000 14 bomaid 2013 annual reportbomaid.co.bw/.../2016/07/bomaid-annual-report-2013.pdf · annual...

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1Annual Report 2013

Contents Page

Board of Trustees ......................................................... 2 - 3

Chairperson’s Report .................................................... 4 - 6

Corporate Governance ................................................. 7 - 9

Principal Officer’s Report .......................................... 10 - 14

Group Annual Financial Statements and Annual Financial

Statements of the Society

General Information .....................................................16

Board’s Responsibility Statement ................................17

Independent Auditor’s Report ......................................18

Statements of Profit or Loss and Other Comprehensive

Income ................................................................ 19 - 20

Statements of Financial Position .......................... 21 - 22

Statements of Changes in Equity ........................ 23 - 24

Statements of Cash Flows ..........................................25

Significant Accounting Policies ............................ 26 - 32

Notes to the Financial Statements ....................... 33 - 55

Additional information not covered by the audit opinion:

Administration Expenses ............................................56

2 Annual Report 2013

Board of Trustees

Rebecca M. Mgadla

Board Chairperson

Rebecca Mgadla was appointed Chairperson of

the BOMaid Board of Trustees in July 2013 having

served on the BOMaid Board since 2008. She holds

a Bachelor of Commerce degree from the University

of Botswana and is a qualified Chartered Accountant.

She is a Fellow Member of the Association of

Chartered Certified Accountants (FCCA) and a

Fellow Member of Botswana Institute of Chartered

Accountants (FCPA). Her 30 years’ professional

experience spans across various leadership

positions in financial management and reporting

as well as in project management. She is currently

the Chief Financial Officer of the Botswana Power

Corporation (BPC) in charge of Corporate Finance

and also oversees the Strategy and Transformation

function.

Batsho Elite Nthoi

Deputy Chairperson

Batsho Nthoi holds a law degree (LLB) and an MA in

Politics and International Relations from the University

of Botswana as well an LLM in International Financial

Law from King’s College, University of London.

He is currently the Legal Counsel, Corporate

and Institutional Clients - Africa for Standard

Chartered Bank. Prior to that he was a junior

partner with Salbany and Torto Attorneys. Batsho

holds responsibilities in corporate organisations

and contributes to civil society on media freedom

issues and youth development having represented

Botswana in the Commonwealth Youth Caucus from

2005-2010.

Moraki Mokgosana

Ex-Officio

Moraki Mokgosana has been involved in the medical

aid industry since 2005 and served as a board

member and chairperson of Metropolitan Health

Botswana (Pty) Ltd until November 2013. Moraki

has held leadership positions with G4S Botswana

Limited, Collection Africa Limited and Credit

Reference Bureau where he served as Managing

Director. He worked as a Business Development

Executive for Botswana International Financial

Services Centre (now BITC) and has also held various

accounting positions with different multinationals. He

is a Trustee of the Kabelano Trust and also serves

on the boards of the Botswana Meat Commission

and Botswana Couriers and Logistics. Moraki holds

a Bachelor of Commerce (Accounting) Degree from

the University of Botswana and a Master of Business

Leadership from the School of Business Leadership

at the University of South Africa.

3Annual Report 2013

Board of Trustees

Gratian Rutta

Trustee

Gratian Rutta received an accounting

degree from the now St Augustine

University of Tanzania in 1978 and

has been a Fellow Certified Public

Accountant (FCPA) for 34 years.

He received his MSc in Financial

Management in 1987 and a Doctorate in

International Finance in 1990 from MEI

School of Management in Cambridge,

Massachusetts, USA. Gratian has

more than 27 years’ experience in

international finance, financial planning

and budgeting, project management,

management accounting and auditing.

He worked for the Government of

Tanzania, rising to Deputy Accountant

General, and for UNDP as Management

Consultant and Advisor. Since 2008

he has been the Senior Finance

Officer - Management Accounting for

the Southern African Development

Community (SADC) in Gaborone.

Macie Keneilwe Molebatsi

Trustee

Macie Molebatsi holds an MBA, a

BCom and Certificates in Management

Services and SAP Human Resource and

Administration. She has vast experience

in HR Management, having started her

career at the Botswana Institute of

Administration and Commerce (BIAC)

as a Management and Accountancy

lecturer in 1985. She proceeded to the

Institute of Development Management

(BLS) as Principal Consultant in

HR Management, Organisational

Development, Management Services

and Performance Management.

Macie worked for the Water Utilities

Corporation (WUC) for 26 years, rising

to Human Resources Director, before

taking early retirement in 2011. She

is the Managing Director of an HR

Consultancy company.

Evelyn Disele

Trustee

Evelyn Disele obtained an MSc in

Human Resource Management from the

University of Salford, UK, in 2004 and a

Bachelor’s degree in Social Sciences

with majors in Public Administration

and Accounting from the University of

Botswana in 1996. She is currently the

Human Resource and Administration

Manager at Water Utilities Corporation

(WUC), a position she has held for the

past four years. Prior to joining WUC

she worked for the public service for

fourteen years, primarily in the area of

Human Resource and Administration,

having joined as an Administration

Officer in 1997. She progressed up the

ranks until she left the service in 2011

while serving as Hospital Manager

(Finance and Administration). She is

currently the Alternate Chairperson

of the Board of Trustees of the Water

Utilities Corporation Pension Fund.

Jane M. Monyake

Trustee

Jane Monyake holds a Bachelor of

Commerce Degree from the University

of Botswana and an MSc in Business

Administration from the University of

Illinois, USA. She has attended numerous

seminars in management and leadership,

project appraisal and management,

financial restructuring and privatisation and

debt recovery management, broadening

her outlook and sharpening her analytical

and interpersonal skills. She has

worked for the Botswana Development

Corporation Limited (BDC) and during her

tenure she was seconded to the CEMAEF

Trust. In 2009 she joined Kwena Concrete

Products (Pty) Ltd as Chief Executive

Officer. She is currently a lecturer in the

Management Department, Faculty of

Business at the University of Botswana.

Since 1991 Jane has served on numerous

boards and currently sits on the boards of

Black Signature (Pty) Ltd, Goodnews Fire

Ministries, and Candy Mel Investments

(Pty) Ltd.


Chairperson’s Report

Introduction

BOMaid strategic focus is premised on the 2012 Organisational

Reinvention (OR) project initiatives. Central to the OR was the formation

of Southview as a 100% owned subsidiary of BOMaid and the creation of

a new corporate structure which came into effect in January 2013.

In terms of the OR, this year should be regarded as the first review for the

project. This has been the period where those decisions were vetted and

achievement of targets assessed.

The measure of achievement focuses on sustainable growth and, in this

regard, the medical aid business has two key performance indicators:

Firstly, it is the number of members and number of lives covered.

Secondly, an assessment of the extent to which the provider is working

with the best interests of the members in mind, and whether members’

needs are being satisfied. The two are directly linked, as the successful

recruitment and retention of members is fundamentally dependent on the

extent to which members’ best interests are served.

Achievement of these performance indicators requires operational

efficiencies. In order that BOMaid remains focused on its core function of

caring for the health of its members, it is essential that non-core functions

do not impede this goal. The purpose of Southview, therefore, is not only

to administer the fund but also to serve as an investment vehicle that

can leverage on opportunities to venture into value chain businesses that

enhance the health of its members. The vision for Southview is, therefore,

to take the Society’s service provision “Beyond Health Care” and, hence,

it focuses on offering members a comprehensive wellness provision

package under one roof.

Governance

A number of changes to the Board occurred during the year. Sheila

Sealetsa, Abel Bogatsu (Chairman) and Steven Bogatsu retired as their

term came to end, while Matlhogonolo Mponang resigned as at 11th

November 2013 and was replaced by Evelyn Disele of Water Utilities

Corporation. I was elected Chairperson while Batsho Nthoi was elected

Deputy Chairperson from July 2013. As a result of these changes, the

Board of Trustees operated with seven members for the last half of the

year. I will retire from the Board in June 2014 when my maximum two

terms of three-years each come to an end.

5Annual Report 2013

Chairperson’s Report (cont.)

On the 1st December, 2013 Dennis Alexander stepped down as Acting Principal Officer and Ex-Officio Board member. Moraki Mokgosana was appointed to the substantive position of Principal Officer, tasked with bringing about the various changes approved by the 2012 AGM, including modifications to the Board structure, introducing corporate governance structures, overseeing the service level agreement with Southview and the performance of the Group. The Principal Officer will also assist the Board in determining the appropriate composition and rules for appointing Board members as well as the development and monitoring of the BOMaid Group policies.

Where are we?

A reorganisation exercise can be problematic and often leads to some discomfort as well misalignment among stakeholders. One fundamental issue to acknowledge is that the BOMaid member may struggle to differentiate between BOMaid and Southview, and in recognition of this, the Board has continuously taken measures to address the issue through the relevant governance structures. The envisaged modus operandi is one that furnishes the Principal Officer (PO) with the requisite resources to sell BOMaid as a group while effectively monitoring the mandate of subsidiaries for goal congruence. Therefore the current phase of the reorganisation focuses on ensuring that communications at BOMaid occurs at a level that recognises the group structure and channels all communication through BOMaid.

A thorough reflection on the role of the PO reveals that it remains a central conduit on all matters of strategy, financing and administration. Key performance areas are investment management; strategy formulation and implementation; preparation and submission of annual budgets and reports; management of third party contracts; stakeholder relationship management; regulatory compliance and taking charge of the secretarial function of the Board of Trustees.

What remains critical at this juncture in the transition is to resource the structure under the BOMaid PO to ensure that all the Society’s core activities can be performed effectively, while complementing the efforts of the subsidiaries and observing the principles of sound governance. The PO will be the main driver of the Society’s policies, programs and projects, which must cascade down to subsidiaries. The subsidiaries on the other hand, should support the PO by working towards a common goal. As the transition process is still in the gestation phase, to date some of these structural particulars may have been compromised. However, the Society cannot afford for the status quo to continue and the task of the new Chairperson will therefore be to ensure that the PO’s office is fully resourced to carry out its mandate.

Actual performance

The following review highlights the progress achieved to date in attaining

milestones set out in the strategic plan. The roadmap for reorganising

BOMaid is summarised below:

Milestone Status

Development of a 5 Year (2012 – 2016) strategy

reflecting the new business model (2011)

√

Developing the Southview Business Model (2011) √

Board Review and Approval (2011) √

General Membership Endorsements (June 2012) √

Implementation (2013) Ongoing

The milestones can be further examined in terms the attainment of

strategic objectives:

Strategic Objective Status

Establish a 100% Society owned

entity to take over fund administration

and engage in other business related

activities

Completed. Southview has been

established and has taken over fund

administration

Amend Constitution of the Society Completed

Change the composition of the Board The Board has been restructured and

is now a Board of Trustees

A Board of Directors has been

appointed for Southview and is now

in place

To appoint a Principal Officer who is

not the Chairman of the Board

The Principal Officer for BOMaid has

been appointed

Structural Reorganisation - Implementation

The first step in the structural reorganisation process was the establishment

of Southview. What followed was a successful split and transition

process, as relevant resources were transferred to the new entity. A few

teething problems relating to staff changes were handled successfully

and Southview commenced operations in January 2013. Southview was

capitalised to the value of P41m, which included the value of the transfer

of the MRI shareholding, the value of operating assets, working capital and

a capital budget for 2013.


Chairperson’s Report (cont.)

Initial Southview operations include the administration of the BOMaid fund,

the transfer and integration of MRI, and the launch of a new latex products

manufacturing & medical equipment supplies manufacturing business,

Alpha Access. Opportunities for the expansion of Southview activities

include potential additional fund administration contracts, the creation

of a pharmaceutical wing and integrated healthcare services under MRI,

as well as expansion of Alpha Access’ product range to include medical

gloves, medical appliances and equipment.

The Health Balance Sheet

It is essential for the success of the structural reorganisation that BOMaid

is able to clearly demonstrate that the fund administration wing was

established in the interest of the members. In pursuit of sustainability,

BOMaid needs to be seen to move away from focusing on an ordinary

financial balance sheet, like a commercial business, and to look instead at

a Health Balance Sheet as a measure of its performance. This is the most

effective way of satisfying and retaining current members while attracting

new ones.

Statistics alone can be misleading and may be unable to identify whether

member numbers are based on proactive initiatives and not on choice but

merely on a default perceived loyalty. Statistics are unable to differentiate

between new members who were ‘born in BOMaid’ and who subscribe to

the notion “better the devil you know”, and those who have been attracted

to BOMaid by specific interventions, service delivery and accrued good

will. Statistics should therefore not only reflect the strength of brand

loyalty, but also the continued efforts and initiatives of the Society and its

stakeholders. “Better the devil you know” should not be a business model

that Society espouses. For these reasons, the Society must clearly step

up to the next level and gauge its success in relation to a health balance

sheet.

Another important aspect of the Society’s self-evaluation is its membership

of the Health Funders Association of Botswana (HFAB) which allows

BOMaid to keep abreast of all current issues and industry trends, thereby

ensuring that the Society works towards attaining the best standards in

service provision while competing fairly in the marketplace. To this end,

BOMaid Trustees, subsidiaries and executives actively participate in

interventions conducted through this body to ensure that the Society’s

policies and strategies are aligned with global trends.

Acknowledgements

I would like to take this opportunity to thank Sheila Sealetsa, Abel

Bogatsu, Steven Bogatsu and Matlhogonolo Mponang for their invaluable

contributions during their various terms. I also extend a warm welcome

to Evelyn Disele who was appointed to the Board towards the end of the

year. The Board of Trustees is not yet fully up to strength and the Board has

dedicated a lot of time and effort to identify candidates with the requisite

skills. The appointment of the additional Trustees has taken longer than

anticipated. Some members, therefore, only joined the Board after the turn

of the year.

This year also marks the re-assignment of Dennis Alexander as the CEO

(and more recently as Acting PO) of BOMaid under the old structure, to

CEO of Southview. We wish him well in his new role and acknowledge

the pivotal part he has played over the years to bring the Society to the

position of strength it finds itself in today.

At the same time I ask you to join me in welcoming Moraki Mokgosana

to the position of Principal Officer. Moraki has eight years’ experience in

the medical aid industry and has held leadership positions in a number of

organisations. I wish him every success in the very challenging role he will

play in heading the Group.

May I take this opportunity to thank my fellow serving BOMaid Trustees,

the Board and Management of Southview and the other subsidiaries as

they continue to deliver on the mandate of going beyond healthcare.

I would also like to take this opportunity to say goodbye as I will be

stepping down from the Board in June 2014. It has been an honour and

a pleasure to serve you, the members. I wish the incoming Chairperson

and the Board of Trustees every success in attaining the Society’s vision

for the future.

Last but not least, my thanks to the members of BOMaid. Without your

loyalty and support there would be no Society. I assure you that your

Board of Trustees strives at all times to protect not only your health but

also your wider interest.

