For the Nedcor employee and management schemes black-controlled employee trusts will be created and funded directly by Nedbank, either by way of an interest-free loan or a grant as discussed in the Nedcor Employee Scheme. Dividends will be applied to paying down the capital portion of the loan, or distributed to beneficiaries in the case of grant-funded shares. Cash received on the exercise of share options will be applied to paying down the capital portion of the loan.

For all the other schemes, Nedcor has developed a mechanism which involves Nedcor issuing the scheme shares at or about par value to the various scheme participants. On the applicable termination dates for each scheme, Nedcor will be entitled to call back as many of the scheme shares as, based on their then market value, equate in value to the terminal balance of a notional calculation model. The notional calculation model will calculate at pre-agreed notional funding rates. The fundamental parameters of the structure for each of the schemes are set out below:

									Eyethu
					Black				Community
	Eyethu Corporate				Business		Eyethu Retail		Trust (non-
	Client Scheme				Partners		Client Scheme		grant element)
	Aka Capital		Other participants
Issue price of	Par		Par		2.5% of market		Par		Par
scheme shares					value
Upfront amount paid by underlying participants	Issue price		None (issue price funded on an arms length basis by Old Mutual)		Issue price		Effectively 75% of market value on allocation (par value into trust funded on an arms length basis by Old Mutual)		None (issue price funded on an arms length basis by Old Mutual)
Term	6 years		6 years		10 years		3 years		6 years
Notional	75% of		75% of		97.5% of		75% of		75% of
opening	market value		market value		market value		market		market value
balance							value
Notional rate	11.83%		11.83%		8.16% + 1.5% of		11.83%		11.83%
(fixed, NACA)					the market value
					at inception
Performance	Yes		No		Yes		No		No
adjusters

Further detail on the proposed structure will be furnished to shareholders in the forthcoming circular to shareholders, but the essential features of the structure are:

• creation of separate black-controlled vehicles as appropriate for the respective participants (“SPVs”);
• the subscription by those SPVs for ordinary shares in Nedcor at par value of R1.00 per share (in the case of the Black Business Partner SPVs, at a small premium to par value representing a 2.5% downpayment paid by the Black Business Partners). The par value payment in respect of the Corporate Scheme SPV (other than Aka Capital as per the note above), the Retail Scheme SPV and the Community Trust SPV will be Group funded, but not by Nedcor;
• the grant to Nedcor of a call option against the SPVs for a formulaically determined number of Nedcor ordinary shares held in the SPVs, exercisable on the termination date of the particular scheme at the same price per share at which the shares were issued to the SPVs;
• the application of the formula referred to above replicates the same economic consequences that would ensue if the Nedcor Transaction were funded by way of fixed rate preference share funding;
• the SPVs will be granted a call to acquire the same number of shares as acquired by Nedcor exercising its call at the then market value; and
• the effective obligatory re-investment of cash receipts (dividends and a portion of performance fees in the case of Black Business Partners) by recipients into Nedcor shares. In the case of dividends, Nedcor will, through the period of the schemes, undertake semi-annual capitalisation awards with a cash dividend election, and the participants will waive their cash dividend election upfront. In the case of performance fees, the Black Business Partners will be obliged to re-invest the cash portion in subscribing for new Nedcor shares.