ANNOUNCEMENT REGARDING THE INTRODUCTION OF A STRATEGIC EMPOWERMENT PARTNER TO ALEXANDER FORBES AFRICAN OPERATIONS AND WITHDRAWAL OF CAUTIONARY

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1 ALEXANDER FORBES GROUP HOLDINGS LIMITED Incorporated in the Republic of South Africa (Registration number: 2006/025226/06) JSE Share Code: AFH ISIN: ZAE ( Alexander Forbes or the Company ) ANNOUNCEMENT REGARDING THE INTRODUCTION OF A STRATEGIC EMPOWERMENT PARTNER TO ALEXANDER FORBES AFRICAN OPERATIONS AND WITHDRAWAL OF CAUTIONARY 1. Introduction and rationale Further to the cautionary announcement dated 14 March 2016 and subsequent renewal of cautionary announcements, the last of which was dated 7 September 2016, the board of directors of Alexander Forbes ( the Board ) is pleased to advise shareholders that it has entered into agreements ( Transaction Agreements ) to introduce African Rainbow Capital Proprietary Limited ( ARC ), a wholly-owned subsidiary of Ubuntu-Botho Investments Proprietary Limited ( Ubuntu-Botho Investments ), as an empowerment shareholder into the African operations (including South Africa) of Alexander Forbes and its subsidiaries ( the Group ). The rationale for the transaction is to, amongst other things, improve the black economic empowerment ownership position of the Group and to further promote and support Alexander Forbes African business. In terms of the Transaction Agreements, ARC will subscribe for 10% of the total issued shares of the Company s wholly-owned subsidiary, Alexander Forbes Limited ( AFL ), equating to ordinary par value shares ( Subscription Shares ) for a total cash consideration of R ( the Subscription )(before taking into consideration the Post Completion Dividend described in paragraph 2.3 below). AFL is currently the holding company of all the main operating subsidiaries of Alexander Forbes, housing both the Company s African and international operations (through Alexander Forbes International Limited ( AFIL )). Thus, in order for AFL to be reflective of the Group s African operations only (which is in line with ARC s investment objectives), prior to the Subscription being effected, AFL will distribute its shares in AFIL to AFL s holding company, Alexander Forbes Acquisition Proprietary Limited ( AF Acquisition )( the Unbundling ). Following the Unbundling and the Subscription, AF Acquisition will hold 90% of the Group s African operations (AFL) and 100% of its international operations (AFIL).

2 Furthermore, in terms of the Transaction Agreements and subject to shareholder approval and the happening of certain specified events, ARC will have the right to exchange its shareholding in AFL for listed Alexander Forbes shares, subject to certain suspensive conditions set out in paragraph 3.2 below ( the Flip-Up ) (the Subscription and the Flip-Up together referred to as the Proposed Transaction ). As contemplated in the Company s existing relationship agreement with its largest shareholder, Mercer Africa Limited ( Mercer ) (which agreement was addressed in the pre-listing statement published in anticipation of the Company s listing), Alexander Forbes proposes to issue a number of ordinary shares at market value to Mercer at the time of the Flip-Up (if Mercer elects to take up such shares), so as to mitigate the dilutionary effect of the Flip-Up on Mercer s current shareholding in Alexander Forbes ( the Specific Issue ). The Specific Issue will be subject to separate shareholder approval. 2. The Subscription 2.1. Details of AFL AFL is the holding company of all the main operating subsidiaries of the Company. The main services provided by its subsidiaries include retirement funds and asset consulting, actuarial consulting, investment and administration services, employee risk benefits and healthcare consulting, multi-manager investment and platform solutions, individual financial advice and personal lines insurance. Primary clients span both the private and public sector market segments, including employers, retirement funds, investment and other special purpose funds on the institutional side, and individual members and beneficiaries of these retirement funds, as well as the wider individual market, on the retail side. AFL s geographic focus (prior to the Unbundling) includes South Africa, rest of Africa, the UK and other selected jurisdictions which have employee benefits legislative frameworks similar to South Africa.

3 2.2. ARC Overview ARC is a wholly-owned subsidiary of Ubuntu-Botho Investments which was created in 2004 with its initial main purpose of building black controlled capital through being Sanlam Limited's empowerment partner. In addition, the vision of Ubuntu-Botho Investments from the outset was to make a difference in the lives of ordinary South Africans by creating a premier black-owned and controlled financial services entity. This objective is being partly achieved through ARC. ARC aims to become a leading South African based pan-african financial services company which is black-owned and controlled. ARC has done a number of transactions since its inception in Subscription Price and use of proceeds ARC will subscribe for the Subscription Shares for a total consideration of R (being R14.69 per Subscription Share)( Subscription Price ), which will be settled in cash. Immediately prior to the Subscription, the board of directors of AFL will declare a dividend of R (being an amount equal to the Subscription Price), such dividend to be declared by the board of directors of AFL on the basis that it will be paid to the shareholders of record of AFL immediately after completion of the Subscription, and paid within 14 (fourteen) days of completion of the Subscription ( the Post Completion Dividend ). Accordingly, a net cash amount of R (being an amount equal to the Subscription Price less ARC s pro rata portion of the Post Completion Dividend) will be retained by Alexander Forbes Effective date of the Subscription The effective date of the Subscription will be 5 (five) business days following the fulfilment and/ or waiver of the relevant suspensive conditions, detailed in paragraph Suspensive conditions to the Subscription The Subscription is conditional on the fulfilment of the following suspensive conditions: AFL taking such steps as are necessary to distribute the shares held by it in AFIL to AF Acquisition;

