, 2007.
Scheme members who hold certificated ordinary shares in the Applicant and scheme members who hold dematerialised
ordinary shares in the Applicant through a Central Securities Depository Participant (“CSDP”) or broker in “own-name”
registration form may attend, speak and vote in person at the scheme meeting or any adjourned meeting, or may
appoint one or more proxies (who need not be shareholders of the Applicant) to attend, speak and vote at the scheme
meeting in the place of such scheme members. A form of proxy for this purpose is included in the circular which has
been posted to all shareholders of the Applicant at their addresses as recorded in the register of members of the
Applicant at the close of business 4 (four) calendar days before the date of such posting. Properly completed forms of
proxy must be lodged with or posted to the transfer secretaries of the Applicant, Computershare Investor Services 2004
(Proprietary) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) to be received by
no later than 09:00 on Monday, 15 October 2007, or on the business day immediately preceding any adjourned
meeting, or handed to the chairperson no later than 10 (ten) minutes before the scheme meeting or adjourned scheme
meeting is due to commence. Notwithstanding the aforegoing, the chairperson may approve in his discretion the use
of any other form of proxy.
Scheme members who hold certificated ordinary shares in the Applicant through a nominee and shareholders who hold
dematerialised ordinary shares in the Applicant through a CSDP or broker and not in “own-name” registration form
should timeously inform their nominees, CSDPs or brokers, as the case may be, to issue them with the necessary Letter
of Representation to attend the scheme meeting or should they not wish to attend the scheme meeting in person, to
timeously provide their nominees, CSDPs or brokers, as the case may be, with their voting instructions in order for their
votes to be represented at the scheme meeting.



10
Where there are joint holders of the Applicant’s ordinary shares, any one of such persons may vote at the scheme
meeting in respect of such ordinary shares as if such joint holder was solely entitled thereto, but if more than one such
joint holders be present or represented at the scheme meeting, that one of the said persons whose name appears first
in the Applicant’s share register or their proxy, as the case may be, will alone be entitled to vote in respect thereof.
In terms of the aforementioned Order of Court, the chairperson must report the results of the scheme meeting to the
above Honourable Court on Tuesday, 30 October 2007 at 10:00 or so soon thereafter as Counsel may be heard. A copy
of the chairperson’s report to the Court will be available on request to any scheme member, free of charge, at the
registered office of the Applicant during normal business hours at least 7 (seven) calendar days prior to the date fixed
by the Court for the chairperson to report back to it.
To the extent that the conditions precedent are not fulfilled by 30 November 2007, the above dates and times will be
delayed. To the extent that the conditions precedent are fulfilled prior to 30 November 2007, the salient dates and
times may be accelerated by agreement of both Ellerines and ABIL.
Any changes to the above dates and times will be released on SENS and published in the press.


Chairperson of the scheme meeting


Attorneys to the scheme


Cliffe Dekker Inc.
4th Floor
1 Protea Place
Sandown, Sandton, 2196
Tel: 011 290 7000
Fax: 011 290 7300
Ref: Mr C H Ewing/Mr W H Jacobs




                                                                                                                      11
           Ellerine Holdings Limited                              African Bank Investments Limited
            (Incorporated in the Republic of South Africa)                  (Incorporated in the Republic of South Africa)
               (Registration number 1968/013402/06)                            (Registration number 1946/021193/06)
              Share code: ELH      ISIN: ZAE000022752                   Ordinary share code: ABL         ISIN: ZAE000030060
                                                                        Preference share code: ABLP      ISIN: ZAE000065215




EXPLANATORY STATEMENT
APPLICABLE TO THE SCHEME OF ARRANGEMENT
IN TERMS OF SECTION 312(1)(a)(i) OF THE COMPANIES ACT


The definitions commencing on page 6 of this document apply throughout this explanatory statement.
1.   INTRODUCTION
     In an announcement released on SENS on Wednesday, 5 September 2007, Ellerines shareholders were advised that
     ABIL had made an offer to acquire the entire issued share capital of Ellerines (other than the excluded shares), to
     be implemented by way of a scheme of arrangement.
     If the scheme is implemented, scheme participants will receive 255 ABIL shares (265 ABIL shares adjusted for the
     BEE reserved shares) for every 100 Ellerines shares held and Ellerines will become a wholly-owned subsidiary of
     ABIL. Ellerines’ listings on the JSE, BSE and NSX will then be terminated.
     The scheme will be subject to the fulfilment of the conditions precedent, which include, inter alia, Competition
     Authorities’ approval of the transaction.
     The scheme (yellow) is set out in full in the section immediately following this explanatory statement. For a full
     understanding of the detailed terms and conditions, the scheme should be read in its entirety.


2.   RATIONALE FOR THE SCHEME
     2.1   ABIL’s rationale for the transaction
           ABIL believes that the recent introduction of the NCA will have a profound effect on the landscape of the
           credit markets in South Africa, particularly within ABIL’s target market. ABIL believes that, over time, the NCA
           will result in greater competition, a wider variety of choice and utility, and generally a lower cost of credit to
           consumers, which in turn will grow the size of the market.
           It is ABIL’s intention to continue to grow its business to sufficient scale so that it can further lower the cost
           of credit to its clients and accelerate the innovation of new credit products and risk underwriting models to
           take full advantage of the changing landscape of the credit markets. To this end ABIL has been pursuing a
           growth strategy in terms of the number of clients it services, and the size of its advances book. To date, this
           has been achieved largely through ABIL’s risk segmentation and price differentiation strategy (which,
           particularly for lower risk clients, has resulted in larger loans for longer terms being offered), the lowering of
           the cost of credit to its clients and an expanded distribution network of branches.
           ABIL believes that the credit furniture retail market offers attractive growth opportunities and that Ellerines
           offers a strong strategic fit to pursue these strategies. The Ellerines group is a successful and established retail
           business operating a number of well-known household brands through some 1 300 outlets. In its retail credit
           divisions, the Ellerines group sells furniture, appliances and electronic goods mainly on credit to clients that
           largely fit within ABIL’s target market.
           It is ABIL’s belief that over time the credit activities of retailers will become increasingly disintermediated. At
           present however, the retailing of furniture and the provision of related credit are inextricably linked.
           Furthermore, whilst vulnerable to change under the credit markets, the furniture retailers have a strong
           point-of-sale advantage and a loyal client base.



12
           The joining of the two businesses under a single ownership structure will optimise the opportunities available
           in order to play a leading role in the reshaping of the retail and financial services offering to this market.
           Ellerines has proven and experienced retail expertise, and ABIL is confident that the retail business will
           continue to grow and increase its market share, powered by an enhanced financial services offering.

     2.2   Ellerines’ rationale for the transaction
           Expansion of financial services is a stated strategic priority of Ellerines and the Ellerines group has spent the
           past 30 months exploring numerous possibilities in this regard. Identification of an ideal partner and an
           optimal structure have proven to be extremely difficult. Ellerines believes that financial services form the
           backbone of its “customer for life” strategy and that the retail business can benefit significantly by
           complementary financial services offerings.
           Ellerines’ vision has for some time contemplated the creation of a stand-alone consumer finance
           organisation, capable of offering a wide range of consumer finance, insurance and banking products. At the
           same time, the Ellerines group has been highly concerned about the ongoing loss of its traditional credit retail
           customers to the banking sector, and has been actively seeking ways of taking advantage of this movement.
           The Ellerines board believes that the transaction with ABIL offers the perfect opportunity to fulfil its strategic
           objectives, stem the loss of retail credit customers and provides the ideal platform, to address the growing
           burden of regulatory compliance in terms of the NCA and to rapidly expand the Ellerines group’s reach and
           range of financial services products. ABIL’s proven expertise in credit risk optimisation and its highly effective
           analytics expertise will provide a significant boost to Ellerines’ credit capabilities. Ellerines also shares ABIL’s
           views in striving to lower the cost of credit. The Ellerines board believes that ABIL provides an excellent fit
           with the Ellerines group.

     2.3   Benefits from the transaction
           The major opportunities and advantages that emerge from the combining of the two groups are as follows:
           • greater critical mass for the financial services business of the combined group. The combining of the two
             groups will double the joint client base to more than two million active credit clients and increase the
             gross advances book to approximately R16 billion. The benefits of this critical mass will allow the group
             to become more cost efficient and thereby allow it to further reduce the cost of credit to the market;
           • a greater distribution footprint with approximately 1 900 branches and outlets, improving client
             accessibility and service;
           • the ability to introduce ABIL’s greater price and risk differentiation underwriting models into the Ellerines
             distribution channel. This creates greater credit capacity for lower risk clients, which in turn creates greater
             purchasing power for consumers in the furniture retail market;
           • improved product offerings and flexibility for Ellerines clients. ABIL intends to implement and
             further innovate its card-based technology to offer retail clients a more flexible credit offering with
             greater convenience. This will also give ABIL the opportunity to achieve critical mass in its card operations;
           • Ellerines operates in a wider target market than ABIL and unlike ABIL has gained experience in lending
             to clients that are informally employed and/or who do not have bank accounts. This will enable ABIL to
             expand its target market through the increased distribution footprint and gain experience in these areas; and
           • ABIL estimates that there is approximately R2 billion of surplus capital in Ellerines that can over time be
             more effectively funded via debt and secondary capital instruments. This in turn will lower the weighted
             average cost of capital, enabling more competitive product pricing to the credit markets.


3.   REQUIREMENTS AND MECHANICS OF THE SCHEME OF ARRANGEMENT
     3.1   In terms of section 311 of the Companies Act, a scheme of arrangement proposed between a company and
           its shareholders (or any class of its shareholders), will become binding on that company and all shareholders
           (or all shareholders of the relevant class) (irrespective of whether or not any such shareholder agrees with
           the scheme and is willing to be bound) if:
           • a meeting of scheme members has been summoned in a manner directed by the Court;
           • the scheme is agreed to by a majority representing not less than three-fourths of the votes exercisable by
             scheme members present and voting, either in person or by proxy at such meeting;




                                                                                                                            13
           • after such approval, the scheme is sanctioned by the Court at an open hearing; and
           • the Order of Court sanctioning the scheme is lodged with, and registered, by the Registrar.

     3.2   The Court has granted an Order (a copy of which is set out on pages 106 to 108 of this document) in terms
           of which a scheme meeting of Ellerines shareholders must be convened to consider the scheme.

     3.3   A copy of the notice convening the scheme meeting (which has been published in the press in accordance
           with the requirements of the Order) is set out on pages 10 and 11 of this document.


4.   THE SCHEME
     4.1   If the scheme is approved by the requisite majority of scheme members at the scheme meeting, Ellerines will
           apply to the Court for the sanctioning of the scheme.

     4.2   If the Court sanctions the scheme and the other conditions precedent are fulfilled, the scheme will become
           binding and:
           4.2.1   scheme participants will be deemed to have disposed of all of the scheme shares held by them to
                   ABIL which will be deemed to have acquired ownership of the scheme shares;
           4.2.2   scheme participants will be entitled to receive the scheme consideration;
           4.2.3   ABIL will be obliged to deliver the scheme consideration shares to Ellerines as principal and Ellerines
                   will be obliged to transfer the scheme consideration shares to the scheme participants;
           4.2.4   scheme participants will be entitled to enforce their rights only against Ellerines and Ellerines, in turn,
                   undertakes for the benefit of scheme participants, to enforce all its rights in terms of the scheme
                   against ABIL; and
           4.2.5   as a result, ABIL will become the beneficial holder of the entire issued share capital of Ellerines and
                   the listings of Ellerines on the JSE, NSX and BSE will be terminated.


5.   THE SCHEME MEETING
     5.1   The scheme will be put to a vote at the scheme meeting to be held at 09:00 on Tuesday, 16 October 2007,
           at the registered office of Ellerines, Block E, Gillooly’s View Office Park, Osborne Lane, Bedfordview, 2007.

     5.2   Section 311(2)(b) of the Companies Act requires that the scheme be approved by a majority representing not
           less than three-fourths of the votes exercisable by scheme members who are present and voting, either in
           person or by proxy, at the scheme meeting.

     5.3   Each certificated scheme member or dematerialised scheme member holding shares with “own-name”
           registration recorded in the register on the voting record date, can attend the scheme meeting in person or
           give a proxy to someone else (including the chairperson of the scheme meeting) to represent him at the
           scheme meeting.

     5.4   The transfer secretaries must receive a duly completed form of proxy (green) by not later than 09:00 on
           Monday, 15 October 2007. Forms of proxy may also be handed to the chairperson of the scheme meeting
           not later than 10 (ten) minutes before the commencement of the scheme meeting.

     5.5   A dematerialised scheme member who does not have “own-name” registration, must arrange with his CSDP
           or broker, to give such dematerialised scheme member the authority to attend at the scheme meeting or
           appoint a proxy. Alternatively, he must furnish his voting instructions to his CSDP or broker on or before the
           cut-off time as stipulated by his CSDP or broker.

     5.6   Scheme members who do not wish to vote in favour of the scheme will be given the opportunity to voice
           their objections at the scheme meeting.




14
6.   COURT HEARING
     6.1   The Court is located at the High Court Building, Von Brandis Square, corner Pritchard and Von Brandis Streets,
           Johannesburg, 2001.

     6.2   Subject to the scheme being approved by the requisite majority at the scheme meeting, application will be
           made to the Court to sanction the scheme. Ellerines shareholders will be entitled to attend the Court hearing
           in person, or to be represented by Counsel, on the day on which the application is to be made and to oppose
           the sanctioning of the scheme should they wish to do so.

     6.3   No action need be taken by Ellerines shareholders should such Ellerines shareholders not wish to attend the
           Court hearing and oppose the sanctioning of the scheme.

     6.4   In terms of section 311(6) of the Companies Act, the Order of Court sanctioning the scheme will have no
           effect until it is registered by the Registrar. Ellerines will notify Ellerines shareholders by announcements in
           the press and on SENS once the outstanding conditions precedent have all been fulfilled, other than the
           registration of the Order of Court, and will only seek to register the Order of Court with the Registrar once
           all the other conditions precedent have been fulfilled.


7.   THE SCHEME CONSIDERATION
     The scheme consideration has been based on a valuation of R85.00 per Ellerines share. ABIL intends to settle the
     scheme consideration by the issue of the scheme consideration shares.
     Based on the 30-day VWAP of ABIL, at close of business on Friday, 17 August 2007 (being the last business day prior
     to the release of the joint cautionary announcement), of R32,10, the scheme consideration translates into a fixed
     exchange ratio of 265 ABIL shares per 100 Ellerines shares held.
     In order to maintain the current level of BEE ownership in ABIL, after the new issue of ABIL shares, ABIL is proposing
     to reserve the BEE reserved shares, being 11 557 109 new ABIL shares. These ABIL shares are to be used to facilitate
     a BEE programme (similar to ABIL’s Eyomhlaba programme) targeted at the current Ellerines business, its preferred
     BEE partners and its other stakeholders, which will be implemented shortly after the conclusion of the scheme.
     Accordingly, after deducting the BEE reserved shares, scheme participants would receive the net scheme
     consideration of 255 ABIL shares per 100 Ellerines shares, rounded up to the nearest whole ABIL share.
     The scheme consideration results in the following premiums to scheme participants:
                                                                                            Premium           Premium
                                                                                            based on             net of
                                                                                                gross      BEE reserved
                                                                                        consideration            shares
     Based on Ellerines closing price on 17 August 2007 of R58,00                                 47%               41%
     Based on Ellerines 30-day VWAP to 17 August 2007 of R64,28                                   32%               27%
     Annexure IX sets out the number of new ABIL shares to which an Ellerines shareholder is entitled in respect of that
     portion of his holding in Ellerines which is not a multiple of 100 Ellerines shares.


8.   SETTLEMENT OF THE SCHEME CONSIDERATION
     8.1   For certificated scheme participants the scheme consideration will, where the documents of title have been
           validly surrendered prior to the scheme record date, be posted, by ordinary post, by the transfer secretaries
           at the risk of such scheme participants on or about the operative date, or will be posted within five business
           days of receipt of the attached form of surrender and transfer together with the relevant documents of title,
           where such documents are surrendered after the operative date.

     8.2   The scheme consideration due to certificated scheme participants will be posted to the addresses reflected
           in the register at the scheme record date at the risk of such scheme participants, unless written instructions
           to the contrary are furnished in the attached form of surrender and transfer.




                                                                                                                        15
     8.3   For dematerialised scheme participants, Ellerines will transfer the scheme consideration into the account of
           the relevant CSDP or broker on the operative date. A dematerialised scheme participant will receive from
           his CSDP or broker, in accordance with the provisions of the custody agreement between each such
           dematerialised scheme participant and his CSDP or broker, that portion of the scheme consideration received
           by the CSDP or broker as is attributable to the dematerialised shares held by the CSDP or broker on behalf
           of that dematerialised scheme participant.

     8.4   Where on, or subsequent to, the operative date, a person who was not a registered holder of scheme shares
           on the scheme record date tenders to the transfer secretaries, documents of title together with the form of
           surrender and transfer purporting to have been executed by or on behalf of the registered holder of such
           shares, and provided that the scheme consideration shall not already have been posted or delivered to the
           registered holder or deposited directly into the registered holders’ account, such transfer shall be accepted
           by Ellerines as if it were a valid transfer to such person of the scheme shares concerned. The scheme
           consideration will be posted to such person in accordance with the provisions of this paragraph 8 within five
           business days of such tender, subject to satisfactory proof provided to ABIL and to Ellerines as to the payment
           of any stamp duty or uncertificated securities tax payable and provided that ABIL and Ellerines are, if so
           required, given an indemnity on terms acceptable to it in respect of such scheme consideration.

     8.5   If:
           8.5.1   the scheme consideration is not sent to scheme participants entitled thereto, or transferred directly
                   into such scheme participants’ accounts because the relevant documents of title, in the case of
                   certificated scheme participants, have not been validly surrendered; or
           8.5.2   the scheme consideration is returned undelivered to the transfer secretaries,
           unless otherwise agreed between ABIL, Ellerines and the scheme participants concerned, the relevant scheme
           consideration will be held in trust by Ellerines (or any third party nominated by it for this purpose) for the
           benefit of the scheme participants concerned until claimed by such scheme participant.

     8.6   Unless otherwise agreed between ABIL, Ellerines and the scheme participants concerned, the scheme
           consideration will be paid in full in accordance with the terms of the scheme without regard to any lien, right
           of set-off, counterclaim or other analogous right to which Ellerines may be entitled.


9.   SURRENDER OF DOCUMENTS OF TITLE
     The provisions of this paragraph 9 do not apply to dematerialised scheme participants.
     9.1   Certificated scheme participants must surrender their documents of title together with a duly completed
           form of surrender and transfer in order to claim the scheme consideration.

     9.2   Certificated scheme participants who wish to anticipate the implementation of the scheme and expedite receipt
           of the scheme consideration should complete the attached form of surrender and transfer and return same as
           soon as possible to the transfer secretaries together with share certificates and/or other documents of title so as
           to be received by the transfer secretaries by no later than 12:00 on the scheme record date.

     9.3   Alternatively, certificated scheme participants may wait until the scheme becomes operative, and surrender
           their documents of title under cover of the completed form of surrender and transfer at that time.

     9.4   The attention of certificated scheme participants is drawn to the fact that if they surrender their documents
           of title in advance of the implementation of the scheme, they will not be in a position to dematerialise their
           documents of title or to deal in their scheme shares on the JSE, BSE, NSX or otherwise between the date of
           surrender and the operative date.

     9.5   The transfer secretaries will hold, in trust, the documents of title surrendered by certificated scheme
           participants in anticipation of the scheme becoming operative. If the conditions precedent are not fulfilled
           and the scheme participant does not issue alternative instructions, then the transfer secretaries will, within
           five business days of the date upon which it becomes known that the scheme will not become operative,
           return the documents of title to the certificated scheme participant concerned, by registered post, at the risk
           of such certificated scheme participant.



16
   9.6   No receipts will be issued for documents of title surrendered unless specifically requested.

   9.7   If documents of title have been lost or destroyed and the scheme participant produces evidence to this effect
         to both Ellerines and ABIL, Ellerines and ABIL may dispense with the requirement of the surrender of
         documents of title against provision of an acceptable indemnity, the cost of which indemnity will be borne
         by the scheme participant concerned.


10. CONDITIONS PRECEDENT
   The scheme is subject to and will only become binding upon the fulfilment of the last of the following conditions
   precedent:
   10.1 the scheme being approved by a majority representing not less than three-fourths of the votes exercisable
        by the scheme members present and voting, either in person or by proxy, at the scheme meeting;

   10.2 the Court sanctioning the scheme;

   10.3 a certified copy of the Order of Court sanctioning the scheme being registered by the Registrar in terms of
        the Companies Act;

   10.4 the approval of the Competition Authorities and any other regulatory authorities to the extent required
        including approvals from the Registrar of Banks and the Financial Services Board, either unconditionally or
        subject to such conditions as may be acceptable to Ellerines and ABIL;

   10.5 the passing by ABIL shareholders of the requisite resolution, required to implement the acquisition of the
        scheme shares, at a general meeting of ABIL shareholders; and

   10.6 the JSE agreeing to grant a listing of the scheme consideration shares.


11. DIVIDENDS
   The boards of both ABIL and Ellerines have agreed that since the operative date of the scheme is expected to
   be after each company reports its year-end results, the parties would be entitled to pay a final dividend out of the
   second half results, provided that the relevant date to participate in the dividend is prior to the operative date for
   the scheme. Furthermore, it has been agreed that such dividends should be based on the respective dividend cover
   ratios (using headline earnings attributable to ordinary shareholders for the second half of the financial year) of
   each company for its most recent interim results, being 1.20 times for ABIL and 2.85 times for Ellerines. If either
   party declares a final dividend which results in the respective dividend cover ratio being less than the limits set out
   above, an equitable adjustment to the switch ratio will be made prior to the operative date of the scheme to
   compensate the other party, provided that an adjustment will only be made if it results in a change to the exchange
   ratio of at least 1 ABIL share per 100 Ellerines shares.


12. EFFECTS OF THE SCHEME
   If the scheme becomes operative;
   12.1 each scheme participant (whether he voted in favour of the scheme or not), will be deemed to have sold his
        scheme shares to ABIL and will no longer be a shareholder in Ellerines; and

   12.2 ABIL will become the beneficial owner of the entire issued share capital of Ellerines and the listings of
        Ellerines’ shares on the JSE, BSE and NSX will be terminated.


13. ELLERINES SHARE SCHEMES
   Ellerines currently has two operative share-linked incentive schemes, one being a deferred delivery scheme
   operated through the Ellerines Trust and the second being a cash-settled bonus scheme linked to the Ellerines share
   price. Ellerines management and staff, where possible, will convert their existing rights in terms of the cash settled
   bonus scheme into the current ABIL long term incentive programme, on terms no less favourable to the
   beneficiaries, than the existing scheme.


                                                                                                                       17
     With regard to the deferred delivery scheme, ABIL has agreed that Ellerines may allow the acceleration of the
     vesting criteria and the payment and delivery obligation of the remaining unvested options prior to the operative
     date. If early vesting, payment and delivery are effected, this will result in all holders of rights to shares under the
     Ellerines Trust either being converted to scheme participants or selling their Ellerines shares in the open market. To
     the extent that this early vesting, payment and delivery are not effected, the Ellerines Trust will be a scheme
     participant and the Ellerines shares held by the Ellerines Trust on the scheme record date will constitute scheme
     shares. The Ellerines Trust will not transfer any of its Ellerines shares, prior to the operative date, other than to
     beneficiaries of such trust who have a right to delivery of such shares.
     In addition, the remuneration committee of Ellerines has conditionally approved a further allocation of Ellerines
     shares to the management of Ellerines under a new long term incentive programme which has been approved in
     principle by the Ellerines board, but which Ellerines has been unable to implement to date. ABIL acknowledges the
     commitment made by Ellerines and will work with Ellerines management to ensure that the programme or an
     appropriate alternative is implemented, recognising the 60-day calendar VWAP price of Ellerines shares at close of
     business on 17 of August 2007, being the price at which such a scheme would have been implemented.


14. EXCHANGE CONTROL REGULATIONS
     Annexure VII contains a summary of the Exchange Control Regulations as they apply to scheme participants.
     A scheme participant who is not resident in, or who has a registered address outside of South Africa, must satisfy
     himself as to the full observance of the laws of any relevant territory concerning the receipt of the scheme
     consideration, including obtaining any requisite governmental or other consents, observing any other requisite
     formalities and paying any issue, transfer or other taxes due in such territory.


15. OPINIONS AND RECOMMENDATIONS
     15.1 KPMG has been appointed by the Ellerines board to independently advise it as to the fairness and
          reasonableness of the terms of the scheme. KPMG has considered the terms of the scheme and is of the
          opinion that the scheme is fair and reasonable to scheme participants. The text of the letter from KPMG in
          this regard is set out in Annexure VI.

     15.2 The Ellerines board has considered the terms of the scheme and has considered the opinion of the
          independent professional expert, and is of the opinion that the terms of the scheme are fair and reasonable.
          The directors intend to vote in favour of the scheme in respect of their own shareholdings in Ellerines and
          recommend that Ellerines shareholders do likewise.


16. SPECIAL ARRANGEMENTS
     Save as detailed in this document:
     16.1 no arrangements, undertakings or agreements have been made between ABIL and Ellerines, or persons acting
          in concert with Ellerines and ABIL, in relation to the scheme shares;

     16.2 save as detailed in paragraph 13 above, no arrangements or undertakings (including any compensation
          arrangements) which have any connection with or dependence on the scheme exist between ABIL (or any
          person acting in concert with ABIL) and any director of Ellerines, or any person who was a director of Ellerines
          within the period commencing 12 months prior to the operative date, or any person who is or was a holder
          of shares within the period commencing 12 months prior to the operative date;

     16.3 no arrangements have been made between Ellerines and the directors of ABIL in connection with the scheme;

     16.4 no arrangements have been made between Ellerines and the directors of Ellerines in connection with the
          scheme;

     16.5 scheme participants shall be entitled to any dividend declared by the Ellerines board prior to the
          implementation of the scheme; and

     16.6 Scheme participants shall not be entitled to any dividends declared by the ABIL board prior to the
          implementation of the scheme.


18
17. AUTHORS
    The authors of this explanatory statement are the respective boards of Ellerines and ABIL.


For and on behalf of                                         For and on behalf of


ELLERINE HOLDINGS LIMITED                                    AFRICAN BANK INVESTMENTS LIMITED


R B G Sinclair                                               D F Woollam
Director                                                     Director


Bedfordview                                                  Midrand
27 September 2007                                            27 September 2007


D S McGlashan                                                L Kirkinis
Chairman                                                     Chief Executive Officer


Bedfordview                                                  Midrand
27 September 2007                                            27 September 2007




                                                                                                 19
          Ellerine Holdings Limited                                   African Bank Investments Limited
            (Incorporated in the Republic of South Africa)                      (Incorporated in the Republic of South Africa)
               (Registration number 1968/013402/06)                                (Registration number 1946/021193/06)
              Share code: ELH       ISIN: ZAE000022752                      Ordinary share code: ABL         ISIN: ZAE000030060
                             (“Ellerines”)                                  Preference share code: ABLP      ISIN: ZAE000065215
                                                                                                   (“ABIL”)



SCHEME OF ARRANGEMENT


In terms of section 311 of the Companies Act (No 61 of 1973), as amended, proposed by ABIL between Ellerines
and its shareholders, other than the holders of the excluded shares.



DEFINITIONS AND INTERPRETATIONS


The definitions below apply throughout the scheme.
In this document, unless otherwise stated or clearly indicated by the context, the words in the first column have the
meanings stated opposite them in the second column; words in the singular include the plural and vice versa; words
importing one gender include the other genders and references to a person include reference to a body corporate and
vice versa:
“ABIL”                                          African Bank Investments Limited (registration number 1946/021193/06), a
                                                limited liability public company duly incorporated in South Africa, the shares of
                                                which are listed on the JSE;
“African Bank”                                  African Bank Limited (registration number 1975/002526/06), a limited liability
                                                public company duly incorporated in South Africa, a wholly-owned subsidiary
                                                of ABIL;
“ABIL shares”                                   ordinary shares with a par value of 2,5 cents each in the issued share capital
                                                of ABIL;
“BEE”                                           Black Economic Empowerment;
“BEE reserved shares”                           11 557 109 new ABIL shares equating to 3,75% of the scheme consideration
                                                (based on the gross exchange ratio of 265 ABIL shares for every 100 Ellerine
                                                shares) to be used to facilitate a BEE programme (similar to ABIL’s Eyomhlaba
                                                programme) targeted at the Ellerines business, its preferred BEE partners and
                                                its other stakeholders, which will be implemented shortly after the
                                                implementation of the scheme;
“BSE”                                           Botswana Stock Exchange;
“business day”                                  any day other than a Saturday, Sunday or public holiday in South Africa;
“certificated Ellerines shares”                 Ellerines shares which have not yet been dematerialised, title to which is
                                                represented by a share certificate or other document of title;
“certificated scheme members”                   scheme members who hold certificated Ellerines shares;
“certificated scheme participants”              scheme participants who hold certificated Ellerines shares;
“common monetary area”                          South Africa, Namibia and the Kingdoms of Swaziland and Lesotho;
“Companies Act”                                 the Companies Act (Act 61 of 1973,) as amended;



20
“Competition Act”                     the Competition Act (Act 89 of 1998), as amended;
“Competition Authorities”             the Competition Commission and the Competition Tribunal;
“Competition Commission”              the Commission established in terms of the Competition Act and which is
                                      responsible for the investigation, control and evaluation of restrictive practices,
                                      abuse of dominant position and mergers;
“Competition Tribunal”                the Tribunal established in terms of the Competition Act and, which is responsible
                                      to adjudicate on matters referred to it by the Competition Commission;
“conditions precedent”                the conditions precedent to which the scheme is subject, as set out in
                                      paragraph 5 on page 24 of the scheme;
“Court”                               the High Court of South Africa (Witwatersrand Local Division), which is located
                                      at High Court Building, Von Brandis Square, corner Pritchard and Von Brandis
                                      Streets, Johannesburg, 2001;
“CSDP”                                Central Securities Depository Participant;
“dematerialised scheme members”       scheme members who hold dematerialised Ellerines shares;
“dematerialised scheme participants” scheme participants who hold dematerialised Ellerines shares;
“dematerialised Ellerines shares”     those Ellerines shares which have been incorporated into the Strate system and
                                      which are no longer evidenced by physical documents of title;
“documents of title”                  valid share certificate(s), certificated transfer deed(s), balance receipts or any
                                      other documents of title acceptable to ABIL and Ellerines in respect of Ellerines
                                      shares;
“Ellerines” or “the company”          Ellerine Holdings Limited (registration number 1968/013402/06), a limited
                                      liability public company duly incorporated in South Africa, the shares of which
                                      are listed on the JSE, BSE and NSX;
“Ellerine Properties”                 Ellerine Properties (Proprietary) Limited (registration number
                                      1967/003465/07), a limited liability private company duly incorporated in
                                      South Africa, a wholly-owned subsidiary of Ellerines which owns 9 090 685
                                      Ellerines shares as treasury shares;
“Ellerines shareholders”              registered holders of Ellerines shares, from time to time;
“Ellerines shares”                    ordinary shares with a par value of 5 cents each in the issued share capital of
                                      Ellerines;
“Ellerines Trust”                     The Ellerine Employees Share Trust, which owns 561 448 Ellerines shares;
“Exchange Control Regulations”        the Exchange Control Regulations, 1961, made in terms of section 9 of the
                                      Currency and Exchanges Act, 1933;
“excluded shareholders”               Ellerine Properties and the Relyant Share Trust;
“excluded shares”                     the 9 404 643 Ellerine shares held by the excluded shareholders;
“Eyomhlaba programme”                 the black equity ownership programme that was designed to place ABIL shares
                                      in the hands of a broad base of historically disadvantaged individuals;
“JSE”                                 JSE Limited (registration number 2005/022939/06), a public company
                                      registered and incorporated in South Africa, licensed as an exchange under the
                                      Securities Services Act (Act 36 of 2004), as amended;
“last practicable date”               Thursday, 13 September 2007, being the last practicable date prior to the
                                      finalisation of this document;
“Namibia”                             the Republic of Namibia;
“NSX”                                 Namibian Stock Exchange;
“operative date”                      the first business day following the scheme record date, which operative date
                                      is expected to be Tuesday, 18 December 2007, or such other date as released
                                      on SENS and published on the press;


                                                                                                                      21
“own-name registration”               the registration of dematerialised Ellerines shares in the name of the beneficial
                                      owner thereof (as opposed to in the name of a nominee for the beneficial
                                      owner) in a sub-register;
“Registrar”                           the Registrar of Companies in South Africa;
“Relyant Share Trust”                 The Relyant Share Trust, which owns 313 958 Ellerines shares;
“scheme” or “scheme of arrangement” the scheme of arrangement in terms of section 311 of the Companies Act
                                    proposed by ABIL between Ellerines and its shareholders (other than the
                                    excluded shareholders), in terms of which ABIL will acquire the scheme shares
                                    in exchange for the scheme consideration, subject to any modification or
                                    amendment, to which Ellerines and ABIL agree in writing and which is
                                    sanctioned by the Court;
“scheme consideration”                the consideration payable to each scheme participant in terms of the scheme,
                                      being 255 new ABIL shares for every 100 scheme share held, which scheme
                                      consideration is based on the gross exchange ratio of 265 ABIL shares per
                                      100 Ellerines shares adjusted for the BEE reserved shares;
“scheme meeting”                      the meeting of scheme members to be held at the registered office of Ellerines,
                                      Block E, Gillooly’s View Office Park, Osborne Lane, Bedfordview, 2007 at 09:00 on
                                      Tuesday, 16 October 2007, to consider and, if deemed fit, approve the scheme;
“scheme members”                      Ellerines shareholders (other than the excluded shareholders), recorded in the
                                      Ellerines share register as such on the voting record date, who are entitled to
                                      attend and vote at the scheme meeting;
“scheme participants”                 Ellerines shareholders (other than the excluded shareholders), recorded in the
                                      Ellerines share register as such at 17:00 on the scheme record date, who are
                                      entitled to receive the scheme consideration;
“scheme record date”                  the latest time and date for holders of the scheme shares to be recorded in the
                                      Ellerines share register as such in order to receive the scheme consideration
                                      which date is expected, subject to the fulfilment of the conditions precedent,
                                      to be the close of business on Friday, 14 December 2007, or such other date as
                                      released on SENS and published in the press;
“scheme shares”                       Ellerines shares held by scheme participants at the close of business on the
                                      scheme record date;
“SENS”                                Securities Exchange News Service of the JSE;
“share certificates”                  shares which are held and represented by a paper share certificate or other
                                      documents of title, which shares have not been dematerialised in terms of the
                                      requirements of Strate;
“South Africa”                        the Republic of South Africa;
“SRP”                                 the Securities Regulation Panel established in terms of section 440B of the
                                      Companies Act;
“Strate”                              Strate Limited (registration number 1998/022242/06), a public company
                                      registered and incorporated in South Africa and the electronic clearing and
                                      settlement system used by the JSE to settle trades;
“transaction”                         the proposed acquisition by ABIL of the entire issued share capital of Ellerines
                                      (other than the excluded shares);
“transfer secretaries”                Computershare Investor Services 2004 (Proprietary) Limited (registration
                                      number 2004/003647/07), a limited liability private company duly
                                      incorporated in South Africa, whose address is 70 Marshall Street,
                                      Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), being the transfer
                                      secretaries to Ellerines; and
“voting record date”                  the close of business on Friday, 12 October 2007, or such other date as may
                                      be released on SENS and published in the press, being the last date to
                                      be recorded in Ellerines’ register of members in order to be eligible to vote at
                                      the scheme meeting.



