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PSG Group/PSL/Arch Equity/Channel Life - Channel Life disposal and related party transaction PSG GROUP LIMITED Registration number 1970/008484/06) JSE share code: PSG ISIN: ZAE000013017 ("PSG Group") PSG Financial Services Limited Registration number 1919/000478/06 JSE share code: PGFP ISIN code: ZAE000060166 ("PSL") ARCH EQUITY LIMITED Registration number 2004/004019/06 JSE share code: ACH ISIN: ZAE000061073 ("Arch Equity") CHANNEL LIFE LIMITED Registration number: 1969/012487/06 ("Channel Life") CHANNEL LIFE DISPOSAL BECOMES UNCONDITIONAL AND SMALL RELATED PARTY TRANSACTION 1. INTRODUCTION 1.1 Shareholders are referred to the joint announcement published on the Securities Exchange News Service ("SENS") of the JSE Limited ("JSE") on 11 August 2005 and in the press on 12 August 2005 regarding the disposal of a 50% interest in Channel Life Limited ("Channel Life") to Sanlam Life Insurance Limited ("the Channel Life disposal"). 1.2 The Channel Life disposal was subject to and conditional upon, inter alia, regulatory approval as may have been required by the relevant regulatory authorities. Shareholders are hereby advised that the last remaining suspensive condition was fulfilled on 7 February 2006 and that the Channel Life disposal is no longer subject to any unfulfilled conditions. The proceeds relating to the Channel Life disposal will be received on 9 February 2006. 1.3 The aforementioned announcement included details of a related party transaction between PSL and Arch Equity ("the Channel Holdings transaction") in terms of which PSL will acquire the 26% interest that Arch Equity holds in Channel Life Holdings (Pty) Limited ("Channel Holdings"). The Channel Holdings transaction was subject to PSG Group obtaining written confirmation from an independent professional expert confirming the fairness and reasonableness of said transaction to PSG Group shareholders ("the fair and reasonable opinion") and subject to the finalisation of an agreement between PSL and Arch Equity. 2. RELATED PARTY TRANSACTION 2.1 PSG Group, through its wholly-owned subsidiary PSL, holds approximately 20% of Arch Equity"s ordinary issued share capital. Arch Equity, in turn, holds approximately 23% of PSG Group"s issued share capital. PSL and Arch Equity respectively hold 74% and 26% of the issued shares in Channel Holdings. 2.2 In terms of Section 10.7 of the Listings Requirements of the JSE, the Channel Holdings transaction is regarded as a small related party transaction for PSG Group. Accordingly, PSG Group has appointed PricewaterhouseCoopers Corporate Finance (Pty) Ltd ("PWC") as the independent professional expert in accordance with paragraph 10.7(b) of the Listing Requirements of the JSE and has provided the JSE with written confirmation from PWC that the terms of the Channel Holdings transaction are fair and reasonable to PSG Group shareholders. The fair and reasonable opinion will lie open for inspection at the registered office of PSG Group for a period of 28 days from the date of publication of this announcement. 3. DETAILS OF CHANNEL LIFE HOLDINGS AND CHANNEL LIFE Channel Holdings" only asset is a shareholding in Channel Life. Channel Life is a niche life insurance company that provides life assurance products as well as investment products to both retail and institutional clients. At 28 February 2005 it had a net asset value of R123,7 million and generated headline earnings of R39,0 million for the financial year then ended. 4. RATIONALE FOR THE ACQUISITION It is PSG Group"s desire to continue to exert meaningful influence and participate in the expected growth in profitability of Channel Life following the Channel Life disposal. Had it not acquired the 26% interest in Channel Holdings from Arch Equity, PSG Group"s interest in Channel Life would have been reduced to 23% compared with the 35% that it now holds. 5. PARTICULARS OF THE ACQUISITION 5.1 Subject matter of the acquisition 1040 ordinary shares in Channel Holdings, representing 26% of the issued share capital, as well as a loan account of R14,9 million. 5.2 Acquisition consideration The purchase consideration of R26,6 million will be paid by PSL to Arch Equity in cash within 24 hours after PSG Group has received the proceeds in respect of the Channel Life disposal. 5.3 Effective date The effective date of the Channel Holdings transaction is 1 August 2005. 5.4 Suspensive Conditions Following the approval by the Competition Commission and other regulatory approvals of the Channel Life disposal, the Channel Holdings transaction is no longer subject to any unfulfilled conditions. 6. FINANCIAL EFFECTS The pro forma financial effects of the Channel Holdings transaction are presented for illustrative purposes only and because of their nature may not give a fair reflection of PSG Group"s financial position nor of the effect on future earnings after the transaction. Set out below are the unaudited pro forma financial effects of the transaction, based on the unaudited consolidated financial results of PSG Group for the six months ended 31 August 2005. The directors are responsible for these pro forma financial effects. Unaudited Pro forma Change
Before the After the (%) transaction Transaction (cents) (cents) Earnings per share 84,1 84,4 0,4 Headline earnings per share 101,1 101,4 0,3 Net asset value per share 412 412 Nil Net tangible asset value per 328 312 (4,9) share Notes to financial effects 1. The earnings and headline earnings per share figures in the "Pro forma After the transaction" column have been calculated: - on the basis that the transaction was effected on 1 March 2005; and - the consideration paid would have earned interest at an after tax interest rate of 6%. 2. The net asset value and net tangible asset value per share figures in the "Pro forma After the transaction" column have been calculated on the basis that the transaction was effected on 31 August 2005. Stellenbosch 8 February 2006 PSG Capital Sponsor to PSG Group and designated advisor to Arch Equity Date: 08/02/2006 10:18:39 AM Supplied by www.sharenet.co.za Produced by the JSE SENS Department
