The Rainbow Loans business unit was established some five years ago and after somewhat uncertain beginnings, has now established itself as a significant contributor to Group earnings.

As at August 2005, there were 59 retail outlets of which 26 are stand-alone and 33 are located in existing stores. A decision has been taken whereby the number of outlets is to be increased to 70 by August 2006 with the new outlets being located in regional type shopping centres being
developed in the areas in which Rainbow Loans operates, namely Gauteng, Northern Province, North West and Mpumalanga. A decision has also been taken to expand the operations into the Free State province.

Rainbow Loans is registered and complies fully with the Micro Finance Regulatory Council regulations. It is a niche business with a limited offering whereby initial loans through outlets are limited to R2 000 per borrower. Once borrowers have proved themselves, this offering may be increased to R4 000 with the maximum payment period of nine months. Loans to staff members are offered up to a maximum sum of R5 000, however, at slightly lower interest rates and for periods ranging up to 18 months, given the additional security available on these loans.

The Rainbow Loans division achieved its budgets in contributing R30,7 million to Group pre tax pro. t for the year to August 2005 (2004: R24,5 million) plus certain additional insurance revenues. During the year, the business unit produced positive cash flow of R21,8 million with the
return on equity at 40,6%.

On average, it takes around six months for outlets to become pro. table. Given the fact that a number of outlets were opened during the second half of the financial year, these should contribute to profitability during the first half of the new financial year and thus enable this business unit
to achieve further compounded growth of around 25% per annum in the year ahead.