Rebecca M Mgadla

Chairperson of the Board of Trustees

7Annual Report 2013

Corporate Governance (cont.) Corporate Governance

Corporate Governance

A key element of the implementation of the structural reorganisation of the

Society is that the Board was changed from a Board of Management to a

Board of Trustees. All appointments to the Board at the 2013 AGM were

made in line with the new Board composition and structure.

The Botswana Medical Aid Society subscribes to the doctrine of good

Corporate Governance. Accordingly, and in line with the rules of the

Society, the Board is ultimately accountable to the Members of the

Society. In recognition of this responsibility, the Board has committed itself

to the highest standards of Corporate Governance through adhering to a

Board Charter which outlines the Board’s responsibilities These include

setting the Society’s strategic direction, developing key policies, approving

the budgets, monitoring implementation of the approved strategy and

ensuring that there is full compliance with all regulatory requirements.

These responsibilities are achieved through a systematic process of

comprehensive reporting to the Board by Management, and the Board is

ultimately responsible for ensuring that reporting standards conform to the

principles laid out in the Society’s Book of Rules.

Board Structure

In accordance with the Society’s Constitution, the Board is composed

of ten Trustees from the representatives of the Society’s Constituent

Bodies, elected and appointed to the Board by the General Membership

of the Society. The Board further includes one Ex- Officio Member, being

the Principal Officer of the Society who is appointed by the Board. The

elected Trustees serve for a maximum of two terms of three years each.

A Chairperson and Deputy Chairperson is elected from among the ten

Trustees.

During the year under review, Sheila Sealetsa, Abel Bogatsu and Steven

Bogatsu retired from the Board as their term came to end. Matlhogonolo

Mponang retired in November 2013 and was replaced by Evelyn Disele.

Rebecca Mgadla was elected Chairperson and Batsho Nthoi was elected

Deputy Chair from July 2013. As a result of these changes, the Board of

Trustees operated with seven members for the last half of the year. The

Chair will retire from the Board in June 2014 when her maximum two terms

of three-years each come to an end.

On the 1st December, 2013 Dennis Alexander stepped down as Acting

Principal Officer and Ex-Officio Board member and Moraki Mokgosana

was appointed Principal Officer. The Principal Officer attends Board and

Board Committee meetings in an ex-officio capacity.

Board Composition

The following Trustees served on the Board during the year:

Mrs R Mgadla Chairperson

Mr B Nthoi Deputy Chairperson (From July 2013)

Mr S Bogatsu Trustee (Retired 28th June 2013)

Ms S Sealetsa Trustee (Retired 28th June 2013)

Mr A A Bogatsu Trustee (Retired 28th June 2013)

Mrs M Molebatsi Trustee

Mrs J Monyake Trustee

Mr G Rutta Trustee

Ms E Disele Trustee (Appointed 11th November 2013)

Ms M Mponang Trustee (Retired 11th November 2013

Mr D Alexander Ex-officio (Retired 1st December 2013)

Mr M Mokgosana Ex-officio (Appointed 1st December 2013)

Board Meetings

The Board is required to meet at least four times a year. During the year,

the Board met seven times.

Board Attendance Register 2013

Name 15/03 07/06 25/06 04/07 18/09 06/11 18/12

R M Mgadla P P A P P P P

A A Bogatsu P P P N/A N/A N/A N/A

S M Sealetsa A A P N/A N/A N/A N/A

S Bogatsu P N/A N/A N/A N/A N/A N/A

M K Molebatsi A P P P P P P

J M Monyake A P A P P P P

G Rutta P P P A A P P

B Nthoi A A A A P A P

M Mponang P P A A P N/A N/A

E Disele N/A N/A N/A N/A N/A N/A P

P- Present A-Absent/Apology N/A-Not Applicable/Trustee not on Board


Corporate Governance (cont.) Corporate Governance (cont.)

Board Committees

In line with the standards of good Corporate Governance, the Society’s

Constitution and the Board Charter provide for the establishment of

designated Board Committees, in order to assist the Board to deliver on its

mandate. Where it deems fit, the Board can delegate some of its powers to

these designated Committees. In delegating its powers, the Board ensures

that such delegated authority is express. The Committees recommend

their final decisions to the Board. This, however, does not transfer any

of the responsibilities of the Board to the respective Committees, and

the Board remains ultimately accountable to the Members of the Society.

During the year under review, the Board had three Committees; and in line

with the Constitution the Chairperson sat on none of these.

Finance, Risk and Audit Risk Committee

Gratian Rutta Chairperson Steven Bogatsu Member (Until June 2013)Rebecca Mgadla Member (Until June 2013)Abel Bogatsu Member (Until June 2013)Macie Molebatsi Member (From December 2013)Jane Monyake Member Dennis Alexander Ex-officio (Until 1st December 2013)Moraki Mokgosana Ex-officio (From 1st November 2013)

The Finance, Risk and Audit Committee comprises at least three members. The main function of this Committee is to assist the Board in discharging its duties of ensuring prudent management of financial matters and managing risks facing the Society. The Committee continuously reviews reports on the management of internal controls, risk management and management accounts and makes the requisite recommendations for approval by the Board.

Financial ReportingThe Committee assists the Board of Trustees with all financial reporting and reviews the annual financial statements as well as preliminary announcements and interim financial information. It further provides the Board with its views on a regular assessment of the financial status of the Group and regularly reviews the appropriateness of the capital structure. The Committee specifically oversees financial reporting risks and internal financial controls as they relate to financial reporting.

The Committee also reviews and, where necessary, challenges the annual financial statements as well as interim and preliminary announcements

before their submission to the Board for approval.

AuditingWith regard to Auditing, the Committee is required to:

the internal control systems, accounting practices, information systems

and auditing processes applied in the day-to-day management of the

Society in compliance with all applicable legal requirements, corporate

governance and accounting standards.

and the internal and external auditors.

review and approve the engagement of the external auditors for non-

audit work.

Risk AssessmentThe Finance, Risk and Audit Committee reviews the risk register in which

all key operational and financial risks affecting the business are recorded.

New risks, if and when identified, are added to the register while others

fall away over a period of time. The role of Risk Assessment is to enhance

the organisation’s ability to manage, and not necessarily avoid or eliminate

every risk, but to ensure that the overall risk profile remains acceptable.

Attendance Register

Date of Meeting 11-Mar-13 06-Jun-13 18-Jun-13 25-Oct-13 17-Dec-13

Gratian Rutta A P A P P

Rebecca M Mgadla P P P N/A N/A

Jane Monyake A P P P P

Steven Bogatsu P N/A N/A N/A N/A

Macie Molebatsi N/A N/A N/A N/A P

Abel Bogatsu A P N/A N/A N/A

P- Present A-Absent/Apology N/A-Not Applicable/Member not in

Committee

Staff Welfare and Compensation Committee

Matlhogonolo Mponang Chairperson (Until November 2013)

Jane Monyake Member

Rebecca Mgadla Member

Macie Molebatsi Member

Batsho Nthoi Member

Dennis Alexander Ex-officio (Until 1st December 2013)

Moraki Mokgosana Ex-officio (From 1st December 2013)

9Annual Report 2013

Corporate Governance (cont.) Corporate Governance (cont.)

The function of this Committee is to advise the Board on Human Resources

policies and strategies, including remuneration and the appointment of

officers of the Society and the Group. The Committee is charged with

scrutinising and offering counsel on the status of the Society’s human

intellectual capital and the transformation processes regarding workforce

skills development. In particular, the Committee evaluates succession

planning and endorses executive appointments.

This Committee is also responsible for reviewing the remuneration policies

of the Group. In awarding annual increases to employees, consideration

is given to an employee’s performance as well as economic conditions

impacting the industry and geographical market in which the Society

operates.

Attendance Register

Date of Meeting 22-May-13 05-Jun-13 18-Jun-13 22-Jun-13

Matlhogonolo Mponang A P A A

Jane Monyake P A P A

Macie Molebatsi P P P P

Rebecca Mgadla P P P P

Batsho Nthoi A A A P


Committee

Appeals and Service Quality Committee

Sheila Sealetsa Chairperson (Until June 2013)

Macie K Molebatsi Member

Gratian Rutta Member

Matlhogonolo Mponang Member

Batsho Nthoi Member

Evelyn Disele Member (From November 2013)

Dennis Alexander Ex-officio (Until 1st December 2013)

Moraki Mokgosana Ex-officio (From 1st December 2013)

This Committee assists the Board in carrying out its responsibility to assess

appeals from the Society’s Members and to foster a culture of service

excellence. The Committee ensures that the Society fulfils its mission of

providing competitive and diverse health care funding through innovation

and service excellence while at the same time maintaining an appropriate

balance between compassion, fairness and fiscal realism.

Attendance Register

Date of Meeting 12-Mar-13 24-Jun-13 10-Sep-13 25-Oct-13 17-Dec-13

Sheila M Sealetsa P P N/A N/A N/A

Macie K Molebatsi P P P P P

Gratian Rutta A P A A A

Matlhogonolo

Mponang

A A P P N/A

Batsho Nthoi A A P P P

Evelyn Disele N/A N/A N/A N/A P


Committee

Board Remuneration

Remuneration for Board members is calculated according to the stipulated

sitting rates and compensation for members was as follows for the year

under review:

2013 Board Fees

R M Mgadla 17,220.00

A A Bogatsu 5,670.00

S M Sealetsa 1890.00

S Bogatsu 1365.00

M K Molebatsi 15,015.00

J M Monyake 10,080.00

G Rutta 8,715.00

B Nthoi 8,400.00

M Mponang 3,780.00

E Disele 1,260.00

BWP 73,395.00

Remuneration above includes compensation for Trustees’ attendance at

committee meetings. The breakdown of remuneration by meeting type is

as follows:

Board 29,400.00

Appeals and Service Quality Committee 6,510.00

Finance, Audit & Risk Committee 5,880.00

Staff Welfare Committee 5,355.00

Other Assignments 24,360.00

AGM 1,890.00

BWP 73,395.00


Principal Officer’s Report

Introduction

Following a momentous year on the journey of the BOMaid transformation,

in 2013 the Society focused on implementing the reorganised structure

which had been approved by the Membership during 2012, and came

into effect on 1st January 2013. On this date, all staff and relevant

resources were transferred to Southview (Pty) Ltd, the 100% BOMaid

owned business subsidiary set up by the Society. This transfer formed

part of the capitalisation of Southview which was capitalised at P41m.

The overall operating performance reflects that, during the year, the

Society experienced an increase in claims pay-outs, resulting in an

operational deficit of P12.2m. This represents an increase on the P8.3m

deficit recorded in 2012. The Group operating surplus increased from a

P6 million deficit in 2012 to a surplus of P2.3m.

General Economic Overview

In his budget speech for 2014, The Honourable Minister of Finance and

Development Planning, Kenneth Matambo, noted appeals for Government

to address shortcomings that inhibit private sector investment and local

industry development. However, against a background of weakening

demand for Botswana diamonds in both the advanced and emerging

economies, the growth of the domestic economy had decreased from

6.1% in 2011 to 4.2% in 2012. The decline in the mining sector was partly

offset by a strong performance of some non-mining sectors including

construction; social and personal services; and finance and business

services. The non-mining sectors had also shown resilience during the

2008-09 economic downturn and were expected to continue to grow in

2014.

Despite the improving economic indicators, the market environment

remained challenging. Domestic inflation decreased from 7.4% in

December 2012 to 4.1% in December 2013 which was within the Bank

of Botswana’s objective range of 3 – 6%. Despite the reduction in general

inflation, health inflation was reported by Statistics Botswana to be higher

than the national rate of inflation at 5.5% for the year - though this was

below the 8.8% figure reported in 2012. It is anticipated that health

inflation will continue to outpace consumer price and earnings inflation

in the future.

Government has decided to reduce the age of consent for HIV testing

from 21 to 16 years of age. Government is also developing a Health

Funding Strategy to help find alternative means of funding the health care

11Annual Report 2013

Principal Officer’s Report (cont.)

system and to explore ways of containing costs in health service delivery.

These initiatives will create opportunities for the BOMaid Group to contract

Public Private Partnerships (PPP’s) in the delivery of health services.

Medical aid sector growth in 2013 was a modest of 1.4%. Against this

backdrop, the 8.4% growth in the Society’s membership during the year

was very encouraging. It must be noted that the medical aid market

in Botswana has matured and is becoming increasingly competitive.

Consequently, the Society has to ensure that its product and service

offerings continue to eclipse those of the other market players so as to

continue to attract new members.

The Society remains exposed to foreign exchange fluctuations, particularly

with regard to pharmaceuticals and outpatient consultations, as around a

quarter of its costs are in non-Pula currencies.

BOMaid continues to review its operations and governance structures in

anticipation of a regulatory environment and the promulgation of guidelines

for medical aid funds to be introduced by the Non-Bank Financial Institutions

Regulatory Authority (NBFIRA). The reorganisation of the Scheme and the

milestones that were achieved during the year form a key component in

steering BOMaid into a regulated regime.

Group Performance

Total revenue for the twelve months ended December 2013 was 17% up

on prior year at P482.6m. Subscription income amounted to P409.2m, up

from P346.1m in 2012; while revenue from the Ministry of Health Public

Private Partnership contract was up just over 1% at P39.8m. The Wellness

Program remained flat at P1.7m. Subsidiaries contributed a further P31.9m

to revenue resulting in a contribution surplus before tax of P17.5m for the

year.

Total cost of services for the group, inclusive of PPP and direct costs,

was P425.7m against P370.9m in 2012 – an increase of 14.8%. The

contribution surplus was up 38.4% from P41.1m to P56.9m, while

administration expenses for the group (including depreciation) increased

by 16.1% from P47.8m in 2012 to P55.5m.

The group operating surplus was P2.3m against a P6m deficit reported in

2012. Interest and dividend income increased from P10.2m to P15.3m.

Taxation increased from P0.5m to P2.9m largely due to corporate tax on

Southview. Surplus after tax increased from P3.7m to P14.6m. Income on

revaluation of investments grew from P15.7m in 2012 to P37.8m.

Cash and cash equivalents at the end of the year stood at P41.5m, down from P45.6m in 2012, illustrating a bigger outflow due to increased claim pay-outs and the capitalisation of Southview. Accumulated group reserves grew from P283.7 in 2012 to P329.8m in 2013, with the number of months’ claim cover reducing to 11 months from 13 months.

The Society

Financial Performance

Despite new entrants in the medical aid industry and sustained pressure from competing schemes, the Scheme membership continued to grow in 2013. The year ended with a total billable membership at 38 832, and a total of 85 410 lives covered, increases of 8.4% and 4.8% respectively over prior year.

Income for the Society grew by 17% in 2013 to P450.7m from P386m in 2012. Total claim pay-outs, including the Special Benefit Fund, were P411.1m against P357.9m for the prior year. The administration fee paid to Southview amounted to P44.6m or 10.9% of subscription income, while total administration expenses increased by 39% from P37.1m to P51.7m. The total claims cost-to-subscriptions income ratio for the year reduced from 93% to 91%.

