Discovery - Resolution of outstanding issues

Discovery - Resolution of outstanding issues                                    
Discovery Holdings Limited                                                      
(Incorporated in the Republic of South Africa)                                  
(Registration number 1999/007789/06)                                            
(Share code: DSY      ISIN: ZAE000022331)                                       
("Discovery")                                                                   
Resolution of outstanding issues between Discovery, the Registrar and the       
Council for Medical Schemes                                                     
Resolution of outstanding issues                                                
The Registrar and Council for Medical Schemes, Discovery Health and             
Discovery Health Medical Scheme ("DHMS") have reached resolution on             
outstanding issues.                                                             
In terms of this resolution the Registrar has approved the proposal that        
will build up reserves in the DHMS by December 2004 to meet the required        
statutory reserves.                                                             
To achieve this:                                                                
- Discovery Health has reduced the current administration fee payable by the    
scheme to 12.4% from 14% payable from January 1, 2002.                          
- Future administration fees payable by DHMS will increase by the Consumer      
Price Index until 31 December 2004.                                             
- The effect of this is that fees will reduce further to 11.6% in 2003 and      
10.9% in 2004.                                                                  
- The quota share reinsurance between DHMS and Discovery Life has been          
halved from 67% to 33% of risk contributions and a profit share introduced      
at no cost to DHMS.                                                             
- The reinsurance agreements will be evaluated annually in accordance with      
statutory and other guidelines.                                                 
- DHMS will withdraw its appeal against the Registrar rejecting its 2000        
annual financial statements and against the Registrar refusing to register      
its proposed rule amendment regarding capital contributions.                    
- The Rand Merchant Bank Structured Insurance structure will be unwound and     
the accounts for DHMS as at 31 December 2001 will be restated.                  
- The scheme and administrator will withdraw the Review Application lodged      
over the Council`s refusal to approve a subordinated loan.                      
- DHMS will withdraw its complaint to the Public Protector against the          
Registrar.                                                                      
- There will be regular meetings between the parties to discuss any issues      
that may arise of mutual interest, and to monitor achievements of the agreed    
plan.                                                                           
Impact on business environment                                                  
Discovery believes that this resolution creates a platform for sustainable      
growth in a stable environment. Management looks forward to an exciting         
future for the benefit of all Discovery stakeholders.                           
Financial effects of the resolution                                             
As a result of the resolution reached the administration fees and the quota     
share reinsurance received by Discovery have been reduced. The growth in        
Discovery`s earnings for the financial year ending on 30 June 2002 will be      
less than the consensus forecast. The net effect of the reduction in            
administration fees received and the more stable outlook for Discovery          
Health is a reduction in the embedded value of Discovery.  Full details of      
the financial effects of the resolution will be disclosed in Discovery`s        
annual profit announcement, which will be published towards the end of          
August 2002.                                                                    
Shareholders should accordingly exercise caution when dealing in their          
Discovery shares until the profit announcement is published.                    
Sandton                                                                         
24 May 2002                                                                     
Merchant Bank and Sponsor                                                       
Rand Merchant Bank                                                              
A division of FirstRand Bank Limited                                            
Corporate Finance                                                               
Corporate Law Adviser                                                           
Edward Nathan & Friedland                                                       
Corporate law advisers & consultants                                            
Date: 24/05/2002 03:02:54 PM Produced by the SENS Department