22
1.   INTRODUCTION
     This document contains the scheme proposed by ABIL between Ellerines and the scheme participants. A detailed
     explanation of the object of the scheme is contained in paragraph 3 below.


2.   SHARE CAPITAL OF ELLERINES
     The authorised and issued share capital of Ellerines on the last practicable date is set out below:
                                                                                                                    R’000
     Authorised
     200 000 000 ordinary shares of 5 cents each                                                                  10 000
     Issued
     124 975 732 ordinary shares of 5 cents each                                                                    6 249

     770 625 shares are under option to employees of the Ellerines group in terms of the Ellerines Trust.
     1 347 741 shares are under the control of the directors to be granted in terms of the Ellerines Trust and it is
     anticipated that no further options will be granted to employees under this scheme.
     9 090 685 shares are held as treasury shares by Ellerine Properties, 561 448 shares are held by the Ellerines Trust
     and 313 958 shares are held by the Relyant Share Trust.


3.   THE OBJECT OF THE SCHEME
     The object of the scheme is to procure that ABIL will acquire 100% of the issued share capital of Ellerines, other
     than the excluded shares. The scheme will result in Ellerines becoming a wholly-owned subsidiary of ABIL,
     whereafter Ellerines will be delisted from the JSE, NSX and BSE.


4.   THE SCHEME
     4.1   Mechanics of the scheme
           4.1.1   Subject to the scheme becoming binding, with effect from the operative date, scheme participants
                   shall be deemed to have:
                   4.1.1.1 disposed of their scheme shares to ABIL in exchange for the scheme consideration and ABIL
                           will be deemed to have acquired ownership of the scheme shares with effect from the
                           operative date, in exchange for the delivery by ABIL of the scheme consideration to Ellerines,
                           as stated in paragraphs 4.1.1.2 and 4.1.1.3 below;
                   4.1.1.2 irrevocably authorised Ellerines (as principal), to cause the scheme shares to be transferred
                           and registered into the name of ABIL on or at any time after the operative date; and
                   4.1.1.3 irrevocably instructed Ellerines (as principal) but with the power to appoint agents, to collect
                           from ABIL and set aside and transfer the scheme consideration in respect of the scheme
                           shares to scheme participants in accordance with the provisions of the scheme.
           4.1.2   Upon the scheme becoming binding, certificated scheme participants will be obliged to surrender
                   their documents of title to the transfer secretaries, under cover of a duly completed form of surrender
                   and transfer in order to receive the scheme consideration. No action regarding the surrender of
                   documents of title is required from dematerialised scheme participants.
           4.1.3   Should the scheme become binding, scheme participants will be entitled to receive the scheme
                   consideration, from Ellerines only, in terms of paragraphs 4.2, 7 and 8 below. Ellerines will administer
                   and effect payment of the scheme consideration to the scheme participants. Ellerines, as principal, will
                   be obliged to surrender to ABIL all the scheme shares, provided that ABIL has complied with its
                   obligations in terms of paragraph 4.1.4 below and Ellerines will also be obliged, subject to
                   paragraph 4.1.2 above, at the request of ABIL, to transfer and register, or procure the transfer and
                   registration of, the scheme shares in the name of ABIL.



                                                                                                                        23
           4.1.4   ABIL will timeously provide Ellerines with the requisite shares so as to enable Ellerines to
                   settle the scheme consideration payable to the scheme participants in accordance with this scheme,
                   which will occur only once all conditions precedent have been met.
           4.1.5   ABIL will deliver the scheme consideration to Ellerines or its agent, as principal, on or before the
                   operative date, it being recorded that settlement of the scheme consideration due to the scheme
                   participants will be effected exclusively by Ellerines, or by its agent.
           4.1.6   Delivery by ABIL to Ellerines or its agent, as principal, of the scheme consideration shall be the sole
                   and exclusive manner of discharge by ABIL of its obligations in respect of the scheme and will occur
                   only once all conditions precedent have been met.
           4.1.7   The rights of the scheme participants to receive the scheme consideration will be rights enforceable
                   by scheme participants against Ellerines only. Scheme participants will, in turn, be entitled to require
                   Ellerines to enforce its rights in terms of the scheme against ABIL.
           4.1.8   Ellerines undertakes in favour of scheme participants to enforce all its rights in terms of the
                   scheme against ABIL.
           4.1.9   ABIL can enforce its rights against Ellerines to cause the transfer and registration of the scheme
                   shares into the name of ABIL at any time on or after the operative date.
           4.1.10 With effect from the operative date, the transfer secretaries will irrevocably be deemed to be the
                  attorney and agent in rem suam of all scheme participants to implement the transfer and registration
                  referred to in paragraphs 4.1.2 and 4.1.3 above and to sign any instrument of transfer in respect
                  thereof or any other documents required to implement the scheme.
           4.1.11 Documents of title held by scheme participants in respect of the scheme shares will cease to be of
                  any value and shall not be good for delivery from the operative date, other than for surrender in
                  terms of paragraph 8 below.
           4.1.12 The effect of the scheme will be that, from the operative date, ABIL will beneficially own the entire
                  issued share capital of Ellerines.

     4.2   The scheme consideration
           4.2.1   Subject to the scheme becoming binding, scheme participants will be entitled to receive 255 ABIL
                   shares for every 100 scheme shares held on the record date of the scheme.
           4.2.2   Scheme participants are referred to paragraph 12 below regarding the treatment of the scheme
                   consideration in terms of the Exchange Control Regulations.

     4.3   No set-off of the consideration
           Settlement of the scheme consideration pursuant to the scheme will be implemented in full in accordance
           with the terms of the scheme without regard to any lien, right of set-off, counterclaim, deduction,
           withholding or other analogous right to which ABIL or Ellerines may otherwise be, or claim to be, entitled
           against any scheme participant.

     4.4   The operative date
           It is expected that the scheme will become operative on Tuesday, 18 December 2007, subject to the
           fulfilment of the conditions precedent.

     4.5   Dividend
           Scheme participants shall be entitled to participate in any dividend declared by the Ellerines board prior to
           the implementation of the scheme. Scheme participants shall not be entitled to any dividends declared by
           the ABIL board prior to the implementation of the scheme.


5.   CONDITIONS PRECEDENT
     The scheme is subject to and will become binding upon the fulfilment of the last of the following
     conditions precedent:




24
     5.1   the scheme being approved by a majority representing not less than three-fourths of the votes exercisable
           by the scheme members present and voting, either in person or by proxy, at the scheme meeting;

     5.2   the Court sanctioning the scheme;

     5.3   a certified copy of the Order of Court sanctioning the scheme being registered by the Registrar in
           terms of the Companies Act;

     5.4   the approval of the Competition Authorities and any other regulatory authorities to the extent required,
           including approvals from the Registrar of Banks, and the Financial Services Board, either unconditionally or
           subject to such conditions as may be acceptable to Ellerines and ABIL;

     5.5   the passing by ABIL shareholders of the requisite resolution, required to implement the acquisition of the
           scheme shares, at a general meeting of ABIL shareholders; and

     5.6   the JSE agreeing to grant a listing of the scheme consideration shares.


6.   STATUTORY REQUIREMENTS
     6.1   In terms of section 311(2)(b) of the Companies Act, a majority representing not less than three-fourths of
           the votes exercisable by scheme members, present and voting either in person or by proxy at the scheme
           meeting, is required for the approval of the scheme. Each scheme member so present or represented by proxy
           will be entitled to speak and to vote at the scheme meeting.

     6.2   Subject to the scheme being approved by the requisite majority at the scheme meeting, application will be
           made to the Court to sanction the scheme. Ellerines shareholders will be entitled to attend the Court hearing
           in person on the day on which the application is to be made and to oppose the sanctioning of the scheme
           should they wish to do so.

     6.3   Ellerines shareholders are entitled to be represented at such Court hearing by Counsel at their own cost and
           expense.

     6.4   If the scheme is sanctioned, the Order of Court will be lodged with the Registrar for registration once any
           remaining conditions precedent have been fulfilled and, upon registration, the scheme will become binding
           on all scheme participants.


7.   SETTLEMENT OF THE SCHEME CONSIDERATION
     7.1   For certificated scheme participants the scheme consideration will, where the documents of title have been
           validly surrendered prior to the scheme record date, be posted, by ordinary post, by the transfer secretaries
           at the risk of such scheme participants on or about the operative date, or will be posted within five business
           days of receipt of the attached form of surrender and transfer together with the relevant documents of title,
           where such documents are surrendered after the operative date.

     7.2   The scheme consideration due to certificated scheme participants will be posted to their addresses reflected
           in the register at the risk of such scheme participants, unless written instructions to the contrary are
           furnished by the scheme record date in the form of surrender and transfer.

     7.3   For dematerialised scheme participants, Ellerines will transfer the scheme consideration into the account of
           the relevant CSDP or broker on the operative date. A dematerialised scheme participant will receive from his
           CSDP or broker, in accordance with the provisions of the custody agreement between each such
           dematerialised scheme participant and his CSDP or broker, that portion of the scheme consideration received
           by the CSDP or broker as is attributable to the dematerialised shares held by the CSDP or broker on behalf
           of that dematerialised scheme participant.

     7.4   Where on, or subsequent to, the operative date, a person who was not a registered holder of scheme shares
           on the scheme record date tenders to the transfer secretaries, documents of title together with a duly
           completed form of surrender and transfer purporting to have been executed by or on behalf of the registered
           holder of such shares and provided that the scheme consideration shall not already have been posted or


                                                                                                                      25
           delivered to the registered holder or transferred directly into the registered holders’ account, such transfer
           shall be accepted by ABIL and Ellerines as if it were a valid transfer to such person of the scheme shares
           concerned. The scheme consideration will be posted to such person in accordance with the provisions of this
           paragraph 7 within five business days of such tender, subject to satisfactory proof provided to ABIL and
           Ellerines as to the payment of any stamp duty or uncertificated securities tax payable, and provided that ABIL
           and Ellerines are, if so required by either or both of them, given an indemnity on terms acceptable to them
           in respect of such scheme consideration.

     7.5   If:
           7.5.1   the scheme consideration is not sent to scheme participants entitled thereto, or transferred
                   directly into such scheme participant’s CSDP account, because the relevant documents of
                   title, in the case of a certificated scheme participant, have not been validly surrendered; or
           7.5.2   the scheme consideration is returned undelivered to the transfer secretaries,
           unless otherwise agreed between ABIL, Ellerines and the scheme participants concerned, such scheme
           consideration will be held in trust by Ellerines (or by any third party nominated by it for this purpose) for the
           benefit of the scheme participant concerned until claimed by such scheme participant.


8.   SURRENDER OF DOCUMENTS OF TITLE
     The provisions of this paragraph 8 do not apply to dematerialised scheme participants.
     8.1   Certificated scheme participants must surrender their documents of title together with a duly completed
           form of surrender and transfer in order to claim the scheme consideration.

     8.2   Certificated scheme participants who wish to anticipate the implementation of the scheme and expedite
           receipt of the scheme consideration should complete the form of surrender and transfer and return same as
           soon as possible to the transfer secretaries together with share certificates and/or other documents of title
           to be received by the transfer secretaries by no later than 12:00 on the scheme record date.

     8.3   Alternatively, certificated scheme participants may wait until the scheme becomes operative, and surrender
           their documents of title under the cover of the completed form of surrender and transfer at that time.

     8.4   The attention of certificated scheme participants is drawn to the fact that if they surrender
           their documents of title in advance of the implementation of the scheme, they will not be in a position to
           dematerialise their documents of title or to deal in their scheme shares on the JSE, BSE or NSX or otherwise
           between the date of surrender and the operative date.

     8.5   The transfer secretaries will hold, in trust, documents of title surrendered by certificated scheme participants
           in anticipation of the scheme becoming operative. If the conditions precedent are not fulfilled and the
           scheme participant does not issue alternative instructions, then the transfer secretaries will, within five
           business days of the date upon which it becomes known that the scheme will not become operative, return
           the documents of title to the certificated scheme participants concerned, by registered post, at the risk of
           such certificated scheme participant.

     8.6   No receipts will be issued for documents of title surrendered unless specifically requested.

     8.7   If documents of title have been lost or destroyed and the scheme participant produces evidence to this effect
           to both Ellerines and ABIL, Ellerines and ABIL may dispense with the requirement of the surrender of
           documents of title against provision of an acceptable indemnity, the cost of which indemnity will be borne
           by the scheme participant concerned. No interest will be paid on the scheme consideration.


9.   SUSPENSION AND TERMINATION OF THE LISTINGS OF ELLERINES’ SHARES ON THE JSE, NSX AND BSE
     Subject to the fulfilment of the conditions precedent and the scheme becoming operative, the JSE, NSX and BSE
     have granted approvals for the suspension of the listings of the Ellerines shares with effect from the
     commencement of trading on the first business day, following the last day to trade to participate in the scheme
     and the termination of the listings of the Ellerines shares on the JSE, NSX and BSE from the commencement of
     trading on the first business day, following the scheme operative date.



26
10. UNDERTAKINGS BY ABIL AND ELLERINES
   ABIL and Ellerines each agree that, upon the scheme becoming binding, they will give effect to the terms and
   conditions of the scheme insofar as they relate to them and they will sign and procure the signing of all documents
   and carry out and procure the carrying out of all acts, which are necessary to give effect to the scheme.


11. NOTICE OF SCHEME MEETING AND FORM OF PROXY
   11.1 The notice convening the scheme meeting to be held at 09:00 on Tuesday, 16 October 2007 at the registered
        office of Ellerines, Block E, Gillooly’s View Office Park, Osborne Lane, Bedfordview, 2007 is set out on
        pages 10 and 11 of this document.

   11.2 A form of proxy (green) for use by certificated scheme members or own-name shareholders who are unable
        to attend the scheme meeting and wish to be represented thereat is attached to this document. The
        instructions for the completion and lodging of the form of proxy (green) are recorded on such form.

   11.3 Dematerialised scheme members (other than own-name shareholders) who wish to attend the scheme
        meeting must instruct their CSDP or broker to issue them with the necessary authority to attend the scheme
        meeting in person, in the manner and time stipulated in the custody agreement governing the relationship
        between such dematerialised scheme member and his CSDP or broker. These instructions must be provided to
        the CSDP or broker by the cut-off time and date advised by the CSDP or broker for instructions of this nature.

   11.4 Dematerialised scheme members (other than own-name shareholders) who wish to vote by way of proxy
        should provide their CSDP or broker with their voting instructions, in the manner stipulated in the custody
        agreements governing the relationships between such shareholders and the CSDP or broker. These
        instructions must be provided to the CSDP or broker by the cut-off time and date stipulated by the CSDP or
        broker for instructions of this nature.


12. EXCHANGE CONTROL REGULATIONS
   12.1 Emigrants from the common monetary area
        12.1.1 The scheme consideration is not freely transferable from South Africa and must be dealt with in
               terms of the Exchange Control Regulations.
        12.1.2 The scheme consideration due to a certificated scheme participant who is an emigrant from South
               Africa, whose registered address is outside the common monetary area and whose documents of
               title have been restrictively endorsed under the Exchange Control Regulations will be deposited in a
               blocked Rand account with the authorised dealer in foreign exchange in South Africa controlling the
               scheme participant’s blocked assets in accordance with his instructions, against delivery of the
               relevant documents of title.
        12.1.3 It follows therefore that the authorised dealer releasing the relevant documents of title in the case
               of the scheme must countersign the form of surrender and transfer thereby indicating that the
               scheme consideration will be placed directly in its control.
        12.1.4 The attached form of surrender and transfer makes provision for the details and signature of the
               authorised dealer concerned to be provided.

   12.2 All other non-residents of the common monetary area
        12.2.1 The scheme consideration due to a certificated scheme participant who is a non-resident of South
               Africa and who has never resided in South Africa, whose registered address is outside the common
               monetary area and whose documents of title have been restrictively endorsed under the Exchange
               Control Regulations, will be deposited with the authorised dealer in foreign exchange in South Africa
               nominated by such scheme participant. It will be incumbent on the scheme participant concerned to
               instruct the nominated authorised dealer as to the disposal of the amounts concerned, against
               delivery of the relevant documents of title.


                                                                                                                   27
           12.2.2 The form of surrender and transfer attached to this document makes provision for the nomination
                  required in terms of paragraph 12.2.1 above. If the information regarding the authorised dealer is not
                  given in terms of paragraph 12.2.1 above, the scheme consideration will be held in trust by Ellerines
                  for the scheme participants concerned pending receipt of the necessary information or instruction.


13. INSTRUCTIONS AND AUTHORITIES
     Each mandate, instruction or authority in regard to the scheme shares recorded with Ellerines at the
     scheme record date will be deemed, unless and until revoked, to be a mandate, instruction or authority to Ellerines
     and ABIL in respect of any rights accruing in respect of the scheme consideration shares.


14. GENERAL
     14.1 Upon the scheme becoming operative, documents of title relating to the Ellerines scheme shares will cease
          to be of any value, other than for the purposes of surrender in terms of the scheme, and no certificates or
          deeds or documents will be issued by Ellerines in place thereof.

     14.2 Subject to the written consent of ABIL, the directors of Ellerines may consent:
           14.2.1 before or at the scheme meeting, at any time prior to the voting in respect of the scheme, to any
                  amendment, variation or modification of the scheme; or
           14.2.2 to any amendment, variation or modification which the Court may think fit to approve or impose,
           provided that no amendment, variation or modification made after the scheme meeting may have the effect
           of diminishing the rights which will accrue to a scheme participant in terms of the scheme.

     14.3 A certificate signed by any director of Ellerines stating that all the conditions precedent have been fulfilled
          and that the scheme has become operative shall be binding on Ellerines, ABIL and scheme participants. When
          the Order of Court sanctioning the scheme is registered, the scheme will be binding on all scheme
          participants, including those who voted against it and those scheme participants who became Ellerines
          shareholders after the scheme meeting.

     14.4 All dates and times referred to in the scheme are subject to amendment by mutual agreement between
          Ellerines and ABIL. Details of any such amendments will be released on SENS and published in the press.

     14.5 ABIL (not being a scheme member or scheme participant) will not vote at the scheme meeting.

     14.6 Ellerines shall bear all costs incurred in relation to the fair and reasonable opinion, all legal, advisory, tax and
          other advisors to Ellerines and 50% of the costs of this document (including regulatory fees levied by the JSE
          and SRP) and the related relevant scheme announcements.

     14.7 ABIL shall bear all costs of ABIL’s advisors on the scheme and the transaction (including but not limited to its
          legal, corporate finance, tax and other advisors) and 50% of the costs of this document (including regulatory
          fees levied by the JSE and SRP) and the related relevant scheme announcements. ABIL will also bear and pay
          the following costs and fees:
           14.7.1 all costs relating to the issuing of a circular to the ABIL shareholders incorporating ABIL’s revised
                  listing particulars;
           14.7.2 stamp duty and uncertificated securities tax payable in respect of the proposed acquisition by ABIL
                  and transfer of the scheme shares to ABIL; and
           14.7.3 regulatory fees levied by the Competition Authorities.




28
For and on behalf of        For and on behalf of


ELLERINE HOLDINGS LIMITED   AFRICAN BANK INVESTMENTS LIMITED


R B G Sinclair              D F Woollam
Director                    Director


Bedfordview                 Midrand
27 September 2007           27 September 2007


D S McGlashan               L Kirkinis
Chairman                    Chief Executive Officer


Bedfordview                 Midrand
27 September 2007           27 September 2007




                                                               29
           Ellerine Holdings Limited                            African Bank Investments Limited
            (Incorporated in the Republic of South Africa)               (Incorporated in the Republic of South Africa)
               (Registration number 1968/013402/06)                         (Registration number 1946/021193/06)
              Share code: ELH       ISIN: ZAE000022752               Ordinary share code: ABL         ISIN: ZAE000030060
                             (“Ellerines”)                           Preference share code: ABLP      ISIN: ZAE000065215
                                                                                            (“ABIL”)




VALUATION STATEMENT
IN TERMS OF SECTION 312(1)(a)(ii) OF THE COMPANIES ACT

The definitions commencing on page 6 of this document shall apply throughout this valuation statement.
1.   INFORMATION ON ELLERINES AND ABIL
     1.1   History and nature of business of Ellerines
           Ellerines is a holding company listed on the JSE as well as the NSX and BSE. It was incorporated in South Africa
           as a public company on 12 September 1968 and was subsequently listed on the JSE on 5 February 1969.
           Ellerines operates in the credit and cash retail furniture and appliance sector, trading out of 1 300 outlets.
           Brand names include Ellerines, Town Talk, FurnCity, Wetherlys, Osiers, Dial-a-Bed, Mattress Factory, Furniture
           City, Beares, Geen & Richards, Lubners and Savells/Fairdeal. Financial services revenues are mainly generated
           through the provision of credit to Ellerines customers and include the provision of insurance products by the
           Ellerines group’s insurance subsidiaries and micro-loans through 82 Rainbow Loans outlets. In addition, the
           Ellerines service division, Early Bird, offers TV and household appliance repairs throughout the country from
           its 44 depots. The Ellerines group penetrates the rural and urban areas across six countries in southern Africa,
           namely South Africa, Botswana, Lesotho, Namibia, Swaziland and Zambia. Roodefurn manufactures certain
           furniture for the Ellerines group. In addition, the Ellerines group operates a property division.

     1.2   History and nature of business of ABIL
           ABIL is a publicly quoted bank-controlling company listed on the JSE. The ABIL group operates only within
           South Africa. The main focus of the ABIL group is to underwrite unsecured credit risk through the provision
           of personal loans to the formally employed emerging market. ABIL was founded on the development of this
           market, and has to date built a business of critical mass with a broad distribution base predicated on reliable
           credit scoring models and efficient collection methods.
           ABIL has the following principal subsidiaries:
           • African Bank is registered as a bank under the Banks Act (Act 94 of 1990), as amended, and is the main
             operating company within the ABIL group carrying on the business of providing unsecured personal loans
             within South Africa. Through the group’s banking licence it is able to raise wholesale deposits from
             institutions to fund the group’s operations.
           • The Standard General Insurance Company Limited is registered as a life insurance company under the
             Long-term Insurance Act (Act 52 of 1998), as amended, and provides credit life products to clients of
             African Bank.
           • Theta Investments (Proprietary) Limited has been ABIL’s private equity operation and new business
             incubator. The operating subsidiaries under this company have been divisionalised into African Bank. The
             dormant subsidiaries under this company are in the process of being wound up and liquidated.


2.   FINANCIAL INFORMATION RELATING TO ELLERINES
     2.1   Historical financial information relating to Ellerines for the four financial periods ended 31 August 2006 and
           the interim results to 28 February 2007 are set out in Annexure I and II to this document, respectively.
     2.2   A trading price history of Ellerines’ shares on the JSE is set out in Annexure V to this document.



30
3.   FINANCIAL INFORMATION RELATING TO ABIL
     3.1      Historical information relating to ABIL for the four financial periods ended 30 September 2006 and the
              interim results to 31 March 2007 are set out in Annexure III and IV to this document, respectively.

     3.2      A trading price history of ABIL’s shares on the JSE is set out in Annexure V to this document.


4.   FINANCIAL EFFECTS OF THE TRANSACTION
     The unaudited pro forma financial effects of the scheme set out below are based on the audited year end results
     of ABIL for the 12 months ended 30 September 2006 and the audited year end results of Ellerines for the
     12 months ended 31 August 2006. These effects are the responsibility of the board of directors of Ellerines and are
     given for illustrative purposes only and because of their pro forma nature, may not give a fair reflection of a
     shareholder’s position after the scheme.
                                                                         Notes                 Before                   After               Change
     Market value (cents per share)                                            1               5 800                  7 395                 27,50%
     30-day VWAP (cents per share)                                             1               6 428                  8 186                 27,35%
     EPS (cents per share)                                                     2                  743                    646               (13,06%)
     HEPS (cents per share)                                                    2                  742                    636               (14,29%)
     NAV (cents per share)                                                     3               4 127                  3 822                 (7,39%)
     NTAV (cents per share)                                                    3               3 189                  1 926                (39,60%)
     Dividend (cents per share)                                                4                  253                    413                63,24%
     Dividend yield                                                            4               4,35%                  5,58%                    1,23
     Premium to market value                                                                                         41,05%
     Premium to 30-day VWAP                                                                                          27,34%
     Notes:
     1. The “Before” column sets out the market price, which is based on Ellerines’ closing price on Friday, 17 August 2007, and the 30-day VWAP
        up to and including Friday, 17 August 2007, being the date immediately preceding the joint cautionary announcement. The “After” column
        sets out the pro forma market value attributable to 255 ABIL shares per 100 Ellerines shares on the basis of its market price and VWAP over
        the same period assuming no change in the ABIL market price following the implementation of the scheme.
     2. The “Before” column sets out Ellerines’ EPS and HEPS for the year ended 31 August 2006. The “After” column sets out the pro forma EPS and
        HEPS per 255 ABIL shares for each 100 Ellerines shares held, based on the assumption that the share exchange was in effect from
        1 September 2005 and the ABIL results incorporates the earnings of Ellerines for the year ended 31 August 2006 and based on an assumed
        total weighted average number of 803.20 million ABIL shares in issue.
     3. The “Before” column sets out the NAV and NTAV per Ellerines share at 31 August 2006. The “After” column sets out the pro forma NAV and
        NTAV based on 255 ABIL shares for every 100 Ellerines shares held, adjusted for the share exchange, on the assumption that the transaction
        became effective on 31 August 2006. The excess of the share consideration over Ellerines’ NAV as well as trademarks, have been excluded
        in calculating the NTAV, in all other cases this amount has been notionally capitalised as goodwill in determining the above financial effects.
        This excess will have to be reviewed in terms of IFRS 3 – Business Combinations, before it can be concluded that the full excess amount
        relates to goodwill.
     4. The “Before” dividend yield is based on the dividend per share of Ellerines paid in the second half of the 2006 financial year and the first
        half of the 2007 financial year, divided by “Before” market value. The “After” dividend yield is based on the sum of the dividend per share
        of Ellerines paid in the second half of the 2006 financial year and the first half of the 2007 financial year and the dividend per share of ABIL
        paid in the second half of the 2006 financial year and the first half of the 2007 financial year divided, by the “After” market value.
     5. The above financial effects are based on the ABIL shares that will be received by an Ellerines shareholder, net of the BEE reserved shares.
        The potential dilutionary effect of the BEE reserved shares have been included in the above calculations, apart from the once-off upfront
        charge to earnings in terms of IFRS 2 and IFRS 8 – Share-based Payments.
     6. No adjustment has been made for the one month difference between ABIL and Ellerines’ financial year-ends as the effect of this is
        considered to be immaterial.
     7. The financial effects are based on historic 12-month audited results due to the cyclical nature of the two businesses, which would have
        presented a distorted view if the financial effects were based on the six months’ interim periods.

     The reporting accountants’ report on the pro forma financial effects is set out in Annexure VIII to this document.




                                                                                                                                                    31
5.   TAX IMPLICATIONS FOR SCHEME PARTICIPANTS
     The following paragraphs contain a general summary of the income tax and CGT implications of the scheme for
     scheme participants. The analysis is not comprehensive or determinative. Scheme participants should seek advice
     from appropriate professional advisors if they are in any doubt whatsoever about their tax position. They should
     also confirm how the general comments below apply in their specific personal circumstances and, in particular,
     ascertain whether there are any additional or exceptional tax consequences which could apply to them. Scheme
     participants whose shares are held in a trust should seek advice from appropriate professional advisors, as the tax
     consequences for a trust are different. The analysis set forth below should therefore not be regarded as tax advice
     given by Ellerines or ABIL (or their tax or other advisors) to any particular scheme participant.
     5.1   If the scheme participant holds the Ellerines shares as an investment:
           5.1.1   The transfer of the Ellerines shares to ABIL will be a disposal by the scheme participants for CGT
                   purposes.
           5.1.2   A scheme participant will therefore realise a capital gain or loss, being the difference between the
                   base cost for the Ellerines shares and the proceeds received by or accrued to the scheme participant.
           5.1.3   Base cost as well as proceeds must be determined in accordance with the Eighth Schedule to the
                   Income Tax Act (“the CGT legislation”). The proceeds will be based on the market value of the ABIL
                   shares on the disposal date. For the calculation of the base cost of the Ellerines shares different rules
                   apply to shares acquired before and after 1 October 2001. The applicable rules will depend on the
                   personal circumstances of the scheme participant.
           5.1.4   In terms of the CGT legislation an individual’s total capital gains are reduced by R12 500 per year.
                   Broadly, this means that a share participant will not pay CGT on the first R12 500 of capital gain per
                   year (including any gain from the present transaction). However, the CGT calculation might not be
                   this simple if the scheme participant made other CGT gains and losses during the tax year or if he or
                   she has a CGT loss which may be carried forward from a previous tax year.

     5.2   If the scheme participant does not hold its Ellerines shares as an investment, but as a share dealer or as part
           of a profit-making scheme, the taxable profit (the market value of the ABIL shares less the cost of the
           Ellerines shares) will be subject to income tax in the hands of the scheme participant.
           Note: If the scheme participant disposes of the ABIL shares in future the cost of the ABIL shares would be
           the market value of the ABIL shares which are exchanged in terms of the scheme, as determined on the
           operative date.