The Society realised an operating deficit of P12.2m compared to a P8.3m deficit in 2012. The net revaluation of investments was P37.8m, up from P15.7m; and total comprehensive income was up from P17.1m in 2012 to P45.3m. At year end, cash and cash equivalents stood at P31m, down from P38.1m the year before.

Service Delivery

Member Expectations

The core business of a medical scheme differs from banking and insurance in that it focuses beyond savings to caring for the welfare of clients. Medical schemes must, therefore, develop strategies for actively promoting the well-being of their members.

The emerging trend is for a paradigm shift towards the balancing of the financial performance of the scheme with the enhancement of the wellbeing of, and the provision of support to their members; and reporting accordingly. In essence, a medical scheme assumes direct responsibility for the health of its members, effectively replacing the government authorities. Members of medical schemes have been found to distinctly prefer private service providers over public facilities. This preference places them closer

to medical schemes which play the role of a surrogate Ministry of Health.


In line with these trends, BOMaid’s strategic thrust is expected to introduce

a review of member benefits towards the achievement of the following

outcomes:

The graph below illustrates the ideal balance between the extent of

contributions made by members and the value they obtain for the scheme.

Medical schemes must strive to provide the greatest value to members at

the lowest cost.

The Health Balance Sheet

Reporting Requirements for Governance

The traditional focus of medical schemes has been on ensuring strong

financial performance. This has led the schemes to pay more attention to

financial performance indicators at the expense of health performance. The

Financial Performance Balance Sheet includes Income and Expenditure,

Cash Flow, and Investments Statements, as well as Reserve and Claim

ratios. The Health Performance Balance Sheet that must be developed by

medical schemes places emphasis on the following:

Impact Disease Burden

Life expectancy Prevalence

Current risk

Death rates Incidence

Crude Future risk

Normalised crude Always risk

Infant Always need two values

Under 5 years

Maternal

In hospital

Future risk

Always risk

Always need two values

Death distribution

As seen above, the main thrust of the Health Balance Sheet is to measure

indicators that show the state of health of members, the prevalence of

conditions and potential health risks. The underlying premise is that health

risks must be managed before they occur to mitigate their exposure on the

scheme, as these risks are ultimately borne directly by the scheme.

In order to better appreciate and monitor health risks, an important set of

indicators is tracked and monitored by the Health Quality Assurers (HQA)

and includes:

1. Flu vaccine coverage showing the update of this vaccine

2. Prevalence of chronic illnesses: asthma, diabetes, hypertension

and HIV

3. Proxy medicine compliance

4. Health cash flow showing current managed care and utilisation

costs including,

- Admissions per 1000

- Days per 1000

- Visits per 1000

- MRI per 1000

5. Health investment

- Preventive care benefits provided

- Preventive care benefits utilised


Value



6. Screening

- Mammogram coverage every 2 years (50-74 year-olds)

- Cervical Cytology coverage every 3 years (20-65 year-olds).

- Colorectal cancer screening age >=50.

- Dentistry consultations >2 years.

- Circumcision <1 years (%).

- Glaucoma screening >=65.

- Bone density coverage.

- Flu vaccine age >=65.

- Pneumococcal coverage >65.

Put briefly, the two major challenges for medical schemes are:

i. i. To fully understand the expectation of their member so that they

are responsive to changing needs, and

ii. To implement a well-developed reporting system that tracks

important indicators which provide inputs to decision making and

governance.

Through the successful organisational transformation, and by allowing itself to focus on its primary function, the Society has placed itself firmly on the path of meeting these two challenges.

Product Enhancements

Hospital Benefits

Going into 2013, the Society recognised that hospital benefit limit levels

were adequate and these were left largely unchanged, but a number of

adjustments were made within the individual subcategories. Benefit limits

for professionals, laboratory, radiology and neonatal hospitalisation were

increased across all schemes.

Severe Illness Cover

The recently introduced Severe Illness Cover pays out a cash amount

which can be utilised by eligible members to meet whatever associated

expenses they may have. This offering is covered by a third party insurer.

The benefit pays a fixed lump sum cash payment on diagnosis of various

pre-defined severe illnesses. The sum insured is P20 000 for adults and

P4 000 for child dependents.

Chemotherapy, Radiation Therapy and Renal Dialysis

Chemotherapy, radiation and renal dialysis benefits were restructured

to accommodate the related laboratory and radiology requirements of

members. As a result the associated laboratory and radiology needs

of affected members are now covered more adequately. In order to

accommodate these changes, the benefit limits for chemotherapy,

radiation therapy and renal dialysis were increased by more than 60%.

Chronic Disease Cover

In order to reflect the changing profile of the Society’s membership, the list of chronic conditions included under the Chronic Disease Cover was increased by nine new conditions, from 19 to 28. This extended benefit reflects BOMaid’s commitment to provide the best affordable chronic disease cover to its members.

Appliances Benefit

The appliances benefit was expanded to include previously excluded appliances such as stoma products including colostomy bags and skin care accessories, continuous positive airway pressure (CPAP) machines and portable home oxygen dispensers.

Consultation Benefit

The consultation benefit was increased by about 30% across all schemes to allow for more consultations per year.

Physiotherapy Benefit

The benefit limit for physiotherapy was doubled in recognition of the inadequacy of the previous limits and in line with the Society’s continuous reassessment of limit appropriateness.

Dentistry

The dentistry benefit was restructured to relocate dental procedures into the in-hospital benefit in order to allow for greater cover. Basic dentistry limits were also increased up to the overall annual limit in order to improve access to primary dental care so as to prevent more complex and costly dental procedures.

Systems

In its efforts to improve overall service delivery, the Society, through its administrator, continued to enhance and integrate operating systems during the year.



Human Resources

As a result of reorganisation, BOMaid now has only one employee, the Principal Officer. However the Society retains control of its operations through a service level agreement with the fund administrator, Southview. My office is tasked with developing an operating structure that will ensure that there are sufficient resources in place for adequate oversight over the management of relationships and service levels with members and service providers through Southview.

Customer Service

The Society conducted a customer satisfaction survey in the second half of 2013. This exercise has provided an ideal platform to interact with key stakeholders and reflect on how BOMaid’s value proposition to members could be enhanced.

We would like to thank the members who participated in this survey and to assure them that their input provides useful insight in informing our strategic initiatives going forward.

Future Outlook

As we transform our customer outlook to “Beyond Healthcare” the Botswana Medical Aid Society will continue to take the lead as a trustworthy medical aid service provider and to enhance our health balance sheet by offering innovative healthcare solutions.

Our investment in Southview and other healthcare related projects is critical to offering our members a return on investment from both a financial perspective – in terms of a reduced burden on healthcare costs - and from a health balance sheet perspective.

BOMaid will continue to work with key stakeholders and service providers to ensure that our products and benefits remain relevant in the market. The Group will also continue to develop robust governance structures in line with international best practice in preparation for impending regulatory reform.

Conclusion

I would to conclude by thanking you, the members, for the confidence you continue to demonstrate in the Society, and to assure you that the continuing implementation of our strategy will enable us to not only remain your trusted medical aid partner, but also by “going beyond health care” to always put your wellness first.

Thank you.Moraki MokgosanaBOMaid Principal Officer


Contents PageGeneral Information ............................................................16

Board’s Responsibility Statement .......................................17

Independent Auditor’s Report .............................................18

Statements of Profit or Loss and Other Comprehensive

Income ....................................................................... 19 - 20

Statements of Financial Position ................................ 21 - 22

Statements of Changes in Equity .............................. 23 - 24

Statements of Cash Flows..................................................25

Significant Accounting Policies ................................... 26 - 32

Notes to the financial statements ............................... 33 - 55

Additional information not covered by the audit opinion:

Administration Expenses ...................................................56

Group Annual Financial Statements

and Annual Financial Statements of the SocietyFor the year ended 31 December 2013


BOARD OF TRUSTEES

R M Mgadla (Chairperson)

S M Sealetsa (Retired 28th June 2013)

A A Bogatsu (Retired 28th June 2013)

M K Molebatsi

J M Monyake

G Rutta

B E Nthoi

E Disele (Appointed 11th November2013)

M Mponang (Retired 11th November 2013)

S Bogatsu (Retired 28th June 2013)

D J Alexander (Retired 1 December 2013)

PRINCIPAL OFFICER

Moraki Mokgosana

SECRETARY

S T Molodi

PRINCIPAL ACTIVITY

The Society raises funds from and grants assistance to its members

and their dependants to defray medical expenses.

BUSINESS ADDRESS

Plot 50638, Fairgrounds Office Park, Gaborone

AUDITORS

KPMG

Plot 67977, Fairgrounds Office Park

Off Tlokweng Road

PO Box 1519, Gaborone

Botswana

BANKERS

Standard Chartered Bank Botswana Limited

First National Bank of Botswana Limited

Barclays Bank of Botswana Limited

Stanbic Bank of Botswana Limited

African Banking Corporation of Botswana Limited

General Information


EVENTS AFTER THE REPORTING DATE

The Board is not aware of any matter or circumstance arising since the end of the financial year, not dealt with in this report or these financial

statements which would have a material impact on the financial results or operations of the Society.

The Board of Trustees (“the Board”) is responsible for the preparation and fair presentation of the group annual financial statements and annual

financial statements of Botswana Medical Aid Society (“the Society”), comprising the statements of financial position at 31 December 2013, and the

statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant

accounting policies and other explanatory information, in accordance with International Financial Reporting Standards and in the manner required by

the Society’s Rules and the Societies Act of Botswana.

The Board is also responsible for such internal control as the Board determines is necessary to enable the preparation of financial statements that

are free from material misstatement, whether due to fraud or error and for maintaining adequate accounting records and an effective system of risk

management, as well as the preparation of the supplementary schedule included in these financial statements.

The Board has made an assessment of the ability of the Society and its subsidiaries to continue as going concerns and have no reason to believe

these businesses will not be going concerns in the year ahead.

The auditor is responsible for reporting on whether the group annual financial statements and annual financial statements of the Society are fairly

presented in accordance with the applicable financial reporting framework.

Approval of the group annual financial statements and annual financial statements of the Society:

The group annual financial statements and annual financial statements of the Society, as identified in the first paragraph, were approved by the Board

on 06 June 2014 and signed on its behalf by:

G RUTTA R MGADLA M MOKGOSANA

FINANCE SUB-COMMITTEE BOARD CHAIRPERSON PRINCIPAL OFFICER

Board’s Responsibility Statement For the year ended 31 December 2013


Independent Auditor’s Report

We have audited the accompanying consolidated annual financial

statements and annual financial statements of Botswana Medical Aid

Society, which comprise the consolidated and separate statements

of financial position at 31 December 2013, and the consolidated

and separate statements of profit or loss and other comprehensive

income, changes in equity and cash flows for the year then ended, and

a summary of significant accounting policies and other explanatory

information, as set out on pages 19 to 55.

Board’s Responsibility for the Financial Statements

The Board is responsible for the preparation and fair presentation of

these financial statements in accordance with International Financial

Reporting Standards and in the manner required by the Society’s Rules

and the Societies Act of Botswana, and for such internal control as the

Board determines is necessary to enable the preparation of financial

statements that are free from material misstatement whether due to

fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements

based on our audit. We conducted our audit in accordance with

International Standards on Auditing. Those standards require that we

comply with ethical requirements and plan and perform the audit to

obtain reasonable assurance about whether the financial statements

are free from material misstatement.

An audit involves performing procedures to obtain audit evidence

about the amounts and disclosures in the financial statements. The

procedures selected depend on the auditor’s judgment, including

the assessment of the risks of material misstatement of the financial

statements, whether due to fraud or error. In making those risk

assessments, the auditor considers internal controls relevant to the

entity’s preparation and fair presentation of the financial statements

in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on

the effectiveness of the entity’s internal control. An audit also includes

evaluating the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by management, as

well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of,

the consolidated and separate financial position of Botswana Medical

Aid Society at 31 December 2013, and its consolidated and separate

financial performance and its consolidated and separate cash flows

for the year then ended in accordance with International Financial

Reporting Standards and in the manner required by the Society’s Rules

and the Societies Act of Botswana.

Supplementary Information

The supplementary schedule set out on page 56 does not form part

of the financial statements and is presented as additional information.

We have not audited this schedule and accordingly we do not express

an opinion on it.

KPMG

Certified Auditors

Place: Gaborone

Practicing Member: Francois Roos (20010078:45)

Date: 06 June 2014

Chartered Accountants

Plot 67977, Off Tlokweng Road,

Fairground Park

P O Box 1519, Gaborone, Botswana

Telephone +267 391 2400

Fax +267 397 5281

Web http://www.kpmg.com

To the members of Botswana Medical Aid Society


Statements of Profit or Loss and Other

Comprehensive Income For the year ended 31 December 2013

Group Society

Notes 2013 2012 2013 2012

Continuing operations Revenue Revenue from contracts 32,967,160 26,058,916 - - Subscriptions received 408,181,959 346,115,146 409,215,689 346,944,524 Ministry of Health PPP revenue 39,719,640 38,103,604 39,719,640 38,103,604 Wellness Program income 1,739,346 1,749,878 1,739,346 1,749,878 482,608,105 412,027,544 450,674,675 386,798,006 Cost of Services Benefits paid - Dental (15,556,579 ) (13,888,130 ) (15,556,579 ) (13,888,130 )- Hospital (141,436,589 ) (128,179,201 ) (141,436,589 ) (128,179,201 )- Consultation, drugs and rehabilitation (133,747,894 ) (118,024,211 ) (133,747,894 ) (118,024,211 )- Maternity (11,156,787 ) (11,447,662 ) (11,156,787 ) (11,447,662 )- Optical and appliances (8,883,647 ) (8,308,384 ) (8,883,647 ) (8,308,384 )- Funeral (1,613,500 ) (1,545,000 ) (1,613,500 ) (1,545,000 )- Medical Rescue International (771,314 ) - (7,198,933 ) (6,959,387 )- Chronic ailments (29,322,685 ) (21,105,896 ) (29,322,685 ) (21,105,896 )- Special benefits 1 (8,615,334 ) (11,885,249 ) (14,359,658 ) (12,322,526 )- Legal expenses (4,419 ) (114,055 ) (4,419 ) (114,055 )- Severe illness benefit cover (6,230,478 ) (1,395,208 ) (6,230,478 ) (1,395,208 )- Ministry of Health PPP costs (32,640,554 ) (32,160,307 ) (39,719,640 ) (32,911,143 )- Wellness Program costs (1,601,192 ) (1,551,696 ) (1,909,476 ) (1,727,652 )Direct costs (34,149,399 ) (21,333,666 ) - - (425,730,371 ) (370,938,665 ) (411,140,285) (357,928,455 Contribution surplus 56,877,734 41,088,879 39,534,390 28,869,551 Other income 906,890 679,214 - - ExpenditureDepreciation (3,443,990 ) (3,094,292 ) (688,804 ) (947,053 )Administration expenses (47,232,107 ) (44,691,998 ) (6,401,493 ) (36,179,220 )Administration fees (4,842,129 ) - (44,646,299 ) - (55,518,226 ) (47,786,290 ) (51,736,596 ) (37,126,273 )


