Transaction between Tsogo Investment Holding Company (Proprietary) Limited(“TIH”), a 74.67% held subsidiary of HCI, and NAFCOC Investment Holding Company (Proprietary) Limited (“Nafhold”) pursuant to which the HCI group increases its interest in TIH.



Shareholders are advised that TIH has entered into an agreement with Nafhold in terms of which TIH will repurchase from Nafhold, in terms of section 85 of the Companies Act of 1973, Nafhold`s 25% interest in the issued ordinary share capital TIH (“the repurchase transaction”). As a result of the repurchase transaction HCI`s interest in the ordinary share capital of TIH will increase to 99.56%. The main business of TIH is to hold ordinary shares in Tsogo Sun Group (Proprietary) Limited (“TSH”).


The HCI group believes it is opportune to increase its indirect interest in the issued ordinary shares of TSH to above 50%.


In terms of the repurchase transaction TIH will repurchase all of the shares held by  Nafhold in the ordinary share capital of TIH (comprising 25% of the issued ordinary capital of TIH) (“the repurchase shares”) in exchange for the repurchase consideration set out below, with effect from the 3rd business day after the repurchase transaction becomes unconditional (“the effective date”).

Upon implementation the HCI group will own 99.56% of the issued ordinary share capital of TIH giving it an additional 12.75% indirect interest in TSH  and an overall indirect interest of 50.78% in TSH.

The transaction also provides for the immediate postponement of all   proceedings in relation to present disputes between the TIH, HCI and Nafhold     and, following the discharge by TIH of its obligation to pay the repurchase consideration, the full and final settlement of each such dispute.

HCI has provided a written guarantee to Nafhold in terms of which HCI grants     a guarantee to all the holders of the preference shares to be issued by TIH      (as set out below) in relation to the obligations of TIH in respect of such      preference shares.


1.   Shareholders of Nafhold holding in excess of 75% (seventy five percent)        of the voting rights at a meeting of shareholders of Nafhold have               executed written undertakings in terms of which they have irrevocably        undertaken to bind themselves to vote in favour of the repurchase               transaction and the resolution referred to in 2 below and Nafhold               delivers copies of such undertakings to TIH on or before 11 December            2009 and certified copies thereof on or before 31 January 2010;              2.   the sale by Nafhold of the repurchase shares in terms of the repurchase

transaction is approved by:

2.1  the board of directors of Nafhold on or before 11 December; and

2.2  a special resolution of Nafhold`s shareholders in terms of section         228 of the 1973 Companies Act and Nafhold delivers a certified copy             thereof to the Company on or before 15 March 2010;

3.   the registration by the Registrar of Companies of the special resolution    contemplated in clause 2 on or before 31 March 2010;

4.   special resolutions are adopted at a general meeting of TIH in the form        and substance reasonably acceptable to Nafhold to:

4.1  amend the articles of association of  TIH to:

4.1.1     allow for the repurchase of TIH`s shares;

4.1.2     provide for the creation of 15,625 cumulative redeemable                        non-participating preference shares of R0.01 (One Cent)       each in the capital of TIH having such rights, privileges                       and conditions as have been agreed between TIH and                              Nafhold (“Nafhold preference shares”); and

4.1.3     provide that, on a poll, each ordinary shareholder shall      be entitled to that proportion of the total votes in the                        TIH which the aggregate amount of the par value of the                          ordinary shares held by him bears to the aggregate amount                       of the par value of all the shares issued by the TIH;

4.2  authorise TIH by way of a specific authority in terms of section                85(2) of the 1973 Companies Act, to acquire the repurchase shares               for the repurchase consideration in terms of the repurchase                     transaction;

4.3  amend TIH`s authorised share capital by creating the Nafhold                    Preference Shares;

and certified copies of such resolutions are delivered to Nafhold               on or before 28 February 2010;

5.   the special resolutions contemplated in 4 are registered by the                Registrar of Companies on or before 31 March 2010;

6.   ordinary resolutions are adopted at a general meeting of TIH in the form       and substance reasonably acceptable to Nafhold to authorise the              directors of the TIH by way of a specific authority in terms of section         221 of the 1973 Companies Act, to allot and issue the Nafhold Preference        Shares to Nafhold in terms of the repurchase transaction and certified          copies of such resolutions are delivered to Nafhold on or before 28          February 2010;

7.   the agreement entered into between Nafhold and a third party for the           acquisition of Nafhold`s shares in TIH:

7.1  lapses on or before 31 January 2010, or

7.2  is cancelled or otherwise terminated on or before 31 January 2010;         and

8.   the acquisition of the repurchases shares is approved unconditionally,      or subject to such conditions as may be reasonably acceptable to TIH and        Nafhold, by the relevant gambling authorities within 30 days of Nafhold         calling for such approval by written notice to the and HCI (provided            that no such written notice shall be given on or before 31 July 2010).


The aggregate purchase consideration for the repurchase shares is the sum of     R1,200,000,000 (One Billion Two Hundred Million Rand) payable partly by way      of set-off against the subscription consideration, being the sum of              R500,000,000 (Five Hundred Million Rand), payable by Nafhold to TIH for the      subscription of the Nafhold Preference Shares and the remainder in cash,         being the sum of R 700,000,000 (Seven Hundred Million Rand).

In the event that the effective date occurs after 31 July 2010 then the cash     portion of the purchase consideration shall attract interest at the rate of      5% per annum with effect from 1 August 2010 to the actual date of payment        thereof in full, calculated and compounded monthly in arrears.

Funding of the transaction

Nafhold and/or certain Nafhold shareholders will subscribe for the Nafhold       Preference Shares for an aggregate subscription price of R 500,000,000 (Five     Hundred Million Rand).

The additional funding required for the repurchase transaction will be funded    from the cash resources of TIH at the relevant time.


The preparation of the unaudited pro forma financial effects of  the             transaction is the responsibility of the directors of HCI. The unaudited pro     forma financial effects of the transaction are presented for illustrative        purposes only to provide information on how the transaction may impact on an     HCI shareholder and, due to the nature thereof, may not give a fair              reflection of HCI`s actual financial position after the transaction.

The pro forma financial effects of the transaction are based on the published    unaudited abridged consolidated group results of HCI for the six months ended    30 September 2009.  The pro forma financial effects of the transaction on        HCI`s earnings and headline earnings are set out below. The transaction has      no pro forma effect on HCI`s net asset value and net tangible asset value as     reported at 30 September 2009.

Per HCI share                         Before    After     % change

Earnings (cents)                      100.09    115.37    15.26

Headline earnings (cents)         104.02    119.29    14.69


1.   The unaudited pro forma financial effects of the transaction are        indicative only and have been    based on the assumptions set out               below:

2.   The transaction was effected on 1 April 2009 for income statement               purposes and on 30 September 2009 for balance sheet purposes.

3.   The proceeds from sale are invested with financial institutions at              daily call rates. An average rate of 7,53%, after deducting                     taxation at a rate of 28%, was used for the period.

4.   The coupon on the preference shares issued was assumed to be a          8.27% for the period. It has been assume that TIH will have                     sufficient STC credits at the relevant dividend dates

5.   Goodwill and intangible assets have been excluded in the                        calculation of NTAV per HCI ordinary share.


In terms of the Listings Requirements of the JSE limited, this transaction is    categorised as a Category 2 transaction.

14 December 2009                                                                 Cape Town