     5.3   Scheme participants may in certain circumstances qualify for “share-for-share” tax deferral relief in terms of
           section 43 of the Income Tax Act (Act 58 of 1962), as amended, in which case they would be taxed on gains
           or profits, as calculated at that stage, when they eventually sell their ABIL shares. Whether or not this relief
           would be available to any particular scheme participant depends on a variety of factors, including his
           personal circumstances and overall tax position. Scheme participants should therefore approach appropriate
           professional advisors to ascertain whether the relief might apply to them.

     5.4   A scheme participant who is not a South African resident for tax purposes and who does not carry on
           business in South Africa will under certain circumstances not be liable for the taxes set out above. Scheme
           participants who think that they may qualify as non-residents should consult with appropriate professional
           advisors to ascertain whether they are non-residents for tax purposes and whether and on what basis they
           will be liable for tax.
Note: Scheme participants are advised to retain records relating to the dates and costs of acquisitions of their Ellerines
shares, which will be required by the South African Revenue Services at the time of the disposal of ABIL shares.


6.   OPINIONS AND RECOMMENDATIONS
     Ellerines has retained KPMG to act as its independent professional expert in connection with the scheme. On
     12 September 2007 KPMG delivered to the Ellerines board an opinion to the effect that, as of the date of the
     opinion and based upon and subject to the factors and assumptions detailed in its letter, the terms and conditions
     of the scheme are fair and reasonable to the scheme members.




32
    The full text of KPMG’s opinion letter is included in Annexure VI to this document. The aforegoing is qualified by
    reference to this opinion and you are urged to read this opinion carefully in its entirety.
    The Ellerines board has considered the terms and conditions of the scheme and, inter alia, the opinion of KPMG, and
    is of the opinion that the scheme is fair and reasonable to scheme members. Accordingly, the Ellerines board
    recommends that scheme members vote in favour of the scheme. The directors of Ellerines who hold Ellerines shares
    intend to vote in favour of the scheme at the scheme meeting in respect of their own holdings of Ellerines shares.
    The view expressed above by the Ellerines board is based on the receipt, at the date of issue of this document, of
    only the scheme as proposed by ABIL and could be reviewed and/or revised by the Ellerines board on receipt of any
    further offers, if any, in due course.


For and on behalf of                                          For and on behalf of

ELLERINE HOLDINGS LIMITED                                     AFRICAN BANK INVESTMENTS LIMITED

R B G Sinclair                                                D F Woollam
Director                                                      Director

Bedfordview                                                   Midrand
27 September 2007                                             27 September 2007

D S McGlashan                                                 L Kirkinis
Chairman                                                      Chief Executive Officer

Bedfordview                                                   Midrand
27 September 2007                                             27 September 2007




                                                                                                                    33
           Ellerine Holdings Limited                              African Bank Investments Limited
            (Incorporated in the Republic of South Africa)                 (Incorporated in the Republic of South Africa)
               (Registration number 1968/013402/06)                           (Registration number 1946/021193/06)
              Share code: ELH       ISIN: ZAE000022752                 Ordinary share code: ABL         ISIN: ZAE000030060
                             (“Ellerines”)                             Preference share code: ABLP      ISIN: ZAE000065215
                                                                                              (“ABIL”)




Directors of Ellerines                                            Directors of ABIL
Executive:                                                        Executive:
P J C Squires (Chief Executive Officer)                           G Schachat (Deputy Chairman)
A F F Moca                                                        L Kirkinis (Chief Executive Officer)
R A Rawlings                                                      A Fourie
R B G Sinclair                                                    T M Sokutu
                                                                  D F Woollam
Non-executive:                                                    Non-executive:
D S McGlashan (Chairman)                                          A S Mabogoane (Chairman)
K G M Heil                                                        M S Mogase
M E K Nkeli                                                       A Tugendhaft
A H Sangqu                                                        R Naidoo
I B Skosana                                                       D F G Tembe
                                                                  G Z Steffens
                                                                  B P F Steele
                                                                  B D Goba
                                                                  D B Gibbon


STATEMENT OF DIRECTORS’ INTERESTS
IN TERMS OF SECTION 312(1)(a)(iii) OF THE COMPANIES ACT

The definitions commencing on page 6 of this document apply throughout this statement of directors’ interests.
1.   THE INTERESTS OF ELLERINES AND ITS DIRECTORS IN ELLERINES
     1.1   Shareholdings
           At the last practicable date, the directors of Ellerines held the following interests in Ellerines shares:
                                                                                                                   Percentage
                                                                                                                     of issued
           Director                                           Direct          Indirect                Total      share capital
           Executive
           P J C Squires                                     146 200                  –           146 200                    0.12
           A F F Moca                                              –                  –                 –                       –
           R A Rawlings                                       31 600                  –            31 600                    0.03
           R B G Sinclair                                          –                  –                 –                       –
           Non-executive
           D S McGlashan                                          –            10 000               10 000                   0.01
           K G M Heil                                             –                 –                    –                      –
           M E K Nkeli                                            –                 –                    –                      –
           A H Sangqu                                             –                 –                    –                      –
           I B Skosana                                            –                 –                    –                      –
                                                             177 800           10 000             187 800                    0.16



34
     1.2   Option holdings
           At the last practicable date, the directors of Ellerines held the following interests in Ellerines shares in the
           form of options:
           Date offer made                             May 2002          May 2003           Nov 2005         Nov 2006
           First 25% of shares available on            May 2004          May 2005           Nov 2007         Nov 2008
           Price of option                               R14,95            R19,00             R47,85(1)        R66,28(1)             Total
           P J C Squires                                                    100 000                                                100 000
           A F F Moca                                                                          30 000            40 000             70 000
           R A Rawlings                                    30 000            55 000                              40 000            125 000
           R B G Sinclair                                                                      30 000            40 000             70 000
                                                           30 000           155 000            60 000           120 000            365 000
           Notes:
           1. Cash settled share-based payments.
           2. Share options may be exercised in lots of 25% after two years from the offer date and 25% every year thereafter.


     1.3   On the last practicable date, the directors of Ellerines held no interests in ABIL, other than I B Skosana who
           directly holds 1 746 shares in ABIL.

     1.4   Share dealings
           The dealings in Ellerines shares by the directors of Ellerines since the last financial year end of Ellerines up to
           the last practicable date were as follows:
                                                              Date       Purchase/           Number            Option/           Purchase/
           Name                                           of trade            Sale          of shares       Share price          Sale price
                                                                                                                 (Rand)              (Rand)
           P J C Squires                        24 January 2007            Purchase            50 000              14,35           717 500
           D S McGlashan                        30 January 2007                Sale            26 539              76,21         2 022 537
           D S McGlashan                        1 February 2007                Sale            40 461              75,67         3 061 684
           P J C Squires                           29 May 2007             Purchase            50 000              14,35           717 500
           D S McGlashan                           30 May 2007             Purchase            10 000              79,05           790 500
           P J C Squires                           12 June 2007            Purchase            37 500              14,95           560 625

     1.5   At the last practicable date, no subsidiary of Ellerines, Ellerines, nor any person acting in concert with Ellerines
           held any interests in ABIL shares.


2.   THE INTERESTS OF ABIL AND ITS DIRECTORS IN ELLERINES
     2.1   At the last practicable date ABIL held no Ellerines shares.

     2.2   At the last practicable date none of the directors of ABIL held any Ellerines shares.

     2.3   Changes to the beneficial shareholding of ABIL directors during the current financial year were as follows:
           Name                                                                        Date of            Purchase/              Number of
                                                                                         trade                 Sale                 shares
           Leon Kirkinis                                                        14 June 2007                Purchase               250 000
           David Woollam                                                         23 July 2007                    Sale              240 000
           Mutle Mogase                                                          4 June 2007                 Indirect            1 659 259
                                                                                                            purchase
           Mutle Mogase acquired a beneficial interest in 1 659 259 ABIL shares indirectly though an investment in
           Eyomhlaba Investment Holdings Limited.
           Other movements in directors’ holdings were as a result of their indirect holdings increasing through
           acquisitions of ABIL shares by Eyomhlaba Investment Holdings Limited.




                                                                                                                                         35
     2.4   At the last practicable date, neither ABIL, any subsidiary of ABIL, nor any person acting in concert with ABIL,
           held any interests in Ellerines.


3.   DIRECTORS’ EMOLUMENTS
     The Ellerines directors’ emoluments will not be affected as a result of the scheme.


4.   DIRECTORS’ INTERESTS IN THE SCHEME
     No director has or had any interest, directly or indirectly, in any transaction which was effected by Ellerines during
     the current financial year or in respect of any previous financial year and which remains in any respect outstanding
     or unperformed.


For and on behalf of                                            For and on behalf of


ELLERINE HOLDINGS LIMITED                                       AFRICAN BANK INVESTMENTS LIMITED


R B G Sinclair                                                  D F Woollam
Director                                                        Director


Bedfordview                                                     Midrand
27 September 2007                                               27 September 2007


D S McGlashan                                                   L Kirkinis
Chairman                                                        Chief Executive Officer


Bedfordview                                                     Midrand
27 September 2007                                               27 September 2007




36
          Ellerine Holdings Limited                            African Bank Investments Limited
            (Incorporated in the Republic of South Africa)              (Incorporated in the Republic of South Africa)
               (Registration number 1968/013402/06)                        (Registration number 1946/021193/06)
              Share code: ELH       ISIN: ZAE000022752              Ordinary share code: ABL         ISIN: ZAE000030060
                             (“Ellerines”)                          Preference share code: ABLP      ISIN: ZAE000065215
                                                                                           (“ABIL”)




ADDITIONAL INFORMATION REQUIRED BY THE JSE AND SRP

The definitions commencing on page 6 of this document shall apply, mutatis mutandis, to this section on additional
information required by the JSE and SRP.
1.   SUSPENSION AND TERMINATION OF THE LISTINGS OF ELLERINES SHARES ON THE JSE, NSX AND BSE AND THE
     LISTING OF THE SCHEME CONSIDERATION SHARES ON THE JSE
     Subject to the fulfilment of the conditions precedent and subject to the scheme becoming operative, the JSE, NSX
     and BSE have granted approvals for the suspension of the listings of the Ellerines shares with effect from the
     commencement of trading on the JSE on the first business day following the last date to trade to participate in the
     scheme and the termination of the listing of the Ellerines shares on the JSE from the commencement of trading
     on the first business day following the operative date.
     The JSE has granted the listing of the scheme consideration shares with effect from the first business day following
     the last date to trade for the scheme.


2.   MAJOR ELLERINES SHAREHOLDERS
     At 31 August 2007, the following shareholders held more than 5% of the issued share capital of Ellerines:
                                                                                      Number                Percentage of
     Shareholder                                                                     of shares        issued share capital
                                                                                                                        %
     Beneficial shareholders holding 5% or more
     Public Investment Commissioner                                                16 075 816                             12,9
     Ellerine Properties                                                            9 090 685                              7,3
     Liberty Life                                                                   8 706 630                              7,0
     Fund managers holding 5% or more
     RMB Asset Management                                                          11 612 266                              9,3
     Stanlib                                                                        8 708 215                              7,0
     Old Mutual Asset Management                                                    7 684 465                              6,1
     Investec Asset Management                                                      7 564 106                              6,0


3.   SUPPORT FOR THE SCHEME
     Following the detailed joint cautionary announcement released on SENS on Monday, 20 August 2007 and the firm
     intention announcement released on SENS on Wednesday, 5 September 2007, both ABIL and Ellerines have held
     discussions with a number of their respective major shareholders, who have indicated strong support for the
     transaction.


4.   COSTS OF THE SCHEME
     The costs of the scheme are expected to amount to approximately R9 023 100 (including VAT), which amount
     includes the SRP documentation and inspection fee of R199 500 (including VAT).


                                                                                                                            37
     Ellerines shall bear all costs incurred in relation to the fair and reasonable opinion, all legal, advisory, tax and other
     advisors to Ellerines and 50% of the costs of this document (including regulatory fees levied by the JSE and SRP)
     and the related relevant scheme announcements.
     ABIL shall bear all costs of ABIL’s advisors on the scheme and the transaction (including but not limited to its legal,
     corporate finance, tax and other advisors) and 50% of the costs of this document (including regulatory fees levied
     by the JSE and SRP) and the related relevant scheme announcements. ABIL will also bear and pay the following
     costs and fees:
     • all costs relating to the issuing of a circular to the ABIL shareholders incorporating ABIL’s revised listing
       particulars;
     • stamp duty and uncertificated securities tax payable in respect of the proposed acquisition by ABIL and transfer
       of the scheme shares to ABIL; and
     • regulatory fees levied by the Competition Authorities.


5.   CONSENTS
     Nedbank Capital, KPMG, Cliffe Dekker, Prinsloo, Tindle and Andropoulos, RMB and Grant Thornton have consented
     in writing to the inclusion of their names and, in the case of Grant Thornton and KPMG, their reports in this
     document in the form and context in which they appear and have not withdrawn their consents prior to the
     publication of this document.


6.   MATERIAL CHANGES
     There have been no material changes in the financial or trading position of Ellerines since the publication of the
     final results for the year ended 31 August 2006 and the interim results for the half-year ended 28 February 2007.


7.   LITIGATION STATEMENT
     There are no legal or arbitration proceedings that may have, or have had, during the 12-month period preceding
     the date of this document, a material effect on the financial position of Ellerines. Ellerines is not aware of any such
     proceedings that are pending or threatened.


8.   MATERIAL CONTRACTS
     Ellerines has not entered into any significant material contracts, either verbally or in writing, during the two years
     immediately preceding the last practicable date, or at any other time that contains an outstanding material
     obligation or settlement, other than in the ordinary course of business.


9.   DIRECTORS’ RESPONSIBILITY STATEMENTS
     9.1   Ellerines directors’ responsibility statement
           The directors of Ellerines, whose names are given on the inside front cover of this document, as far as the
           information relates to Ellerines:
           – have considered all statements of fact and opinion in this document;
           – accept, individually and collectively, full responsibility for such statements; and
           – certify that, to the best of their knowledge and belief, there are no omissions of facts or considerations
             which would make any statements of fact or opinion contained in this document false or misleading and
             have made all reasonable enquiries in this regard and that this document contains all information required
             by law, the SRP and the JSE Listings Requirements.

     9.2   ABIL directors’ responsibility statement
           The directors of ABIL, whose names are given on the inside front cover of this document, as far as the
           information relates to ABIL:




38
          – have considered all statements of fact and opinion in this document;
          – accept, individually and collectively, full responsibility for such statements; and
          – certify that, to the best of their knowledge and belief, there are no omissions of facts or considerations
            which would make any statements of fact or opinion contained in this document false or misleading and
            have made all reasonable enquiries in this regard and that this document contains all information required
            by law, the SRP and the JSE Listings Requirements.


10. DOCUMENTS AVAILABLE FOR INSPECTION
    The following documents, or copies of such documents, will be available for inspection at the registered office of
    Ellerines, Block E, Gillooly’s View Office Park, Osborne Lane, Bedfordview, 2007 during normal business hours from
    Wednesday, 27 September 2007 up to and including the date on which the scheme is sanctioned:
    10.1 this document, incorporating, inter alia, the scheme and the explanatory statement;

    10.2 the Order of Court convening the scheme meeting;

    10.3 the audited financial statements of Ellerines for the four financial periods ended 31 August 2006 and the
         interim results for the six months ended 28 February 2007;

    10.4 the audited financial statements of ABIL for the four financial periods ended 30 September 2006 and the
         interim results for the six months ended 31 March 2007;

    10.5 the memoranda and articles of association of both Ellerines and ABIL;

    10.6 the opinion letter from KPMG, the independent professional expert to the Ellerines board;

    10.7 a copy of the circular to ABIL shareholders incorporating the revised listing particulars;

    10.8 written consents from Nedbank Capital, KPMG, Cliffe Dekker, Prinsloo, Tindle and Andropoulos, RMB and
         Grant Thornton for the inclusion of their names and reports in this document in the form and context in
         which they appear; and

    10.9 the reporting accountants’ report prepared by Grant Thornton on the unaudited pro forma financial effects
         referred to in paragraph 5 of the valuation statement of this document.


For and on behalf of                                           For and on behalf of


ELLERINE HOLDINGS LIMITED                                      AFRICAN BANK INVESTMENTS LIMITED


R B G Sinclair                                                 D F Woollam
Director                                                       Director


Bedfordview                                                    Midrand
27 September 2007                                              27 September 2007


D S McGlashan                                                  L Kirkinis
Chairman                                                       Chief Executive Officer


Bedfordview                                                    Midrand
27 September 2007                                              27 September 2007




                                                                                                                   39
                                                                                                                   Annexure I


HISTORICAL FINANCIAL INFORMATION ON ELLERINES


The historical financial information of Ellerines, as extracted from the audited annual financial statements, for the years
ended 31 August 2003, 31 August 2004, 31 August 2005 and 31 August 2006 are set out below. The annual financial
statements have been audited by Grant Thornton and received an unqualified opinion for these years:
CONSOLIDATED INCOME STATEMENTS
                                                                                 2006        2005         2004*       2003*
                                                                                 R’000       R’000        R’000       R’000
Continuing operations:
Revenue                                                                      7 575 158    4 227 957    2 832 903   2 183 984
Sale of merchandise                                                          4 959 408    2 764 927    1 746 073   1 165 340
Cost of merchandise sold                                                 (2 740 706) (1 464 684) (1 219 304)       (879 700)
Gross profit                                                                 2 218 702    1 300 243     526 769     285 640
Other operating revenue                                                   2 522 557   1 385 335        1 086 830   1 018 644
Debtors costs                                                              (396 530)   (141 649)       (138 497)   (180 193)
Operating expenses                                                       (3 071 578) (1 821 683)       (967 222)   (780 585)
 Advertising                                                               (243 614)      (122 065)
 Depreciation and amortisation                                              (92 526)       (62 881)
 Cost of employment                                                      (1 540 821)      (986 442)
 Motor and delivery                                                        (219 816)      (133 797)
 Property expenses                                                         (440 714)      (252 133)
 Administration and other expenses                                         (534 087)      (264 365)

Operating profit                                                             1 273 151     722 246      507 880     343 506
Income from associate                                                          13 457        7 080         4 426         312
Impairment of owner occupied properties                                                                  (3 780)     (1 294)
Profit on disposal of owner occupied properties                                             53 793        10 983         996
Adjustment to fair value of investment properties                                                          2 263       (543)
Impairment and amortisation of goodwill                                                     (16 831)    (23 767)
Insurance investment income                                                     61 520       49 613
Net finance costs                                                              (79 508)     (56 313)    (17 191)     14 062
 Interest received                                                             41 151        36 075
 Interest paid                                                               (120 659)      (92 388)

Profit before taxation                                                       1 268 620     759 588       480 814     357 039
Taxation                                                                      (372 164)   (199 070)    (154 223)   (109 809)
Profit attributable to ordinary shareholders
– continuing operations                                                       896 456      560 518      326 591     247 230
Loss attributable to ordinary shareholders
– discontinued operations                                                       (2 139)     (13 609)
Profit attributable to ordinary shareholders                                  894 317      546 909      326 591     247 230
Attributable earnings per share (cents)                                          743.4        611.1        441.6       342.6
Headline earnings per share (cents)                                              741.9        575.6        457.3       340.0

*Prepared in terms of South African GAAP and therefore not IFRS compliant.




40
CONSOLIDATED BALANCE SHEETS
                                                                                 2006         2005        2004*       2003*
                                                                                 R’000        R’000       R’000       R’000
ASSETS
Non-current assets                                                           2 347 807    2 434 500     946 280     455 129
Property, vehicles and equipment                                              378 687      334 243      261 494     137 681
Goodwill                                                                      824 362      805 617      264 736
Trademarks                                                                    312 000      316 503
Investment in associate                                                                     35 644       27 988      23 562
Deferred taxation                                                             199 199      316 570
Insurance financial assets                                                    633 559      625 923      392 062     293 886
Current assets                                                               5 175 800    4 617 234    2 199 645   1 846 805
Inventories                                                                    587 844      534 397      246 562     130 838
Trade and other receivables                                                  4 457 162    3 821 242    1 811 964   1 620 372
Taxation                                                                           874        1 702
Funds at call, bank balances and cash                                          129 920      259 893     141 119      95 595
Non-current assets classified as held for sale                                 47 500
Total assets                                                                 7 571 107    7 051 734    3 145 925   2 301 934
EQUITY AND LIABILITIES
Shareholders’ equity and reserves                                            4 994 792    4 419 619    1 902 344   1 574 973
Share capital and premium                                                    2 214 214    2 195 095      138 542     44 127
Insurance contingency reserve                                                   49 272       43 272       36 440     30 686
Foreign currency translation reserve                                           (33 426)     (29 545)         371
Non-distributable reserves                                                      27 655       22 276       26 892      26 252
Distributable reserves                                                       2 737 077    2 188 521    1 700 099   1 473 908
Non-current liabilities                                                       695 944      742 444      461 841     287 069
Deferred taxation                                                             238 673      290 219      206 045     204 237
Interest bearing borrowings                                                   457 271      452 225      255 796      82 832
Current liabilities                                                          1 880 371    1 889 671     781 740     439 892
Trade and other payables                                                     1 012 765     951 396      229 640     132 180
Current portion of interest bearing borrowings                                     913       1 700        2 654         767
Taxation                                                                       133 445      40 606       16 726      59 306
Provisions                                                                     287 848     274 737       27 608      46 612
Bank overdrafts and call loans                                                 445 400     621 232      505 112     201 027
Total equity and liabilities                                                 7 571 107    7 051 734    3 145 925   2 301 934

Net asset value per share (cents)                                                4 127        3 682        2 538       2 224
Net tangible asset valuer per share (cents)                                      3 188        2 747        2 185       2 224
*Prepared in terms of South African GAAP and therefore not IFRS compliant.




                                                                                                                           41
CONSOLIDATED CASH FLOW STATEMENTS
                                                                              2006       2005        2004*       2003*
                                                                              R’000      R’000       R’000       R’000
CASH FLOWS FROM OPERATING ACTIVITIES                                     485 831      380 727      174 811     125 363

Cash generated from operations                                           716 491      512 022      387 708     251 786

Cash receipts from customers                                          6 843 926   4 125 596    2 514 565   1 870 227
Cash paid to suppliers and employees                                 (6 127 435) (3 613 574) (2 126 857) (1 618 441)

Insurance investment income                                               61 520        49 613       47 964      58 593
Net finance costs                                                        (79 508)      (57 052)    (65 155)    (44 531)
Exchange rate differences on translation
of foreign entities                                                                                (12 235)    (17 161)
Taxation paid                                                           (212 672)     (123 856)   (183 471)   (123 324)
CASH FLOWS FROM INVESTING ACTIVITIES                                    (127 054)     (145 282)   (640 266)    (74 232)

Purchase of property, vehicles and equipment                            (147 767)     (102 834)    (67 558)    (45 607)
Proceeds on disposal of property, vehicles
and equipment                                                                17 271   107 921       25 135        8 998
Net decrease/(increase) in investment in associate                            1 600      (576)                 (23 250)
Proceeds on sale of preference shares                                                                 5 162
Decrease/(increase) in insurance financial assets                             1 842   (140 064)    (81 321)    (14 373)
Acquisition of Wetherlys Investment Holdings                                                      (511 631)
Acquisition of Wetherlys S.L. Spain                                                                (10 053)
Acquisition of Relyant Retail Limited                                                   (8 088)
Acquisition of Wetherlys                                                                (1 641)
CASH FLOWS FROM FINANCING ACTIVITIES                                    (312 918)     147 864      173 192    (106 576)
Proceeds from interest bearing borrowings                                  5 046      196 429      148 544        (701)
Dividends paid                                                          (342 247)     (79 986)     (62 486)    (53 065)
Acquisition of treasury shares                                                                                 (52 810)
Net proceeds from issue of shares                                            24 283    31 421       87 134

Net increase in cash and cash equivalents                                    45 859   383 309     (292 263)    (55 445)
Cash and cash equivalents on acquisition
of Relyant Retail Limited                                                             (399 534)
Cash and cash equivalents on acquisition
of Wetherlys                                                                                         50 555
Cash and cash equivalents at beginning of year                          (361 339)     (345 114)   (103 406)    (47 961)
Cash and cash equivalents at end of year                                (315 480)     (361 339)   (345 114)   (103 406)

*Prepared in terms of South African GAAP and therefore not IFRS compliant.




42
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
                                                                                             Foreign
                                                                            Insurance      currency            Non-
                                                          Share     Share contingency    translation   distributable   Distributable
                                                         capital premium       reserve       reserve        reserves        reserves      Total
                                                          R’000     R’000        R’000         R’000           R’000           R’000      R’000
Balance at 1 September 2003                              3 541     40 586      30 686       12 606          13 646       1 473 908 1 574 973
Prior year adjustment straight-lining
of operating leases                                                                                                         (11 570)     (11 570)
Balance at 1 September 2003, as restated                 3 541     40 586      30 686       12 606          13 646       1 462 338 1 563 403
Exchange rate differences arising on translation
of foreign entities                                                                         (12 235)                                    (12 235)
Treasury shares purchased and held                         (23)                                                              (7 281)     (7 304)
Issue of shares                                            230     94 208                                                                94 438
Net profit for year                                                                                                        326 591      326 591
Transfer to insurance contingency reserve                                       5 754                                       (5 754)
Transfer of realised profits on disposal of owner
occupied properties to non-distributable reserves                                                           10 983          (10 983)
Transfer of revaluation of investment properties
to non-distributable reserves                                                                                 2 263          (2 263)
Dividend                                                                                                                    (62 549)     (62 549)
 Total                                                                                                                      (64 409)     (64 409)
 Treasury shares                                                                                                              1 860        1860
Balance at 1 September 2004,
as previously reported                                   3 748    134 794      36 440           371         26 892       1 700 099 1 902 344
IFRS restatements                                                                                             5 663           4 992      10 655
Balance at 1 September 2004, as restated                 3 748    134 794      36 440           371         32 555       1 705 091 1 912 999
Net profit for year, as restated                                                                                           546 909   546 909
Dividends paid                                                                                                             (80 026) (80 026)
 Total                                                                                                                      (82 324)     (82 324)
 Treasury shares                                                                                                              2 298        2 298
Issue of shares                                          2 224 2 054 299                                                               2 056 523
Treasury shares sold                                        30                                                                8 171        8 201
Share-based payments                                                                                          4 575                        4 575
Exchange differences on translating
foreign operations                                                                          (29 916)                                     (29 916)
Unrealised surpluses arising from hedged
instruments                                                                                                     354                         354
Transfer to insurance contingency reserve                                       6 832                                        (6 832)
Capital adequacy reserve movement                                                                                39             (39)
Transfer of realised profits on disposal of owner
occupied properties to distributable reserves                                                               (12 131)         12 131
Transfer of realised profits on disposal of
investment properties to distributable reserves                                                              (3 397)          3 397
Transfer of revaluation of investment
properties to non-distributable reserves                                                                        281            (281)
Balance at 1 September 2005, as restated                 6 002 2 189 093       43 272       (29 545)        22 276       2 188 521 4 419 619
Net profit for year                                                                                                        894 317   894 317
Dividends paid                                                                                                            (342 247) (342 247)
 Total                                                                                                                    (349 402) (349 402)
 Treasury shares                                                                                                             7 155     7 155
Issue of shares                                             56     19 070                                                                19 126
Treasury shares purchased and held                          (7)                                                               5 162       5 155
Share-based payments                                                                                          2 251                       2 251
Exchange differences on translating foreign operations                                       (3 881)                                     (3 881)
Unrealised surpluses arising from hedged instruments                                                            452                         452
Transfer to insurance contingency reserve                                       6 000                                        (6 000)
Capital adequacy reserve movement                                                                               641            (641)
Transfer of realised profits on disposal of
investment properties to distributable reserves                                                                 (44)             44
Transfer of revaluation of investment
properties to non-distributable reserves                                                                      2 079          (2 079)
Balance at 31 August 2006                                6 051 2 208 163       49 272       (33 426)        27 655       2 737 077 4 994 792




                                                                                                                                              43
Principal accounting policies
The principal accounting policies are applied in the presentation of the 30 September 2006 annual financial statements
are prepared on the going concern basis in accordance with the historic cost convention, except for investment
properties and certain financial instruments, which are carried at fair value, and in accordance with International
Financial Reporting Standards (“IFRS”) and the requirements of the South African Companies Act, 1973 (as amended).
The previous years’ annual financial statements were prepared in accordance with South African Statements of
Generally Accepted Accounting Practice (SA GAAP).
The accounting policies adopted are consistent with those of the previous year except that the Group has adopted IFRS.
The annual financial statements are presented in South African Rand, rounded to the nearest thousand, unless
otherwise stated.

1.   JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
     In preparing the annual financial statements, management is required to make estimates and assumptions that
     affect the amounts represented in the annual financial statements and related disclosures. Use of available
     information and the application of judgement is inherent in the formation of estimates. Actual results in the future
     could differ from these estimates which may be material to the financial statements. Significant judgements
     include:

     1.1   Allowance for doubtful debts
           A discounted cash flow model using the contractual interest rate and the expected future collections from
           debtors are applied. Debtors that are subject to the allowance for doubtful debts calculation consist of those
           accounts that are considered to be in arrear. Future cash flows are based on the payment pattern of each
           individual debtor. A drop off rate is applied to these future cash flows to bring to account the potential effect
           of a debtor going bad. The drop off rate is based on the Group’s historical bad debt experience. Debtors who
           have not paid for a specific period are provided for in full.

     1.2   Impairment testing
           The recoverable amounts of cash-generating units and individual assets have been determined based on the
           higher of value-in-use calculations and fair values. These calculations require the use of estimates and
           assumptions.

     1.3   Contingent provisions on business combinations
           Contingencies recognised on the acquisition of Relyant required estimates based on managements’
           assessment of the potential exposure and the probability thereof.

     1.4   Share-based payments
           The group used the Black-Scholes pricing model to determine the value of the options granted at issue date.

     1.5   Insurance liabilities
           Insurance contract accounting requires estimates and judgements and is covered in accounting policy
           Note 23.

2.   BASIS OF CONSOLIDATION
     The consolidated annual financial statements incorporate those of the company and all its subsidiaries. Results of
     subsidiaries acquired during the year are included from the effective dates of acquisition, when control is
     transferred to the group. Results of subsidiaries disposed of are included up to the effective dates of disposal, when
     control no longer exists. Business combinations are accounted for in accordance with the purchase method. Inter-
     company transactions and balances are eliminated on consolidation.
     On acquisition, the group recognises the subsidiary’s identifiable assets, liabilities and contingent liabilities at fair
     value, except for assets classified as held-for-sale, which are recognised at fair value less costs to sell. The Ellerines
     Holdings Share Incentive Trust and Relyant Share Option Trust are consolidated into the group annual financial
     statements. The shares in the company owned by the trusts are treated as treasury shares, held at cost and
     presented in equity. Dividends received on treasury shares are eliminated on consolidation. Treasury shares are
     deducted from shares in issue in the calculation of earnings per share.
     Investments in subsidiaries are stated at cost less accumulated impairment losses in the holding Company’s annual
     financial statements.


44
3.   PROPERTY, VEHICLES AND EQUIPMENT
     The cost of an item of property, vehicles and equipment is recognised as an asset when it is probable that future
     economic benefits associated with the item will flow to the group and the cost of the item can be measured
     reliably.
     Owner-occupied properties, vehicles and equipment are stated at cost less accumulated depreciation and any
     accumulated impairment losses. The useful lives and residual values are assessed at each balance sheet date and
     adjusted if appropriate. Investment properties are stated at fair value as determined by the directors and are not
     depreciated. Surpluses or shortfalls on revaluation of investment properties are recognised in the income
     statement.
     Assets held under suspensive sale agreements are capitalised. At the commencement of the suspensive sale
     agreements the assets are reflected at the lower of fair value and the present value of minimum lease payments.
     The related liability is recognised at an equivalent amount. Finance charges are accounted for over the period of
     the transactions on the effective interest rate method.
     Depreciation is provided on all owner occupied properties, vehicles and equipment to write down their cost, less
     estimated residual value, by equal instalments over their estimated economic useful lives, as follows:
     • Computers and software                                       2 to 3 years
     • Vehicles                                                     5 years
     • Equipment                                                    6 years
     • Furniture, fixtures and fittings                             6 years
     • Improvements to leased premises                              Lease period
     • Owner occupied properties                                    20 to 80 years
     • Land                                                         Indefinite
     The gain or loss arising from the derecognition of an item of property, vehicles and equipment is included in the
     income statement, when the item is derecognised.