Statements of Profit or Loss and Other

Comprehensive Income (cont.)For the year ended 31 December 2013 Group Society

Notes 2013 2012 2013 2012

Continuing operations (continued)

Operating surplus/(deficit) 2 2,266,398 (6,018,197 ) (12,202,206 ) (8,256,722 ) Interest received 3 5,694,155 6,094,166 5,499,758 5,828,724 Interest paid (253,925 ) (251,999 ) - - Dividend and other income 4 9,863,530 4,333,739 14,236,819 4,333,739 15,303,760 10,175,906 19,736,577 10,162,463

Surplus before taxation from continuing operations 17,570,158 4,157,709 7,534,371 1,905,741 Taxation 5 (2,953,248 ) (477,808 ) - - Surplus for the year from continuing operations 14,616,910 3,679,901 7,534,371 1,905,741 Deficit after tax for the year from discontinued operations 6 - - - (489,172 ) Surplus for the year 14,616,910 3,679,901 7,534,371 1,416,569

Attributable to: Non-controlling interest 186,068 1,079,355 - - Members of the Society 14,430,842 2,600,546 7,534,371 1,416,569 14,616,910 3,679,901 7,534,371 1,416,569 Total comprehensive income Surplus for the year 14,616,910 3,679,901 7,534,371 1,416,569

Other comprehensive income Net current year revaluation of investments 37,789,847 15,684,767 37,789,847 15,684,767

Low claims reserve payments during the year (4,467 ) (3,843 ) (4,467 ) (3,843 ) Total comprehensive income for the year 52,402,290 19,360,825 45,319,751 17,097,493


Statements of Financial PositionAt 31 December 2013

Group Notes 2013 2012

ASSETS

Non-current assets

Property, plant and equipment 7 54,936,950 40,595,282 Goodwill 8 9,083,105 371,093 Available for sale investments 10 194,361,173 161,557,100 258,381,228 202,523,475 Current assets

Inventories 11 1,351,796 1,806,554 Trade receivables 12 40,091,111 23,810,992 Other receivables 13 3,530,626 4,494,966 Short term investments 14 65,145,909 59,827,878 Cash and cash equivalents 15 41,517,433 45,630,087 Taxation refundable - 404,773 151,636,875 135,975,250

Total assets 410,018,103 338,498,725

Equity

Funds and reserves

Accumulated funds 140,301,623 125,870,781Non-controlling interest 1,111,726 7,235,268Low claim reserve 483,557 488,024Revaluation reserve 16 187,895,666 150,105,819 329,792,572 283,699,892Non-current liabilities Finance lease obligations 17 874,526 1,184,144 Bank loan 18 3,004,089 260,331Property development loan 19 10,190,448 2,356,047Retention payable 20 - 251,310 Deferred rental liability 22 50,929 - Deferred taxation 21 1,091,203 1,292,193 15,211,195 5,344,025 Current liabilities

Trade and other payables 23 18,085,194 19,156,384Retention payable 20 271,109 - Subscriptions received in advance 24 318,556 641,484 Outstanding cheques for claims 15 4,696,600 5,180,322 Provision for outstanding claims 25 38,749,917 23,225,953 Current portion of finance lease obligations 17 1,050,555 991,603 Current portion of bank loan 18 857,269 99,415 Current portion of property development loan 19 330,552 159,647 Taxation payable 654,584 - 65,014,336 49,454,808

Total equity and liabilities 410,018,103 338,498,725


Statements of Financial Position (cont.)At 31 December 2013 Society

Notes 2013 2012

ASSETS

Non-current assets Property, plant and equipment 7 22,873,911 23,536,083 Investment in subsidiaries 9 29,028,744 12,153,102 Available for sale investments 10 194,361,173 161,557,100 246,263,828 197,246,285

Current assets Inventories 11 1,107,060 1,743,800 Trade receivables 12 34,231,469 20,226,394 Other receivables 13 12,387,008 4,127,286 Short term investments 14 65,145,909 59,827,878 Cash and cash equivalents 15 30,981,510 38,111,471 143,852,956 124,036,829 Assets classified as held for sale 6 - 1,799,253 143,852,956 125,836,082

Total assets 390,116,784 323,082,367

EQUITY

Funds and reserves Accumulated funds 136,863,645 129,329,274Low claim reserve 483,557 488,024 Revaluation reserve 16 187,895,666 150,105,819 325,242,868 279,923,117

Current liabilities Trade and other payables 23 21,108,843 10,827,724 Subscriptions received in advance 24 318,556 641,484 Outstanding cheques for claims 15 4,696,600 5,180,322 Provision for outstanding claims 25 38,749,917 23,225,953 64,873,916 39,875,483 Liabilities directly associated with assets classified as held for sale 6 - 3,283,767 64,873,916 43,159,250

Total equity and liabilities 390,116,784 323,082,367


Statements of Changes in EquityFor the year ended 31 December 2013

Group Accumulated Low claim Revaluation Total funds Non-controlling Total funds reserve reserve attributable to interest members

Balance at 01 January 2012 123,270,235 491,867 134,421,052 258,183,154 6,155,913 264,339,067 Surplus for the year 2,600,546 - - 2,600,546 1,079,355 3,679,901 Payments during the year - (3,843 ) - (3,843 ) - (3,843 )Net current year revaluation - - 15,684,767 15,684,767 - 15,684,767 Balance at 31 December 2012 125,870,781 488,024 150,105,819 276,464,624 7,235,268 283,699,892 Acquisition of controlling interest - - - - (6,157,675 ) (6,157,675 )Surplus for the year 14,430,842 - - 14,430,842 186,068 14,616,910 Payments during the year - (4,467 ) (4,467 ) - (4,467 )Dividends paid - - - - (151,935 ) (151,935 )Net current year revaluation - - 37,789,847 37,789,847 - 37,789,847 Balance at 31 December 2013 140,301,623 483,557 187,895,666 328,680,846 1,111,726 329,792,572


Statements of Changes in Equity (cont.)For the year ended 31 December 2013 Society Accumulated Low claim Revaluation Total funds

funds reserve reserve attributable to

members

Balance at 01 January 2012 127,912,705 491,867 134,421,052 262,825,624 Surplus for the year 1,416,569 - - 1,416,569 Payments during the year - (3,843 ) - (3,843 )Net current year revaluation - - 15,684,767 15,684,767 Balance at 31 December 2012 129,329,274 488,024 150,105,819 279,923,117

Surplus for the year 7,534,371 - - 7,534,371 Payments during the year - (4,467 ) - (4,467 )Net current year revaluation - - 37,789,847 37,789,847 Balance at 31 December 2013 136,863,645 483,557 187,895,666 325,242,868


Statements of Cash FlowsFor the year ended 31 December 2013

Group Society

2013 2012 2013 2012 OPERATING ACTIVITIES Surplus before taxation from continuing operations 17,570,158 4,157,709 7,534,371 1,905,741 Deficit before taxation from discontinued operations - - - (489,172)Surplus before taxation 17,570,158 4,157,709 7,534,371 1,416,569 Adjusted for: Depreciation 3,443,990 3,094,292 688,804 1,436,225 Profit on disposal of plant and equipment (21,000 ) (306,704 ) (302,724 ) - Movement in operating lease accrual 50,929 (5,417 ) - - Movement in impairment loss accrual 375,136 669,399 - - Transfer of investment to subsidiary - - 12,153,102 - Profit on disposal of available for sale investment (6,014,237 ) - (6,014,237 ) - Interest paid 253,925 251,999 - - Interest received (5,694,155 ) (6,094,166 ) (5,499,758 ) (5,828,724 )Dividends received (3,772,092 ) (4,112,873 ) (5,790,657 ) (4,112,873 )Cash generated from/(used in) operations 6,192,654 (2,345,761 ) 2,768,901 (7,088,803 )Movement in trade receivables (16,655,255 ) (4,873,925 ) (14,005,075 ) 2,139,704 Movement in other receivables 964,340 (1,814,778) (8,259,722) (1,747,247)Movement in inventories 454,758 (704,383) 636,740 (736,138)Movement in subscriptions received in advance (322,928 ) 79,288 (322,928 ) 79,288 Movement in trade and other payables (1,051,391 ) 5,808,871 10,281,119 (1,687,057 )Movement in provision for outstanding claims 15,523,964 11,685,689 15,523,964 11,685,689 Net working capital relating to discontinued operations - - - (905,032 )Cash generated from normal operations 5,106,142 7,835,001 6,622,999 1,740,404 Interest paid (253,925 ) (251,999 ) - - Tax paid (2,094,881 ) (758,058 ) - - Net cash generated from operating activities 2,757,336 6,824,944 6,622,999 1,740,404

INVESTING ACTIVITIES Net purchase of investments (5,317,928 ) (5,489,087 ) (5,317,928 ) (5,551,855)Acquisition of controlling interest (14,869,688 ) - - - Proceeds on disposal of available for sale investment 11,000,000 - 11,000,000 - Investment in subsidiary - - (29,028,744) - Transfer of assets and liabilities classified as held for sale - - (1,484,515) - Purchase of plant and equipment (17,829,973 ) (8,157,586 ) (26,632) (2,208,011)Proceeds on disposal of plant and equipment 65,315 319,300 302,724 - Interest received 5,694,155 6,094,166 5,499,758 5,828,724 Dividends received 3,772,092 4,112,873 5,790,657 4,112,873 Net cash (used in)/generated from investing activities (17,486,027 ) (3,120,334 ) (13,264,680 ) 2,181,731

FINANCING ACTIVITIES Finance obtained 12,376,569 4,424,126 - - Capital repayment of borrowings (1,120,317 ) (1,140,060 ) - - Benefits paid through low claims reserve (4,467 ) (3,843 ) (4,467 ) (3,843 )Dividends paid (151,935) - - - Net cash generated from/(used in) financing activities 11,099,850 3,280,223 (4,467 ) (3,843 )Net movement in cash and cash equivalents (3,628,841 ) 6,984,833 (6,646,148 ) 3,918,292 Cash and cash equivalents at beginning of year 40,451,592 33,466,759 32,932,976 29,014,684 Cash and cash equivalents at end of year 36,822,751 40,451,592 26,286,828 32,932,976

Represented by: Short term investments 1,918 1,827 1,918 1,827 Outstanding cheques for claims (4,696,600 ) (5,180,322 ) (4,696,600 ) (5,180,322 )Bank and cash balances 41,517,433 45,630,087 30,981,510 38,111,471 36,822,751 40,451,592 26,286,828 32,932,976


Introduction

Botswana Medical Aid Society is a medical aid fund registered in Botswana

under the Society’s Act. These financial statements represent its statutory

financial statements. The consolidated annual financial statements

comprise the consolidated financial position and results of the Society and

its subsidiaries (together referred to as the “Group”).

Statement of compliance

The financial statements have been prepared, in all material respects, in

accordance with International Financial Reporting Standards (IFRS).

Basis of preparation

The financial statements are presented in Botswana Pula, which is also the

functional currency.

The financial statements are prepared on the historical cost basis except

for certain financial instruments and leasehold land and buildings which

are stated at fair value. The accounting policies have been consistently

applied by the Group and are consistent with those used in the previous

year.

The preparation of financial statements in conformity with International

Financial Reporting Standards requires management to make judgements,

estimates and assumptions that affect the application of policies and

reported amounts of assets and liabilities, income and expenses. The

estimates and associated assumptions are based on historical experience

and various other factors that are believed to be reasonable under the

circumstances, the results which form the basis of making the judgements

about carrying values of assets and liabilities that are not readily apparent

from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing

basis. Revisions to accounting estimates are recognised in the year in

which the estimate is revised, if the revision affects only that year, or in the

year of the revision and future years if the revision affects both current and

future years.

Significant judgements in the application of International Financial Reporting

Standards consist mainly of the evaluation of the carrying amount of

goodwill for possible impairment (per note 8), the evaluation of the carrying

amount of the investment in subsidiaries for possible impairment (per note

9), the assessment of residual values and depreciation rates applied to

property, plant and equipment items (per note 7), the evaluation of trade

and other receivables for possible impairment (per note 12) and calculating

the provision for outstanding claims (per note 25).

Basis of consolidation

The consolidated financial statements incorporate the financial statements

of the Society and entities controlled by the Society (its subsidiaries)

(collectively referred to as the “Group”). The Society controls an investee

if it is expected to or has rights to variable returns from its involvement

with the investee and has the ability to affect these returns through its

power over the investee. The results of the subsidiaries are included in the

consolidated financial statements from the effective date of acquisition.

Intra-group balances and any unrealised gains or losses or income and

expenses arising from intra-Group transactions, are eliminated in preparing

the consolidated financial statements.

The purchase method of accounting is used to account for the acquisition

of subsidiaries by the Group. The cost of an acquisition is measured

as the fair value of the assets given, equity instruments issued and

liabilities incurred or assumed at the date of exchange, plus costs directly

attributable to the acquisition. Identifiable assets acquired and liabilities

and contingent liabilities assumed in a business combination are measured

initially at their fair values at the acquisition date, irrespective of the extent

of any minority interest. The excess of the cost of acquisition over the

Group’s share of identifiable net assets acquired is recorded as goodwill.

If the cost of acquisition is less than the fair value of the net assets of the

subsidiary acquired, the difference is recognised directly in the statement

of comprehensive income.

Non-controlling interests

Non-controlling interests are measured, at initial recognition, as the

non-controlling proportion of the fair values of the assets and liabilities

recognised at acquisition. After initial recognition, non-controlling interests

are measured as the aggregate of the value at initial recognition and their

subsequent proportionate share of profits and losses.

Property, plant and equipment

Property, plant and equipment, with the exception of leasehold land and

buildings, are stated at cost less accumulated depreciation and any

impairment in value.

Significant Accounting PoliciesFor the year ended 31 December 2013


Significant Accounting Policies (cont.)For the year ended 31 December 2013

Property, plant and equipment (continued)

Leasehold land and buildings are stated at valuation on the basis of the

most recently established open market values with current additions

measured at cost. Valuations are obtained from professional independent

third parties with sufficient regularity to ensure that the carrying amount

does not differ materially from that which would have been determined

using fair value at the reporting date. The Group currently obtains valuations

of leasehold land and buildings every five years.

Depreciation

Depreciation is recognised in profit or loss on a straight-line basis over

the estimated useful lives of property, plant and equipment items. The

residual value and useful life of each property, plant and equipment item,

if not insignificant, are reassessed annually. The estimated useful lives of

property, plant and equipment items are as follows:

Work-in-progress includes the costs of materials, labour and other

costs incurred in the construction of work-in-progress at reporting date.

