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Discovery Holdings Limited - Announcement of a joint venture in the United

Release Date: 30/04/2004 10:20
Code(s): DSY
Wrap Text

Discovery Holdings Limited - Announcement of a joint venture in the United Kingdom Discovery Holdings Limited (Incorporated in the Republic of South Africa) (Registration number 1999/007789/06) (Share code: DSY ISIN: ZAE000022331) ("Discovery" or "the company") Announcement of a joint venture in the United Kingdom 1. Introduction Further to the cautionary announcement published on 31 March 2004, shareholders are advised that Discovery has established a joint venture ("JV") in the United Kingdom ("UK") with Prudential Assurance Company Limited ("Prudential"). Prudential is a wholly-owned subsidiary of Prudential plc, and a major financial services group in the UK. The JV will provide private medical insurance ("PMI") products in the UK and will be named Prudential Health. 2. Background to the UK Private Medical Insurance ("PMI") Market The UK National Healthcare Service ("NHS") is one of the few fully funded comprehensive public healthcare systems worldwide. Over and above the cover provided by the NHS, approximately 6.7 million people purchase PMI coverage through a number of UK insurance companies. The PMI market is projected to increase from the current level of 6.7 million people to 8 million covered lives by 2006. Over the past 10 years, the cost of PMI coverage in the UK has been increasing at a rate of more than twice the retail price inflation. The consumer demand and rising costs, combined with the fact that no products currently exist that actively engage the consumer in their health needs, presents a unique opportunity to energise the market with an innovative product structure that engages the consumer. 3. Background to Prudential Established in 1848, Prudential is a major financial services group with operations in the UK and Europe, the United States and Asia. As at 31 December 2003, it had GBP168 billion of funds under management and worldwide, it has over 22,000 employees and over 16 million customers. In 2003, Prudential reported total insurance and investment sales of GBP31.5 billion (Euro) (Euro 44.7 billion), an increase of 11% at constant exchange rates over the previous year. In the UK, Prudential is a leading life and pensions provider with 7 million customers. 4. Rationale for the JV Prudential brings to the JV financial strength, a strong brand and distribution capabilities. Their unique strengths complement Discovery"s track record and success in managing and servicing consumer-engaged health plans. 5. Salient terms of the JV The salient terms of the JV are as follows: - The JV will offer and actively market private medical insurance products in the UK; - The JV will utilise the well known Prudential brand and extensive distribution network; - Discovery will provide risk management, health care and operational expertise. - Discovery and Prudential will have equal funding commitments to the JV; and - Discovery and Prudential will share equally in the profits and losses of the JV. 6. Capital requirements The capital required will be injected over a period of time and Discovery anticipates that it will be able to meet this capital requirement from existing cash resources and future cash flows. 7. Financial effects The JV is expected to be launched in the early part of 2005 and hence the financial effects to Discovery in the financial year to 2004 are limited to the development costs of approximately R40 million. The development costs will have an immaterial effect on the net assets and net tangible assets per share of Discovery. 8. Conditions precedent The establishment of the JV is subject to various conditions precedent. The material conditions which are still to be fulfilled are: - Obtaining the requisite approval from the Financial Services Authority in the UK; and - Obtaining the requisite approval from the South African Reserve Bank. It is anticipated that these conditions will be fulfilled in time for the product launch. Sandton 30 April 2004 Merchant bank and sponsor Legal advisors in South Africa Rand Merchant Bank (A division Edward Nathan & Friedland of FirstRand Bank Limited) Corporate Finance Date: 30/04/2004 10:20:59 AM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

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