4.   GOODWILL
     Goodwill is the excess of the cost of an acquisition over the interest in the fair value of the identifiable assets and
     liabilities acquired at acquisition date. Goodwill is carried at cost less any accumulated impairment losses. Goodwill
     is further written down to the extent that the balances will in all probability no longer be recovered from expected
     future economic benefits.
     The group tests goodwill for impairment on an annual basis, or more frequently if there is an indication that the
     carrying value may be impaired.
     At the acquisition date, goodwill acquired is allocated to cash generating units and impairment is assessed in
     relation to these units.


5.   TRADEMARKS
     Acquired trademarks are capitalised and assessed at the individual asset level as having either a finite or indefinite
     life. Trademarks are carried at cost less any accumulated amortisation and any impairment losses. Where a
     trademark has a finite life, it is amortised on a straight line basis over its estimated useful life. The amortisation
     period is five to 15 years. Amortisation periods for trademarks with a finite life are reviewed annually or earlier
     where an indicator of impairment exists. Trademarks having indefinite lives are not amortised, as there is no limit
     to the period over which the asset is expected to generate net cash inflows for the group. Trademarks with
     indefinite lives are reviewed annually to ensure that the carrying value does not exceed the recoverable amount,
     regardless of whether an indicator of impairment is present and whether or not the trademark continues to have
     an indefinite life. Useful lives are also examined on an annual basis and adjustments, where applicable, are made
     on a prospective basis.
     No valuation is made of internally developed and maintained trademarks or brand names. Expenditure incurred to
     maintain these brands is charged to the income statement as incurred.


                                                                                                                         45
6.   FINANCIAL INSTRUMENTS
     6.1   Initial recognition and measurement
           The group classifies financial instruments, or their component parts, on initial recognition as a financial asset,
           a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.
           Financial instruments are recognised on the group’s balance sheet when the group becomes party to the
           contractual provisions of the instrument.
           On initial recognition, financial instruments are recognised at fair value.

     6.2   Subsequent measurement
           6.2.1   Investments
                   Investments are measured at fair value. Fair value represents the current market value where a
                   regulated market exists, otherwise fair value is determined by the directors. The directors’ valuation
                   is calculated on a basis of return or net asset value, as is deemed appropriate. Realised and unrealised
                   profit and losses on these financial assets are recognised in the income statement in the year in
                   which they occur.
           6.2.2   Derivative instruments
                   Derivative instruments are measured at fair value. The hedges are either:
                   • fair value hedges, which hedge exposure to changes in the fair value of a recognised asset or
                     liability; or
                   • cash flow hedges, which hedge exposure to variability in cash flows.
                   In the case of fair value hedges, any mark-to-market gain or loss of hedge instruments is recognised
                   immediately in the income statement. Gains and losses on effective cash flow hedging instruments
                   in respect of firm commitments or forecasted transactions are recognised directly in equity. Any
                   ineffective portion of a cash flow hedge is recognised in the income statement.
           6.2.3   Trade and other receivables
                   Trade and other receivables originated by the group are stated at amortised cost, using the effective
                   interest rate method, less any write down for impairment or uncollectibility.
           6.2.4   Cash and cash equivalents
                   Cash and cash equivalents comprise cash on hand net of overdrafts and demand deposits that are
                   readily convertible to a known amount of cash and are subject to an insignificant risk of change in
                   value. These are recorded at fair value.
           6.2.5   Financial liabilities
                   Financial liabilities, other than derivatives, are recognised at amortised cost, being the original debt
                   value less principal payments and amortisation.
           6.2.6   Trade and other payables
                   Trade and other payables are subsequently measured at amortised cost, using the effective interest
                   rate method.
           6.2.7   Loans between companies within the group
                   Loans between companies within the group are subsequently measured at amortised cost using the
                   effective interest rate method, less any impairment loss.
                   On loans receivable an impairment loss is recognised in the income statement of the company when
                   there is objective evidence that it is impaired. Impairment losses are eliminated on consolidation.
           6.2.8   Derecognition of financial instruments
                   Financial instruments are derecognised when the group no longer controls the contractual rights on
                   the instrument.


46
7.   INVESTMENT IN ASSOCIATE
     An associate is an enterprise in which the group has significant influence and which is neither a subsidiary nor a
     joint venture. In the company’s annual financial statements, investments in associates are carried at cost less
     accumulated impairment losses. In the group’s annual financial statements, investments in associates are
     accounted for under the equity method, adjusted for impairment losses.


8.   NON-CURRENT ASSETS HELD FOR SALE
     Non-current assets are classified as held for sale if their carrying amount will be recovered through a sale
     transaction rather than through continuing use. This condition is regarded as met only when the sale is highly
     probable and the asset is available for immediate sale in its present condition. Non-current assets held for sale are
     measured at the lower of its carrying amount and fair value less costs to sell.


9.   INVENTORIES
     Inventories are stated at the lower of cost and estimated net realisable value. Cost is generally determined on the
     first-in, first-out basis and it includes transport and handling costs. The cost of manufactured products includes
     direct expenditure and production overheads based on the normal level of activity.
     Specific provisions are made for slow-moving, obsolete and redundant inventories.


10. PROVISIONS AND CONTINGENCIES
     Provisions are recognised when:
     – the group has a present obligation as a result of a past event;
     – it is probable that an outflow of resources embodying economic benefits will be required to settle the
       obligation;
     – a reliable estimate can be made of the obligation.
     The amount of a provision is the present value of the expected expenditure required to settle the obligation.
     In respect of onerous contracts, the present obligation under the contract is recognised and measured as a provision.
     Contingent liabilities recognised in business combinations are subsequently measured at the higher of:
     – the amount that would be recognised as a provision; or
     – the amount initially recognised less cumulative amortisation.
     Contingent assets and contingent liabilities not arising from business combinations are not recognised.


11. TAXATION
     11.1 Current tax assets and liabilities
           Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount
           already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is
           recognised as an asset.
           Current tax liabilities and assets for the current and prior periods are measured at the amount expected to
           be paid to or recovered from the tax authorities, using the tax rates that have been enacted or substantively
           enacted by the balance sheet date.

     11.2 Deferred tax assets and liabilities
           A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the
           deferred tax liability arises from:
           – the initial recognition of goodwill; or
           – the initial recognition of an asset or liability in a transaction which:
              – is not a business combination; and
              – at the time of the transaction, affects neither accounting profit nor taxable profit.


                                                                                                                       47
          A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable
          that taxable profit will be available against which the deductible temporary difference can be utilised, unless
          the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that:
          – is not a business combination;
          – at the time of the transaction, affects neither accounting profit nor taxable profit or tax loss.
          A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable
          that future taxable profit will be available against which the unused tax losses can be utilised Deferred tax
          assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset
          is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted by
          the balance sheet date.

     11.3 Tax expenses
          Current and deferred taxes are recognised as income or expense and included in the income statement for
          the period, except to the extent that the tax arises from:
          – a transaction or event which is recognised, in the same or a different period, directly in equity; or
          – a business combination.


12. REVENUE
     12.1 Sale of merchandise
          Sale of merchandise is measured at the fair value of the consideration received or receivable and represents
          the amounts receivable for goods and services provided in the normal course of business, net of discounts
          and Value-Added Tax.
          Revenue from the sale of goods is recognised when all the following conditions have been satisfied:
          • the group has transferred to the buyer the significant risks and rewards of ownership of the goods;
          • the group retains neither continuing managerial involvement to the degree usually associated with
            ownership nor effective control over the goods sold;
          • the amount of revenue can be measured reliably;
          • it is probable that the economic benefits associated with the transaction will flow to the group; and
          • the costs incurred or to be incurred in respect of the transaction can be measured reliably.

     12.2 Finance charges
          Finance charges on instalment sale and term loan debtors are recognised as revenue on a time : proportion
          basis that takes into account the effective yield on the asset.

     12.3 Net insurance income
          Net insurance income comprises gross insurance income less reinsurance premiums and is recognised on
          the basis set out in accounting policy Note 23.

     12.4 Short-term loan income
          Short-term loan income consist of finance charges earned on short-term loans which are recognised on the
          effective yield on the asset.

     12.5 Rendering of services
          Rendering of services consist of delivery charges and other income. Delivery charges are recognised at the
          date goods are delivered to customers.

     12.6 Dividends and interest received
          Dividends are recognised, in the income statement, when the group’s right to receive payment has been
          established.
          Interest received is recognised on a time : proportion basis that takes into account the effective yield on
          the asset.


48
13. COST OF MERCHANDISE SOLD
   When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in
   which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and
   all losses of inventories are recognised as an expense in the period the write-down or loss occurs.


14. TRANSLATION OF FOREIGN CURRENCIES
   14.1 Foreign currency transactions
        A foreign currency transaction is recorded, on initial recognition in Rands, by applying to the foreign currency
        amount the spot exchange rate between the functional currency and the foreign currency at the date of the
        transaction.
        At each balance sheet date, foreign currency monetary items are translated using the closing rate.
        Exchange differences arising on the settlement of monetary items or on translating monetary items at rates
        different from those at which they were translated on initial recognition during the period or in previous
        annual financial statements are recognised in the income statement in the period in which they arise.
        Cash flows arising from transactions in a foreign currency are recorded in Rands by applying to the foreign
        currency amount the exchange rate between the Rand and the foreign currency at the date of the cash flow.

   14.2 Net investment in a foreign operation
        The results and financial position of a foreign operation are translated into the functional currency being
        Rand using the following procedures:
        • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
          balance sheet;
        • income and expenses are translated at the average exchange rates for the year; and
        • all resulting exchange differences are recognised as a separate component of equity.
        Exchange differences arising on a monetary item that forms part of a net investment in a foreign operation
        are recognised initially in the translation reserve and recognised in the income statement on disposal of the
        investment.


15. EMPLOYEE BENEFITS
   15.1 Short-term employee benefits
        The cost of short-term employee benefits, (those payable within one year after the service is rendered, such
        as paid leave, sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the
        period in which the service is rendered and are not discounted.
        The expected cost of compensated leave is recognised as an expense as the employees render services that
        increase their entitlement or, in the case of non-accumulating leave, when the leave occurs.
        The expected cost of profit sharing and bonus payments is recognised as an expense when there is a legal or
        constructive obligation to make such payments as a result of past performance.

   15.2 Defined contribution plans
        Contributions to defined contribution plans in respect of service in a particular year are recognised as an
        expense in that year.
        Payments made to state plan retirement benefit schemes are dealt with as defined contribution plans where
        the group’s obligation under the schemes is equivalent to that arising in a defined contribution retirement
        benefit plan.


                                                                                                                     49
     15.3 Defined benefit plans
           Gains or losses on the curtailment or settlement of defined benefit plans are recognised when it can be
           demonstrated that the group is committed to curtailment or settlement.

     15.4 Medical-current service costs
           The current service cost is recognised as an expense in the year and matched to the benefit received during
           the working life of the employee.


16. OPERATING LEASES
     Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference
     between the amounts recognised as an expense and the contractual payments are recognised as an operating lease
     liability. This liability is not discounted.


17. SEGMENTAL INFORMATION
     The principal segments of the group have been identified on a primary basis by distinction between the nature of
     the trading activities and on a secondary basis by significant geographical region. The primary basis is
     representative of the internal structure for management purposes. The secondary basis, namely geographical,
     classifies all operations based on geographical locations of trading.


18. BORROWING COSTS
     All borrowing costs are dealt with in the income statement in the period in which they are incurred.


19. IMPAIRMENT
     The group assesses at each balance sheet date whether there is any indication that an asset may be impaired. If
     any such indication exists, the group estimates the recoverable amount of the asset.
     Irrespective of whether there is any indication of impairment, the group also:
     • tests trademarks with an indefinite life for impairment annually by comparing its carrying amount with its
       recoverable amount;
     • tests goodwill acquired in a business combination for impairment annually or more frequently if there is an
       indication that the carrying value may be impaired.
     If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual
     asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of
     the cash-generating unit to which the asset belongs is determined.
     The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell or its
     value in use.
     If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced
     to its recoverable amount. The reduction is treated as an impairment loss.
     An impairment loss is recognised immediately in the income statement.
     An impairment loss is recognised for cash-generating units if the recoverable amount of the unit is less than the
     carrying amount of the unit. The impairment loss is allocated to reduce the carrying amount of the assets of
     the unit in the following order:
     • first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit; and
     • then, to the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit.


50
20. DISCONTINUED OPERATIONS

   Discontinued operations is a significant distinguishable component of the Group’s business that is abandoned or
   terminated pursuant to a single formal plan, and which represents a separate major line of business or a
   geographical area of operation.

   The profit or loss on abandonment of a discontinued operation is determined from the formalised discontinuance
   date.


21. SHARE CAPITAL AND EQUITY

   If the group repurchases its own equity instruments, those instruments (“treasury shares”) are deducted from
   equity. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of the
   group’s own equity instruments. Considerations paid or received are recognised directly in equity.


22. SHARE-BASED PAYMENTS

   Goods or services received or acquired in a share-based payment transaction are recognised when the goods or
   services are received. A corresponding increase in equity is recognised if the goods or services were received in an
   equity-settled share-based payment transaction or a liability if the goods or services were acquired in a cash-
   settled share-based payment transaction.

   For equity-settled share-based payment transactions, the goods or services received are measured, and the
   corresponding increase in equity, is recognised at the fair value of the goods or services received, unless the fair
   value cannot be estimated reliably.

   If the fair value of the goods or services received cannot be estimated reliably, their value and the corresponding
   increase in equity are measured by reference to the fair value of the equity instruments granted.

   For cash-settled share-based payment transactions, the goods or services acquired and the liability incurred are
   measured at the fair value of the liability. Until the liability is settled, the fair value of the liability is re-measured
   at each reporting date and at the date of settlement, with any changes in fair value recognised in the income
   statement for the period.

   If the share-based payments granted do not vest until the counterparty completes a specified period of service,
   the group accounts for those services on a straight-line basis over the vesting period. If the share-based payments
   vest immediately the services received are recognised in full.


23. INSURANCE OPERATIONS

   23.1 Classification of insurance contracts

         The group issues insurance contracts under which the group accepts significant insurance risk from another
         party (the policyholder) by agreeing to compensate the policyholder or other beneficiary if a specified
         uncertain future event (the insured event) adversely affects the policyholder.

   23.2 Recognition and measurement of insurance contracts

         Premiums

         Premiums written relate to business incepted during the year. Unearned premiums represent the proportion
         of premiums written in the year that relate to unexpired terms of policies in force at the balance sheet date,
         calculated on a time proportionate basis.




                                                                                                                           51
     Intermediary commissions

     Commissions paid to intermediaries are expensed in the period in which they are incurred.

     Claims incurred

     Claims incurred are included under administration and other expenses and consist of claims paid during the
     financial year together with the movement in the provision for outstanding claims. Outstanding claims do
     not include any provision for possible future claims where the claims arise under contracts not in existence
     at the balance sheet date.

     The provision for outstanding claims comprises the group’s estimate of the undiscounted ultimate cost of
     settling all claims incurred but unpaid at the balance sheet date whether reported or not. Related anticipated
     reinsurance recoveries are disclosed separately as assets. These estimated reinsurance and other recoveries
     are assessed in a manner similar to the assessment of claims outstanding.

     Whilst the directors consider that the gross provisions for claims and the related reinsurance recoveries are
     fairly stated on the basis of the information currently available to them, the ultimate liability will vary as a
     result of subsequent information and events and may result in significant adjustments to the amounts
     provided. Adjustments to the amount of claims provisions established in prior years are reflected in the
     period in which the adjustments are made. The methods used to value these provisions, and the estimates
     made, are reviewed regularly.

     Unexpired risk provision

     Provision, where necessary, is made for unexpired risks where the expected value of claims and expenses
     attributable to the unexpired periods of policies in force at the balance sheet date exceeds the unearned
     premiums provision in relation to such policies.

     Reinsurance

     The group cedes reinsurance in the normal course of business for the purpose of limiting its net loss
     potential. Reinsurance arrangements do not relieve the group from its direct obligations to its policyholders.
     Amounts recoverable under reinsurance contracts are assessed for impairment at each balance sheet date.
     Such assets are deemed impaired if there is objective evidence, as a result of an event that occurred after its
     initial recognition, that the group may not recover all amounts due and that there is a reliably measurable
     impact on the amounts that the group will receive from the reinsurer. Impairment losses are recognised in
     the income statement.

     Only contracts that give rise to a significant transfer of insurance risk are accounted for as reinsurance.
     Amounts recoverable under such contracts are recognised in the same year as the related claim.

     The benefits to which the group is entitled under its reinsurance contracts held are recognised as reinsurance
     assets. These assets consist of short-term balances due from reinsurers as well as longer-term receivables
     that are dependent on the expected claims and benefits arising under the related reinsured insurance
     contracts. Amounts recoverable from or due to reinsurers are measured consistently with the amounts
     associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance
     contract. Reinsurance liabilities are primarily premiums payable for reinsurance contracts and are recognised
     as an expense when due.

     Outward reinsurance premiums are recognised as an expense in accordance with the pattern of reinsurance
     service received.

     Statutory contingency reserve

     Provision is made for the full amount of the contingency reserve in terms of the Short-Term Insurance Act,
     1998, calculated at 10% of the net written premiums.

     Transfers to and from this reserve are taken directly to and from retained income.


52
24. STATEMENTS AND INTERPRETATIONS NOT EFFECTIVE
   At the date of approval of these annual financial statements, certain new accounting standards, amendments and
   interpretations to existing standards had been published that are mandatory for accounting periods beginning on
   or after 1 January 2006 which the group has elected not to adopt early. The following standards and interpretations
   may have an impact on the group’s operations when they become effective:
   • Amendment to IAS 1: Presentation of Financial Statements – Capital Disclosures.
   • Amendment to IAS 21: The Effects of Changes in Foreign Exchange Rates: Net Investment in Foreign Operations.
   • Amendment to IAS 39: Financial Instruments.
   • Recognition and Measurement: Cash Flow Hedge Accounting of Forecast Intra-Group Transactions,
   • Amendment to IFRS 4: Insurance Contracts and IAS 39: Financial Instruments – Recognition and Measurement:
     Financial Guarantee Contracts.
   • IFRS 7: Financial Instruments – Disclosures.
   • IFRIC 11 – IFRS 2: Group and Treasury Share Transactions.
   • IFRIC 4: Determining Whether an Arrangement Contains a Lease.




                                                                                                                   53
                                                                                                                  Annexure II


INTERIM REPORT OF ELLERINES
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2007


Interim profit statement for the six months ended 28 February 2007
– Headline earnings per share up 15,0%
– Distribution per share up 21,5%
– Operating profit up 17,3%
– Revenue up 9,6%
– Gearing at 25,8%


NATURE OF BUSINESS
Ellerine Holdings Limited is a lifestyle furniture and appliance retailer, trading out of 1 177 outlets across South Africa
and its neighbouring countries, including Zambia. The retail divisions comprise 12 trading brands which are well-
positioned to service the lower, middle and higher income consumers in both the rural and metropolitan areas.
71,0% of total revenue is derived from goods sold on credit, which is the core of the group’s Financial Services Division.
Our centrally controlled credit operation is based on state-of-the-art computerised credit granting scorecard systems,
supported by three call centres manned by over 300 collecting agents. In addition, both short-term and life insurance
cover, utilising the three group owned insurance licences, are offered to the group’s credit customers.
The group offers, as part of Financial Services, short-term cash loans to lower income consumers and operates out
of 72 outlets, many of which are housed within the group’s retail outlets. TV installation and repair services are provided
through a network of 44 outlets across South Africa and the group also manufactures high quality furniture,
predominantly for one of the major cash retail brands.


GROUP FINANCIAL REVIEW
We are pleased to report a 15,0% increase in headline earnings per share to 493,9 cents (2006 – 429,4 cents) for the
six months ended February 2007. Operating profit at R853 million increased by 17,3% and resulted in an operating
margin of 19,4%, which is a solid improvement over the previous reporting period.
Record group revenue of R4,4 billion increased by 9,6%. Good revenue growth of 13,5% was recorded in the Cash
Divisions, while the Credit Divisions grew revenue by 7,8%. Two trends emerged in our credit sales. Firstly, a slowdown
was experienced in the growth of the consumer credit market. Secondly, the trend towards cash sales in the credit
brands continued. Against this background, the group nevertheless continued to successfully develop this business and
revenue from financial and other services grew by 13,0% to R757 million.
Total operating income grew by 12,3% to R2,8 billion, with gross profit margins at 45,2% (2006 – 44,2%) and the
contribution from financial services reflecting an improvement compared to the previous period. Debtors’ costs
at R281 million (2006 – R210 million) are 4,0% (2006 – 3,4%) of the gross debtors book and have increased mainly
due to the increase in the allowance for doubtful debts in line with the increase in arrears, which reflects the tightening
credit environment. The group continues to maintain a very prudent provisioning policy.
Operating expenses at R1,6 billion (2006 – R1,5 billion) have been well-controlled and increased by only 6,9%, inclusive
of an additional R13 million over the previous period in respect of accounting for the share-based payment incentive
schemes and the straight-lining of property leases, particularly for new leases.
In line with the group’s stated objective of using its balance sheet efficiently and targeting a gearing ratio of around
35,0%, the group embarked upon a share buy-back programme during the period, which it intends to continue.
Consequently, net finance costs at R54 million (2006 – R37 million) have increased.
Trade receivables at R5,1 billion (2006 – R4,6 billion) have increased by 12,9% and remain well-provisioned, with total
provisions at 29,0% (2006 – 28,3%) of the gross debtors book. Inventories at R651 million (2006 – R558 million) have
increased by 16,7% mainly due to the lower than expected December trading season in the Credit Divisions and the
3,0% net increase in furniture retail outlets. Inventory levels are expected to improve by year-end. Despite this, total assets


54
of R8,1 billion only increased by 2,1%, primarily as a result of more efficient financial structuring of the insurance cash
reserves and the net reduction in the deferred tax asset as a result of profit earned by the relevant operating entities.
It should be noted that the R200 million assessed loss in 1998 for Relyant Trading (Pty) Limited has been re-instated
by SARS. This has resulted in an increase in the deferred tax asset and a reduction in goodwill of R58 million.
The R58 million will result in future cash tax savings. With the equity base now at R5,2 billion and gearing of 25,8%,
the group’s balance sheet remains financially sound. The net asset value per share of the group, at 4 394 cents
(2006 – 3 963 cents), increased by 10,9%, despite the increase in distributions to shareholders and the repurchase
of shares amounting to R285 million.


DIVISIONAL TRADING REVIEW
In line with the group’s strategy of maintaining a sound mix between credit and cash sales, as well as being represented
across all LSM furniture and appliance markets, trading in all divisions during the first half of the period under review
was pleasing, particularly within the Cash Divisions. However, since December, a slowdown in the durable goods
consumer market has been experienced. This has impacted revenues when compared to the high base enjoyed in 2005,
notably in the Credit Divisions. The Cash Divisions, which trade out of 100 outlets (2006 – 91 outlets), performed
particularly well during the period, with the Value Retailing Division recording an increase in revenue of 16,1% and,
together with Wetherlys, total revenue for the Cash Divisions increased by 13,5%. The profit contribution by the Cash
Divisions improved with the operating profit at R93 million (2006 – R66 million) having increased substantially by
40,9% and operating margins at 11,7% (2006 – 9,5%) reflecting a welcome improvement. The increase in the number
of outlets in good locations, particularly in the Furniture City and Osiers brands, coupled with focused marketing and
merchandising initiatives have contributed to the improved results in the division.
The Traditional and Universal Credit Divisions, which trade out of 1 077 outlets (2006 – 1 052 outlets), achieved an
increase of 7,8% in revenue over the previous period. The trend towards cash sales in the Credit Divisions now comprise
19,1% (2006 – 17,2%) of total revenue and the general slowdown in the demand for consumer credit, have had a
negative impact for the period under review in respect of the operating profit and margins of those divisions. As a result
the Credit Divisions recorded no increase in operating profit at R507 million and the operating margin at 17,9% reduced
by 1,4%. The increase in the division’s net assets of 14,5%, which is somewhat higher than the rate of increase in
revenue, is mainly as a result of the 2,4% increase in the number of new outlets, the increase in stock and debtors
caused by the lower than expected December seasonal trading period and the tightening of collections.
Revenue from Financial Services at R690 million (2006 – R611 million) reflects a slight increase in contribution to
group revenue at 15,7% (2006 – 15,3%) and operating profit at R211 million (2006 – R160 million) represents 24,7%
(2006 – 22,0%) of group profits. With the slowdown experienced in the consumer credit environment, a greater share
of the insurance risk relating to the Traditional Division has been passed to the re-insurers. This resulted in a reduction
of the provision for unearned insurance premiums and an increase in revenue for the group. This, together with
improved efficiencies, a broader product range and the expansion of the Rainbow Loans short-term loan business unit
has enhanced profitability in the Financial Services Division.


RELYANT MERGER UPDATE
The final and potentially the most disruptive stage of the merger has been completed very successfully. The Traditional
Division’s credit operation has been moved to the Centralised Collection Offices (CCO’s) which utilises the
internationally renowned Triad collection management software tools. This now allows the group to manage risk
centrally far more effectively and will be of great value when trading under the new NCA environment. In addition, the
Triad software incorporates meaningful customer behavioural patterns and has the capability of mining strategically
important marketing data. This key objective of the merger has been realised with little disruption to daily operations.


THE NATIONAL CREDIT ACT (“NCA”)
The group is on target to successfully implement the new requirements of the NCA and is confident that it will operate
effectively in the new environment.


OUTLOOK
The group’s strategy is to cover the entire cash and credit furniture and appliances market to counter-balance shifts
in trends. In this respect our group is uniquely well positioned. Currently a slowdown in middle-income brands
is notable, while the lower-income brands are showing signs of an improvement.


                                                                                                                        55
The slowdown in the trading rate of growth in the furniture and appliances retail market is expected to continue for
the remaining six months to August 2007. Management, however, confidently expects earnings growth for the full year.


DIRECTORS
Non-Executive Directors, Denzil McGlashan (Deputy Chairman) and Tom Chalmers, retired from the Board on
16 May 2007 and 22 February 2007 respectively. The Board wishes to thank both Denzil and Tom for their valuable
counsel and contribution over the past 20 years and wish them every success in their well-earned retirement. The Board
is pleased to announce that with effect of 16 May 2007 the following Non-Executive Directors have been appointed,
Israel Skosana, Moshopyadi Heil, Andile Sangqu and Mpho Nkeli.


DISTRIBUTION TO ORDINARY SHAREHOLDERS
The Board has resolved to declare an interim distribution to ordinary shareholders of 169,6 cents per share
(2006 – 139,6 cents per share) which represents an increase of 21,5%. The following dates are applicable:
Last date to trade cum the distribution                                                            Friday, 1 June 2007
Date trading commences ex the distribution                                                        Monday, 4 June 2007
Record date                                                                                        Friday, 8 June 2007
Date of payment                                                                                  Monday, 11 June 2007
Share certificates may not be dematerialised between Monday, 4 June 2007 and Friday, 8 June 2007, both dates
inclusive.

By order of the Board

Peter Pohlmann                                              Peter Squires
Non-Executive Chairman                                      Chief Executive Officer

21 May 2007

Registered office: Gillooly’s View Office Park, Block E, Osborne Lane, Bedfordview, 2007
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited, Ground Floor, 70 Marshall Street
Johannesburg. PO Box 61051, Marshalltown, 2107
Auditors: Grant Thornton
Sponsors: Nedbank Capital
Non-executive directors: P J B Pohlmann+ (Non-executive chairman), K M Heil#, J M Moore*, M Nkeli#, A H Sangqu#,
I B Skosana#
Executive directors: P J C Squires (Chief executive officer), A F F Moca, R A Rawlings, R B G Sinclair
+German #Independent *British




56
CONSOLIDATED INCOME STATEMENT
                                               6 months to February                     12 months to
                                                 2007           2006      Percentage     August 2006
                                    Notes    R’million       R’million        change        R’million
                                            Unaudited      Unaudited                         Audited
Revenue                                2        4 387           4 001            9,6           7 579
Sale of merchandise                    2        2 856           2 675            6,8           4 963
Cost of merchandise sold                       (1 564)         (1 492)           4,8          (2 745)
Gross profit                                    1 292            1 183           9,2           2 218
Other operating revenue                2        1 471            1 278          15,1           2 523
Debtors costs                                    (281)            (210)         33,8            (396)
Operating expenses                             (1 629)          (1 524)          6,9          (3 074)

Advertising                                      (154)           (136)          13,2            (244)
Depreciation and amortisation                     (47)            (47)             –             (92)
Cost of employment                               (829)           (763)           8,7          (1 542)
Motor and delivery                               (111)           (107)           3,7            (220)
Property expenses                                (236)           (211)          11,8            (441)
Administration and other expenses                (252)           (260)          (3,1)           (535)

Operating profit                                  853             727           17,3           1 271
Income from associate                               –               5                             13
Impairment of trademarks                           (1)              –                              –
Insurance investment income                        37              30           23,3              62
Net finance costs                                 (54)            (37)          45,9             (79)

Interest received                                  24               25          (4,0)             41
Interest paid                                     (78)             (62)         25,8            (120)

Profit before taxation                            835             725           15,2           1 267
Taxation                                         (246)           (210)          17,1            (373)
Profit attributable to ordinary
shareholders                                      589             515           14,4             894
Earnings per share                     3        Cents           Cents                          Cents
Attributable                                    493,9           429,1           15,1           743,4
Headline                                        493,9           429,4           15,0           741,9
Fully diluted attributable                      489,6           422,6           15,9           732,5
Fully diluted headline                          489,6           422,9           15,8           731,1
                                                   %               %                              %
Gross profit                                     45,2            44,2                           44,7
Operating margin                                 19,4            18,2                           16,8
Tax rate                                         29,5            29,2                           29,7




                                                                                                   57
CONSOLIDATED BALANCE SHEET
                                                          February     February      August
                                                             2007         2006        2006
                                                          R’million    R’million   R’million
                                                 Notes   Unaudited    Unaudited     Audited
ASSETS
Non-current assets                                           2 138        2 436       2 348

Property, vehicles and equipment                               384          361         379
Goodwill                                                       766          806         824
Trademarks                                                     311          312         312
Investment in associate                                          –           39           –
Deferred taxation                                              110          187         199
Insurance financial assets                                     567          731         634

Current assets                                               5 967        5 504       5 176

Inventories                                                    651          558         588
Trade and other receivables                         4        5 139        4 552       4 457
Taxation                                                         4            –           1
Funds at call, bank balances and cash                          173          394         130

Non-current assets classified as held for sale                   –            –          48
Total assets                                                 8 105        7 940       7 572
EQUITY AND LIABILITIES
Shareholders’ equity and reserves                            5 172        4 762       4 995

Share capital and premium                                    2 081        2 195       2 214
Other reserves                                                  35           33          43
Distributable reserves                                       3 056        2 534       2 738

Non-current liabilities                                        670          687         696

Deferred taxation                                              214          236         239
Interest bearing borrowings                                    456          451         457

Current liabilities                                          2 263        2 491       1 881

Trade and other payables                                       853          873       1 013
Current portion of interest bearing borrowings                   1            1           1
Taxation                                                        73           62         133
Provisions                                                     284          264         288
Bank overdrafts and call loans                               1 052        1 291         446

Total equity and liabilities                                 8 105        7 940       7 572
Net asset value per share (cents)                            4 394        3 963       4 127
Current ratio (times)                                           2,6          2,2         2,8
Interest bearing debt : Equity (%)                            25,8         28,3        15,5




58
CONSOLIDATED CASH FLOW STATEMENT
                                                                      6 months to February      12 months to
                                                                      2007           2006      August 2006
                                                                   R’million      R’million       R’million
                                                           Note   Unaudited     Unaudited          Audited
CASH FLOWS FROM OPERATING ACTIVITIES                                   (222)          (203)           487

Cash (absorbed by)/generated from operations                            (19)            (84)          718

Cash generated from operating activities                      5       1 240           1 085         1 645
Working capital changes                                              (1 259)         (1 169)         (927)

Increase in inventories                                                 (63)            (24)          (54)
Increase in trade and other receivables                              (1 019)         (1 065)         (925)
(Decrease)/Increase in trade and other payables                        (177)            (80)           52