Work-in-progress is transferred to property, plant and equipment when

the assets are completed and commissioned. Work-in-progress is not

depreciated and depreciation will commence at the earliest of when the

asset is available for use or when the asset is commissioned.

Gains and losses on disposal of property, plant and equipment items are

determined by comparing proceeds with the carrying amounts and are

included in profit or loss.

Repairs and maintenance costs are recognised in profit or loss during

the financial year in which these costs are incurred. The cost of a major

renovation is included in the carrying amount of the related asset when it is

probable that future economic benefits in excess of the originally assessed

standard performance of the existing asset will flow to the Group. Major

renovations are depreciated over the remaining useful life of the related

asset.

Low claim reserve

The Group rewards members who make low or no claims. The reward is

comprised of increased claim limits. Where necessary, a transfer is made

each year from the operating surplus to the low claims reserve and costs

of the increased limits are charged to the reserve. The reserve is however

available for other purposes as may be determined by the management

committee and members.

Impairment

Financial assets

A financial asset is assessed at each reporting date to determine whether

there is any objective evidence that it is impaired. A financial asset is

considered to be impaired if objective evidence indicates that one or more

events had a negative effect on the estimated future cash flows of that

asset.

An impairment loss in respect of the financial asset measured at amortised

cost is calculated as the difference between its carrying amount, and the

present value of the estimated future cash flows discounted at the original

effective interest rate.

Significant financial assets are tested for impairment on an individual basis.

The remaining financial assets are assessed collectively in groups that

share similar credit risk characteristics.

Impairment losses are recognised in profit or loss. An impairment loss is

reversed if the reversal can be related objectively to an event occurring

after the impairment loss was recognised. The reversal of the impairment

loss is recognised in profit or loss.

Non-financial assets

The carrying values of the Group’s non-financial assets are reviewed

at each reporting date to determine whether there is any indication of

impairment. If any such indication exists then the asset’s recoverable

amount is estimated.

An impairment loss is recognised if the carrying amount of an asset or its

cash-generating unit exceeds its recoverable amount. A cash-generating

unit is the smallest identifiable asset group that generates cash inflows

that are largely independent of the cash inflows from other assets or asset

groups. Impairment losses are recognised in profit or loss. The recoverable


Non-financial assets (continued)

amount of an asset or cash-generating unit is the greater of its value in use

and its fair value less cost to sell. In assessing value in use, the estimated

future cash flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the time value of

money and the risk specific to the asset.

Impairment losses recognised in the prior periods are assessed at each

reporting date for any indication that these losses have decreased or no

longer exist. An impairment loss is reversed if there has been a change in

the estimates used to determine the recoverable amount. An impairment

loss is reversed only to the extent that the asset’s carrying amount does

not exceed the carrying amount that would have been determined, net of

depreciation and amortisation, if no impairment was recognised.

Investment in subsidiary

An investment in a subsidiary is recognised if the parent company is

expected to or has rights to variable returns from its involvement with the

investee and has the ability to affect these returns through its power over

the investee.

The investments in subsidiaries are carried at cost loss any accumulated

impairment losses.

The cost of an investment in a subsidiary is the aggregate of:

incurred, and equity instruments issued by the Society, and

Goodwill

Goodwill represents amounts arising on acquisition of business units. The

goodwill consists of the difference between the cost of the acquisition and

the fair value of the net identifiable assets acquired.

Goodwill is stated at cost less any accumulated impairment losses.

Goodwill is allocated to cash-generating units and is not amortised but

tested annually for impairment. Goodwill is reviewed annually for events

or changes in circumstances which may indicate that the carrying amount

may not be recoverable. An impairment loss is recognised in profit or

loss for the amount by which the asset’s carrying amount exceeds its

recoverable amount.

Inventories

Inventories are stated at the lower of cost and net realisable value. Net

realisable value is the estimated selling price in the ordinary course of

business, less the estimated costs of completion and selling expenses.

The cost of inventories is calculated on the first-in-first-out basis and

includes expenditure incurred in acquiring the inventories and bringing

them to their existing location and condition. Obsolete, redundant and

slow moving inventories are identified on a regular basis and are written

down to their estimated net realisable values.

Taxation

Taxation on the profit or loss for the year comprises current and deferred

taxation. Taxation is recognised in profit or loss except to the extent that

it relates to items recognised directly in equity, in which case the related

taxation is also recognised in equity.

Current taxation comprises taxation payable calculated on the basis of the

expected taxable income for the year, using taxation rates enacted at the

reporting date, and any adjustment to taxation payable for previous years.

Withholding tax is payable on the gross value of dividends in the year in

which the dividends are paid. Dividends declared are disclosed gross of

any withholding tax.

Deferred taxation is provided based on temporary differences. Temporary

differences are differences between the carrying amounts of assets and

liabilities for financial reporting purposes and their tax base. The amount of

deferred taxation provided is based on the expected manner of realisation

or settlement of the carrying amount of assets and liabilities using taxation

rates enacted or substantively enacted at the reporting date. Deferred

taxation is recognised in profit or loss except to the extent that it relates to a

transaction that is recognised directly in equity, or a business combination.

The effect on taxation of any changes in taxation rates is recognised in

profit or loss, except to the extent that it relates to items previously charged

or credited directly to equity.

A deferred taxation asset is recognised to the extent that it is probable that

future taxable profits will be available against which the unused tax losses

and credits can be utilised. Deferred tax assets are reduced to the extent

that it is no longer probable that the related taxation benefit will be realised.



Taxation (continued)

The Society is not subject to taxation as it is exempt from taxation in terms

of the second schedule of the Botswana Income Tax Act (Chapter 52:01).

Recognition and de-recognition of assets and liabilities

The Group recognises an asset when it obtains control of a resource

as a result of past events and future economic benefits are expected to

flow to the company. The Group derecognises a financial asset when

it loses control over the contractual rights that comprise the asset and

consequently transfers the substantive risks and benefits associated with

the asset. A financial liability is derecognised when it is legally extinguished.

Employee benefits

The Group has defined contribution pension schemes which are funded

through payments to insurance companies. A defined contribution plan

is a pension plan under which the Group pays fixed contributions into a

separate fund and will have no legal or constructive obligations to pay

further contributions if the fund does not hold sufficient assets to pay all

employee benefits relating to employee services in the current and prior

periods. Contributions to an approved defined contribution pension plan

are recognised in profit or loss in the year to which these costs relate.

Employees who are not members of these approved pension funds and

are not entitled to gratuities per their employment contracts, are entitled to

severance benefits as regulated by the Labour Act applicable in Botswana.

Employee entitlements to annual leave, bonuses, medical aid, pension

contributions and housing benefits are recognised when they accrue to

employees and an accrual is recognised for the estimated liability as a

result of services rendered by employees up to the reporting date.

Leases

Leases are classified as finance leases whenever the terms of the lease

transfer substantially all the risks and rewards of ownership to the lessee.

All other leases are classified as operating leases.

Assets held under finance leases are initially recognised as assets of the

Group at their fair value at the inception of the lease or, if lower, at the

present value of the minimum lease payments. The corresponding liability

to the lessor is included in the statements of financial position as a finance

lease obligation.

Lease payments are apportioned between finance expenses and reduction

of the lease obligation so as to achieve a constant rate of interest on

the remaining balance of the liability. Finance expenses are recognised

immediately in profit or loss, unless they are directly attributable to qualifying

assets, in which case they are capitalised in accordance with the Group’s

general policy on borrowing costs. Contingent rentals are recognised as

expenses in the periods in which they are incurred.

Operating lease payments are recognised as an expense on a straight-line

basis over the lease term. Contingent rentals arising under operating leases

are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating

leases, such incentives are recognised as a liability. The aggregate benefit

of incentives is recognised as a reduction of rental expense on a straight-

line basis.

Finance costs

Finance costs directly attributable to the acquisition, construction or

production of an asset that necessarily takes a substantial period of time

to get ready for its intended use or sale are capitalised as part of the cost

of the asset. All other finance costs are expensed in the period in which

they occur. Finance costs consist of interest and other costs that an entity

incurs in connection with the borrowing of funds.

Provisions

A provision is recognised in the statements of financial position when

the Group has a present legal or constructive obligation as a result of a

past event, and it is probable that an outflow of economic benefits will

be required to settle the obligation. If the effect is material, provisions are

determined by discounting the expected future cash flows at a pre-tax rate

that reflects current market assessments of the time value of money and,

where appropriate, the risks specific to the liability.

Provision is made for estimated outstanding claims incurred during

the financial year, net of members portions, which are payable in the

succeeding financial year. Members have up to four months to submit

their claims.



Revenue

Revenue comprises the fair value of the consideration received or receivable

for the sale of goods and the rendering of services in the ordinary course

of the Group’s activities.

Revenue from the sale of goods is exclusive of VAT and discounts granted

and is recognised in profit or loss when the following conditions have been

satisfied:

rewards of ownership of the goods;

the degree usually associated with ownership nor effective

control over the goods sold;

transaction will flow to the Group; and

can be measured reliably.

Revenue from rendering of services is exclusive of VAT and discounts

granted and is recognised in profit or loss when the following conditions

have been satisfied:

can be measured reliably;

transaction will flow to the Group; and

can be measured reliably.

Interest income

Interest income is recognised as it accrues, using the effective interest rate

method.

Dividend income

Dividend income is recognised in the period in which the dividends are

declared.

Foreign currency transactions

Transactions in foreign currencies are translated to the functional currency

at exchange rates applicable at the dates of the transactions. Monetary

assets and liabilities denominated in foreign currencies at the reporting

date are translated to the functional currency at the exchange rate at that

date. Foreign currency differences arising on translation are recognised in

profit or loss.

Financial instruments

The Group’s principal financial assets and liabilities comprise of the

following:

Financial assets

Cash and cash equivalents

Cash and cash equivalents are defined as cash on hand, demand deposits

and short-term highly liquid investments readily convertible to known

amounts of cash and subject to insignificant risk of changes in value.

Trade and other receivables

Trade and other receivables are recognised initially at fair value and

subsequently measured at amortised cost using the effective interest

method, less an impairment accrual. An accrual for impairment of trade

receivables is established when there is objective evidence that the Group

will not be able to collect all amounts due according to the original terms

of receivables. Significant financial difficulties of the debtor, probability that

the debtor will enter bankruptcy or financial reorganisation, and default or

delinquency in payments (more than 120 days overdue) are considered

indicators that the trade receivable is impaired.

Amounts due from related entities

The amounts due from related entities are recognised and carried at original

invoice amount less impairment charges. An estimate for impairment

charges is made when collection of the full amount is no longer probable.

Impairment charges are recognised in profit or loss as incurred.

Available-for-sale investments

Available-for-sale financial assets are recognised initially at fair value plus

any directly attributable transaction costs. Investments, including managed

funds, are classified as available for sale investments and are measured

subsequently at fair value. The fair value of the trading investments is

based on quoted bid prices. Gains and losses arising on the fair value are

recognised directly in equity. When these investments are derecognised,

the cumulative gain or loss previously recognised in equity is included in

profit or loss. Available for sale investments are recognised or derecognised

by the Group on the date it commits to purchase or sell the investment.



Financial liabilities

Trade and other payables

Liabilities for trade and other amounts payable, which are normally settled

on 30 to 90 day terms, are carried at cost which is the fair value of the

consideration to be paid in the future for goods and services received,

whether or not billed to the Group.

Amounts due to related entities

Amounts due to related entities are carried at cost which is the fair value of

the consideration to be paid in the future for goods and services received.

Interest bearing liabilities

Interest bearing loans and borrowings are initially recognised at cost, being

the fair value of the consideration received and include acquisition charges

associated with the borrowing/loan. After initial recognition, all interest

bearing loans and borrowings, other than liabilities held for trading, are

subsequently measured at amortised cost. Amortised cost is calculated

by taking into account any discount or premium on settlement.

For liabilities carried at amortised cost (which are not part of a hedging

relationship), any gain or loss is recognised in profit or loss when the liability

is de-recognised or impaired, as well as through the amortisation process.

Gains and losses on subsequent measurement

Gains and losses arising from a change in the fair value of financial

instruments are included in profit or loss in the period in which the change

arises.

Offset

Financial assets and financial liabilities are offset and the net amount

reported in the statements of financial position when the Group has a

legally enforceable right to set off the recognised amounts, and intends

either to settle on a net basis, or to realise the asset and settle the liability

simultaneously.

New standards and interpretations not yet effective

The following are new standards, amendments to standards and

interpretations which are not yet effective for the year ended 31 December

2013 and have not been applied in preparing these financial statements:

Amendments to IAS 32 Financial Instrument, Presentation: Offsetting

financial assets and financial liabilities

These amendments clarify when an entity can offset financial assets and

financial liabilities. These amendments, which become effective for the

Group’s 2014 financial statements, with early adoption permitted, are not

expected to have any impact on its financial statements.

Amendments to IFRS 10, IFRS 12 and IAS 27: Investment entities

These amendments clarify that a qualifying investment entity is required

to account for investments in controlled entities, as well as investments in

associates and joint ventures, at fair value through profit or loss. The only

exception would be subsidiaries that are considered an extension of the

investment entity’s investment activities. The consolidation exemption is

mandatory and not optional.

These amendments, which become effective for the Group’s 2014 financial

statements, with early adoption permitted, are not expected to have any

impact on its financial statements.

Amendments to IAS 36: Recoverable amount disclosures for non-financial

assets

These amendments reverse the unintended requirement in IFRS 13 Fair

Value Measurement to disclose the recoverable amount of every cash-

generating unit to which significant goodwill or indefinite-lived intangible

assets have been allocated. Under these amendments, the recoverable

amount is required to be disclosed only when an impairment loss has been

recognised or reversed.

These amendments, which become effective for the Group’s 2014 financial

statements, with retrospective adjustments for periods commencing on or

after 1 January 2014 and early adoption permitted, are not expected to

have any impact on its financial statements.

IFRIC 21 Levies

Levies have become more common in recent years, with governments

in a number of jurisdictions introducing levies to raise additional income.

Current practice on how to account for these levies is mixed. IFRIC 21

provides guidance on accounting for levies in accordance with IAS 37

Provisions, Contingent Liabilities and Assets. This interpretation, which

becomes effective for the Group’s 2014 financial statements, with

retrospective adjustments for periods commencing on or after 1 January

2014, is not expected to have any impact on its financial statements.



New standards and interpretations not yet effective (continued)

Amendments to IAS 39: Novation of derivatives and continuation of hedge

accounting

IAS 39 Financial Instruments: Recognition and Measurement requires an

entity to discontinue hedge accounting if the derivative hedging instrument

is novated to a clearing counterparty, unless the hedging instrument is

being replaced as part of the entity’s original documented hedging strategy.