4 the shareholders of Alexander Forbes passing the following resolutions: an ordinary shareholders resolution, requiring at least 50% shareholder approval, authorising and approving the issue of the Subscription Shares to ARC; and an ordinary shareholders resolution, requiring at least 50% shareholder approval, authorising and approving the Flip-Up; and the declaration by the board of directors of AFL of the Post Completion Dividend. The suspensive conditions are to be fulfilled on or before 30 December 2016, or such later date as may be agreed between the parties in writing The value of net assets and profits attributable to AFL The value of the net assets attributable to AFL amounts to R1 890 million, while the attributable profit after tax amounts to R718 million for Alexander Forbes most recent financial year ended 31 March Other salient items ARC has provided certain warranties to the Company (including in relation to ownership and conduct) which are standard for a transaction of this nature. 3. The Flip-Up 3.1. Following the completion of the Subscription, ARC will remain a shareholder of AFL until the occurrence of the Flip-Up Trigger Date, being the earlier of: the end of a 3 year period commencing on the closing of the Subscription; or a change of control of the Company or similar transaction; or Alexander Forbes being delisted from the JSE. Following the Flip-Up Trigger Date, Alexander Forbes (or its nominee) will acquire the Subscription Shares from ARC, subject to the

5 fulfilment of certain suspensive conditions set out in paragraph 3.2, the consideration for which shall be the issue of Alexander Forbes ordinary shares. Such number of shares shall be determined in accordance with a formula set out in the Transaction Agreements, in terms of which ARC s proposed shareholding in Alexander Forbes will be calculated relative to its shareholding in AFL on a value-forvalue basis, using the 30 day volume weighed average price ( VWAP ) as at the close of trading on the 3 rd (third) business day prior to the Flip-Up Trigger Date Suspensive conditions to the Flip-Up The implementation of the Flip-Up shall be subject to the fulfilment after the Flip-Up Trigger Date of the suspensive conditions that: any additional approvals that may be legally required for the Flip-Up are obtained; if the Flip-Up is triggered by an announcement in relation to a change of control or similar transaction, such change of control transaction becomes unconditional; and no event of default has occurred in respect of ARC which is continuing Other salient items For so long as ARC is a shareholder of AFL (or, if the Flip-Up occurs before the end of the three year period, until the end of the three year period), Alexander Forbes will have a right to acquire ARC s interest in AFL or Alexander Forbes if, amongst other limited items, ARC commits a material breach of the Transaction Agreements. The price of such acquisition will be at a 15% discount to the fair market value of ARC s interest in AFL or Alexander Forbes, as the case may be. 4. The Specific Issue Pursuant to the relationship agreement between Alexander Forbes and Mercer as disclosed in the Company s pre-listing statement (as amended from time to time), Mercer may elect to participate in the issuance of equity securities ( Anti-Dilution Right ) after the occurrence of a Flip-Up Trigger Event as detailed in paragraph 3.1. In order to give effect to the Anti-Dilution Right, Alexander Forbes will have 5 (five) business days after the Flip-Up Trigger Date to notify Mercer of the occurrence of a Flip-Up Trigger Event.

6 If Mercer elects to exercise its Anti-Dilution Right, the maximum number of ordinary Alexander Forbes shares which Mercer may subscribe for will be such number of ordinary shares that results in Mercer s current ownership percentage remaining unchanged following the occurrence of the Flip-Up( Mercer anti-dilution shares ). The Mercer anti-dilution shares will be issued for cash and the price per ordinary share at which Mercer will subscribe for the Mercer antidilution shares, to the extent that Mercer elects to do so, will be the 30 day VWAP as at the close of trading on the day before Mercer notifies Alexander Forbes of its intention to exercise its Anti- Dilution Right ( Mercer Subscription Price ). In terms of the JSE Listings Requirements, Alexander Forbes will be required to obtain a fairness opinion in respect of the Specific Issue. 5. Shareholder approval The Board recognises that while the Proposed Transaction may not ordinarily require shareholder approval in terms of the JSE Listings Requirements, in the interest of transparency and good corporate governance, the Company is seeking approval from shareholders for the Subscription and the Flip-Up in addition to the Specific Issue. The Specific Issue will be conditional upon shareholders passing an ordinary resolution, requiring at least 75% approval from shareholders (other than Mercer), approving such issue. The Specific Issue is also conditional upon the Proposed Transaction being approved by shareholders (however, the Proposed Transaction will not be conditional on shareholders approving the Specific Issue). To this end, a combined circular is being prepared and will be sent to shareholders in due course. 6. Shareholder Support Alexander Forbes has obtained an irrevocable undertaking from Mercer to vote in favour of the Subscription and Flip-Up. 7. Withdrawal of cautionary Shareholders are advised that further to this announcement, shareholders no longer need to exercise caution when dealing in Alexander Forbes securities.

7 Johannesburg 29 September 2016 Corporate Advisor and Transaction Sponsor PricewaterhouseCoopers Corporate Finance (Pty) Ltd. Legal Advisor to Alexander Forbes Bowmans Corporate Advisor to ARC UBS South Africa Proprietary Limited Legal Advisor to ARC Allen & Overy