Insurance investment income                                              37             30             62
Net finance costs                                                       (54)           (37)           (79)
Taxation paid                                                          (186)          (112)          (214)
CASH FLOWS FROM INVESTING
ACTIVITIES                                                               70           (167)          (129)

Purchase of property, vehicles and equipment                            (62)            (77)         (148)
Proceeds on disposal of property, vehicles and equipment                 10               7            17
Decrease in investment in associate                                      48               2             1
Decrease/(Increase) in insurance financial assets                        74             (99)            1

CASH FLOW FROM FINANCING ACTIVITIES                                    (411)          (166)          (313)

(Decrease)/Increase in interest bearing borrowings                       (1)            (1)             5
Distributions paid                                                     (133)          (173)          (342)
Shares (repurchased)/issued                                            (277)             8             24

Net (decrease)/increase in cash and cash equivalents                   (563)          (536)            45
Cash and cash equivalents at beginning of period                       (316)          (361)          (361)
Cash and cash equivalents at end of period                             (879)          (897)          (316)
Attributable cash flow per share (cents)                             (186,2)         (169,3)         404,8




                                                                                                             59
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                      Share
                                                     capital
                                                        and       Other    Distributable
                                                   premium     reserves         reserves       Total
                                                   R’million   R’million       R’million    R’million
Balance at 1 September 2005                           2 195        36 2             189        4 420
Net profit for period                                                               515          515
Dividends paid                                                                     (173)        (173)
 Total                                                                             (177)        (177)
 Treasury shares                                                                      4            4
Treasury shares sold                                                                  8            8
Share-based payments                                                  1                            1
Exchange differences on translating foreign
operations                                                           (9)                          (9)
Transfer to insurance contingency reserve                             5               (5)
Balance at 1 March 2006                               2 195          33           2 534        4 762
Net profit for the period                                                           379          379
Dividends paid                                                                     (169)        (169)
 Total                                                                             (172)        (172)
 Treasury shares                                                                      3            3
Issue of shares                                          19                                       19
Treasury shares purchased and held                                                    (3)         (3)
Share-based payments                                                  1                            1
Exchange differences on translating foreign
operations                                                            5                            5
Unrealised surpluses arising from hedged
instruments                                                           1                            1
Transfer to insurance contingency reserve                             1               (1)
Capital adequacy reserve movement                                     1               (1)
Transfer of revaluation of investment properties
to non-distributable reserves                                         1               (1)
Balance at 1 September 2006                           2 214          43           2 738        4 995
Net profit for period                                                               589          589
Distributions paid                                     (133)                                    (133)
 Total                                                 (139)                                    (139)
 Treasury shares                                          6                                        6
Treasury shares purchased and held                                                 (277)        (277)
Share-based payments                                                  1                            1
Exchange differences on translating foreign
operations                                                           (3)                          (3)
Transfer from insurance
contingency reserve                                                  (6)              6
Balance at 28 February 2007                           2 081          35           3 056        5 172




60
SEGMENTAL ANALYSIS
                                                   DIVISIONAL
                                   Traditional*      Universal          Total
                                      retailing       retailing        credit
                                     R’million        R’million     R’million
INCOME STATEMENT
Revenue                    2007         1 444            1 394         2 838
                           2006         1 355            1 278         2 633
                          % v LY           6,6              9,1           7,8
Credit revenue             2007         1 259            1 038         2 297
                           2006         1 212              969         2 181
                          % v LY           3,9              7,1           5,3
Cash revenue               2007           185              356           541
                           2006           143              309           452
                          % v LY         29,4             15,2          19,7
Cash revenue (%)           2007          12,8             25,5          19,1
                           2006          10,6             24,2          17,2
                            v LY           2,2              1,3           1,9
Sale of merchandise        2007         1 053            1 057         2 110
                           2006         1 030              982         2 012
                          % v LY           2,2              7,6           4,9
Operating profit/(loss)    2007           243              264           507
                           2006           259              249           508
                          % v LY          (6,2)             6,0          (0,2)
Operating margin (%)       2007          16,8             18,9          17,9
                           2006          19,1             19,5          19,3
                            v LY          (2,3)            (0,6)         (1,4)
Depreciation               2007            24               11            35
                           2006            25                 8           33
                          % v LY          (4,0)           37,5            6,1
BALANCE SHEET
Assets                     2007         3 059            2 373         5 432
                           2006         2 802            2 041         4 843
                          % v LY            9,2            16,3          12,2
Liabilities                2007           (228)            (258)         (486)
                           2006           (249)            (274)         (523)
                          % v LY           (8,4)            (5,8)         (7,1)
Net assets                 2007         2 831            2 115         4 946
                           2006         2 553            1 767         4 320
                          % v LY          10,9             19,7          14,5
Cost to acquire assets     2007             18               17            35
                           2006             30               23            53
                          % v LY         (40,0)           (26,1)        (34,0)
RESOURCES
Number of outlets          2007           633             444         1 077
                           2006           617             435         1 052
% v LY                                     2,6             2,1           2,4
Number of employees        2007         7 992           5 686        13 678
                           2006         8 222           5 463        13 685
                          % v LY          (2,8)            4,1          (0,1)
Retail m2                  2007       391 895         321 345       713 240
                           2006       382 362         316 805       699 167
                          % v LY           2,5             1,4           2,0




                                                                            61
                                                                                  DIVISIONAL
                                                                  Traditional*      Universal             Total
                                                                     retailing       retailing           credit
                                                                    R’million        R’million        R’million
PRODUCTIVITY RATIOS
Merchandise sales:
Revenue                                                2007             72,9             75,8             74,3
                                                       2006             76,0             76,8             76,4
                                                        v LY             (3,1)            (1,0)            (2,1)
Revenue per outlet (R’000)                             2007            2 281            3 140            2 635
                                                       2006            2 196            2 938            2 503
                                                      % v LY              3,9              6,9              5,3
Revenue per employee (Rand)                            2007          180 681          245 164          207 486
                                                       2006          164 802          233 937          192 400
                                                      % v LY              9,6              4,8              7,8
Operating profit per employee (Rand)                   2007           30 405           46 430           37 067
                                                       2006           31 501           45 579           37 121
                                                      % v LY             (3,5)             1,9             (0,1)
Revenue per m2 (Rand)                                  2007            3 685            4 338            3 979
                                                       2006            3 544            4 034            3 766
                                                      % v LY              4,0              7,5              5,7
m2 per outlet                                          2007              619              724              662
                                                       2006              620              728              665
                                                      % v LY             (0,2)            (0,5)            (0,5)
TRADE RECEIVABLES
Gross receivables                                      2007             3 872            2 670            6 542
                                                       2006             3 448            2 331            5 779
                                                      % v LY             12,3             14,5             13,2
Debtors costs                                          2007               174               95              269
                                                       2006               129               74              203
                                                      % v LY             34,9             28,4             32,5
Debtors cost (%)                                       2007                4,5              3,6              4,1
                                                       2006                3,7              3,2              3,5
                                                        v LY               0,8              0,4              0,6
Average length of book in months                       2007              17,5             14,5             16,1
                                                       2006              16,9             13,5             15,4
                                                        v LY               0,6              1,0              0,7
Arrears                                                2007               727              325            1 052
                                                       2006               535              225              760
                                                      % v LY             35,9             44,4             38,4
Arrears (%)                                            2007              18,8             12,2             16,1
                                                       2006              15,5               9,7            13,2
                                                        v LY               3,3              2,5              2,9
Collection rate (%)                                    2007                5,7              6,9              6,2
                                                       2006                5,9              7,4              6,5
                                                        v LY              (0,2)            (0,5)            (0,3)
Deposit rate (%)                                       2007              12,9             21,5             16,4
                                                       2006              13,4             20,3             16,2
                                                        v LY              (0,5)             1,2              0,2
*During 2007, the basis of allocating central Corporate service department costs to the Traditional Retailing and
 Wetherleys divisions were changed. Comparatives have been restated accordingly.




62
SEGMENTAL ANALYSIS (continued)
                                                        DIVISIONAL
                                                              Value      Total
                                          Wetherlys*       retailing      cash
INCOME STATEMENT
Revenue                           2007          273            519         792
                                  2006          251            447         698
                                 % v LY          8,8           16,1        13,5
Credit revenue                    2007             1           159         160
                                  2006                         137         137
                                 % v LY                        16,1        16,8
Cash revenue                      2007         272             360         632
                                  2006         251             310         561
                                 % v LY         8,4            16,1        12,7
Cash revenue (%)                  2007         99,6            69,4        79,8
                                  2006        100,0            69,4        80,4
                                   v LY        (0,4)                       (0,6)
Sale of merchandise               2007         270             476         746
                                  2006         248             415         663
                                 % v LY         8,9            14,7        12,5
Operating profit/(loss)           2007          38              55          93
                                  2006          34              32          66
                                 % v LY        11,8            71,9        40,9
Operating margin (%)              2007         13,9            10,6        11,7
                                  2006         13,5             7,2         9,5
                                   v LY         0,4             3,4         2,2
Depreciation                      2007            2               3           5
                                  2006            5               3           8
                                 % v LY       (60,0)                      (37,5)
BALANCE SHEET
Assets                            2007          240             442        682
                                  2006          176             334        510
                                 % v LY         36,4           32,3       33,7
Liabilities                       2007           (40)          (159)      (199)
                                  2006           (54)          (124)      (178)
                                 % v LY        (25,9)          28,2       11,8
Net assets                        2007          200             283        483
                                  2006          122             210        332
                                 % v LY         63,9           34,8       45,5
Cost to acquire assets            2007             5              7         12
                                  2006             6              6         12
                                 % v LY        (16,7)          16,7
RESOURCES
Number of outlets                 2007           27              73        100
                                  2006           24              67         91
                                 % v LY        12,5              9,0        9,9
Number of employees               2007        1 144             928      2 072
                                  2006        1 065             816      1 881
                                 % v LY          7,4           13,7       10,2
Retail m2                         2007       52 581          75 967    128 548
                                  2006       49 942          73 417    123 359
                                 % v LY          5,3             3,5        4,2




                                                                              63
SEGMENTAL ANALYSIS (continued)
                                                                                  DIVISIONAL
                                                                                        Value             Total
                                                                  Wetherlys*         retailing             cash
PRODUCTIVITY RATIOS
Merchandise sales:
Revenue                                                2007             98,9             91,7             94,2
                                                       2006             98,8             92,8             95,0
                                                        v LY              0,1             (1,1)            (0,8)
Revenue per outlet (R’000)                             2007           10 111            7 110            7 920
                                                       2006           10 458            6 672            7 670
                                                      % v LY             (3,3)             6,6              3,3
Revenue per employee (Rand)                            2007          238 636          559 267          382 239
                                                       2006          235 681          547 794          371 079
                                                      % v LY              1,3              2,1              3,0
Operating profit per employee (Rand)                   2007           33 217           59 267           44 884
                                                       2006           31 925           39 216           35 088
                                                      % v LY              4,0            51,1             27,9
Revenue per m2 (Rand)                                  2007            5 192            6 832            6 161
                                                       2006            5 026            6 089            5 658
                                                      % v LY              3,3            12,2               8,9
m2 per outlet                                          2007            1 947            1 041            1 285
                                                       2006            2 081            1 096            1 356
                                                      % v LY             (6,4)            (5,0)            (5,2)
TRADE RECEIVABLES
Gross receivables                                      2007                 3             362              365
                                                       2006                 4             273              277
                                                      % v LY            (25,0)            32,6             31,8
Debtors costs                                          2007                 1                7                8
                                                       2006                 2                5                7
                                                      % v LY            (50,0)            40,0             14,3
Debtors cost (%)                                       2007              33,3              1,9              2,2
                                                       2006              50,0              1,8              2,5
                                                        v LY            (16,7)             0,1             (0,3)
Average length of book in months                       2007                               13,5             13,5
                                                       2006                               12,5             12,5
                                                        v LY                               1,0              1,0
Arrears                                                2007                                23               23
                                                       2006                                15               15
                                                      % v LY                              53,3             53,3
Arrears %                                              2007                                6,4              6,3
                                                       2006                                5,5              5,4
                                                        v LY                               0,9              0,9
Collection rate (%)                                    2007                                7,4              7,4
                                                       2006                                8,0              8,0
                                                        v LY                              (0,6)            (0,6)
Deposit rate (%)                                       2007                               20,3             20,3
                                                       2006                               19,6             19,6
                                                        v LY                               0,7              0,7
*During 2007, the basis of allocating central Corporate service department costs to the Traditional Retailing and
 Wetherlys divisions were changed. Comparatives have been restated accordingly.




64
SEGMENTAL ANALYSIS (continued)
                                                              DIVISIONAL
                                      Early                   Financial                   Total
                                       Bird     Properties     Services  Corporate*      Group
INCOME STATEMENT
Revenue                       2007      37                        690          30         4 387
                              2006      34                        611          25         4 001
                             % v LY     8,8                       12,9        20,0           9,6
Credit revenue                2007                                659                     3 116
                              2006                                588                     2 906
                             % v LY                               12,1                       7,2
Cash revenue                  2007      37                         31          30         1 271
                              2006      34                         23          25         1 095
                             % v LY     8,8                       34,8        20,0         16,1
Cash revenue (%)              2007    100,0                                  100,0         29,0
                              2006    100,0                                  100,0         27,4
                               v LY                                                          1,6
Sale of Merchandise           2007                                                        2 856
                              2006                                                        2 675
                             % v LY                                                          6,8
Operating profit/(loss)       2007        3             6         211           33          853
                              2006        2             6         160          (15)         727
                             % v LY    50,0                       31,9                     17,3
Operating margin (%)          2007      8,1                       30,6                     19,4
                              2006      5,9                       26,2                     18,2
                               v LY     2,2                        4,4                       1,2
Depreciation                  2007        2                          1            4          47
                              2006        1                          1           (1)         42
                             % v LY   100,0                                                11,9
BALANCE SHEET
Assets                        2007      17              35         828       1 111        8 105
                              2006      16              44         932       1 595        7 940
                             % v LY     6,3          (20,5)      (11,2)       (30,3)         2,1
Liabilities                   2007       (8)           (26)       (114)     (2 100)      (2 933)
                              2006       (7)           (26)       (148)     (2 296)      (3 178)
                             % v LY    14,3                      (23,0)         (8,5)       (7,7)
Net assets                    2007        9              9         714         (989)      5 172
                              2006        9            18          784         (701)      4 762
                             % v LY                  (50,0)        (8,9)       41,1          8,6
Cost to acquire assets        2007        2                           1          12          62
                              2006        2                           1            9         77
                             % v LY                                            33,3        (19,5)
RESOURCES
Number of outlets             2007       44                        72                     1 293
                              2006       44                        65                     1 252
                             % v LY                              10,8                        3,3
Number of employees           2007      402                       243          781       17 176
                              2006      432                       217          742       16 957
                             % v LY     (6,9)                    12,0           5,3          1,3
Retail m2                     2007    7 845                     5 913                   855 546
                              2006    7 813                     4 665                   835 004
                             % v LY      0,4                     26,8                        2,5




                                                                                              65
SEGMENTAL ANALYSIS (continued)
                                                                          DIVISIONAL
                                                  Early                   Financial                       Total
                                                   Bird   Properties       Services  Corporate*          Group
PRODUCTIVITY RATIOS
Merchandise sales:
Revenue                            2007                                                                   65,1
                                   2006                                                                   66,9
                                    v LY                                                                   (1,8)
Revenue per outlet (R’000)         2007            841                                                   3 393
                                   2006            773                                                   3 196
                                  % v LY            8,8                                                     6,2
Revenue per employee (Rand)        2007         92 040                                                 255 415
                                   2006         78 704                                                 235 950
                                  % v LY          16,9                                                      8,3
Operating profit per employee
(Rand)                             2007          7 463                                                  49 662
                                   2006          4 630                                                  42 873
                                  % v LY          61,2                                                    15,8
Revenue per m2 (Rand)              2007          4 716                                                   5 128
                                   2006          4 352                                                   4 792
                                  % v LY            8,4                                                     7,0
m2 per outlet                      2007            178                                                     662
                                   2006            178                                                     667
                                  % v LY                                                                   (0,7)
TRADE RECEIVABLES
Gross receivables                  2007                                        138                        7 045
                                   2006                                        121                        6 177
                                  % v LY                                       14,0                        14,1
Debtors costs                      2007                                         12             (8)          281
                                   2006                                           8            (8)          210
                                  % v LY                                       50,0                        33,8
Debtors cost (%)                   2007                                         8,7                          4,0
                                   2006                                         6,6                          3,4
                                    v LY                                        2,1                          0,6
Average length of book in
months                             2007                                         7,1                        15,6
                                   2006                                         7,2                        14,9
                                    v LY                                       (0,1)                         0,7
Arrears                            2007                                         27                        1 102
                                   2006                                         19                          794
                                  % v LY                                       42,1                        38,8
Arrears (%)                        2007                                        19,6                        15,6
                                   2006                                        15,7                        12,9
                                    v LY                                        3,9                          2,7
Collection rate (%)                2007                                        14,0                          6,4
                                   2006                                        13,8                          6,7
                                    v LY                                        0,2                         (0,3)
Deposit rate (%)                   2007                                                                    16,6
                                   2006                                                                    16,4
                                    v LY                                                                     0,2
*During 2007, the basis of allocating central Corporate service department costs to the Traditional Retailing and
 Wetherlys divisions were changed. Comparatives have been restated accordingly.




66
SEGMENTAL ANALYSIS (continued)
                                                      GEOGRAPHICAL
                                                                         Total
                                              RSA         Foreign       group
INCOME STATEMENT
Revenue                           2007      4 126            261        4 387
                                  2006      3 737            264        4 001
                                 % v LY      10,4            (1,1)         9,6
Credit revenue                    2007      2 927            189        3 116
                                  2006      2 697            209        2 906
                                 % v LY        8,5           (9,6)         7,2
Cash revenue                      2007      1 199             72        1 271
                                  2006      1 040             55        1 095
                                 % v LY      15,3            30,9        16,1
Cash revenue (%)                  2007       29,1            27,6        29,0
                                  2006       27,8            20,8        27,4
                                   v LY        1,3            6,8          1,6
Sale of merchandise               2007      2 666            190        2 856
                                  2006      2 523            152        2 675
                                 % v LY        5,7           25,0          6,8
Operating profit/(loss)           2007        824             29          853
                                  2006        690             37          727
                                 % v LY      19,4           (21,6)       17,3
Operating margin (%)              2007       20,0            11,1        19,4
                                  2006       18,5            14,0        18,2
                                   v LY        1,5           (2,9)         1,2
Depreciation                      2007         44               3          47
                                  2006         38               4          42
                                 % v LY      15,8           (25,0)       11,9
BALANCE SHEET
Assets                            2007      7 545             560       8 105
                                  2006      7 396             544       7 940
                                 % v LY        2,0             2,9         2,1
Liabilities                       2007     (2 655)           (278)     (2 933)
                                  2006     (2 881)           (297)     (3 178)
                                 % v LY       (7,8)           (6,4)       (7,7)
Net assets                        2007      4 890             282       5 172
                                  2006      4 515             247       4 762
                                 % v LY        8,3           14,2          8,6
Cost to acquire assets            2007         61                1         62
                                  2006         71                6         77
                                 % v LY      (14,1)         (83,3)       (19,5)
RESOURCES
Number of outlets                 2007      1 178             115       1 293
                                  2006      1 129             123       1 252
                                 % v LY        4,3            (6,5)        3,3
Number of employees               2007     15 647           1 529      17 176
                                  2006     15 294           1 663      16 957
                                 % v LY        2,3            (8,1)        1,3
Retail m2                         2007    789 299          66 247     855 546
                                  2006    756 306          78 698     835 004
                                 % v LY        4,4           (15,8)        2,5




                                                                            67
SEGMENTAL ANALYSIS (continued)
                                                                                  GEOGRAPHICAL
                                                                                                          Total
                                                                          RSA          Foreign           group
PRODUCTIVITY RATIOS
Merchandise sales: revenue                             2007             64,6              72,8            65,1
                                                       2006             67,5              57,6            66,9
                                                        v LY             (2,9)            15,2             (1,8)
Revenue per outlet (R’000)                             2007            3 503            2 270            3 393
                                                       2006            3 310            2 146            3 196
                                                      % v LY              5,8              5,8              6,2
Revenue per employee (Rand)                            2007          263 693          170 700          255 415
                                                       2006          244 344          158 749          235 950
                                                      % v LY              7,9              7,5              8,3
Operating profit per employee (Rand)                   2007           52 662           18 967           49 662
                                                       2006           45 116           22 249           42 873
                                                      % v LY            16,7             (14,8)           15,8
Revenue per m2 (Rand)                                  2007            5 227            3 940            5 128
                                                       2006            4 941            3 355            4 792
                                                      % v LY              5,8             17,4              7,0
m2 per outlet                                          2007              670              576              662
                                                       2006              670              640              667
                                                      % v LY                             (10,0)            (0,7)
TRADE RECEIVABLES
Gross receivables                                      2007             6 455             590             7 045
                                                       2006             5 639             538             6 177
                                                      % v LY             14,5              9,7             14,1
Debtors costs                                          2007               261              20               281
                                                       2006               199              11               210
                                                      % v LY             31,2             81,8             33,8
Debtors cost (%)                                       2007                4,0             3,4               4,0
                                                       2006                3,5             2,0               3,4
                                                        v LY               0,5             1,4               0,6
Average length of book in months                       2007              15,6             15,9             15,6
                                                       2006              14,9             15,9             14,9
                                                        v LY               0,7                               0,7
Arrears                                                2007               972             130             1 102
                                                       2006               685             109               794
                                                      % v LY             41,9             19,3             38,8
Arrears (%)                                            2007              15,1             22,0             15,6
                                                       2006              12,1             20,3             12,9
                                                        v LY               3,0             1,7               2,7
Collection rate (%)                                    2007                6,4             6,3               6,4
                                                       2006                6,7             6,3               6,7
                                                        v LY              (0,3)                             (0,3)
Deposit rate (%)                                       2007              14,9             24,7             16,6
                                                       2006              13,9             22,1             16,4
                                                        v LY                1,0            2,6               0,2
*During 2007, the basis of allocating central Corporate service department costs to the Traditional Retailing and
 Wetherleys divisions were changed. Comparatives have been restated accordingly.




68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                                                             6 months to        12 months to
                                                                     February       February          August
                                                                        2007             2006          2006
                                                                     R’million      R’million       R’million
1.   BASIS OF PREPARATION
     These summarised consolidated interim financial statements
     have been prepared using accounting policies compliant
     with International Financial Reporting Standards (“IFRS”)
     and in accordance with IAS 34 (Interim Financial Reporting).
     The accounting policies used are consistent with those used
     for the 2006 annual financial statements, which were prepared
     in accordance with IFRS.

2.   REVENUE
     Sale of merchandise                                                2 856          2 675           4 963
     Other operating revenue                                            1 471          1 278           2 523

      Finance charges                                                    591             501           1 043
      Financial services                                                 657             588           1 103

      Net insurance income                                               614             550           1 020

       Gross insurance income                                           1 109            983           1 777
       Reinsurance premium                                               (495)          (433)           (757)

      Short-term loan income                                              43              38              83

      Rendering of services                                              223             189             377

     Dividends and interest received                                      60              48              93
     Total revenue                                                      4 387          4 001           7 579

3.   EARNINGS PER SHARE
     Reconciliation between profit attributable to ordinary
     shareholders to headline earnings:
     Profit attributable to ordinary shareholders                        589             515             894
     Net profit on disposal of vehicles and equipment                     (1)
     Adjustment to fair value of investment properties                                                     (1)
     Impairment of trademarks                                               1
     Headline earnings                                                   589             515             893
     Number of ordinary shares
     Outstanding                                               117 709 447       120 157 907     121 018 826

     Shares in issue                                           123 997 044       122 887 075     123 997 044
     Shares held as treasury shares                             (6 287 597)       (2 729 168)     (2 978 218)

     Weighted average                                          119 249 033       119 907 734     120 305 470

     Shares in issue                                           123 997 044       122 887 075     123 236 770
     Shares held as treasury shares                             (4 748 011)       (2 979 341)     (2 931 300)

     Fully diluted weighted average                            120 309 323       121 748 465     122 087 297




                                                                                                                 69
                                                                    6 months to         12 months to
                                                             February       February          August
                                                               2007             2006           2006
                                                             R’million     R’million        R’million
4.   TRADE AND OTHER RECEIVABLES
     Net instalment sale debtors                              3 010           3 168            2 894
     Gross instalment sale debtors                            4 217           4 373            4 012
      Payable within one year                                 3 110           3 235            2 999
      Payable thereafter                                      1 107           1 138            1 013
     Provisions                                              (1 207)          (1 205)         (1 118)
      Allowance for doubtful debts                            (442)            (383)            (370)
      Provision for unearned finance charges and club fees    (516)            (511)            (463)
      Net provision for unearned premiums                     (249)            (311)            (285)
       Gross provision for unearned premiums                  (710)            (607)            (679)
       Reinsurance portion for unearned premiums               461              296              394


     Net term loan debtors                                    1 945           1 221            1 404
     Gross term loan debtors                                  2 730           1 723            1 942
      Payable within one year                                 1 892           1 088            1 311
      Payable thereafter                                       838              635              631
     Provisions                                               (785)            (502)            (538)
      Allowance for doubtful debts                            (205)            (115)            (132)
      Provision for unearned finance charges and club fees    (440)            (284)            (305)
      Net provision for unearned premiums                     (140)            (103)            (101)
       Gross provision for unearned premiums                  (502)            (306)            (349)
       Reinsurance portion for unearned premiums               362              203              248


     Net short-term loans                                       48               38               39
     Payable within one year                                    98                81              88
     Provisions                                                (50)              (43)            (49)

      Allowance for doubtful debts                             (18)              (12)            (16)
      Provision for unearned finance charges                   (32)              (25)            (28)
      Net provision for unearned premiums                                         (6)             (5)


     Other                                                     136              125              120
     Total trade and other receivables                        5 139           4 552            4 457
     Trade receivables comprising:
      Net trade debtors                                       5 003           4 427            4 337
      Gross trade debtors                                     7 045           6 177            6 042
       Payable within one year                                5 100           4 404            4 398
       Payable thereafter                                     1 945           1 773            1 644
     Provisions                                              (2 042)          (1 750)         (1 705)
      Allowance for doubtful debts                            (665)            (510)            (518)
      Provision for unearned finance charges and club fees    (988)            (820)            (796)
      Net provision for unearned premiums                     (389)            (420)            (391)




70
                                                                      6 months to          12 months to
                                                               February        February          August
                                                                  2007            2006            2006
                                                               R’million       R’million       R’million
5.   RECONCILIATION OF PROFIT
     BEFORE TAXATION TO CASH GENERATED FROM
     OPERATING ACTIVITIES
     Profit before taxation                                    835              725            1 267
     Depreciation and amortisation                             47                47               92
     Other adjustments                                          8               (17)             (14)
     Increase in provisions                                    333              323              283

      Debtors allowances and provisions                        337              334              289
      Creditor provisions                                      (4)              (11)              (6)

     Insurance investment income                               (37)              (30)             (62)
     Net finance costs                                          54                37               79

     Total cash generated from operating activities            1 240          1 085            1 645

6.   COMMITMENTS
     Estimated future rental of premises and trading stores,
     vehicles and other                                        1 295          1 033            1 188

      Payable within one year                                  411              357              392
      Payable within two to five years                         830              652              766
      Payable thereafter                                       54                24               30

     Total capital expenditure                                  93               84              138

      Contracted for                                            17               16               14
      Not yet contracted for                                    76               68              124

     Total commitments                                         1 388          1 117            1 326




                                                                                                         71
                                                                                                                         Annexure III


HISTORICAL FINANCIAL INFORMATION ON ABIL


The historical financial information of ABIL, as extracted from the audited annual financial statements, for the years ended
30 September 2003, 30 September 2004, 30 September 2005 and 30 September 2006 are set out below. The annual
financial statements have been audited by Deloitte & Touche and received an unqualified opinion for these years:
BALANCE SHEETS
                                                                    2006                  2005                 2004*         2003*
                                                                 R’million             R’million            R’million     R’million
ASSETS
Property and equipment                                                  116                  112                  140          194
Investment in associate                                                                       11                   10            9
Policyholders’ investments                                               87                   63                   50           54
Goodwill                                                                                                           14           20
Deferred tax asset                                                     153                    93                   36           59
Net advances                                                         6 064                 5 282                4 472        4 400
     Gross advances                                                  7 727                 6 454                6 129        6 314
     Deferred administration fees                                     (228)                  (55)
     Impairment provisions                                          (1 435)               (1 117)              (1 657)       (1 914)
Other assets                                                            12                    63                  174          110
Taxation                                                                 7                    21                    6            5
Statutory assets – bank and insurance                                  472                   517                  490          479
Short-term deposits and cash                                         1 252                 1 147                1 944        1 149
Total assets                                                         8 163                 7 309                7 335        6 478

LIABILITIES AND EQUITY
Life fund reserve                                                      103                    95                   79            80
Subordinated debentures                                                202                   197                  193
Bonds and other long-term funding                                    3 579                 3 256                3 524        2 251
Short-term money market funding                                      1 085                   633                  544          884
Other liabilities                                                      395                   426                  156          173
Deferred tax liability                                                                                             12           11
Bank overdraft                                                                                                      4
Taxation                                                                109                    87                 183            95
Total liabilities                                                    5 473                 4 694                4 695        3 495
Share capital                                                           12                    12                   12           12
Reserves                                                             2 195                 2 110                2 629        2 776
Ordinary shareholders’ equity                                        2 207                 2 122                2 641        2 778
Preference shareholders’ equity                                        483                   483                               190
Minority shareholders’ interest                                                               10                                 5
Total equity – capital and reserves                                  2 690                 2 615                2 641        2 982
Total liabilities and equity                                         8 163                 7 309                7 335        6 478
Net asset value per share (cents)                                     444,1                428,6                 559,1        588,1
Tangible net asset value per share (cents)                            444,1                428,6                 556,9        581,6
* Prepared in terms of South African Generally Accepted Accounting Practice (“GAAP”) and therefore not IFRS compliant.




72
INCOME STATEMENTS
                                                                    2006         2005        2004*       2003*
                                                                 R’million    R’million   R’million   R’million
Revenue
Interest income on advances                                          2 974       2 752       2 490       2 296
Net assurance income                                                   424         357         291         247
Non-interest income                                                    446         274         294         323
Total revenue                                                        3 844       3 383      3 075       2 866
Charge for bad and doubtful advances                                  (606)       (488)      (484)       (445)
Risk-adjusted revenue                                                3 238       2 895      2 591        2 421
Other interest income                                                  113         156        118          143
Interest expense                                                      (465)       (492)      (453)        (464)
Operating costs                                                     (1 048)       (951)      (946)      (1 036)
Indirect taxation: VAT and RSC                                         (46)        (50)       (69)
Net income from operations                                           1 792       1 558      1 241       1 064
Profit on sale of CVF and other
capital items                                                            37                                  2
Share of associate company’s income                                                  1           1
Net income before taxation                                           1 829       1 559      1 242       1 066
Direct taxation: STC                                                  (118)       (140)      (100)        (85)
Direct taxation: SA normal                                            (535)       (476)      (387)       (314)
Net income after tax                                                 1 176         943        755         667
Minorities                                                                                                 (7)
Attributable earnings                                                1 176         943        755         660
Attributable earnings to:                                            1 176         943        755         660
   Preference shareholders                                              36           8
   Ordinary shareholders                                             1 140         935        755         660
Per share statistics
Attributable earnings per share (cents)                              229,5       198,7       160,3       136,2
Fully diluted attributable earnings
per share (cents)                                                    229,3       197,9       154,5       135,6
Number of shares in issue (net of
treasury shares) (million)                                           496,9       495,1       472,3       474,2
Weighted number of shares in issue
(million)                                                            496,7       470,6       471,6        484
Fully diluted number of shares in issue
(million)                                                            497,2       472,4       489,4        487
Dividends per ordinary share (cents)
   Interim – paid                                                       80          52          35          25
   Final – declared                                                    120          70          57          31
Total ordinary dividends                                               200         122          92          56
   Special – paid                                                                   70
   Special – declared                                                               30          53        100
Total ordinary and special dividends                                   200         222        145         156
* Prepared in terms of South African GAAP and therefore not IFRS compliant.