These amendments add a limited exception to IAS 39, to provide relief

from discounting an existing hedging relationship, when a novation was

not contemplated and the original hedging documentation meets specific

criteria. These amendments, which become effective for the Group’s

2014 financial statements, with retrospective adjustments for periods

commencing on or after 1 January 2014 and early adoption permitted, are

not expected to have any impact on its financial statements.

Amendments to IAS 19: Defined benefit plans: Employee contributions

These amendments introduce relief that will reduce the complexity and

burden of accounting for certain contributions from employees or third

parties. Such contributions are eligible for practical expedient if they are:

When contributions are eligible for the practical expedient, an entity is

permitted (but not required) to recognise them as a reduction of the service

cost in the period in which the related service is rendered. If an entity

with a defined benefit plan that requires employees to contribute to the

plan chooses to apply this amendment, the company will recognise the

contributions as reduction of the service costs in the period in which the

related service is rendered. These amendments, which become effective

for the Group’s 2015 financial statements, with retrospective adjustments

for periods commencing on or after 1 January 2015 and early adoption

permitted, are not expected to have any impact on its financial statements.

IFRS 9 Financial instruments

IFRS 9 (2009) introduces new requirements for the classification and

measurement of financial assets. Under IFRS 9 (2009), financial assets are

classified and measured based on the business model in which they are

held and the characteristics of their contractual cash flows. IFRS 9 (2010)

introduces additions relating to financial liabilities. The IASB currently

has an active project to make limited amendments to the classification

and measurement requirements of IFRS 9 and add new requirements to

address the impairment of financial assets and hedge accounting.

The effective date of IFRS 9 was 1 January 2015. The effective date has

been postponed and a new date is yet to be specified. The Group will

adopt the standard in the first annual period beginning on or after the

mandatory effective date (once specified). The impact of the adoption of

IFRS 9 has not yet been estimated as the standard is still being revised and

impairment and macro-hedge accounting guidance is still outstanding.



Notes to the Financial StatementsFor the year ended 31 December 2013

Group Society

2013 2012 2013 2012

1 Special benefits Drugs and laboratory tests 9,530,400 12,368,046 14,884,298 12,368,046 Other costs 203,848 472,714 594,274 909,991 Staff salaries 1,988,995 1,991,705 1,988,995 1,991,705 Recoveries from members (3,107,909 ) (2,947,216 ) (3,107,909 ) (2,947,216 )Net special benefits paid during the year 8,615,334 11,885,249 14,359,658 12,322,526

2 Operating surplus/(deficit) The operating surplus/(deficit) is stated after taking into account the following items

Audit fee - current year 585,307 561,200 142,520 291,200 Directors’ - fees 181,314 233,222 73,395 117,222 - remuneration 2,722,053 1,306,052 - - Bad debts recovered (42,962 ) (22,538 ) - - Fidelity insurance claim repayment - 121,658 - - Movement in impairment loss accrual 375,136 669,399 - - Depreciation 3,443,990 3,094,292 688,804 947,053 Foreign exchange gain (478,636 ) (89,083 ) (478,636 ) (92,578 )Profit on disposal of plant and equipment (21,000 ) (306,704 ) (302,7241 ) - Staff costs 42,436,881 36,342,784 237,037 22,565,380 Operating lease rent - property-cash basis 566,640 142,802 - - Operating lease rent - property-operating lease liability movement 50,929 (5,417 ) - -

3 Interest received Call deposits 351,472 559,261 181,817 339,567 Short term deposits 5,342,683 5,518,038 5,317,941 5,489,157 Interest on cash loss - 16,867 - - 5,694,155 6,094,166 5,499,758 5,828,724

4 Dividend and other income

Dividends received 3,772,092 4,112,873 5,790,657 4,112,873 Agency commission - 120,830 - 120,830 Sundry income 56,201 101,266 77,201 101,266 Agency expenses - (1,230 ) - (1,230 )Rental income - - 2,052,000 - Profit on disposal of plant and equipment 21,000 - 302,724 - Profit on redemption of investment 6,014,237 - 6,014,237 -

9,863,530 4,333,739 14,236,819 4,333,739 5 Taxation

Company tax at 22% 3,154,238 560,135 - - Deferred tax movement (200,990) (82,327) - -

2,953,248 477,808 - -


Group Society 2013 2012 2013 2012

5 Taxation (cont.)

Tax reconciliation Surplus before taxation 17,570,158 4,157,709 7,534,371 1,905,741

Taxation at 22% 3,865,435 914,696 1,657,562 419,263 VAT refund included in taxable income 17,560 8,001 - - Income exempt from income tax (560,694 ) (387,557 ) (1,657,562 ) (419,263 )Expenses not deductible for tax 727,815 47,938 - - Prior year over-provision of deferred tax - (105,270 ) - -

Taxation per statement of profit or loss and other comprehensive income 4,050,116 477,808 - -

6 Discontinued operations Members of the Society authorised the separation of the administration of the fund to a separate, wholly owned subsidiary, Southview (Proprietary) Limited (“the subsidiary”) at the annual general meeting held on 29 June 2012. The separation was effective from 1 January 2013 with all employees of the Society being transferred to the subsidiary. As part of the capitalisation process, all movable assets of the Society were transferred to the wholly owned subsidiary at fair values which were determined independently by CB Richards Ellis, professional valuers.

The Wellness Program income and Ministry of Health PPP revenue, and the associated program costs, were not transferred to the subsidiary due to contractual matters. These operations were not discontinued per expectations and as a result the statement of profit or loss and other comprehensive income and statement of financial position were reclassified to include the results under continued operations. All other business activities of the Society that were profit focussed have been transferred to the subsidiary. Income tax at 22% of any taxable income is now payable by the subsidiary.

Society 2013 2012

Cost of services - Depreciation - (489,172 )

Deficit from discontinued operations - (489,172 )

“The major classes of assets and liabilities of Botswana Medical Aid Societyclassified as held for sale as at 31 December 2012 were as follows:”

Assets Plant and equipment - 1,799,253 Assets classified as held for sale - 1,799,253

Liabilities Staff related accruals - 3,283,767 Liabilities directly associated with assets classified as held for sale - 3,283,767

Net liabilities directly associated with disposal group - (1,484,514 )

Notes to the Financial Statements (cont.)For the year ended 31 December 2013


Leasehold land Motor Office Equipment furniture Work-in and buildings vehicles equipment and fittings progress Total

7 Property, plant and equipment

7.1 Group

Cost/valuationBalance at beginning of the year 37,277,987 5,759,053 9,033,750 6,916,528 3,841,914 62,829,232 Additions 18,331 1,395,897 810,389 5,163,020 10,442,336 17,829,973 Disposals - (299,223) - - - (299,223)

Balance at end of the year 37,296,318 6,855,727 9,844,139 12,079,548 14,284,250 80,359,982

Accumulated depreciation Balance at beginning of the year 6,732,022 3,203,200 7,532,085 4,766,643 - 22,233,950 Charge for the year 844,659 1,110,965 322,580 1,165,786 - 3,443,990 Disposals - (254,908) - - - (254,908)

Balance at end of the year 7,576,681 4,059,257 7,854,665 5,932,429 - 25,423,032 Net book values At 31 December 2013 29,719,637 2,796,470 1,989,474 6,147,119 14,284,250 54,936,950 At 31 December 2012 30,545,965 2,555,853 1,501,665 2,149,885 3,841,914 40,595,282

Leasehold land and buildings comprise of the following:

- Lot 50638 Fairgrounds, Gaborone, measuring 4,386 square meters, which property is held under a Deed of Fixed Period State Grant for 50 years commencing 4 February 1994. This property was independently valued at P23 930 000 by CB Richards Ellis, Chartered Surveyor on the open market value basis in 2010.

- Lot 60601, Block 7, Gaborone, measuring 1,1707 hectares, which property is held under a Deed of Fixed Period State Grant of 50 years commencing 27 November 2008. This property was independently valued by Knight Frank Botswana on the open market value basis in November 2013 at P18 665 000. The property is encumbered as per note 19.

- Lot 20623 Gaborone West, Extension 34, measuring 1 562 square metres, which property is held under a Deed of Fixed Period State Grant of 50 years commencing 17 February 1999. This property was independently valued by MG Properties on the open market value basis in January 2013 at P5 100 000. The property is encumbered as per note 19.

- Tribal Lot 734, Maun measuring 1, 337 square metres held under a long-term lease agreement of 50 years commencing 15 October 1996. This property was independently valued on the open market value basis by Roscoe Bonna Valuers, Chartered Surveyors in May 2010 at P700 000.

The open market value basis is defined as the estimated amount for which the property could be exchanged between a willing buyer and a willing seller in an arm’s length transaction after proper marketing, wherein the parties each acted knowledgeably, prudently and without compulsion.

Motor vehicles with a net book value of P2 380 469 (2012: P2 361 061), a printer with a net book value of P21 766 (2012: P 28 637) and a radio system with a net book value of P209 551 (2012: P291 303) are encumbered as per note 17.

The estimated useful lives, residual values and depreciation methods are reviewed by management at each reporting date, with the effect of any changes in estimates accounted for on a prospective basis. The review did not highlight any requirement for an adjustment to the residual values and useful lives used in the current or prior periods.



Leasehold Computer land and equipment buildings and fittings Total

7 Property, plant and equipment (continued)

7.2 Society

Cost/valuation

Balance at beginning of the year 29,096,631 - 29,096,631

Additions 18,331 8,301 26,632

Balance at end of the year 29,114,962 8,301 29,123,263

Accumulated depreciation

Balance at beginning of the year 5,560,548 - 5,560,548

Charge for the year 688,631 173 688,804

Balance at end of the year 6,249,179 173 6,249,352

Net book values

At 31 December 2013 22,865,783 8,128 22,873,911

At 31 December 2012 23,536,083 - 23,536,083

The leasehold land and buildings comprise Lot 50638 Fairgrounds, Gaborone, measuring 4,386 square meters, which property is held under a Deed of Fixed

Period State Grant for 50 years commencing 4 February 1994. The leasehold land and buildings were independently valued at P23 930 000 by CB Richards

Ellis, Chartered Surveyor on the open market value basis in 2010. The revaluation surplus was credited to the revaluation reserve. The open market value basis

is defined as the estimated amount for which the property could be exchanged between a willing buyer and a willing seller in an arm’s length transaction after

proper marketing, wherein the parties each acted knowledgeably, prudently and without compulsion.

The estimated useful lives, residual values and depreciation methods are reviewed by management at each reporting date, with the effect of any changes in

estimates accounted for on a prospective basis. The review did not highlight any requirement for an adjustment to the residual values and useful lives used in

the current or prior periods.

7.3 Operating lease commitments

Operating leases relate to three office facilities with lease terms of between 2 to 3 years, with an option to extend for a further year. Two of the three operating

lease contracts contain a fixed escalation clause of 10% per annum. The Group does not have an option to purchase the leased asset at the expiry of the

lease period. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

Group Society

2013 2012 2013 2012

Not later than 1 year 663,643 100,018 - -

Later than 1 year but not later than 5 years 2,323,906 66,000 - -

2,987,549 166,018 - -



Group Society 2013 2012 2013 2012

7 Property, plant and equipment (continued)

7.4 Capital commitments The board approved the development of a fit-for-purpose office building in Gaborone and a base office in Maun at a cost of P15.3 million. The buildings are currently being constructed on Lot 60601, Block 7, Gaborone and Lot 734 in Maun. Costs of P14 284 250 were incurred to the current reporting date and included as work-in-progress. P10.5 million of the total development cost was financed by financial institutions with the remaining balance financed through cash flows from operating activities.

8 Goodwill Balance at beginning of year 371,093 371,093 - - Acquisition of minority interest in MRI Botswana Limited 8,712,012 - - - Balance at end of year 9,083,105 371,093 - - The goodwill arose on acquisition of MRI Botswana Limited with effect from 11 July 2008 and a further 40% acquired during the current financial period at a value of P14.8 million. Goodwill was determined by comparing the fair value of the consideration paid to acquire the shareholding and the proportionate share of the estimated fair values of the company’s net assets. Management’s assessment of goodwill impairment at year end did not indicate that goodwill was impaired. The assessment of goodwill impairment was based on the net asset value (including current market values of properties) and the estimated future cash flows of MRI Botswana Limited.

9 Investment in subsidiaries

9.1 MRI Botswana Limited Balance at beginning of year - - 12,090,334 12,090,334 Transfer of investment to Southview (Pty) Ltd - - (12,090,334) - Balance at end of year - - - 12,090,334

Shares held in MRI Botswana Limited Balance at beginning of year - - 9,672,267 9,672,267 Transfer of investment to Southview (Pty) Ltd - - (9,672,267) - Balance at end of year - - - 9,672,267 The Society shareholding, representing 53% of the total stated capital of MRI Botswana Limited, was transferred to Southview (Pty) Ltd effective 01 January 2013 as part of capitalisation of the wholly owned subsidiary. On 12 February 2013, the Society, through its 100% owned subsidiary, Southview (Proprietary) Limited, acquired an additional 7,172,267 ordinary shares in MRI Botswana Limited increasing its total indirect shareholding to 93% of the total shareholding. The cost of this additional investment was BWP14.8 million.



Group Society 2013 2012 2013 2012

9 Investment in subsidiaries (continued)

9.2 Southview (Proprietary) Limited Investment in ordinary shares - - 1,100 1,100 Amount advanced to subsidiary - - 29,027,644 61,668 Balance at end of year - - 29,028,744 62,768 Shares held in Southview (Proprietary) Limited 1,100 1,100

Southview (Proprietary) Limited is a wholly owned subsidiary of the Society. Southview (Proprietary) Limited is a company incorporated in Botswana.

The amounts due from Southview (Pty) Ltd are interest free, unsecured and without any fixed repayment terms.

A detailed impairment assessment performed by management at year end indicated that the investment in Southview (Proprietary) Limited was not impaired. The assessment was based on the five year estimated future cash flows of Southview (Proprietary) Limited. Refer to note 6 for additional information.