                                                                                                             73
STATEMENTS OF CHANGES IN EQUITY
                                                                                          Preference
                                Ordinary                            IFRS 2                      share
                                   share    Distributable          reserve    Treasury    capital and
                                  capital        reserves   (distributable)     shares      premium        Total
                                R’million       R’million        R’million    R’million     R’million   R’million
Balance at
30 September 2003                     12           2 925                          (149)                    2 788
Dividends paid                                      (788)                                                   (788)
ABIL share trust transactions                                                      (31)                      (31)
Loss incurred on ABIL
share trust                                          (71)                                                    (71)
Cancellation of treasury
shares held by subsidiary             (1)           (124)                          125
CGT on cancellation of
treasury shares held by
subsidiary                                           (14)                                                    (14)
Attributable earnings                                742               14                                    756
Balance at
30 September 2004                     11           2 670               14          (55)                    2 640
Issue of shares                        1                                                         500         501
Share issue expenses                                                                             (17)        (17)
Dividends paid                                    (1 107)                                         (8)     (1 115)
Shares purchased into the
ABIL Employee Share Trust
less shares issued to
employees (cost)                                                                    13                        13
Loss incurred on group
employees acquiring
ABIL Share Trust shares less
dividends received                                  (248)                                                   (248)
Treasury shares acquired by
subsidiary less dividends
received                                               2                           (23)                      (21)
Attributable earnings                                935                                           8         943
IFRS 2 adjustments (employee
share options)                                                        (91)                                   (91)




74
STATEMENTS OF CHANGES IN EQUITY (continued)
                                                                                                         Preference
                                    Ordinary                                    IFRS 2                         share
                                       share       Distributable               reserve     Treasury      capital and
                                      capital           reserves        (distributable)      shares        premium         Total
                                    R’million          R’million             R’million     R’million       R’million    R’million
Balance at
30 September 2005                           12               2 252                (77)            (65)          483        2 605
IFRS (IAS 18) adjustment to
current year opening
distributable reserves
(administration fees)                                           (64)                                                         (64)
IFRS (IAS 39) adjustment to
current year opening
distributable reserves/
(impairments)                                                   (58)                                                         (58)
Cancellation of shares as a
result of odd-lot offer                                        (14)                                                          (14)
Dividends paid                                                (897)                                             (36)        (933)
Shares purchased into the
ABIL Employee Share Trust
less shares issued to
employees (cost)                                                                                  41                          41
Loss incurred on group
employees acquiring ABIL
Share Trust shares less dividends
received                                                        (14)                                                         (14)
IFRS 2 reserve transactions
(employee share options)                                                          (49)                                       (49)
Attributable earnings                                        1 140                                                 36      1 176
Balance at 30 September 2006                12               2 345               (126)            (24)          483        2 690

CASH FLOW STATEMENTS
                                                                    2006              2005                  2004*          2003*
                                                                 R’million         R’million             R’million      R’million
Cash generated from operations                                        2 733            2 382                1 973         1 667
Increase in gross advances                                           (1 987)          (1 367)                (662)          (22)
(Increase)/Decrease in working capital                                 (108)             274                  (89)         (474)
Indirect and direct taxation paid                                      (638)            (738)                (445)         (504)
Ordinary shareholders’ payments and transactions                       (897)          (1 127)                (904)         (303)
Preference shareholders’ payments and transactions                      (36)             475
Cash outflow from equity accounted incentive
transactions                                                            (1)               (297)
Cash inflow/(outflow) from investing activities                        127                (208)               16            (12)
Cash inflow/(outflow) from financing activities                        780                (175)              936            179
(Decrease)/Increase in cash and cash equivalents                       (27)            (781)                 825            530
Cash and cash equivalents at beginning of year                       1 390            2 171                1 346            816
Cash and cash equivalents at end of year                             1 363            1 390                2 171          1 346
* Prepared in terms of South African GAAP and therefore not IFRS compliant.




                                                                                                                               75
1.   PRINCIPAL ACCOUNTING POLICIES
     The principal accounting policies applied in the presentation of the annual financial statements are set out below
     and have been applied consistently by all the group entities.

     1.1    Underlying assumptions
            The group annual financial statements are prepared as a going concern using accrual accounting.
            The historical cost basis is followed, except for certain financial assets and liabilities that are measured
            on a fair value basis, in terms of IAS 39 – Financial Instruments: Recognition and Measurement. Under accrual
            accounting the effects of transactions and other events are Recognised when they occur and are recorded
            in the accounting records of the periods to which they relate. The going-concern basis assumes that the
            group is a going concern and will continue in operation for the foreseeable future.

     1.2    Basis of presentation
            The group consolidated annual financial statements have been prepared in accordance with International
            Financial Reporting Standards (“IFRS”) adopted by the International Accounting Standards Board (IASB) and
            interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB,
            and the requirements of the South African Companies Act. These are the group’s first consolidated annual
            financial statements prepared in accordance with IFRS. In prior years the group prepared its consolidated
            financial statements in accordance with South African Statements of Generally Accepted Accounting Practice
            (SA GAAP).
            The accounting policies of the group are consistent with those adopted in the previous year, except
            for changes made as a result of the adoption of IFRS. The group has restated its opening balances at
            1 October 2004 except where the group elected to apply certain IFRS with effect from 1 October 2005,
            as allowed under the transitional arrangements as set out in IFRS 1.

     1.3    Transition to IFRS
            In order to achieve a smooth and consistent adoption of IFRS by companies, IFRS 1 sets out the requirements
            for transition to IFRS. This statement requires a full retrospective restatement of the impact of the change
            to IFRS back to the transition date balance sheet, and also allows certain exemptions and elections during
            the transition period. The standard sets out disclosure requirements for the effects of the changes to IFRS.
            As the group publishes comparative information for one year in its financial statements, the date for
            transition to IFRS is 1 October 2004, which represents the start of the earliest period of comparative
            information presented.
            The group has made certain elections to avoid making changes to the prior year reported results, unless
            such changes would materially affect the comparison with the current year’s performance and make such
            comparisons more meaningful. In most cases, the changes under IFRS result in a once-off adjustment (not
            taken through the income statement) and the year-on-year income statement remains fairly constant.
            Primarily the elections allow a company to choose in certain cases whether to apply changes retrospectively
            or prospectively.
            Retrospective application means that the new IFRS must be applied back to the transition date balance sheet
            ie 1 October 2004, and the income statements restated for all periods since that date.
            Prospective application means that the IFRS is applied in the current year of adoption ie from 1 October 2005,
            and that an adjustment for the effect of the changes on 1 October 2005 is reflected as an entry in the
            statement of changes in equity on that date. Thereafter the income statement reflects the impact of the new
            standard.
            Under IFRS 1 the group has made the following elections with regard to the application of IFRS during the
            transition period:
           • IFRS 2 – Share-based Payment (retrospective adoption)
             The group has elected not to apply the provisions of IFRS 2 to share-based awards, relating to employee
             incentive schemes, granted on or before 7 November 2002 or to awards granted after that date but which
             had vested prior to 1 January 2005. The economic cost of these options primarily relates to periods prior
             to stated comparatives and therefore has little relevance to the current periods under review. With regard
             to the BEE programme, which entailed the issue of ABIL shares in September 2005, at par value, ABIL has


76
     elected not to account for this transaction under IFRS 2, as the implementation date of a new
     interpretation, IFRIC 8 – Scope of IFRS 2, which scopes such transactions into IFRS 2, is only effective for
     financial periods beginning on or after 1 May 2006.
•    IFRS 3 – Business Combinations
     The group has elected not to retrospectively apply the requirements of IFRS 3 for business combinations
     that occurred prior to 1 October 2004, and hence the carrying value of goodwill at 30 September 2004
     remains unchanged.
•    IFRS 4 – Insurance Contracts (prospective adoption)
     This standard has been adopted prospectively from 1 October 2005, with no restatement of 2005
     comparative numbers. The impact of the change was not material.
•    IAS 16 – Property, Plant and Equipment
     The group has elected not to use the fair value of owner-occupied property as the deemed cost
     at 1 October 2004. Thus the group will continue to use the original cost of these assets, and to depreciate
     the assets in accordance with IAS 16. The impact of this election was immaterial to the group’s results.
•    IAS 18 – Revenue (prospective adoption)
     The group has elected to apply the provisions of IAS 18 with regard to the deferred recognition
     of administration fees prospectively from 1 October 2005. This is consistent with the prospective
     application of IAS 39 below. The impact of the change to IAS 18 has been made by way of an adjustment
     to opening reserves on 1 October 2005.
•    IAS 32 – Financial Instruments: Presentation and IAS 39 – Financial Instruments: Recognition and
     Measurement (prospective adoption)
     The group has elected to apply the effects of both IAS 32 and IAS 39 prospectively from 1 October 2005,
     with no restatement of comparative numbers for the 2005 financial year. The impact of the change to
     IAS 39 has been made by way of an adjustment to opening reserves on 1 October 2005.

    1.3.1   Primary differences in the accounting policies as a result of the transition from SA GAAP to IFRS:
            SA GAAP                                             IFRS
            Impairment for credit losses
            AC 133 – Financial Instruments: Recognition         IAS 39 – Financial Instruments: Recognition
            and Measurement                                     and Measurement
            Impairment for credit losses on loans and           Impairment for credit losses on loans and
            advances was based on an expected loss model.       advances is now based on an incurred loss
            rate less the credit spread priced into the         model. Thus loans and advances that do not
            In addition, expected future cash flows were        display objective evidence of impairment, even
            discounted using the original effective interest    though there is a future likelihood of this
            rate less the credit spread priced into the         occurring, are not considered impaired.
            contract.                                           In addition, the estimated future cash flows for
                                                                loans and advances considered to be impaired
                                                                are discounted using the original effective
                                                                interest rate inherent in the loan, without an
                                                                adjustment for the credit spread.
            Income recognition for administration fees
            AC 111 – Revenue                                    IAS 18 – Revenue
            Origination fees charged on loans granted, were     Origination fees are considered to be an integral
            recognised upfront only to the extent that they     part of the loan agreement and accordingly are
            recovered the direct costs of loan origination,     amortised to the income statement over the
            with the balance of the origination fees being      term of the contract, using the effective
            amortised over the contractual life of the loan     interest rate method.
            on a straight-line basis.                           The effect of this is to convert the origination
                                                                fee for accounting purposes into an additional
                                                                interest charge, which equates to the net
                                                                present value of the origination fee charged.




                                                                                                                 77
                   SA GAAP                                              IFRS
                   Share-based payments                                 IFRS 2 – Share-based payment
                   No specific GAAP statement                           Share-based payments in the form of equity-
                   Share-based payments in the form of share            settled instruments, result in a charge to the
                   options issued to employees under the previous       income statement, recognised over the
                   long-term incentive schemes were accounted           expected vesting period and based on the fair
                   for as equity transactions within the statement      value of the instrument measured at the grant
                   of changes in equity.                                date. In the case of a cash-settled instrument,
                                                                        the charge to the income statement is the same
                                                                        as above, except that the change in the fair
                                                                        value of the instrument at each reporting date
                                                                        is also recognised in the income statement.

     1.4   Use of estimates, judgements and assumptions
           In preparing the consolidated financial statements, management is required to make estimates and
           assumptions that affect reported income, expenses, assets and liabilities and disclosure of contingent assets
           and liabilities.
           Estimates and judgements made predominantly relate to impairment provisions for loans and advances), and
           residual values, useful lives and depreciation methods for property and equipment. Other judgements made
           relate to classifying financial assets and liabilities into their relevant categories.
           A change in accounting estimate is defined as an adjustment to the carrying value of an asset, liability or the
           amount of the periodic consumption of an asset that results from new information or new developments.
           Changes in accounting estimates are recognised in the income statement during the period in which the
           change is made.

     1.5   Comparative figures
           Where necessary, comparative figures have been reclassified to conform with changes in presentation in the
           current year and for changes relating to the implementation of IFRS.

     1.6   Assets and liabilities
           An asset is a resource controlled by the group as a result of past events and from which future economic
           benefits are expected to flow to the group.
           A liability is a present obligation of the group arising from past events, the settlement of which is expected
           to result in an outflow from the group’s resources embodying economic benefits.

           1.6.1   Recognition of assets and liabilities
                   Assets are only recognised if they meet the definition of an asset, it is probable that future economic
                   benefits will flow to the group and the asset has a cost or value that can be measured reliably.
                   Liabilities are only recognised if they meet the definition of a liability, it is probable that an
                   outflow of resources embodying economic benefits will result from the settlement of the obligation
                   and the amount at which the settlement will take place can be measured reliably.

           1.6.2   Derecognition of assets and liabilities
                   Assets are derecognised when the contractual right to receive cash flows has been transferred or has
                   expired, or when substantially all the risks and rewards of ownership have passed, on disposal or when
                   no future economic benefits are expected from their use.
                   Liabilities are derecognised when the relevant obligation has either been discharged or cancelled
                   or has expired.

     1.7   Consolidation
           1.7.1   Basis of consolidation
                   The group consolidated annual financial statements incorporate the annual financial statements
                   of the company, its subsidiaries and the ABIL Employee Share Trust. For this purpose, subsidiaries are


78
        companies over which the group, either directly or indirectly, has the power to govern the financial
        and operating policies so as to obtain the benefits from their activities.
        The operating results of the subsidiaries are included from the effective dates control is acquired
        and up to the effective dates of disposal. Intercompany transactions and balances are eliminated
        on consolidation.
        Premiums or discounts arising on the acquisition of subsidiaries are treated in terms of the group’s
        accounting policy for goodwill.
        Eyomhlaba Investment Holdings Limited and the ABIL Development Trust, both special purpose
        vehicles created to facilitate ABIL’s black empowerment programme, are not consolidated into the
        ABIL group, due to the fact that ABIL has no control over the entities, nor does it have an interest
        in the economic risks and rewards associated with the entities.
        In the holding company financial statements, investment in subsidiaries and associates are accounted
        for at cost. The carrying amounts of these investments are reviewed annually and written down for
        impairment where considered necessary.

1.7.2   Goodwill
        Goodwill arising on consolidation represents the excess of the cost of acquisition over the group’s
        interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly
        controlled entity at the date of acquisition. The carrying amount of goodwill is reviewed annually,
        or more frequently if events or changes in circumstances indicate that the carrying value may be
        impaired, and written down for permanent impairment where it is considered necessary.
        Negative goodwill, which represents the excess of the group’s interest in the fair value of the
        identifiable assets and liabilities acquired over the cost of acquisition, is recognised immediately
        in profit or loss.
        On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill
        is included in the determination of the profit or loss on disposal.

1.7.3   Joint ventures
        A joint venture is a contractual agreement between the group and another party to undertake an
        economic activity, which is subject to agreed sharing of control, in which the group has a long-term
        interest.
        Investments in joint ventures are accounted for on the proportional consolidation method, whereby
        the group’s proportionate share in assets, liabilities, revenue, expenses and cash flows of the joint
        venture are combined on a line-by-line basis with similar items in the consolidated financial
        statements.
        The proportional share of intragroup transactions and balances is eliminated. The results of the joint
        ventures are included from the effective date of acquisition and up to the effective date of disposal.

1.7.4   Associates
        Associates are those enterprises in which the group holds an equity interest and over which it has the
        ability to exercise significant influence and which are neither subsidiaries nor joint ventures.
        Investments in associated companies are accounted for in the group financial statements using the
        equity method, for the duration that significant influence is exercised by the group.
        Equity accounted income, which is included in the respective carrying values of the investments and
        in the consolidated income statement, represents the group’s proportionate share of the associates’
        attributable income after accounting for dividends paid by those associates.
        Provision is made when there has been an impairment in the carrying value of an interest in an
        associate. Where the equity method results in the group’s proportion of an associate’s losses being
        greater than or equal to the carrying value of the associate, the associate is carried at nil or at a
        nominal amount. Additional losses are only recognised to the extent that the group has incurred
        obligations or made payments on behalf of the associate to satisfy the associate’s obligations.


                                                                                                                79
           1.7.5   Treasury shares
                   Ordinary shares in African Bank Investments Limited held by any subsidiary or the ABIL Employee
                   Share Trust are classified as treasury shares in the statement of changes in equity. Shares repurchased
                   by the issuing company are cancelled.
                   Treasury shares are treated as a deduction from the issued and weighted number of shares in issue
                   and the cost price of the shares is presented as a deduction from equity.
                   Dividends received on treasury shares are eliminated on consolidation.

           1.7.6   Segmental reporting
                   A segment is a distinguishable component of the group engaged in providing products or services
                   within a particular economic environment, which is subject to risks and rewards that are different
                   from those of other segments. The group’s only segmentation is based on the group’s internal
                   reporting format to management.
                   The group operates within a single market segment, namely the underwriting and provision of
                   unsecured credit. Individual business units operating within this segment have been further
                   segmented to highlight the key performance drivers of the business units.
                   Geographical segments are not disclosed, as the group has no operations outside South Africa.

     1.8   Property and equipment
           Property and equipment are tangible items that are held for use in the production or supply of goods
           or services, for rental to others or for administrative purposes and are expected to be used during more than
           one period.
           Owner-occupied property, furniture, computer equipment and software, office equipment and motor
           vehicles are stated at cost less accumulated depreciation and impairments.
           The group does not hold any investment properties.
           Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives.
           Useful lives and residual values are assessed on an annual basis. Useful lives are as follows:
           Furniture                                                   Six years
           Computer equipment and software                             Three years
           Office equipment                                            Three years
           Motor vehicles                                              Four years
           Leasehold improvements                                      Over the shorter of the lease term or its useful life
           Buildings (owner-occupied)                                  Useful life (limited to 50 years)
           Land is not depreciated.
           The carrying amounts of property and equipment are written down to their estimated recoverable amounts,
           where the estimated recoverable amount is lower than the carrying value. Repairs and maintenance are
           charged to the income statement when the expenditure is incurred.

     1.9   Financial instruments
           A financial instrument is defined as a contract that gives rise to a financial asset in one entity and a financial
           liability or equity instrument in another entity. Financial instruments are recognised when the group
           becomes a party to the contractual provisions of the instrument.
           Financial instruments, as reflected on the balance sheet, include all financial assets and financial liabilities
           but exclude investments in subsidiaries (consolidated out), associated companies and joint ventures,
           employee benefit plans, property and equipment, deferred taxation, taxation payable, intangible assets, and
           goodwill.




80
1.9.1   Investments
        Investments are recognised on a trade-date basis and are initially measured at cost, including
        transaction costs.
        At subsequent reporting dates, debt securities that the group has the express intention and ability
        to hold to maturity (held-to-maturity debt securities) are measured at amortised cost, less any
        impairment loss recognised to reflect irrecoverable amounts. The annual amortisation of any discount
        or premium on the acquisition of a held-to-maturity security is aggregated with other investment
        income receivable over the term of the instrument so that the revenue recognised in each period
        represents a constant yield on the investment.
        Investments other than held-to-maturity debt securities are classified as either held-for-trade or
        available-for-sale, and are measured at subsequent reporting dates at fair value. Where securities are
        held for trading purposes, gains and losses arising from changes in fair value are included in profit
        or loss for the period. For available-for-sale investments, gains and losses arising from changes in fair
        value are recognised directly in equity, until the investment is disposed of or is determined to be
        impaired, at which time the cumulative gain or loss previously recognised in equity is included in the
        net profit or loss for the period.

1.9.2   Loans and advances and related impairment provisions
        1.9.2.1 Loans and advances
                 Loans and advances are non-derivative financial assets with fixed or determinable payments
                 that are not quoted in an active market. They arise when the group provides money, goods
                 or services directly to a debtor with no intention to trade the receivable. In the case of the
                 ABIL group, all loans and advances are in the form of personal unsecured loans that are either
                 paid back in fixed equal instalments or are revolving credit facilities.
                 Advances are accounted for at amortised cost using the effective interest rate method.
                 Origination fees that are capitalised to the loan upfront are amortised to the income
                 statement over the contractual life of the loan using the effective interest rate method.
                 Advances, which are deemed uncollectible, are written off against the impairment provision
                 for non-performing loans. Loans previously written off which subsequently become
                 performing are re-incorporated in the advances portfolio. Cash collected on loans previously
                 written off, but which do not qualify for rehabilitation back onto the balance sheet,
                 is recognised in the income statement as bad debts recovered when the cash is received.
                 Loans and advances are disclosed net of deferred administration fees, impairment provisions
                 and credit life insurance reserves.
        1.9.2.2 Impairment provisions
                 The group reviews the carrying amounts of its loans and advances to determine whether
                 there is any indication that those advances have become impaired using objective evidence
                 at a loan level. Where it is not possible to estimate the recoverable amount of an individual
                 advance, the group estimates the recoverable amount on a portfolio basis for a group
                 of similar financial assets.
                 The recoverable amount is the sum of the estimated future cash flows, discounted to their
                 present value using a discount rate that reflects the portfolio of advances’ original effective
                 interest rate. Estimated future cash flows includes cash flows on written off loans that are
                 deemed likely to rehabilitate in the foreseeable future. In circumstances where the original
                 effective interest rate has been varied contractually, the current effective interest rate is
                 used to discount the sum of the estimated future cash flows.
                 If the recoverable amount of the advance is estimated to be less than the carrying amount,
                 the carrying amount of the advance is reduced to its recoverable amount by raising an
                 impairment provision, which is recognised as an expense in the income statement.
                 Where the impairment loss subsequently reverses, the carrying amount of the advance is
                 increased to the revised estimate of its recoverable amount, but so that the increased
                 carrying amount does not exceed the carrying amount that would have been determined
                 had no impairment loss been recognised for the advance in prior years. A reversal of an
                 impairment loss is immediately recognised in the income statement.


                                                                                                              81
                  Credit life insurance reserves are the actuarial reserves held by the group’s insurance company on
                  policies ceded to African Bank Limited by customers as security and which provide additional
                  provision coverage.
                  The impairment provisions raised during the year, less recoveries of advances previously written off,
                  are charged to the income statement.

          1.9.3   Derivative financial instruments and hedge accounting
                  The group uses derivative financial instruments only for the purpose of hedging its exposures
                  to known market risks that will affect the current or future profit and loss of the group, and as a policy
                  will not enter into derivatives for speculative reasons. In this regard, the only derivative financial
                  instruments the group has entered into have been to hedge the market risk associated with the
                  group’s equity-based long-term incentive schemes.
                  In terms of hedge accounting, the derivatives entered into have been in connection with cash flow
                  hedges, which hedge exposure to future variability in cash flows relating to a recognised asset or
                  liability, or a highly probable forecast transaction, and which were designated as such when entered
                  into. As a result the instruments are recorded initially in the balance sheet at cost, and remeasured to
                  fair value at subsequent reporting dates.
                  The group recognises changes in the fair value of any cash flow hedges that are designated as such,
                  and prove to be highly effective, directly in equity. Any ineffective portion of a cash flow hedge is
                  recognised in the income statement for the period.
                  When the hedged item (in ABIL’s case the accrual of the LTIP liability) is recognised, the matched
                  portion of the gain or loss on the hedge, previously taken directly to equity, is released to the income
                  statement. When a hedging instrument is terminated, but the hedged transaction is still expected to
                  occur, the cumulative gains or losses recognised in equity remain in equity and are recognised as
                  above. If the hedged transaction is no longer expected to occur, the cumulative gains or losses
                  recognised in equity are immediately recognised in the income statement.

          1.9.4   Offsetting
                  Financial assets and liabilities are offset and the net amount reported on the balance sheet where,
                  and only where, there is a legally enforceable right to set off the recognised amount and there is an
                  intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.
     1.10 Cash
          1.10.1 Short-term deposits and cash
                  Short-term deposits and cash comprises fixed and notice deposits as well as call and current
                  accounts.
                  For purposes of the balance sheet, South African Reserve Bank cash requirements and prudential liquid
                  assets, together with insurance prudential cash reserves required by the Financial Services Board, are
                  not disclosed as short-term deposits and cash but rather as “statutory assets – bank and insurance”.

          1.10.2 Cash and cash equivalents
                  For the purposes of the cash flow statement, cash and cash equivalents comprise short-term deposits
                  and cash, net of bank overdrafts, and cash reserves held by the insurance company.

     1.11 Life fund reserve
          The group’s statutory actuary, in accordance with the provisions of the Long-term Insurance Act, 1998,
          computes the group’s insurance liabilities under in-force policies annually at the balance sheet date. Claims
          incurred prior to the end of the financial year, but not reported until after that date, are brought into account
          in the valuation of the actuarial liabilities.




82
     The life fund equals the amount of the actuarial valuation of the liability to parties outside the group
     according to the assurance policies and contracts in force at that date.
     Linked endowment products are investment-related products where the risk and reward of the underlying
     investment portfolio accrues directly to the policyholder. Such products, which provide for returns based on
     the change in value of the underlying instruments, are initially recorded at cost. Valuations are adjusted for
     the effects of changes in foreign exchange rates. Actuarial liabilities of the linked endowment products are
     stated at the same value as the underlying supporting investments. There is thus no risk to the group on
     these products, however, the amounts do not qualify for offsetting and are therefore shown at their
     respective gross values.

     1.11.1 Policyholder liabilities
              The insurance liabilities consist of third party policyholders’ liabilities as well as group policyholders’
              liabilities. Group policyholders’ liabilities (which are in the form of credit life reserves) are the
              actuarial reserves held by the group’s insurance company on policies ceded to African Bank Limited
              as security for loans granted. Such reserves are included in impairment provisions and provide
              additional provision coverage.

1.12 Provisions
     Provisions represent liabilities of uncertain timing or amount.
     Provisions are recognised when the group has a present legal or constructive obligation as a result of past
     events, it is probable that an outflow of resources embodying economic benefits will be required to settle
     the obligation and a reliable estimate of the amount of the obligation can be made.
     Provision for leave pay
     Employee benefits in the form of annual leave entitlements are provided for when they accrue
     to employees with reference to services rendered up to the balance sheet date.

1.13 Equity
     Equity is the residual interest in the assets of the group after deducting all liabilities of the group.
     All transactions relating to the acquisition and sale of shares in the company are accounted for in equity.
     Ordinary and preference share capital are separately disclosed on the balance sheet and statement of
     changes in equity.
     1.13.1 Share capital
              Share capital issued by the company is recorded as the proceeds received less the external costs
              directly attributable to the transaction.

     1.13.2 Dividends
              Dividends are recognised in the period in which they are declared. Dividends declared after balance
              sheet date are disclosed in the dividends note.

1.14 Revenue recognition
     Revenue comprises interest income, assurance income and non-interest income.
     1.14.1 Interest income
              Interest income is accrued on a time basis by reference to the principal outstanding and the interest
              rate applicable. Interest accrued but not yet received is included in the assessment for impairment
              provisions. In certain instances where a loan is in arrears for greater than six months, an assessment
              is made regarding the recoverability of the loan and if necessary the accrual of interest is stopped.




                                                                                                                      83
          1.14.2 Assurance income
                 Assurance income consists of premiums received after taking into account any transfers
                 to or from the actuarial life fund and after taking into account any benefits paid to policyholders.
                 Premiums are accounted for when they become due and payable. Premium income is disclosed net
                 of reinsurance premiums. The only reinsurance premiums the group pays are in connection with the
                 Standard Bank joint venture, where the reinsurance premiums are the instrument used to share the
                 underwriting risk in terms of the joint venture.

          1.14.3 Non-interest income
                 Non-interest income consists primarily of administration fees on loans and advances, as well as any
                 other sundry income the group earns. Administration fees charged comprise two components:

                 • Origination fees on loans granted
                     These fees are capitalised into the loan upfront and are primarily based on the cost
                     of granting the loan to the individual. In accordance with IAS 18 – Revenue, these origination fees are
                     considered an integral part of the loan agreement, and accordingly are amortised to the income
                     statement over the contractual life of the loan using the effective interest rate method, with the
                     unamortised portion of the fees recorded in a provision for deferred administration fees. The group
                     does not defer any related operating costs, as these are all internal costs and not directly attributable
                     to individual transactions and as such are primarily absorbed infrastructure costs. The portion of the
                     deferred fees released during each reporting period is disclosed under non-interest income on the face
                     of the income statement, and reflected separately in the notes to the annual financial statements to
                     disclose the amount, which is effectively interest income in terms of IAS 18.

                 • Monthly servicing fees
                     These are fees charged monthly for the cost of maintaining and administering loans granted to
                     clients. These fees are taken directly to the income statement when charged.
     1.15 Taxation

          1.15.1 Indirect taxation
                 Indirect taxes in the form of non-claimable Value-Added Tax (“VAT”) and Regional Services Council
                 levies (“RSC”) are grouped as indirect taxation in the income statement.

          1.15.2 Direct taxation
                 Direct taxation in the income statement consists of income tax inclusive of capital gains tax
                 (currently payable, prior year adjustments and deferred) as well as secondary tax on companies
                 (“STC”) (currently payable and deferred).
                 STC on dividends, net of STC credits earned, is expensed through the income statement
                 in the period in which the dividend paid is accounted for.

                 1.15.2.1 Current taxation
                            Current taxation is the expected taxation payable based on the taxable income, inclusive of
                            capital gains, for the year, using taxation rates enacted or substantially enacted at the
                            balance sheet date, and any adjustment to taxation payable in respect of previous years.
                            Current tax is charged or credited in the income statement, except to the extent that it
                            relates to items charged or credited directly to the statement of changes in equity, in which
                            case the tax is also dealt with in equity.
                            STC that arises from the distribution of dividends is recognised at the same time as the
                            liability to pay the related dividend.




84
           1.15.2.2 Deferred taxation
                    Deferred taxation is provided on temporary differences using the balance sheet liability
                    method. Temporary differences are differences between the carrying amounts of assets and
                    liabilities for financial reporting purposes and their taxation base. The amount of deferred
                    taxation provided is based on taxation rates enacted or substantially enacted at the balance
                    sheet date.
                    Deferred tax is charged or credited in the income statement, except to the extent that it
                    relates to items charged or credited directly to the statement of changes in equity, in which
                    case the deferred tax is also dealt with in equity.
                    The effect on deferred taxation of any changes in taxation rates is recognised in the income
                    statement, except to the extent that it relates to items previously charged or credited
                    directly to equity.
                    Deferred tax liabilities are generally recognised for all taxable temporary differences and
                    deferred tax assets are recognised to the extent that it is probable that taxable income will
                    be available against which deductible temporary differences can be utilised. The carrying
                    amount of deferred tax assets is reviewed at each balance sheet date and reduced to the
                    extent that it is no longer probable that sufficient taxable profit will be available to allow all
                    or part of the deferred tax asset to be recovered.


1.16 Share-based payments

    The only share-based payment transactions that were carried out related to the group’s long-term incentive
    scheme for employees and the issue of new ordinary shares pursuant to the creation of the group’s black
    economic empowerment programme – Eyomhlaba.
    1.16.1 Share-based payments under the group’s long-term incentive programme (“LTIP”) for employees
           The group previously issued options on the ABIL listed ordinary shares as part of its long-term
           incentive programme for employees. In 2005, the issuance of share options was ceased and existing
           options were either converted to a cash-settled alternative or remained in force.
           The group has introduced a new cash-settled share appreciation scheme, to replace the share option
           scheme, in which employees receive units based on an initial value of ABIL listed shares, and receive
           on the maturity date the market value of the units based primarily on the ABIL share price.
           Both these instruments qualify as share-based payments under IFRS 2 – Share-based Payment.
           Both the share options and share appreciation rights instruments have a predetermined vesting
           profile, which results in a lapsing of the instrument if the employee resigns or is dismissed before the
           vesting date. In accordance with IFRS 2, where the equity instruments do not vest until the employee
           has completed a specified period of service, it is assumed that the services rendered by the employee,
           as consideration for those equity instruments, will be received in the future during the vesting period.
           In the case of the share options (equity-settled), the grant date fair value of the share option is
           amortised to the income statement over the vesting period of the instrument. In the case of the share
           appreciation rights scheme, the fair value of the instrument, from period to period, is amortised to
           the income statement over the vesting period of the instrument.

    1.16.2 Measurement of fair value of equity instruments granted
           The equity instruments granted by the group are measured at fair value at measurement date using
           standard option pricing or share appreciation rights valuation models. The valuation technique is
           consistent with generally accepted valuation methodologies for pricing financial instruments and
           incorporates all factors and assumptions that knowledgeable and willing market participants would
           consider in setting the price of the equity instruments.




                                                                                                                   85
          1.16.3 Conversion of equity-settled to a cash-settled instrument
                 Certain equity-settled instruments (share options) were converted into cash-settled instruments
                 during the 2005 financial year. The group recognises as a minimum, a charge for the services received,
                 measured at the grant date fair value of the equity instrument, unless the converted equity
                 instruments do not vest due to a failure to meet a vesting condition.

                 The conversion (modification) was done at the fair value of the equity-settled instrument
                 on the modification date. Since the converted instrument is now a cash-settled instrument, any
                 change in the fair value of the cash-settled instrument since the conversion date is taken through the
                 income statement over the remaining vesting period of the instrument.

          1.16.4 ABIL BEE share ownership programme
                 During 2005, the ABIL group established Eyomhlaba, ABIL’s BEE share ownership programme. While
                 the establishment of the programme involved the issue of new ABIL ordinary shares with no vesting
                 criteria, the group was of the opinion that the transaction fell outside the scope of IFRS 2.
                 Subsequently, IFRIC has issued an interpretation, IFRIC 8 – Scope of IFRS 2, which scopes such
                 transactions into IFRS 2, but is only effective for financial periods beginning on or after 1 May 2006.
                 Accordingly the group has elected not to apply the provisions of IFRIC 8 to these financial statements,
                 and therefore no charge for the shares issued under the BEE programme has been taken to the
                 comparative income statement.

     1.17 Borrowing costs

          Borrowing costs directly attributable to the acquisition of qualifying assets are capitalised as part
          of the costs of those assets and continues up to the date where the assets are substantially ready for their
          intended use. Qualifying assets are those that necessarily take a substantial period of time to prepare for
          their intended use. Details of borrowing costs capitalised (if any) are disclosed in the notes to the annual
          financial statements by asset category.
          All other borrowing costs are recognised as an expense in the income statement in the period
          in which they are incurred.

     1.18 Leased assets

          Leases are classified as finance leases or operating leases at the inception of the lease.
          The group is not party to any finance leases.
          Leased assets are classified as operating leases where the lessor effectively retains the risks and rewards of
          ownership. Obligations incurred under operating leases are charged to the income statement on a straight-
          line basis over the term of the relevant lease and disclosed under operating expenses.

     1.19 Retirement benefits

          Defined contribution plans have been established for eligible employees of the group, with the assets held in
          separate trustee administered funds.
          Contributions in respect of defined-contribution plans are recognised as an expense in profit or loss as
          incurred.

     1.20 Contingent liabilities and commitments

          1.20.1 Contingent liabilities
                 Obligations are classified as contingent liabilities where they are dependent on uncertain future
                 events or the amount of the obligation cannot be measured with sufficient reliability.

          1.20.2 Commitments
                 Items are classified as commitments where the group commits itself to future transactions or the
                 acquisition of assets.



86
                                                                                                              Annexure IV


INTERIM REPORT OF ABIL FOR THE SIX MONTHS ENDED 31 MARCH 2007


UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2007
Features of the results
* Sales of new loans increased by 20%
* Larger loan sizes and longer average terms resulted in advances growth of 29%
* Price reductions resulted in overall yields declining by 5%
* Credit quality and bad debt charge in line with increased risk appetite
* Operating cost control created further operational leverage
* Headline earnings per share up 18% to 114,1 cents
* Interim ordinary dividends up 19% to 95 cents per share


OVERVIEW
ABIL generated headline earnings of R587 million for the first six months of its current financial year (H1 2006:
R498 million), up 18% on the prior year.
Headline earnings per share increased by 18% to 114,1 cents (H1 2006: 96,7 cents), while dividends per ordinary share
increased 19% to 95 cents (H1 2006:
80 cents). Basic earnings of R587 million grew by a lower 10% over the equivalent period, due to the capital profit
realised on the disposal of the Commercial Vehicle Finance division in the first half of 2006. Return on assets remained
constant at 12,7%, while increased gearing from 3,9 to 4,2 times resulted in the return on equity increasing from 49,1%
to 53,8%.
These results were achieved against a backdrop of intensifying credit supply due to increased competitive behaviour.
ABIL’s risk-based segmentation models enabled it to focus growth during this period towards its lower risk clients.
There is some early evidence that the growth in credit supply has started to slowly decelerate which, if sustained,
should bode well for an improving credit environment in the next eighteen months.
Key to this set of results is ABIL’s strategy of increasing volumes while reducing prices and maintaining relatively flat
operating costs. During the current period, gross advances increased by 29% through larger, longer-term and cheaper
loans, while the overall yield on the portfolio fell by 5%. Improved cost efficiency offset this yield decline, while credit
quality remained within expected parameters and funding costs fell further. ABIL has indicated that it will use its high
return on assets and equity to grow the business and strengthen its competitive position. This strategy therefore has
to be tested against the economic value created for shareholders over and beyond the cost of equity. During this
reporting period, economic profit increased by 20% to R417 million.


Operational performance
The drivers of the results for the six months to 31 March 2007 were:
* Advances – Sales increased by 20% to R3,4 billion over the prior period, which, combined with the extension
  of average term from 21 to 27 months, resulted in advances growing by 29% to R9,1 billion (H1 2006: R7,0 billion).
  The growth in advances, driven by the increasing average term, exceeded the growth in sales and this trend
  is expected to continue for the foreseeable future.
  Another result of the increasing term is that, over the past eighteen months, the percentage of loans maturing
  in greater than one year has changed from 21% to 38%.
* Yields – The overall yield on advances at 49,8% (H1 2006: 54,8%) has declined faster than expected as a result
  of the greater and more rapid shift to larger and longer-term loans at lower yields to lower risk clients. Sales volume
  increases from the price reductions have again exceeded expectations. Further price cuts will be effected
  by June 2007.




                                                                                                                         87
* Bad debts – The charge for bad debt increased by R95 million to R396 million or 9,3% of advances (H1 2006: 8,7%),
  and was predominantly driven by higher volumes and an increased risk appetite. NPL coverage was 64,1%.
  Write-offs of R314 million represent 7,4% of average gross advances.
* Operating costs – Expenditure remained flat at R574 million (H1 2006: R578 million,) aided by a lower IFRS 2 charge
  for incentives. This resulted in the cost to advances ratio falling from 16,8% for the prior period to 13,5%. The group
  is confident that it will achieve its full year target of less than 12,5% for this ratio.
* Funding costs – The average cost of funds fell to 9,2% as older more expensive funding matured. The group raised
  R1,7 billion of new wholesale funding during the last six months, of which 82% was for twelve months or longer.
     The above drivers combined to produce a 16% increase in profit from operations from R808 million to R936 million.
* Taxation – The all-in tax rate was 38,7% (H1 2006: 39,2%). In addition to the normal corporate tax rate of 29%,
  R75 million was paid in STC (H1 2006: R65 million). Indirect taxes reduced to R21 million (H1 2006: R28 million),
  as a result of the abolition of RSC levies and a more favourable VAT apportionment ratio.

Credit rating upgrade
Moody’s announced on 25 April 2007 that it raised the long-term national scale credit rating of African Bank from A2.za
to A1.za and has affirmed the short-term rating at Prime –1.za.

Looking ahead
ABIL’s intent is to entrench its position as the market leader in a larger, more competitive and fast changing unsecured
credit market, fuelled by the introduction of the National Credit Act and a growing and transforming economy.
Key to achieving success in this process are the following strategies:
* Driving down overall prices further in order to make the business more competitive and increase the demand for and
  affordability of unsecured credit.
     This is enabled through continued refinement in the underwriting models and risk segmentation, and tight cost
     control.
* Developing an unbeatable client value proposition and re-engineering the business accordingly, to ensure that
  competitive pricing is backed up by excellent service levels, fastest loan approval times and a pervasive distribution
  network.
* Continuing the development and growth of the credit card product in order to take it to scale.
* Increasing the universe of clients that we engage with through improved leverage of our brand and distribution
  footprint, developing more focused products to meet their requirements and innovating new risk models.
* Ensuring our employees have a clear understanding and buy-in to our strategy along with focused training and
  development to raise the level of competencies necessary to achieve this.
* Managing a smooth and efficient transition to the National Credit Act, particularly with regard to the price ceilings,
  the debt mediation processes and the changes to the National Payment System, in order that the opportunities
  created by the Act may be pursued.
     Due to the strong advances growth on the back of the success of the price reduction strategies, ABIL has increased
     its targeted book growth for 2007 from the previously stated range of 18% – 22% to approximately 30%, while
     it also expects that the total yield on advances for the full 2007 year will decline by approximately 5% from the
     previously stated 2% to 4%. ABIL remains on track to achieve the financial targets it set for the 2007 financial year.


CHANGES TO THE BOARD OF DIRECTORS
ABIL announced on 12 March 2007 the appointment of Mutle Mogase as an independent non-executive director
of ABIL and African Bank Limited.


ACCOUNTING POLICIES
These condensed group interim consolidated financial statements have been prepared in accordance with International
Accounting Standard (IAS) 34 and the requirements of the South African Companies Act, Act 61 of 1973,
as amended.
The accounting policies of the group are consistent with those applied in the previous year.


88
DIVIDEND DECLARATION
                                          Ordinary shares                           Preference shares
Share code                                ABL                                       ABLP
ISIN                                      ZAE000030060                              ZAE000065215
Dividend number                           13                                        5
Dividends per share                       95 cents                                  430 cents
Last date to trade cum-                   Friday, 8 June 2007                       Friday, 1 June 2007
dividend
Shares commence trading                   Monday, 11 June 2007                      Monday, 4 June 2007
ex-dividend
Record date                               Friday, 15 June 2007                      Friday, 8 June 2007
Dividend payment date                     Monday, 18 June 2007                      Monday, 11 June 2007
Preference share certificates may not be dematerialised or rematerialised between Monday, 4 June 2007 and Friday,
8 June 2007, both days inclusive Ordinary share certificates may not be dematerialised or rematerialised between
Monday, 11 June 2007 and Friday, 15 June 2007, both days inclusive.


On behalf of the board


Ashley Mabogoane                          Gordon Schachat                           Leon Kirkinis
Chairman                                  Executive deputy chairman                 Chief executive officer


14 May 2007




                                                                                                              89
GROUP INCOME STATEMENT
for the six months ended 31 March 2007
                                                                         Unaudited     Unaudited        Audited
                                                                          6 months      6 months     12 months
                                                                                  to            to            to
                                                                             31 Mar        31 Mar        30 Sep
                                                                   %           2007          2006         2006
                                                               change      R’million     R’million     R’million
Interest income on advances                                       (1)         1 514         1 526         2 974
Net assurance income                                              80            299           166           424
Non-interest income                                               55            307           198           446
Total revenue                                                      12         2 120         1 890         3 844
Charge for bad and doubtful advances                              (32)         (396)         (301)         (606)
Risk-adjusted revenue                                               8         1 724         1 589         3 238
Other interest income                                              29            67            52           113
Interest expense                                                  (15)         (260)         (227)         (465)
Operating costs                                                     1          (574)         (578)       (1 048)
Indirect taxation: VAT and RSC                                     25           (21)          (28)          (46)
Profit from operations                                             16           936           808         1 792
Capital items                                                    (100)                         45            37
Profit before taxation                                             10           936           853         1 829
Direct taxation: STC                                              (15)          (75)          (65)         (118)
Direct taxation: SA normal                                         (9)         (274)         (252)         (535)
Profit for period                                                 10            587           536         1 176
Reconciliation of headline earnings and
per share statistics:
Profit/(Basic earnings)                                           10            587           536         1 176
Adjusted for:
   Capital items                                                  100                         (45)          (37)
   Capital Gains Tax thereon                                     (100)                          7             6
Headline earnings                                                 18            587           498         1 145

Attributable to preference shareholders                           11             20            18            36
Attributable to ordinary shareholders                             18            567           480         1 109

Number of shares in issue million – net of treasury                           497,1        496,8          496,9
Weighted number of million shares in issue                                    497,0        496,5          496,7
Fully diluted number of million shares in issue                               497,4        497,1          497,2
Basic earnings per share cents                                     9          114,1        104,3*         229,5
Fully diluted basic earnings per share cents                       9          114,0        104,2*         229,3
Headline earnings per share cents                                 18          114,1         96,7*         223,3
Fully diluted headline earnings per share cents                   18          114,0         96,6*         223,1
Declared dividends per ordinary share
Ordinary dividends per share
   Interim – declared (cents)                                     19             95            80            80
   Final (cents)                                                                                            120
Total ordinary dividends cents                                    19             95            80           200
* Restated to adjust for the effect of preference dividends.




90
GROUP BALANCE SHEET
at 31 March 2007
                                                  Unaudited    Unaudited     Audited
                                                     31 Mar       31 Mar      30 Sep
                                            %          2007         2006       2006
                                        change     R’million    R’million   R’million
ASSETS
Property and equipment                      24          128          103         116
Policyholders’ investments                 (77)          15           65          87
Deferred tax asset                          15          146          127         153
Net advances                                30        7 220        5 572       6 064

Gross advances                             29         9 060        7 002       7 727
Deferred administration fees               31          (238)        (181)       (228)
Impairment provisions                      28        (1 602)      (1 249)     (1 435)

Other assets                                44           46           32          12
Taxation                                   (29)          10           14           7
Statutory assets – bank and insurance       20          586          489         472
Short-term deposits and cash                          1 312        1 311       1 252
Total assets                               23         9 463        7 713       8 163

LIABILITIES AND EQUITY
Life fund reserve                          (65)          34           96         103
Subordinated debentures                   (100)                      199         202
Bonds and other long-term funding           44        5 315        3 696       3 946
Short-term money market funding             35        1 016          752         718
Other liabilities                          (13)         381          440         395
Taxation                                    46           41           28         109
Total liabilities                          30         6 787        5 211       5 473
Ordinary shareholders’ equity                9        2 193        2 019       2 207
Preference shareholders’ equity                         483          483         483
Total equity – capital and reserves          7        2 676        2 502       2 690
Total liabilities and equity               23         9 463        7 713       8 163




                                                                                   91
GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 March 2007
                                         Ordinary                Preference
                                            share    Reserves         share
                                           capital        and        capital
                                              and    treasury           and
                                         premium       shares     premium         Total
                                         R’million   R’million     R’million   R’million
Balance at 30 September 2005                   12       2 110           483       2 605
IAS 18 adjustment to opening reserves                     (57)                      (57)
IAS 39 adjustment to opening reserves                     (58)                      (58)
Cancellation of shares: odd-lot offer                     (14)                      (14)
Dividends paid                                           (498)          (18)       (516)
Share Trust shares issued to employees                     16                        16
Loss incurred on Share Trust shares                       (15)                      (15)
Treasury shares disposed                                   23                        23
IFRS 2 reserve transactions                               (18)                      (18)
Profit for the period                                     518            18         536
Balance at 31 March 2006                       12       2 007           483       2 502
IAS 18 adjustment to opening reserves                      (7)                       (7)
Dividends paid                                           (399)          (18)       (417)
Share Trust shares issued to employees                      2                         2
Loss incurred on Share Trust shares                         1                         1
IFRS 2 reserve transactions                               (31)                      (31)
Profit for period                                         622            18         640
Balance at 30 September 2006                   12       2 195           483       2 690
Dividends paid                                           (597)          (20)       (617)
Share Trust shares issued to employees                      4                         4
Loss incurred on Share Trust shares                        (1)                       (1)
IFRS 2 reserve transactions                                13                        13
Profit for period                                         567            20         587
Balance at 31 March 2007                       12       2 181           483       2 676




92
GROUP CASH FLOW STATEMENT
for the six months ended 31 March 2007
                                                                     Unaudited     Unaudited        Audited
                                                                      6 months      6 months     12 months
                                                                              to            to            to
                                                                         31 Mar        31 Mar        30 Sep
                                                                           2007          2006         2006
                                                                       R’million     R’million     R’million
Cash generated from operations                                            1 528         1 246         2 733
Increase in gross advances                                               (1 647)       (1 086)       (1 987)
(Increase)/Decrease in working capital                                     (157)            3          (108)
Indirect and direct taxation paid                                          (439)         (364)         (638)
Ordinary shareholders’ payments and transactions                           (597)         (498)         (897)
Preference shareholders’ payments and transactions                          (20)          (18)          (36)
Cash inflow/(outflow) from equity accounted incentive transactions            3            15            (1)
Cash (outflow)/inflow from investing activities                             (72)          212           127
Cash inflow from financing activities                                     1 465           561           780
Increase/(Decrease) in cash and cash equivalents                             64            71           (27)
Cash and cash equivalents at beginning of period                          1 363         1 390         1 390
Cash and cash equivalents at end of period                                1 427         1 461         1 363
Made up as follows:
Short-term deposits and cash                                              1 312         1 311         1 252
Statutory cash reserves – insurance                                         115           150           111
                                                                          1 427         1 461         1 363

ADVANCES ANALYSIS
                                                                             %          As at         As at
                                                                          y-o-y       31 Mar        31 Mar
                                                                        growth          2007          2006
                                                                      R’million     R’million     R’million
Retail                                                                      36          6 587         4 832
Payroll                                                                     (9)           481           531
Credit card                                                               >100            258             0
Mining                                                                      26            838           663
Standard Bank JV                                                            (9)           357           394
Persal                                                                      (7)           180           193
Saambou PLB                                                                 (8)           359           389
Gross advances                                                               29         9 060         7 002

ASSET QUALITY ANALYSIS
at 31 March 2007
                                      31 Mar              %             30 Sep            %         31 Mar
R’million                               2007          change             2006         change          2006
Gross advances
Performing                             6 561              19              5 514             6         5 207
Non-performing                         2 499              13              2 213            23         1 795
Gross advances                         9 060              17              7 727            10         7 002




                                                                                                          93
Share transfer secretaries
Link Market Services SA (Pty) Limited
11 Diagonal Street, Johannesburg, 2001
PO Box 4844, Johannesburg, 2000
Telephone +27 11 834 2266
africanbank@linkmarketservices.co.za

Board of directors
A S Mabogoane (Chairman), G Schachat (Deputy chairman)*, L Kirkinis (CEO)*, A Fourie*, D B Gibbon, B D Goba,
M C Mogase, R Naidoo, T M Sokutu*, B P F Steele, G Z Steffens (German), D F G Tembe (Mozambique), A Tugendhaft,
D F Woollam*
* Executive

Group secretary
S Martin

For a full analysis of the above results including graphs refer to
http://www.africanbank.co.za




94
                                                                                                          Annexure V


SHARE PRICE HISTORY OF ELLERINES AND ABIL SHARES ON THE JSE


Share price history of Ellerines
The highest, lowest and closing price of Ellerines shares on the JSE for each quarter ended 30 September 2005 to
30 June 2006 and the aggregated quarterly volumes are as follows:
                                                           High              Low              Close          Volume
                                                         (cents)           (cents)           (cents)
30/09/2005                                                6 400            4 995             6 311       24 733 756
30/12/2005                                                6 450            5 680             6 201       10 870 439
31/03/2006                                                9 025            6 200             8 500       34 012 599
30/06/2006                                                9 449            5 950             6 550       37 131 949

The highest, lowest and closing price of Ellerines shares on the JSE for each successive month, the first of which ends
on 31 July 2006 and the last of which ends on 31 July 2007 and the aggregated monthly volumes are as follows:

                                                           High              Low              Close          Volume
                                                         (cents)           (cents)           (cents)
31/07/2006                                                7 000            6 050             6 600        9 517 531
31/08/2006                                                7 199            6 240             6 700        7 969 158
29/09/2006                                                6 700            6 101             6 525        7 237 248
31/10/2006                                                7 199            6 300             7 080       13 420 425
30/11/2006                                                7 899            6 831             7 350       16 205 753
29/12/2006                                                7 775            6 927             7 775        8 564 976
31/01/2007                                                8 150            7 514             7 581       10 644 848
28/02/2007                                                8 310            7 400             8 010       15 035 417
30/03/2007                                                8 500            7 750             8 200       16 683 125
30/04/2007                                                9 600            8 150             9 600        8 007 257
31/05/2007                                                9 610            7 801             7 825       42 713 800
29/06/2007                                                8 000            6 520             6 970       16 261 269
31/07/2007                                                7 000            6 050             6 500       17 079 597

The highest, lowest and closing price of Ellerines shares on the JSE for each trading day commencing on 1 August 2007
and terminating on 13 September 2007 and the daily volumes are as follows:

                                                           High              Low              Close          Volume
                                                         (cents)           (cents)           (cents)
01/08/2007                                                6 390            6 110             9 299           452 126
02/08/2007                                                6 405            6 100             6 186           500 442
03/08/2007                                                6 300            6 105             6 300           681 681
06/08/2007                                                6 299            6 101             6 161           227 262
07/08/2007                                                6 245            6 177             6 220           109 591
08/08/2007                                                6 297            6 220             6 270           189 937
10/08/2007                                                6 285            6 105             6 200           268 319
13/08/2007                                                6 296            6 170             6 190           382 492
14/08/2007                                                6 297            6 150             6 200           568 089
15/08/2007                                                6 131            5 823             6 131           350 360
16/08/2007                                                6 010            5 768             5 800           273 473
17/08/2007                                                5 845            5 601             5 800           254 257
20/08/2007                                                6 050            5 849             6 050           213 293
21/08/2007                                                7 540            6 900             7 080         7 148 591
22/08/2007                                                7 350            7 105             7 175         1 774 067
23/08/2007                                                7 440            7 200             7 400         1 011 800



                                                                                                                    95
                                                          High              Low             Close          Volume
                                                        (cents)           (cents)          (cents)
24/08/2007                                               7 410            7 242             7 410        7 007 143
27/08/2007                                               7 480            7 300             7 401          268 086
28/08/2007                                               7 500            7 350             7 365        2 510 807
29/08/2007                                               7 405            7 301             7 370        5 126 406
30/08/2007                                               7 487            7 370             7 425          379 952
31/08/2007                                               7 500            7 425             7 500          473 458
03/09/2007                                               7 700            7 500             7 680          823 729
04/09/2007                                               7 680            7 530             7 590        1 549 775
05/09/2007                                               7 700            7 353             7 600        1 007 536
06/09/2007                                               7 725            7 410             7 445          968 663
07/09/2007                                               7 500            7 272             7 398          968 445
10/09/2007                                               7 450            7 260             7 439          751 109
11/09/2007                                               7 494            7 383             7 401        1 225 096
12/09/2007                                               7 410            7 365             7 399        1 298 611
13/09/2007                                               7 400            7 371             7 399        2 137 269


Share price history of ABIL
The highest, lowest and closing price of ABIL shares on the JSE for each quarter ended 30 September 2005 to 30 June
2006 and the aggregated quarterly volumes are as follows:
                                                          High              Low             Close          Volume
                                                        (cents)           (cents)          (cents)
30/09/2005                                               2 305            1 870             2 125      98 963 006
30/12/2005                                               2 500            1 910             2 450      94 904 364
31/03/2006                                               3 180            2 400             3 012     121 557 758
30/06/2006                                               3 430            2 360             2 799     170 424 693
The highest, lowest and closing price of ABIL shares on the JSE for each successive month, the first of which ends on
31 July 2006 and the last of which ends on 31 July 2007 and the aggregated monthly volumes are as follows:
                                                          High              Low             Close          Volume
                                                        (cents)           (cents)          (cents)
31/07/2006                                               2 990            2 427             2 475      41 391 637
31/08/2006                                               2 579            2 215             2 543      70 607 397
29/09/2006                                               2 592            2 205             2 210      56 672 160
31/10/2006                                               2 770            2 110             2 749      62 394 062
30/11/2006                                               2 987            2 595             2 827      43 333 291
29/12/2006                                               2 969            2 571             2 860      47 063 529
31/01/2007                                               3 095            2 721             2 900      33 298 451
28/02/2007                                               3 061            2 660             2 760      47 495 208
30/03/2007                                               3 047            2 616             3 030      48 972 278
30/04/2007                                               3 510            2 990             3 405      38 009 907
31/05/2007                                               3 495            3 080             3 150      33 203 679
29/06/2007                                               3 370            2 890             2 990      31 982 456
31/07/2007                                               3 437            2 935             3 310      50 504 307




96
The highest, lowest and closing price of ABIL shares on the JSE for each trading day commencing on 1 August 2007 and
terminating on 13 September 2007 and the daily volumes are as follows:
                                                         High              Low             Close          Volume
                                                       (cents)           (cents)          (cents)
01/08/2007                                              3 300             3 200            3 255        3 446 011
02/08/2007                                              3 285             3 150            3 225        2 236 583
03/08/2007                                              3 330             3 132            3 132        2 835 734
06/08/2007                                              3 158             3 100            3 140          917 033
07/08/2007                                              3 219             3 150            3 185          689 060
08/08/2007                                              3 250             3 205            3 230        1 877 657
10/08/2007                                              3 230             3 080            3 080        1 368 911
13/08/2007                                              3 180             3 075            3 121        1 174 774
14/08/2007                                              3 200             3 100            3 100          863 769
15/08/2007                                              3 129             3 015            3 101        1 191 648
16/08/2007                                              3 051             2 902            2 990        2 141 430
17/08/2007                                              3 100             2 862            2 900        3 295 744
20/08/2007                                              3 094             2 951            2 951        1 089 286
21/08/2007                                              3 199             2 850            3 005       16 090 976
22/08/2007                                              3 055             2 970            3 030        5 532 098
23/08/2007                                              3 135             3 075            3 113        3 402 132
24/08/2007                                              3 200             3 051            3 200        3 563 401
27/08/2007                                              3 250             3 120            3 127        1 584 253
28/08/2007                                              3 153             3 125            3 147        3 105 971
29/08/2007                                              3 164             3 101            3 164        2 245 503
30/08/2007                                              3 180             3 106            3 130        1 006 413
31/08/2007                                              3 170             3 140            3 149        2 256 309
03/09/2007                                              3 265             3 148            3 230        3 049 689
04/09/2007                                              3 250             3 199            3 200        1 285 226
05/09/2007                                              3 210             3 136            3 172        1 875 972
06/09/2007                                              3 210             3 100            3 110        3 091 170
07/09/2007                                              3 140             3 069            3 105        2 282 537
10/09/2007                                              3 170             3 055            3 165        3 208 086
11/09/2007                                              3 197             3 125            3 150        4 156 543
12/09/2007                                              3 174             3 114            3 174        2 851 750
13/09/2007                                              3 175             3 144            3 164        1 386 676




                                                                                                                 97
                                                                                                           Annexure VI


OPINION LETTER FROM KPMG CORPORATE FINANCE

“Ellerine Holdings Limited
Block E, Gillooly’s View Office Park
Osborne Lane
Bedfordview
2007

For the attention of the Board of Directors
                                                                                                    12 September 2007

Dear Sirs

REPORT OF THE INDEPENDENT PROFESSIONAL EXPERT TO ELLERINE HOLDINGS LIMITED (“Ellerines”) REGARDING
THE PROPOSED SCHEME OF ARRANGEMENT IN TERMS OF SECTION 311 OF THE COMPANIES ACT, NO. 61 OF 1973,
AS AMENDED (“Companies Act”), PROPOSED BY AFRICAN BANK INVESTMENTS LIMITED (“ABIL”) BETWEEN
ELLERINES AND ITS SHAREHOLDERS

Introduction

In a cautionary announcement released on 20 August 2007 and in the letter of firm intention from ABIL, dated
4 September 2007, Ellerines shareholders were advised that ABIL had made an offer to acquire the entire issued share
capital of Ellerines (other than the excluded shares), to be implemented by way of a scheme of arrangement in terms
of section 311 of the Companies Act.
If the scheme is implemented, scheme participants will receive 255 ABIL shares (265 ABIL shares adjusted for the
BEE reserved shares) for every 100 Ellerines shares held (“the share exchange ratio”) and Ellerines will become a
wholly-owned subsidiary of ABIL or its nominated wholly-owned subsidiary (“the scheme”). Ellerines’ listings on the
JSE Limited, Botswana Stock Exchange and Namibian Stock Exchange will then be terminated.
The scheme will be subject to the fulfilment of the conditions precedent, which include, inter alia, Competition Tribunal
approval of the scheme.
Full details of the terms and conditions of the scheme are contained in the circular to Ellerines shareholders
(“the circular”) to be dated on or about 27 September 2007, which will include a copy of this letter.

Scope
Rule 3.1 of the Securities Regulation Code on Takeovers and Mergers provides that the board of directors of the offeree
company shall obtain appropriate external advice on any offer as to how it affects all holders of securities, including
specifically, where applicable, minority holders of securities.
KPMG Services (Proprietary) Limited (“KPMG”) has been appointed by the board of directors of Ellerines as the
independent professional expert to advise on whether the terms and conditions of the scheme are fair and reasonable
to the shareholders of Ellerines.

Responsibility
The circular and compliance with The Securities Regulation Code are the responsibility of the directors of Ellerines.
Our responsibility is to report on the terms and conditions of the proposed scheme.

Definition of the terms “fair” and “reasonable”
The scheme will generally be considered fair to a company’s shareholders if the benefits received by the shareholders,
as a result of the scheme, are equal to or greater than the value surrendered by the shareholders.


98
The assessment of fairness is primarily based on quantitative issues. The scheme may be considered fair if the value
of the shareholding in ABIL received by an Ellerines shareholder as a result of the scheme is considered to be greater
than or equal to the value of the existing shareholding in Ellerines.
The assessment of reasonableness is generally based on qualitative considerations surrounding the scheme.
Hence, even though the value of the resulting shareholding in ABIL for an Ellerines shareholder as a result of the
scheme may be lower than the value of the existing shares in Ellerines, the entire scheme may still be reasonable
in certain circumstances after considering other significant qualitative factors.

Information and sources of information
In arriving at our opinion, we have relied upon the following principal sources of information:
• Audited annual financial statements of Ellerines for the financial years ended 31 August 2005 and 31 August 2006
   and interim results for the six month period ended 28 February 2007;
• Audited annual financial statements of ABIL for the financial years ended 30 September 2005 and 30 September
   2006 and interim results for the six month period ended 31 March 2007;
• Unaudited management accounts of Ellerines for the ten months ended 30 June 2007 and of ABIL for the nine
   months ended 30 June 2007;
• Forecast of Ellerines for the financial year ending 31 August 2007 and of ABIL for the financial year ending
   30 September 2007, as prepared by the management of Ellerines and ABIL, respectively;
• Budget of Ellerines for the financial year ending 31 August 2008, approved by the Ellerines board in August 2007,
   and of ABIL for the financial year ending 30 September 2008;
• Discussions with the directors of Ellerines and ABIL on:
   – the rationale for the scheme;
   – the actual and perceived benefits to be obtained from the scheme; and
   – prevailing market, economic, legal and other conditions which may affect underlying values;
• Publicly available information relating to Ellerines and ABIL that we deemed to be relevant, including company
   announcements, analysts’ reports, market reports and media articles; and
• The draft circular to Ellerines shareholders to be dated on or about 27 September 2007.

Procedures performed
In arriving at our opinion, we have undertaken the following procedures in evaluating the fairness of the scheme:
• Reviewed the terms and conditions of the scheme;
• Reviewed the audited annual financial statements of Ellerines for the financial years ended 31 August 2005
   and 31 August 2006 and of ABIL for the financial years ended 30 September 2005 and 30 September 2006;
• Reviewed the interim results of Ellerines for the six month period ended 28 February 2007 and of ABIL for the six
   months ended 31 March 2007;
• Reviewed the unaudited management accounts of Ellerines for the ten months ended 30 June 2007 and of ABIL for
   the nine months ended 30 June 2007;
• Held discussions with certain directors and management of Ellerines and ABIL, and considered such other matters
   as we consider necessary, including assessing the prevailing economic and market conditions and trends in the
   furniture retail and financial services sector;
• Reviewed certain publicly available information relating to Ellerines, ABIL and the scheme that we deemed to be
   relevant, including company announcements, analysts’ reports and media articles;
• Considered Ellerines’ and ABIL’s forecast and budgeted financial information as well as the basis of the assumptions
   therein, including the prospects of the business. This review included an assessment of the reasonableness of the
   outlook assumed based on recent historical performance to date as well as discussions with management;
• Compiled high level valuation models of Ellerines and ABIL, based on budgeted financial information and applying
   our projected assumptions based on discussions with management and market/industry information;
• Performed a sensitivity analysis on key assumptions included in the valuation models;
• Evaluated the relative risks and upside benefits associated with Ellerines and ABIL;
• Estimated at a high level, the potential synergies that may accrue as a result of the scheme; and
• Considered the value per Ellerines share before the scheme based on our valuation as compared to our estimate
   of the value of the resulting ABIL shares allocated per the share exchange ratio.