Total investment in subsidiaries at cost - - 29,028,744 12,153,102

10 Available-for-sale investments

At valuation

10.1 Available for sale listed investments - local FIRST NATIONAL BANK OF BOTSWANA LIMITED 66,723,960 46,474,400 66,723,960 46,474,400 16 598 000 (2012: 16 598 000) ordinary shares BARCLAYS BANK OF BOTSWANA LIMITED 1 590 000 (2012: 1 590 000) ordinary shares 8,506,500 10,335,000 8,506,500 10,335,000 SEFALANA HOLDING COMPANY LIMITED 786 616 (2012: 786 616) ordinary shares 5,309,658 2,556,502 5,309,658 2,556,502 SECHABA INVESTMENT TRUST CORP. 200 000 (2012: 200 000) ordinary shares 3,800,000 3,150,000 3,800,000 3,150,000 G4S (BOTSWANA) LIMITED 150 000 (2012: 150 000) ordinary shares 442,500 825,000 442,500 825,000 BOTSWANA INSURANCE HOLDINGS LIMITED 887 779 (2012: 887 779) ordinary shares 9,277,290 9,188,513 9,277,290 9,188,513 STANDARD CHARTERED BANK BOTSWANA LIMITED 500 000 (2012: 500 000) ordinary shares 5,750,000 5,000,000 5,750,000 5,000,000 K Y S INVESTMENTS LIMITED 154 200 (2012: 154 200) ordinary shares 146,490 107,940 146,490 107,940 FURNMART LIMITED 322 020 (2012: 322 020) ordinary shares 676,242 515,232 676,242 515,232 ENGEN BOTSWANA LIMITED 30 000 (2012: 30 000) ordinary shares 243,000 184,800 243,000 184,800 CHOBE HOLDINGS LIMITED 56 969 (2012: 56 969) ordinary shares 174,325 145,271 174,325 145,271 TURNSTAR HOLDINGS LIMITED 1 000 000 (2012: 1 000 000) linked units 1,700,000 1,490,000 1,700,000 1,490,000 Local investments 102,749,965 79,972,658 102,749,965 79,972,658



Group Society 2013 2012 2013 2012

10 Available-for-sale investments (continued)

At valuation

10.2 Available for sale listed investments - offshore African Alliance - Global Income Fund 5,917,670 15,285,025 5,917,670 15,285,025 BIFM offshore equities 49,859,936 36,751,200 49,859,936 36,751,200 BIFM fixed interest fund 19,792 19,068 19,792 19,068 BIFM offshore bonds 18,609,597 15,553,339 18,609,597 15,553,339 BIFM offshore money market 439,071 477,674 439,071 477,674 African Alliance - Global Allocation Fund 4,307,276 3,430,559 4,307,276 3,430,559 Fleming Asset Management 12,457,866 10,067,577 12,457,866 10,067,577 Offshore investments 91,611,208 81,584,442 91,611,208 81,584,442

Total available for sale investments 194,361,173 161,557,100 194,361,173 161,557,100

11 Inventories Raw materials 5,302 - - - Dispensary drugs, medicines and other consumables 1,346,494 1,806,554 1,107,060 1,743,800

1,351,796 1,806,554 1,107,060 1,743,800

12 Trade receivables Trade receivables 38,416,469 18,124,514 30,966,308 13,324,533 Ministry of Health PPP receivable 3,265,161 6,901,861 3,265,161 6,901,861 Less impairment loss accrual (1,590,519 ) (1,215,383 ) - - 40,091,111 23,810,992 34,231,469 20,226,394

13 Other receivables Contributions 297,947 258,065 297,947 258,065 Wellness receivable 477,386 267,450 477,386 267,450 Other receivables 2,755,293 3,969,451 1,756,101 3,511,171 Amounts due from related parties (note 28.3) - - 9,855,574 90,600

3,530,626 4,494,966 12,387,008 4,127,286

14 Short-term investments

African Alliance 1,918 1,827 1,918 1,827 Botswana Building Society Indefinite Period Paid-Up Shares 65,143,991 59,826,051 65,143,991 59,826,051 65,145,909 59,827,878 65,145,909 59,827,878 The Botswana Building Society Indefinite Period Paid-Up Shares are only redeemable at the option of the Botswana Building Society by giving Botswana Medical Aid Society a notice period of six (6) months. The shares earn an annual investment income of 8.00% (2012: 9.25%).



Group Society 2013 2012 2013 2012

15 Cash and cash equivalents Cash and bank balances (note 15.1) 41,517,433 45,630,087 30,981,510 38,111,471 Short term investments (note 15.2) 1,918 1,827 1,918 1,827 Outstanding cheques for claims (note 15.3) (4,696,600 ) (5,180,322 ) (4,696,600 ) (5,180,322 )

36,822,751 40,451,592 26,286,828 32,932,976

15.1 Cash and bank balances comprise cash and deposits with financial institutions which are payable on demand.

15.2 These investments matured during the year and were reinvested with local financial institutions for periods less than three months. Interest in respect of these investments generally accrues at the prevailing market rates.

15.3 These amounts are un-presented cheques in respect of benefits (claims) paid, which had not been cleared by the bankers at the reporting date. The majority of these payments cleared subsequent to the reporting date.

16 Revaluation reserve

Available for sale reserve Balance at beginning of year 131,670,057 115,985,290 131,670,057 115,985,290 Net revaluation during the year 37,789,847 15,684,767 37,789,847 15,684,767 Balance at end of year 169,459,904 131,670,057 169,459,904 131,670,057 Property revaluation Balance at beginning and end of year 18,435,762 18,435,762 18,435,762 18,435,762 Total revaluation reserve at end of year 187,895,666 150,105,819 187,895,666 150,105,819

17 Finance lease obligations Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.

Annual interest on finance lease liabilities is charged at the Botswana prime lending rate for motor vehicles and radio system (currently 9% per annum) and the Botswana prime lending rate plus 2% (currently 11% per annum) on the printer. The finances leases are secured over the motor vehicles, radio system and printer which were financed at a cost of P3 810 825 (2012: P3 447 969), P321 207 (2012: P321 207) and P54 300 (2012: P54 300) respectively. Gross finance lease liabilities - minimum lease payments: Not later than 1 year 1,215,451 1,182,044 - - Later than 1 year but not more than 5 years 1,025,687 1,305,428 - - 2,241,138 2,487,472 - -

Future finance charges on the finance lease liabilities (316,057 ) (311,725 ) - - Present value of the finance lease liabilities 1,925,081 2,175,747 - -



Group Society 2013 2012 2013 2012

17 Finance lease obligations (continued)

The present value of the finance lease liabilities Not later than 1 year 1,050,555 991,603 - - Later than 1 year but not more than 5 years 874,526 1,184,144 - - 1,925,081 2,175,747 - -

18 Bank loan Balance at beginning of year 359,746 446,781 - - Repayments (129,745 ) (90,307 ) - - Disbursements during the year 2,850,000 - - - Accrued interest 781,357 3,272 - - Balance at end of year 3,861,358 359,746 - - Not later than 1 year 857,269 99,415 - - Later than 1 year but not later than 5 years 3,004,089 260,331 - -

3,861,358 359,746 - - Interest on the bank loan is charged at the Botswana prime lending rate (currently 9% per annum). The bank loan is unsecured and is repayable over a five year period in monthly instalments commencing 1 April 2011.

19 Property development loan Balance at beginning of year 2,515,694 - - - Disbursements during the year 7,860,946 2,497,007 - - Capitalised interest 721,325 48,437 - - Interest payments - (29,750) - - Repayments (576,965) - - - 10,521,000 2,515,694 - - Not later than 1 year 330,552 159,647 - - Later than 1 year but not later than 5 years 2,215,017 1,454,108 - - More than 5 years 7,975,431 901,939 - - 10,521,000 2,515,694 - -

The company is currently developing a fit-for-purpose office building on Lot 60601, Block 7, Gaborone. Costs of P14 284 250 were incurred to the current reporting date and included as work-in-progress per note 6. P10.5 million of the total development cost will be financed by financial institutions with the remaining balance financed through cash flows from operating activities.

Interest is charged at the Botswana prime lending rate (currently 9% per annum). Principal repayments will commence after the loan is fully drawn. Currently only interest is payable on the loan. The loan is repayable over a fifteen (15) year period. Instalments will be paid monthly.



Group Society

2013 2012 2013 2012 19 Property development loan (cont.)

Bank Gaborone Limited (“the bank”) has a First Covering Mortgage Bond for P9.21 million over Plot 60601, Block 7, Gaborone. It also has a Registered Cession of Fire Policy of P14.66 million during development of the fit-for-purpose office building. The bank also has a First Covering Mortgage Bond for P4.3 million over Plot 20623 in Block 3, Gaborone and a Registered Cession of Fire Policy for P5.13 million over the same building. On completion of the construction of the office building, the bond over Plot 20623, Block 3, Gaborone will be released only if the bond over Lot 60601 adequately covers the bank’s exposure.

20 Retention payable Retention due to contractor 271,109 251,310 - - The construction contract for the office building on Plot 60601, Block 7, Gaborone provides for the retention to be released at the end of the defects liability period. The defects liability period is defined as six months or such extended time if necessary to enable a test of the roof by heavy rains to be made. The expected completion of the construction of the building is April 2014.

21 Deferred taxation

21.1 Reconciliation Balance at beginning of year (1,292,193 ) (1,374,520 ) - - Movement per statement of profit or loss and other comprehensive income 200,990 82,327 - - Balance at end of year (1,091,203 ) (1,292,193 ) - -

21.2 Analysis of deferred taxation Capital allowances/depreciation on plant and equipment 89,222 (79,768) - - Fair valuation of subsidiary land and buildings (1,180,425 ) (1,212,425) - - (1,091,203) (1,292,193) - -

22 Deferred rental liability Balance at beginning of year - 5,417 - - Movement per statement of profit or loss and other comprehensive income 50,929 (5,417 ) - - Balance at end of year 50,929 - - - The operating lease accrual reverses as follows: - Within 4 years 11,826 - - - - After 4 years 39,103 - - -

50,929 - - -



Group Society 2013 2012 2013 2012

23 Trade and other payables Staff related accruals 5,700,458 4,858,507 31,954 - Accruals and other creditors 12,124,938 14,297,877 4,865,792 10,129,755 Value added tax payable 259,798 - 259,798 527,349 Amounts due to related parties (note 28.3) - - 15,951,299 170,620 18,085,194 19,156,384 21,108,843 10,827,724

24 Subscriptions received in advance These are amounts received from members during the current year which relate to the following financial year. These amounts were classified as current liabilities as the benefits in respect thereof are expected to be utilised during the subsequent financial year.

25 Provision for outstanding claims This balance represents the fair value of claims which were due and payable as at year end. The obligation approximates the total value of claims which were paid subsequent to the reporting date within the four month period in accordance with the Society’s rules.

26 Fidelity cover In accordance with the rules of the Society, fidelity cover of P2 000 000 (2012: P2 000 000) has been procured.

27 Contingent liabilities An individual has filed a lawsuit against the Group for a claim of P355 000 with interest at 10% per annum for an accident which occurred in March 2006.

One ex-employee has instituted compensation claims against the Group in the Industrial Court for unfair dismissal and is claiming six months compensation.The amount of the compensation claimed has not been quantified. The matter will be heard in June 2014.

The directors have evaluated the current circumstances with regards to the two outstanding cases against the Group and are confident that no liability or negative cash flows will be incurred as a result of the outstanding claims.

28 Related parties Related party transactions include all transactions between the Society and entities under common ownership or control and the remunerations to the board and key members of management. Transactions with related parties are entered into on an arm’s length basis and in the normal course of business.

28.1 Remuneration to key members of management Directors’ fees 178,267 233,222 73,395 117,222 Directors’ remuneration 2,722,053 1,306,052 - - Compensation to key members of management 7,180,434 6,825,255 - 4,214,197

10,080,754 8,364,529 73,395 4,331,419



Group Society 2013 2012 2013 2012

28 Related parties (cont.)

28.2 Related party transactions

28.2 i Payments by Botswana Medical Aid Society to MRI Botswana Limited for services rendered: Medical rescue services - - 7,198,933 6,959,387 Disease management services - - 745,130 750,836 Counselling services - - 437,277 437,277 Well @ Work programme - - 156,314 175,956 - - 8,537,654 8,323,456

28.2 ii Payments by Botswana Medical Aid Society to Southview (Pty) Ltd for services rendered:

- Fund administration fees - - 39,804,170 - - Dispensing fees - - 5,353,898 -

- Rent - - (2,052,000) - - Management fees - - 6,333,956 - - Wellness program - - 168,717 - - - 49,608,741 -

These include payments by MRI Botswana Limited to Botswana Medical Aid Society for services rendered: Shared services cost - - 317,220 262,987 Employee subscriptions for medical aid - - 1,033,730 829,378

- - 1,350,950 1,092,365

28.3 Year end balances arising from the rendering of services: Southview (Proprietary) Limited (note 23) - payable - - (15,058,434) (170,620) MRI Botswana Limited - receivable - - 40,817 82,544 Southview (Proprietary) Limited - receivable - - 9,814,757 8,056 MRI Botswana Limited - payable - - (892,865) - Amounts due from related parties (note 13) - - 9,855,574 90,600 Amounts due to related parties (note 23) - - (15,951,299) (170,620)

Amounts due to and from related parties are interest free, unsecured and without any fixed repayment terms.



Group Society 2013 2012 2013 2012

29 Financial instruments Exposure to interest rate, foreign exchange, credit and liquidity risk occurs in the normal course of the Group’s business. Each of these financial risks are described below together with a summary of the ways in which the Group manages these risks.

Market risk Fluctuation in interest rates impact on the value of short-term cash investments, giving rise to price risk. Other than ensuring optimum money market rates for deposits, the Group does not make use of financial instruments to manage this risk.