                                                                                                                   99
Key qualitative considerations
In arriving at our valuation, we have also considered the following key qualitative considerations:
• Consideration of the rationale and potential benefits of the scheme as set out in the circular and based on
  discussions with certain Ellerines and ABIL directors;
• Consideration of the fact that an Ellerines shareholder will continue to have exposure to the Ellerines business,
  following the scheme being implemented;
• Consideration of the liquidity of the ABIL shares, following the scheme being implemented, to provide ongoing
  liquidity to current Ellerines shareholders; and
• Our understanding of the extent of the strategic assessment and market interaction undertaken by Ellerines prior
  to, and as part of, the proposed scheme, including interaction with potential strategic partners.


Valuation
KPMG performed valuations of Ellerines and ABIL to determine whether the scheme offer represents fair value to
Ellerines shareholders. In addition, we performed a high level estimate of potential synergies arising from the proposed
scheme. The discounted cash flow methodology and valuation using trading multiples were the primary valuation
methodologies employed.
The valuations were performed taking cognisance of risk and other market and industry factors affecting Ellerines and
ABIL. Additionally, sensitivity analyses were performed considering key assumptions.
Key value drivers to the valuation of Ellerines included the discount rate, operating margins and future growth in the
business. Prevailing market and industry conditions were also considered in assessing the risk profile of Ellerines.
Key value drivers to the valuation of ABIL included the discount rate, future growth of the gross advances book and the
future trend of the cost of credit for ABIL’s customers.
Based on the results of our procedures performed and other considerations, we believe that a fair exchange ratio range
to be between 232 and 270 ABIL shares for every 100 Ellerines’ shares.
The valuation above is provided solely in respect of this opinion and should not be used for any other purpose.
This opinion does not constitute a recommendation to any Ellerines shareholder as how to vote at the scheme meeting
relating to the scheme or on any matters relating to it.


Opinion
KPMG has considered the terms and conditions of the proposed scheme and, based upon and subject to the
conditions set out herein, is of the opinion that the terms and conditions of the scheme are fair and reasonable to the
Ellerine shareholders.
Our opinion is necessarily based upon the information available to us up to 10 September 2007, including in respect
of the financial, regulatory, securities market and other conditions and circumstances existing and disclosed to us at
the date thereof. We have furthermore assumed that all conditions precedent, including any material regulatory, other
approvals and consents required in connection with the proposed scheme, have been fulfilled/obtained.
Accordingly, it should be understood that subsequent developments may affect this opinion, which we are under
no obligation to update, revise or re-affirm.


Limiting conditions
This report and opinion is provided to the board of directors and shareholders of Ellerines in connection with and for
the purposes of the scheme. The opinion does not purport to cater for each individual shareholder’s perspective, but
rather that of the general body of Ellerines shareholders. Should an Ellerines shareholder be in doubt as to what action
to take, he or she should consult an independent advisor.
An individual shareholder’s decision as to whether to vote in favour of the scheme may be influenced by his particular
circumstances. The assessment as to whether or not the directors of Ellerines decide to recommend the scheme is
a decision that can only be taken by the directors of Ellerines.
We have relied upon and assumed the accuracy of the information used by us in deriving our opinion. Where practical,
we have corroborated the reasonableness of the information provided to us for the purpose of our opinion, whether
in writing or obtained in discussion with management of Ellerines and ABIL, by reference to publicly available or


100
independently obtained information. While our work has involved an analysis of, inter alia, the annual financial
statements, and other information provided to us, our engagement does not constitute, nor does it include, an audit
conducted in accordance with generally accepted auditing standards.
Where relevant, forward-looking information on Ellerines and ABIL relates to future events and is based on assumptions
that may or may not remain valid for the whole of the forecast period.
Consequently, such information cannot be relied upon to the same extent as that derived from audited financial
statements for completed accounting periods. We express no opinion as to how closely the actual future results
of Ellerines or ABIL will correspond to those projected. Where practicable, we have compared the forecast financial
information to past trends as well as discussing the assumptions inherent therein with management.
On the basis of these enquiries and such other procedures we consider appropriate to the circumstances, we believe
that the forecasts have been prepared with due care and consideration.
We have also assumed that the scheme will have the legal, accounting and taxation consequences described in
discussions with, and materials furnished to us by, representatives and advisors of Ellerines and ABIL, and we express
no opinion on such consequences. We have assumed that all agreements that will be entered into in the scheme will
be legally enforceable.


Independence
In terms of Schedule 3.3 of The Securities Regulation Code on Take-overs and Mergers, we confirm that we have
no conflict of interest in respect of the scheme. Furthermore, we confirm that our professional fees are not contingent
upon the success of the proposed scheme.


Consent
We consent to the inclusion of this letter and the reference to our opinion in the circular to be issued to the
shareholders of Ellerines in the form and context in which it appears.


Yours faithfully


Neeraj Shah
Director: Corporate Finance


Warren Watkins
Director: Corporate Finance


KPMG Services (Proprietary) Limited
KPMG Crescent
85 Empire Road
Parktown
2193”




                                                                                                                   101
                                                                                                              Annexure VII


SOUTH AFRICAN EXCHANGE CONTROL REGULATIONS


The definitions commencing on page 6 of this document, where required, have been used in this annexure.
The following is a summary of the Exchange Control Regulations insofar as they have application to scheme
participants. In the event of scheme participants having any doubts, they should consult their professional advisors
without delay.


1.    RESIDENTS OF THE COMMON MONETARY AREA
      In the case of certificated scheme participants whose registered addresses in Ellerines’ share register are within
      the common monetary area and whose documents of title are not restrictively endorsed in terms of the Exchange
      Control Regulations, the scheme consideration will be posted or electronically transferred, depending on the
      election of the certificated scheme participant.
      In the case of dematerialised scheme participants whose registered addresses in Ellerines’ share register are within
      the common monetary area in terms of the Exchange Control Regulations, the scheme consideration will be
      credited to their account held at their CSDP or broker.


2.    EMIGRANTS FROM THE COMMON MONETARY AREA
      In the case of scheme participants who are emigrants from the common monetary area, the consideration will:
      – in the case of certificated scheme participants whose documents of title have been restrictively endorsed under
         the South African Exchange Control Regulations, be forwarded to the authorised dealer in foreign exchange
         in South Africa controlling such certificated scheme participants’ blocked assets in terms of the South African
         Exchange Control Regulations. The attached form of surrender and transfer (white) makes provision for details
         of the authorised dealer concerned to be given; or
      – in the case of dematerialised scheme participants, be credited to the bank account of the scheme participants’
         CSDP or broker which shall arrange for the same to be credited directly to the scheme participants’ blocked rand
         bank accounts held by the scheme participants’ authorised dealer and held to the order of the scheme
         participants authorised dealers in foreign exchange in South Africa.

      All other non-residents of the common monetary area
      The scheme consideration accruing to non-resident scheme participants whose registered addresses are outside
      the common monetary area and who are not emigrants from the common monetary area will:
      – in the case of certificated scheme participants, whose documents of title have been restrictively endorsed under
         the South African Exchange Control Regulations, be posted to the registered addresses of the non-resident
         scheme participants concerned, unless written instructions to the contrary are received and an address
         provided, the attached form of surrender and transfer (white) makes provision for a substitute address or bank
         details; or
      – in the case of dematerialised scheme participants, be credited by their duly appointed CSDP or broker directly
         to the accounts nominated by the scheme participants in terms of the provisions of the custody agreement
         with their CSDP or broker.

      Information not provided
      If the information regarding the authorised dealer is not given or instructions are not given as required, the
      consideration will be held by Ellerines or its agent on behalf of Ellerines for the benefit of the certificated scheme
      participants concerned pending receipt of the necessary information or instructions.




102
                                                                                                         Annexure VIII


REPORTING ACCOUNTANTS’ REPORT ON THE PRO FORMA FINANCIAL
EFFECTS


“Ellerine Holdings Limited
Block E, Gillooly’s View Office Park
Osborne Lane
Bedfordview
2007

                                                                                                   12 September 2007

Attention: The Board of Directors


Dear Sirs


REPORT OF THE REPORTING ACCOUNTANTS ON THE PRO FORMA FINANCIAL EFFECTS OF THE TRANSACTION


We have performed our limited assurance engagement in respect of the pro forma financial information set out
in paragraph 4 of the Valuation Statement of the document, excluding the financial information relating to the
market value, 30-day VWAP and the information contained in note 1, to be dated on or about 27 September 2007 (“the
document”) and to be issued in connection with the proposed scheme of arrangement proposed by African
Bank Investments Limited (“ABIL”) between Ellerine Holdings Limited (“Ellerines”) and its shareholders in terms of
which ABIL proposes to acquire the entire issued share capital of Ellerines.
The pro forma financial information has been prepared in accordance with the requirements of the JSE Limited (“JSE”)
Listings Requirements, for illustrative purposes only, to provide information about how the transaction would have
affected an Ellerines shareholder (excluding the excluded shares) for the 12 months ended 31 August 2006.


Directors’ responsibility
The directors are responsible for the compilation, contents and presentation of the pro forma financial information
contained in the document and for the financial information from which it has been prepared. Their responsibility
includes determining that:
– the pro forma financial information has been properly compiled on the basis stated;
– the basis is consistent with the accounting policies;
– the pro forma adjustments are appropriate for the purposes of the pro forma financial information disclosed in terms
  of the JSE Listings Requirements.


Reporting accountants’ responsibility
Our responsibility is to express our limited assurance conclusion on the pro forma financial information included in the
document. We conducted our assurance engagement in accordance with the International Standard on Assurance
Engagements, applicable to Assurance Engagements Other Than Audits or Reviews of Historical Financial Information and
the Guide on Pro Forma Financial Information issued by SAICA.
This standard requires us to obtain sufficient appropriate evidence on which to base our conclusion. We do not accept
any responsibility for any reports previously given by us on any financial information used in the compilation of the
pro forma financial information, beyond that owed to those to whom those reports were addressed by us at the dates
of their issue.


                                                                                                                    103
Sources of information and work performed
Our procedures consisted primarily of:
– comparing the unadjusted financial information with the source documents;
– considering the pro forma adjustments in light of the accounting policies of Ellerines;
– considering the evidence supporting the pro forma adjustments;
– discussing the adjusted pro forma financial information with the directors of the company in respect of the
  corporate actions that are the subject of the document.
In arriving at our conclusion, we have relied upon financial information prepared by the directors of Ellerines and other
information from various public, financial and industry sources.
While our work performed has involved an analysis of the financial information of Ellerines for the period from
1 September 2005 to 31 August 2006 and other information provided to us, our assurance engagement does not
constitute an audit or review of any underlying financial information conducted in accordance with International
Standards on Auditing or International Standards on Review Engagements and accordingly, we do not express an audit
or review opinion. In a limited assurance engagement, the evidence gathering procedures are more limited than
for a reasonable assurance engagement. We believe our evidence obtained is sufficient and appropriate to provide a
basis for our conclusion.


Conclusion
Based on our examination of the evidence obtained, nothing has come to our attention, which causes us to believe that:
– the pro forma financial information has not been properly compiled on the basis stated;
– such a basis is inconsistent with the accounting policies of Ellerines;
– the adjustments are not appropriate for the purposes of the pro forma financial information as disclosed.
We have given and not withdrawn our written consent to the inclusion of this report in the scheme document in the
form and context in which the report appears.


Yours faithfully


GRANT THORNTON
Chartered Accountants (SA)
Registered Auditors

Per Jeanette Hern
Chartered Accountant (SA)
Registered Auditor


137 Daisy Street
Sandown
2196”




104
                                                                                                      Annexure IX


TABLE OF ENTITLEMENT


The following table sets out the number of new ABIL shares to which an Ellerines shareholder is entitled in respect
of that portion of his holding in Ellerines which is not a multiple of 100 ordinary shares (“odd-lot holding”).
                      Entitlement                          Entitlement                           Entitlement
     Odd-lot          to new ABIL          Odd-lot         to new ABIL          Odd-lot          to new ABIL
     holdings            shares            holdings           shares            holdings            shares
         1                 3                 35                  90                69                176
         2                 6                 36                  92                70                179
         3                 8                 37                  95                71                182
         4                11                 38                  97                72                184
         5                13                 39                 100                73                187
         6                16                 40                 102                74                189
         7                18                 41                 105                75                192
         8                21                 42                 108                76                194
         9                23                 43                 110                77                197
        10                26                 44                 113                78                199
        11                29                 45                 115                79                202
        12                31                 46                 118                80                204
        13                34                 47                 120                81                207
        14                36                 48                 123                82                210
        15                39                 49                 125                83                212
        16                41                 50                 128                84                215
        17                44                 51                 131                85                217
        18                46                 52                 133                86                220
        19                49                 53                 136                87                222
        20                51                 54                 138                88                225
        21                54                 55                 141                89                227
        22                57                 56                 143                90                230
        23                59                 57                 146                91                233
        24                62                 58                 148                92                235
        25                64                 59                 151                93                238
        26                67                 60                 153                94                240
        27                69                 61                 156                95                243
        28                72                 62                 159                96                245
        29                74                 63                 161                97                248
        30                77                 64                 164                98                250
        31                80                 65                 166                99                253
        32                82                 66                 169               100                255
        33                85                 67                 171
        34                87                 68                 174




                                                                                                               105
ORDER OF COURT


IN THE HIGH COURT OF SOUTH AFRICA
(WITWATERSRAND LOCAL DIVISION)                                                               Case number: 07/22727
Before the Honourable Justice Lamont
on Tuesday, 25 September 2007
In the ex parte application of:
ELLERINE HOLDINGS LIMITED                                                                    Applicant
(Incorporated in the Republic of South Africa)
(Registration number 1968/013402/06)




Having read the documents filed and having considered the matter:
IT IS ORDERED THAT:
1.    A meeting (“scheme meeting”) in terms of section 311(1) of the Companies Act, 1973 (Act 61 of 1973),
      as amended (“Companies Act”), of all members of Applicant (other than Ellerine Properties (Proprietary) Limited
      and The Relyant Share Trust) registered as such at the close of business on Friday, 12 October 2007 be convened
      by the chairperson mentioned in paragraph 2 of this Order of Court (“Order”), at 09:00 on Tuesday, 16 October
      2007, at the registered office of the Applicant, situated at Block E, Gillooly’s View Office Park, Osborne Lane,
      Bedfordview, 2007, for the purpose of considering and, if deemed fit, approving, with or without modification, the
      scheme of arrangement (“scheme”) proposed by African Investment Bank Limited (“ABIL”) between the Applicant
      and the members of the Applicant (other than Ellerine Properties (Proprietary) Limited and The Relyant Share Trust)
      registered as such on the record date of the scheme, which is expected to be Friday, 14 December 2007;

2.    Mr S Slom, or failing him, Mr P Vallet, be and is hereby appointed as chairperson of the scheme meeting
      (“chairperson”);

3.    the chairperson is authorised to:

      3.1    convene the scheme meeting;

      3.2    appoint scrutineers for the purpose of the scheme meeting;

      3.3    determine the validity and acceptability of any form of proxy submitted for use at the scheme meeting
             and/or any adjournment thereof;

      3.4    adjourn the scheme meeting from time to time if the chairperson considers it necessary to do so; and

      3.5    determine the procedure to be followed at the scheme meeting and any adjournment thereof;

4.    the Applicant shall cause a notice convening the scheme meeting (substantially in the form contained in the papers
      before this Honourable Court) to be published once in each of the Business Day, Beeld and the Government
      Gazette at least 14 (fourteen) calendar days before the date of the scheme meeting. The notice shall state:

      4.1    the basic characteristics of the scheme;

      4.2    the time, date and venue of the scheme meeting;

      4.3    that the scheme meeting has been convened in terms of this Order to consider and, if deemed fit, to agree,
             with or without modification, to the scheme;

      4.4    that a copy of this Order, the scheme and the explanatory statement in terms of section 312(1) of the
             Companies Act may be inspected or obtained, free of charge, during normal business hours at any time prior
             to the scheme meeting at the registered office of the Applicant at Block E, Gillooly’s View Office Park,
             Osborne Lane, Bedfordview 2007;


106
5.   copies of:

     5.1   the scheme and the statements in terms of section 312(1) of the Companies Act explaining the scheme
           (substantially in the form of the scheme and statements attached to the papers before this Honourable
           Court);

     5.2   the notice convening the scheme meeting (substantially in the form of the notice attached to the papers
           before this Honourable Court) showing the time, date and place of the scheme meeting;

     5.3   the form of proxy to be used at the scheme meeting (substantially in the form of the form of proxy attached
           to the papers before this Honourable Court); and

     5.4   this Order of Court,
     shall be posted by the Applicant at least 14 (fourteen) calendar days before the date of the scheme meeting
     to each of the ordinary shareholders of the Applicant at their addresses as reflected in the Applicant’s register
     of members at the close of business on a date not more than 4 (four) calendar days before the date of such posting
     and in respect of holders of dematerialised shares, at the addresses as notified by Strate Limited to the Applicant’s
     transfer secretaries on a date not more than 4 (four) calendar days before the date of such posting;

6.   copies of:

     6.1   the scheme and the statements in terms of section 312(1) of the Companies Act (substantially in the form
           of the scheme and the statements attached to the papers before this Honourable Court);

     6.2   the notice convening the scheme meeting (substantially in the form of the notice attached to the papers
           before this Honourable Court);

     6.3   a form of proxy (substantially in the form of the form of proxy attached to the papers before this Court); and

     6.4   this Order of Court,

     shall lie for inspection at, and copies of these documents may be inspected or obtained free of charge from the
     registered office of the Applicant during normal business hours at the registered office of the Applicant for at least
     14 (fourteen) calendar days prior to the date of the scheme meeting;

7.   the date of posting of the documents referred to in paragraph 5 shall be evidenced by an affidavit deposed to
     by a representative of the Applicant duly supported by post office receipts;

8.   the chairperson shall report by way of affidavit the results of the scheme meeting to this Court on Tuesday,
     30 October 2007 at 10:00 or so soon thereafter as Counsel may be heard;

9.   the report required by this Court from the chairperson shall give details of:

     9.1   the number of scheme members present in person at the scheme meeting (including those represented) and
           the number of shares held by them;

     9.2   the number of scheme members represented by proxy at the scheme meeting and the number of shares held
           by them together with information as to the numbers represented by the chairperson in terms of proxies
           annexed to the scheme document;

     9.3   any proxies which have been disallowed;

     9.4   all resolutions passed at the scheme meeting, with particulars of the number of votes cast in favour of and
           against each such resolution and of any abstentions, indicating in each case how many votes were cast by
           the chairperson in terms of proxies which were annexed to the scheme document;

     9.5   all rulings made and directions given by the chairperson at the scheme meeting;

     9.6   the relevant portions of documents and reports submitted or tabled at the scheme meeting which have
           a bearing on the merits or demerits of the scheme, including copies thereof; and

     9.7   the main points of any other proposals which were submitted to the scheme meeting;


                                                                                                                      107
10. the Applicant shall arrange to make available at its registered office (and the notice of the scheme meeting which
    is published and sent to scheme members shall include a statement that it will be so available) a copy of the
    chairperson’s report to this Court, free of charge, to any scheme member on request, for at least 1 (one) week
    before the date fixed by this Court for the chairperson to report back to it;

11. any scheme member wishing to vote by proxy should tender as his/her proxy the form of proxy referred to
    in paragraph 5.3 of this Order. The form of proxy must be completed and returned in accordance with the
    instructions therein to the Applicant’s transfer secretaries, namely, Computershare Investor Services 2004
    (Proprietary) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), to be received
    by no later than 09:00 on Monday, 15 October 2007;

12. scheme members who hold certificated ordinary shares in the Applicant or dematerialised ordinary shares in
    the Applicant through a Central Securities Depository Participant (“CSDP”) or broker and have “own-name”
    registration and wish to vote by proxy, should tender as their proxy, the form of proxy referred to in paragraph 5.3
    of this Order. In addition, a form of proxy may be handed to the chairperson up to 10 (ten) minutes before the
    scheme meeting is due to commence; and

13. scheme members who hold shares in the Applicant which have been dematerialised and are held on the
    sub-register, other than on an own-name registration basis, who wish to attend the scheme meeting or to vote by
    way of proxy, must contact their CSDP, or broker who will furnish them with the necessary Letter of Representation
    to attend the scheme meeting or to be represented thereat by proxy. This must be done in terms of the agreement
    between the member and his/her CSDP or broker.

By Order of the Court


Court Registrar


Attorneys to the Applicant
Cliffe Dekker Inc.
4th Floor
1 Protea Place
Sandown, Sandton, 2196
Tel: 011 290 7000
Fax: 011 290 7300
Ref: Mr C H Ewing/Mr W H Jacobs




108                                                PRINTED BY INCE (PTY) LTD                                 REF. W2CF03876
                                                  Ellerine Holdings Limited
                                                    (Incorporated in the Republic of South Africa)
                                                       (Registration number 1968/013402/06)
                                                      Share code: ELH      ISIN: ZAE000022752
                                                         (“Ellerines” or “the company”)


FORM OF PROXY
Only for use by Ellerines shareholders who hold their Ellerines shares in certificated form or dematerialised
shareholders with “own-name” registration

For use by shareholders of Ellerines registered as such at the close of business on Friday, 12 October 2007 (“the scheme members”) at a meeting
convened in terms of an Order of the High Court of South Africa (Witwatersrand Local Division), to be held at registered office of Ellerines, Block E,
Gillooly’s View Office Park, Osborne Lane, Bedfordview, 2007 at 09:00 on Tuesday, 16 October 2007 (“the scheme meeting”).
If you have dematerialised your shares with a Central Securities Depository Participant (“CSDP”) or broker and you do not own shares in “own-name”
dematerialised form you must arrange with your CSDP or broker to provide you with the necessary Letter of Representation to attend the scheme meeting
or you must instruct your CSDP or broker as to how you wish to vote in this regard. This must be done in terms of the agreement entered into between you
and the CSDP or broker.

I/We (please print names in full) ]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]

being the holders of                                   certificated Ellerines shares or dematerialised “own-name” Ellerines shares do hereby appoint
                                                       (see note 1):

1.                                                                                                                                    or failing him/her,

2.                                                                                                                                    or failing him/her,

3. the chairperson of the scheme meeting,
as my/our proxy to attend and speak on my/our behalf at the scheme meeting and, if deemed fit, approving (see note 3):

 With or
 without modification

a scheme of arrangement (“the scheme”) to be proposed by African Bank Investment Limited between Ellerines and its shareholders, and at any
adjournment of the scheme meeting to vote for and/or against the scheme and/or abstain from voting in respect of the shares registered in my/our
name/s, in accordance with the following instructions (see note 2):

 For the scheme                                                                 Number of votes*
 Against the scheme                                                             Number of votes*

 Abstain from voting                                                            Number of votes*

* One vote per share held by scheme members

Signed at                                                                  on                                                                      2007

Signature

Capacity of signatory (where applicable)

Note: Authority of signatory to be attached – see note 9.

Assisted by me (where applicable)

Full name

Capacity

Signature

• If a scheme member agrees that the scheme may be modified, the scheme member may, if he/she so desires, indicate the manner and extent of any such
  modifications to which the proxy may agree on a separate form which must be lodged at or posted to the address stipulated in note 4, together with this
  form of proxy. In addition, please refer to the conditions stipulated in note 4. If a scheme member does not indicate the manner and extent of any
  modification, the proxy may exercise his/her discretion whether or not to accept the modification.
Please read the notes on the reverse side hereof.
Notes:

 1. Each scheme member is entitled to appoint one or more proxies (none of whom need be a member of Ellerines) to attend, speak and vote
    in place of that scheme member at the scheme meeting.

 2. A scheme member may insert the name of a proxy or the names of two alternative proxies of the scheme member’s choice in the space/s
    provided, with or without deleting “the chairperson of the scheme meeting” but the scheme member must initial any such deletion. The person
    whose name stands first on this form of proxy and who is present at the scheme meeting will be entitled to act as proxy to the exclusion
    of those whose names follow.

 3. A scheme member’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by the scheme
    member in the appropriate box provided. Failure to comply with the above will be deemed to authorise and direct the chairperson of the
    scheme meeting, if the chairperson is the authorised proxy, to vote in favour of the scheme, or any other proxy to vote or abstain from voting
    at the scheme meeting as he/she deems fit, in respect of all the scheme member’s votes exercisable at the scheme meeting.

 4. If a scheme member agrees that the scheme may be modified, the scheme member may indicate the manner and the extent of such
    modification to which the proxy may agree on a separate sheet of paper which must be lodged with or posted to Computershare Investor
    Services 2004 (Proprietary) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) to be received no later than
    09:00 on Monday, 15 October 2007 or may be handed to the chairperson of the scheme meeting no later than 10 (ten) minutes before the
    scheme meeting is due to commence. It should be noted that, notwithstanding that a scheme member indicates that the scheme may not be
    modified, the chairperson (if the chairperson is the authorised proxy) or any other proxy shall nevertheless be entitled to agree to a modification
    of the scheme in terms of which the scheme consideration is increased.
     If a scheme member fails to indicate the manner and the extent of any modification to which the proxy may agree, such failure shall be deemed
     to authorise the chairperson of the scheme meeting or any other proxy, to agree to the scheme with or without modification as he/she deems
     fit, in respect of all the scheme member’s votes exercisable at the scheme meeting.

 5. Forms of proxy must be lodged with or posted to Computershare Investor Services 2004 (Proprietary) Limited, 70 Marshall Street, Johannesburg,
    2001 (PO Box 61051, Marshalltown, 2107) to be received by no later than 09:00 on Monday, 15 October 2007. Alternatively, forms of proxy
    may be handed to the chairperson of the scheme meeting by no later than 10 (ten) minutes before the scheme meeting is due to commence.

 6. The completion and lodging of this form of proxy will not preclude the relevant scheme member from attending the scheme meeting and
    speaking and voting in person to the exclusion of any proxy appointed in terms hereof, should such scheme member wish to do so.

 7. The chairperson of the scheme meeting may reject or accept any form of proxy which is completed and/or received, other than in accordance
    with these notes, provided that the chairperson is satisfied as to manner in which the scheme member concerned wishes to vote.

 8. Any alteration or correction made to this form of proxy must be initialled by the signatory/ies.

 9. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity (e.g. for a company,
    close corporation, trust, pension fund, deceased estate, etc.) must be attached to this form of proxy unless previously recorded by the company
    or its transfer secretaries or waived by the chairperson of the scheme meeting.

10. Where this form of proxy is signed under power of attorney, such power of attorney must accompany this form of proxy, unless it has previously
    been registered with Ellerines or the transfer secretaries.

11. Where ordinary shares are held jointly, all joint holders are required to sign.

12. A minor must be assisted by his/her parent or guardian unless the relevant documents establishing his/her legal capacity are produced or have
    been registered by the transfer secretaries of Ellerines.

13. Dematerialised shareholders who do not own Ellerines shares in “own-name” dematerialised form and who wish to attend the scheme
    meeting or to vote by way of proxy, must contact their CSDP or broker who will furnish them with the necessary authority to attend the scheme
    meeting or to be represented thereat by proxy. This must be done in terms of the agreement between the shareholder and his/her CSDP
    or broker.




                                                                         I
                                                  Ellerine Holdings Limited
                                                    (Incorporated in the Republic of South Africa)
                                                       (Registration number 1968/013402/06)
                                                      Share code: ELH      ISIN: ZAE000022752
                                                                    (“Ellerines”)


FORM OF SURRENDER AND TRANSFER
For use by Ellerines shareholders who hold their Ellerines shares in certificated form only in relation to a scheme
of arrangement in terms of section 311 of the Companies Act

This form should be read in conjunction with the documents sent to shareholders dated 27 September 2007.
Instructions
A separate form of surrender is required for each certificated Ellerines shareholder.
Part A must be completed by all certificated shareholders who return this form.
Part B must be completed by certificated shareholders who are emigrants from or non-residents of the Republics of South Africa and Namibia and
the Kingdoms of Swaziland and Lesotho (“the common monetary area”) (see note 2 overleaf).
A certificated shareholder will have his/her documents of title returned in the event that the scheme fails.
To: The transfer secretaries
By hand                                                                    By post
Computershare Investor Services 2004 (Proprietary) Limited                 Computershare Investor Services 2004 (Proprietary) Limited
70 Marshall Street                                                         PO Box 61763
Johannesburg                                                               Marshalltown
2001                                                                       2107
Dear Sirs
I/We hereby surrender and enclose the share certificate/s, certificated transfer deed/s and/or other documents of title, details of which have been
completed overleaf, in respect of my/our holding of shares in Ellerines.
PART A – All certificated shareholders must please complete all the blocks below and overleaf (IN BLOCK CAPITALS).
Surname or Name of corporate body
First names (in full)
Address to which the scheme consideration should be sent if different to the address appearing on the register


                                                                                                    Postal code
Country
Share certificates and/or other documents of title surrendered
             Name of registered holder                          Certificate number(s)                             Number of shares covered
          (separate form for each holder)                        (in numerical order)                               by each certificate




                                                                                            Total

 Signature of Ellerines ordinary shareholder                                         Stamp and address of agent lodging this form (if any)
 Assisted by me (if applicable)
 (state full name and capacity)
 Date                                                               2007
 Telephone number (Home) (           )
 Telephone number (Work) (          )
PART B – To be completed by all certificated shareholders who are emigrants from and non-residents of South Africa (see notes 1 and 2 below).
The consideration will be forwarded to the authorised dealer nominated below for its control. Accordingly, non-residents who are emigrants from
South Africa must provide the following information:
Name of authorised dealer

Account number

Address

If no nomination is made above, the scheme consideration will be held in trust by the transfer secretaries.

Notes:
 1. Emigrants from the common monetary area must complete Part B.
 2. All other non-residents of the common monetary area must complete Part B (if they wish the consideration to be sent to an authorised dealer
    in South Africa).
 3. If Part B is not properly completed, the consideration (in the case of emigrants or non-residents) will be held in trust by the transfer secretaries
    pending receipts of the necessary nomination or instruction.
 4. If this form of surrender is returned with the relevant documents of title, it will be treated as conditional surrender which is made subject to
    the scheme of arrangement between Ellerines and its shareholders (“the scheme”) becoming effective. Documents surrendered in anticipation
    of the scheme becoming operative will be held in trust by the transfer secretaries until the scheme becomes operative. Should the scheme not
    become operative, the transfer secretaries will, within five business days, return the documents of title to the certificated shareholders
    concerned, by registered post at the risk of such shareholders.
 5. The scheme consideration will not be sent to scheme members unless and until documents of title in respect of the relevant scheme shares
    have been surrendered to Computershare Investor Services 2004 (Proprietary) Limited.
 6. If a shareholder produces evidence to the satisfaction of African Bank Investment Limted (“ABIL”) and Ellerines that documents of title in respect
    of Ellerines shares have been lost or destroyed, ABIL and Ellerines may waive the surrender of such documents of title against delivery of an
    indemnity in a form and on terms and conditions approved by them, or may in their discretion waive such indemnity.
 7. ABIL is bound in terms of the scheme to accept only those shares surrendered in terms of the scheme. However, ABIL reserves the right, without
    prejudice to its other rights, to condone the non-observance by any Ellerines shareholder of any of the terms of the scheme.
 8. Persons who have acquired shares in Ellerines after 27 September 2007, the date of posting of the document to which this form of surrender
    and transfer is attached, can obtain copies of the document from Computershare Investor Services 2004 (Proprietary) Limited, 70 Marshall
    Street, Johannesburg, 2001 (PO Box 61763, Marshalltown, 2107).
 9. No receipts will be issued for documents lodged, unless specifically requested. In compliance with the requirements of the JSE Limited (“JSE”),
    lodging agents are requested to prepare special transaction receipts. Signatories may be called upon for evidence of their authority or capacity
    to sign this form.
10. Any alteration to this form of surrender and transfer must be signed in full and not initialled.
11. If this form of surrender and transfer is signed under a power of attorney, then such power of attorney, or a notarially certified copy hereof,
    must be sent with this form for noting (unless it has already been noted by Ellerines or its transfer secretaries).
12. Where the shareholder is a company or a close corporation, unless it has already been registered with Ellerines or its transfer secretaries, a
    certified copy of the directors’ or members’ resolution authorising the signing of this form of surrender and transfer must be submitted if so
    requested by Ellerines.
13. Note 12 above does not apply in the event of this form bearing the stamp of a broking member of the JSE.
14. Where there are joint holders of any shares, only that holder whose name stands first in the register in respect of such shares need sign this
    form of surrender and transfer.




                                                                         I

				
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