Interest rate risk Financial instruments subject to interest rate risk are as follows:

Finance lease obligations (1,925,081) (2,175,747) - - Bank loan (3,861,358) (359,746) - - Property development loan (10,521,000) (2,515,694) - - Short term investments 65,145,909 59,827,878 65,145,909 59,827,878Call accounts and money market funds 22,540,833 34,805,869 22,540,833 31,405,499 71,379,303 89,582,560 87,686,742 91,233,377 The Group invests with reputable institutions and is subjected to normal interest rate risk. The effective annual interest rates on the financial instruments noted above are as follows:

Rand call accounts 1.00% 2.58% 1.00% 1.00%Pula call accounts 1.00% 1.00% 1.00% 1.00%GBP call accounts 1.25% 1.25% 1.25% 1.25%Finance lease liabilities (motor and radio system) 9.00% 11.00% - - Finance lease liabilities (printer) 11.00% 13.00% - - Bank loan 9.00% 11.00% - - Property development loan 9.00% 11.00% - - African Alliance 4.98% 6.84% 4.98% 6.84%Botswana Building Society Indefinite Period Paid-Up Shares 8.00% 9.25% 8.00% 9.25% The following are the Pula equivalent amounts that were held by the Group in its call accounts: GBP Pula Rand 2013 Call deposits 167,547 22,305,931 67,355 2012 Call deposits 902,619 33,830,896 2,481,098



29 Financial instruments (cont.)

The following are the Pula equivalent amounts that were held by the Society in its call accounts: GBP Pula Rand 2013 Call deposits 167,547 22,305,931 67,355 2012 Call deposits 902,619 28,021,782 2,481,098

Maturity analysis for short term investments Interest rate Maturity date Pula

2013 African Alliance 4.98% 31-Mar-14 1,918 Botswana Building Society Indefinite Period Paid-Up Shares 8.00% 30-Jun-14 65,143,991 65,145,909

2012 African Alliance 6.84% 31-Mar-13 1,827 Botswana Building Society Indefinite Period Paid-Up Shares 9.25% 30-Jun-13 59,826,051 59,827,878

Sensitivity to interest rate movement A change of 50 basis points in interest rates during the reporting period would have increased/(decreased) the surplus by an equal amount in either direction, as shown below:

Current rate New rate Principal Effect on

amount the surplus

Group 2013 Finance lease liabilities (motor & radio system) 9.00% 9.50% (1,912,611 ) (9,563 )Finance lease liabilities (printer) 11.00% 11.50% (12,470 ) (62)Bank loan 9.00% 9.50% (3,861,358 ) (19,307 )Property development loan 9.00% 9.50% (10,521,000 ) (52,605 ) Net decrease in surplus (81,537 )

Short term investments African Alliance 4.98% 5.48% 1,918 10 Botswana Building Society Indefinite Period Paid-Up Shares 8.00% 8.50% 65,143,991 325,720 Call and short term deposit funds 1.00% 1.50% 22,540,833 112,704 Net increase in surplus 438,434

Group 2012 Finance lease liabilities (motor) 11.00% 11.50% (2,163,277 ) (10,816 )Finance lease liabilities (printer) 13.00% 13.50% (12,470 ) (62 )Bank loan 11.00% 11.50% (359,746 ) (1,799 ) Property development loan 11.00% 11.50% (2,515,694 ) (12,578 )Net decrease in surplus (25,255 )



Current rate New rate Principal Effect on

amount the surplus


Short term investments African Alliance 6.84% 7.34% 1,827 9 Botswana Building Society Indefinite Period Paid-Up Shares 9.25% 9.75% 59,826,051 299,130 Call and short term deposit funds 1.00% 1.50% 34,805,869 174,029 Net increase in surplus 473,168

Society 2013 African Alliance 4.98% 5.48% 1,918 10 Botswana Building Society Indefinite Period Paid-Up Shares 8.00% 8.50% 65,143,991 325,720 Call and short term deposit funds 1.00% 1.50% 22,540,833 112,704 Net increase in surplus 438,434

Society 2012 African Alliance 6.84% 7.34% 1,827 9 Botswana Building Society Indefinite Period Paid-Up Shares 9.25% 9.75% 59,826,051 299,130 Call and short term deposit funds 1.00% 1.50% 28,996,775 144,984 Net increase in surplus 444,123

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to the financial instrument fails to meet its obligation.

Reputable financial institutions are used for investing and cash handling purposes. All money market instruments and cash equivalents are placed with financial institutions registered in Botswana or South Africa. Banks in Botswana are not rated however each of the banks concerned are subsidiaries of major South African or United Kingdom registered institutions. The Group does not hold collateral as security in respect of its financial assets and the maximum credit exposure as at the reporting date is equal to the carrying amounts of the following financial assets (which approximate their fair values):

Group Society

2013 2012 2013 2012 Trade receivables 40,091,111 23,810,992 34,231,469 20,226,394 Other receivables 3,530,626 4,494,966 12,387,008 4,127,286 Cash and cash equivalents 41,517,433 40,451,592 26,286,828 32,932,976 Short-term investment 65,143,991 59,826,051 65,143,991 59,826,051 Investments (offshore) 91,611,208 81,584,442 91,611,208 81,584,442 241,894,369 210,168,043 229,660,504 198,697,149

Based on historic default rates, the Group believes that no impairment allowance is necessary in respect of medical aid subscriptions receivable included in trade receivables, as these balances relate to customers with a good credit history with the Group. Total medical aid subscriptions included in trade receivables at year-end were P30 966 308 (2012: P13 324 533). The Group establishes an allowance for impairment which represents its estimate of incurred losses in respect of trade receivables. The main component of this allowance consists of a specific loss component based on balances exceeding agreed upon credit terms.



Group Society

2013 2012 2013 2012


Credit risk (cont.) As at year end, Group trade receivables of P36 825 950 (2012: P18 736 309) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing of these receivables is as follows: Up to 2 months 35,814,786 17,405,367 30,966,308 13,004,7552 to 3 months 204,524 242,124 - 37,6003 to 4 months 144,656 185,728 - 41,072Over 4 months 661,984 903,090 - 241,106 36,825,950 18,736,309 30,966,308 13,324,533

The Group has no concentration of credit risk with outstanding balances due from a large number of customers located in Botswana.

Group 2013 2012Movement for the provision for impairment Balance at beginning of year 1,215,383 545,984 Movement in accrual for impairment allowance 375,136 669,399 Balance at end of year 1,590,519 1,215,383

Liquidity risk

The Group is exposed to daily operational payments and payment of claims, trade and other payable balances, finance lease obligations and borrowings.

The following are the contractual maturities of financial liabilities, excluding estimated interest payments and the impact of netting agreements: Carrying amount Contractual 6 months or less Group 2013

Trade and other payables (18,085,194 ) (18,085,194 ) (18,085,194 ) Finance lease obligations (1,925,081 ) (1,925,081 ) (525,278 )Bank loan (3,861,358 ) (3,861,358 ) (428,635 ) Property development loan (10,521,000 ) (10,521,000 ) (165,276 ) Subscriptions received in advance (318,556 ) (318,556 ) (318,556 ) Outstanding cheques for claims (4,696,600 ) (4,696,600 ) (4,696,600 ) Provisions for outstanding claims (38,749,917 ) (38,749,917 ) (38,749,917 ) Retention payable (271,109 ) (271,109 ) (271,109 )

(78 428 815 ) (78 428 815 ) (63,240,565 )



Carrying amount Contractual 6 months or less


Liquidity risk (cont.)

Group 2012 Trade and other payables (19,156,384 ) (19,156,384 ) (19,156,384 )Finance lease obligations (2,175,747 ) (2,175,747 ) (495 802 )Bank loan (359,746 ) (359,746 ) (49,708 )Property development loan (2,515,694 ) (2,515,694 ) (79,824 )Subscriptions received in advance (641,484 ) (641,484 ) (641,484 )Outstanding cheques for claims (5,180,322 ) (5,180,322 ) (5,180,322 )Provisions for outstanding claims (23,225,953 ) (23,225,953 ) (23,225,953 )Retention payable (251,310 ) (251,310 ) -

(53,506,640 ) (53,506,640 ) (48,829,477 )

Society 2013 Trade and other payables (21,108,843 ) (21,108,843 ) (21,108,843 )Subscriptions received in advance (318,556 ) (318,556 ) (318,556 )Outstanding cheques for claims (4,696,600 ) (4,696,600 ) (4,696,600 )Provisions for outstanding claims (38,749,917 ) (38,749,917 ) (38,749,917 )

(64,873,916 ) (64,873,916 ) (64,873,916 )

Society 2012 Trade and other payables (10,827,724 ) (10,827,724 ) (10,827,724 )Subscriptions received in advance (641,484 ) (641,484 ) (641,484 )Outstanding cheques for claims (5,180,322 ) (5,180,322 ) (5,180,322 Provisions for outstanding claims (23,225,953 ) (23,225,953 ) (23,225,953 ) (39,875,483 ) (39,875,483 ) (39,875,483 )

Exposure to currency risk The Group is exposed to foreign currency risk for transactions that are denominated in a currency other than Pula.

The Group does not take cover on foreign currency as it regards the Pula as a stable currency. The Group’s exposure to foreign currency risk based on notional amounts is analysed as follows:

GBP Rand Pula equivalent

2013 Cash and cash equivalents 11,845 87,153 234,902 GBP/BWP ZAR/BWP Year-end translation rate – Buy 14.146 1.233 Year-end translation rate – Sell 14.654 1.164




Exposure to currency risk (cont.) GBP Rand Pula

2012 Cash and cash equivalents 73,226 2,783,615 3,383,717 GBP/BWP ZAR/BWP Year-end translation rate – Buy 12.327 1.122 Year-end translation rate – Sell 12.770 1.059

A 10 percent strengthening of the Botswana Pula against these currencies at year-end would have decreased the Group and Society’s surplus for the year by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2012. Surplus for the year 2013 (21,355 ) 2012 (307,611 ) A 10% weakening of the Pula against the above currencies at year end would have had the equal but opposite effect on the Group and the Society’s and

surplus for the period to the amounts shown above, on the basis that all other variables remain constant.

Price risk The Group has investments in equity funds and equity instruments listed on the Botswana Stock Exchange. These investments are classified as available for sale. Fluctuations in the share prices impact on the value of the investments, giving rise to price risk. The Group does not take out financial instruments to manage this risk as fluctuations are normal in the short term. The share prices are expected to stabilise over the long term. As at year-end, the fair value of the equity instruments were as follows: Fair value 2013 194,361,173 Fair value 2012 161,557,100 A 10% movement in the above stated fair values at year end would result in the following gains or losses of equal amount: 2013 19,436,117 2012 16,155,710 These gains or losses are allocated directly to equity.




Categorisation of assets and liabilities (Group)

Financial assets and liabilities Current/non-current distinction

2013 Total

Financial

assets

designated at

fair value

Loans and

receivables

Financial

liabilities at

amortised

cost

Other non-

financial

assets and

liabilities

Current

assets and

liabilities

Non-current

assets and

liabilities

Assets

Property, plant and equipment 40,652,700 - - - 40,652,700 - 40,652,700

Work-in-progress 14,284,250 - - - 14,284,250 - 14,284,250

Goodwill 9,083,105 - - - 9,083,105 - 9,083,105

Available for sale investments 194,361,173 194,361,173 - - - - 194,361,173

Inventories 1,351,796 - - - 1,351,796 1,351,796 -

Trade receivables 40,091,111 - 40,091,111 - - 40,091,111 -

Other receivables 3,530,626 - 3,530,626 - - 3,530,626 -

Short term investments 65,145,909 65,145,909 - - - 65,145,909 -

Cash and cash equivalents 41,517,433 - 41,517,433 - - 41,517,433 -

410,018,103 259,507,082 85,139,170 - 65,371,851 151,636,875 258,381,228

Liabilities

Finance lease obligations 1,925,081 - - 1,925,081 - 1,050,555 874,526

Bank loan 3,861,358 - - 3,861,358 - 857,269 3,004,089

Property development loan 10,521,000 - - 10,521,000 - 330,552 10,190,448

Retention payable 271,109 - - 271,109 - 271,109 -

Deferred taxation 1,091,203 - - - 1,091,203 - 1,091,203

Trade and other payables 18,085,194 - - 18,085,194 - 18,085,194 -

Subscriptions received in

advance

318,556 - - 318,556 - 318,556 -

Outstanding cheques for

claims

4,696,600 - - 4,696,600 - 4,696,600 -

Taxation payable 654,584 - - - 654,584 654,584 -

Deferred rental liability 50,929 - - - 50,929 - 50,929

Provision for outstanding

claims

38,749,917 - - 38,749,917 - 38,749,917 -

80,225,531 - - 78,428,815 1,796,716 65,014,336 15,211,195




Categorisation of assets and liabilities (Group)


2012 Total

Financial

assets

designated at

fair value

Loans and

receivables

Financial

liabilities at

amortised

cost

Other

non-financial

assets and

liabilities

Current

assets and

liabilities

Non-current

assets and

liabilities

Assets


Work-in-progress 3,841,914 - - - 3,841,914 - 3,841,914

Goodwill 371,093 - - - 371,093 - 371,093


Inventories 1,806,554 - - - 1,806,554 1,806,554 -





Taxation refundable 404,773 - - - 404,773 404,773 -

338,498,725 221,384,978 73,936,045 - 43,177,702 135,975,250 202,523,475

Liabilities

Finance lease obligations 2,175,747 - - 2,175,747 - 991,603 1,184,144

Bank loan 359,746 - - 359,746 - 99,415 260,331

Property development loan 2,515,694 - - 2,515,694 - 159,647 2,356,047

Retention payable 251,310 - - 251,310 - - 251,310

Deferred taxation 1,292,193 - - - 1,292,193 - 1,292,193



advance

641,484 - - 641,484 - 641,484 -


claims

5,180,322 - - 5,180,322 - 5,180,322 -


claims

23,225,953 - - 23,225,953 - 23,225,953 -

54,798,833 - - 53,506,640 1,292,193 49,454,808 5,344,025




Categorisation of assets and liabilities (Society)


2013 Total

Financial

assets

designated at

fair value

Loans and

receivables

Financial

liabilities at

amortised

cost

Other

non-financial

assets and

liabilities

Current

assets and

liabilities

Non-current

assets and

liabilities

Assets


Investment in subsidiaries 29,028,744 - - - 29,028,744 - 29,028,744


Inventories 1,107,060 - - - 1,107,060 1,107,060 -





390,116,784 259,507,082 77,599,987 - 53,009,715 143,852,956 246,263,828

Liabilities



advance

318,556 - - 318,556 - 318,556 -


claims

4,696,600 - - 4,696,600 - 4,696,600 -


claims

38,749,917 - - 38,749,917 - 38,749,917 -

64,873,916 - - 64,873,916 - 64,873,916 -




Categorisation of assets and liabilities (Society)


2012 Total

Financial

assets

designated at

fair value

Loans and

receivables

Financial

liabilities at

amortised

cost

Other non-fi-

nancial assets

and liabilities

Current

assets and

liabilities

Non-current

assets and

liabilities

Assets


Investment in subsidiary 12,153,102 - - - 12,153,102 - 12,153,102


Inventories 1,743,800 - - - 1,743,800 1,743,800 -





Assets classified as held for

sale

1,799,253 - - - 1,799,253 1,799,253 -

323,082,367 221,384,978 62,465,151 - 39,232,238 125,836,082 197,246,285

Liabilities



advance

641,484 - - 641,484 - 641,484 -


claims

5,180,322 - - 5,180,322 - 5,180,322 -


claims

23,225,953 - - 23,225,953 - 23,225,953 -

Liabilities associated with as-

sets classified as held for sale

3,283,767 - - - 3,283,767 3,283,767 -

43,159,250 - - 39,875,483 3,283,767 43,159,250 -




Fair values

Financial instruments carried at fair value are categorised in three levels by valuation method. The different levels have been defined as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

30 Retirement benefits The Group contributes to the following defined contribution pension plans:

30.1 Botswana Medical Aid Pension Fund which is held independent of the Group and is administered by Glenrand MIB Botswana (Proprietary) Limited.

30.2 Sentlhaga Pension Fund which is held independent of the Group and is administered by Aon Botswana (Proprietary) Limited.

31 Events after the reporting date The Board is not aware of any matter or circumstance arising since the end of the financial year, not dealt with in this report or these financial statements which would have a material impact on the financial results or operations of the Group.


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GaboroneP. O. Box 636322, GGaborone, Botswana

Plot 50638, Fairgrounddss, GGababorone, Botswana

Tel: +267 31 84 210

Fascimile: +267 31 84 230, +267 31 84 152

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P.O.Box 3328, Francistown, BBototswswana a

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