Annual Report 201415 - BBS BBS... · • Mr. MOLEFE Pius 9. ... means of communication such as this Report, general meetings as well as individual meetings, where appropriate. Further,

Customer service excellence

Botswana Building Society 2014/15Annual Report

About us...The Botswana Building Society was established on 13 December 1976 with assets of only P4, 108,000 after three months of business as at 31 March 1977. Its assets consisted of Government stock of P200, 000, advances of P2, 505,000 and cash and investments amounting to P1, 264,800. The advances comprised 488 mortgages taken over from the then United Building Society of SA, of which the Society had until then operated as a branch. Only nine new home loans were advanced in its first three months of operation. The liabilities consisted of P2, 644,700 in capital, mostly subscribed to by Government in shares, a statutory reserve of a mere P200, and retained earnings of P1, 900. Savings and fixed deposits accounted for P1, 388,700, with creditors and provisions making up the balance.

During its first ten years of operation, the Society was restricted by law to lend only against the security of immovable urban property. The Building Societies Act was amended in April 1986 to permit lending in rural areas. Since then, the number of mortgages in respect of rural properties has grown to 699, representing 12% of our mortgage book, compared with 4, 825 advances in urban areas, as at 31 March 2012. This reflects the commitment to contribute to the social and economic upliftment of Batswana, most of whom reside in rural areas of the country. Up until 1986, the Society restricted its lending only to residential properties, as a matter of policy. It was only in 1986 that the Society ventured into commercial lending for the first time, and now has on its books 97 advances on commercial undertakings. These represent 8% of the Society’s mortgage book in terms of value. The exceptional growth of the Society over the past 36 years can best be measured by the phenomenal increase in its reserves, from only P2,100 in March 1977 to just under P236 million in March 2015. The Statutory reserve alone increased from a mere P200 to almost P2, 460 billion over this period. The Society has consistently met its dividend obligations to its shareholders every year over the past 39 years of its existence. A bonus dividend of P60.304 million was also awarded in 2015.

MissionTo provide attractive financial products and services that create value for our stakeholders.

VisionTo be the regional leader in the provision of financial services solutions.

ValuesThe Botswana Building Society has 5 values. The BBS values do not just describe the Botswana Building Society’s culture, but also encapsulate the spirit of Botho. BBS therefore understands that everything it does is about Batswana and hence our values give substance to what we are and why we are proud to serve within our society. BBS is committed to the following key values which are fundamental to our business philosophy.

Teamwork

Service ExcellenceInnovation

IntegrityRespect

BBS annual report 2014/15

Go online to download a copy of the annual report at

www.bbs.co.bw/publications

Customer service excellence Customer service excellence

PB 1

Annual Report 2014/15

Five Year Summary 02

Value Added Statement 03

Performance Highlights 04

Notice of Meeting & Agenda 06

Board of Directors 08

Executive Management Team 10

Chairman’s Statement 13

Managing Director’s Report 19

Corporate Governance 24

Annual Financial Statements 30

Contents PageBotswana Building Society 2014/15 Annual Report


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Annual Report 2014/15 Annual Report 2014/15

Five Year Summaryfor the year ended 31 March 2015

Value Added Statementfor the year ended 31 March 2015

Analysis of Amounts (P’000) 2015 2014 2013 2012 2011 P’000 P’000 P’000 P’000 P’000 Deposits (Ordinary, Special savings, Letsibogo and Tlamelo and Lerako) 581,082 528,111 482,898 280,431 282,270 Fixed deposits 445,369 118,554 108,800 158,456 8,080 Advances (mortgages and short loans) 3,010,432 2,605,177 2,355,014 1,988,586 1,688,744 All classes of shares 1,307,830 1,210,267 1,109,019 971,391 1,013,112 Analysis of Account holdings Number of mortgage bond holders 5,723 5,484 5,540 5,488 5,206 Number of short-term loan account holders 7,020 6,955 6,747 7,285 7,728 Number of paid up share account holders 44,227 43,310 42,357 41,636 41,427 Number of subscription share account holders 5,684 5,573 5,582 5,817 5,968 Number of fixed-deposit account holders 130 126 130 148 842 Number of savings account holders 122,766 118,142 112,733 107,658 103,214 185,416 179,590 173,089 168,032 164,385

Value created 2015 2014 P’000 P’000

Income from lending and banking activities 329,947 310,746 Cost of services (140,561 ) (127,456 )Value created by operations 189,386 183,290 Non-operating income 11,671 5,293 Operating expenditure excluding staff costs (66,209 ) (55,238 ) 134,848 133,345 Value distributed Employees - Salaries & benefits 55,608 58,047 Shareholders - Dividends 60,304 59,125 115,912 117,172

Value retained Retained income 11,645 8,910 (including transfer to statutory reserve) Depreciation 7,291 7,263 18,936 16,173 Total value distributed & retained 134,848 133,345


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Performance Highlightsfor the year ended 31 March 2015

Profit for the year(P”000)

Total assests(P”000)

Earnings per share(thebe)

Total liabilities(P”000)

Dividend per share(thebe)

74,000

72,000

70,000

68,000

66,000

64,000

62,000

60,000

58,000

0

15 14 13 12 11

4,000,000

3,500,000

3,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0

15 14 13 12 11

4,000,000

3,500,000

3,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0

15 14 13 12 11

18

16

14

12

10

8.0

6.0

4.0

2.0

0.0

15 14 13 12 11

18

16

14

12

10

8.0

6.0

4.0

2.0

0.0

15 14 13 12 11

Annual Report 2014/15Annual Report 2014/15


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Notice of Meeting & Agenda

Notice is hereby given that the Thirty Ninth (39th) Annual General Meeting ofMembers will be held at the Gaborone Sun Conference Centre, Gaborone onFriday 28 August 2015 at 0900 a.m.

Agenda

1. Confirmation of quorum2. Chairman’s welcome remarks3. To approve Minutes of the Annual General Meeting held on 29 August 20144. To receive the Financial Statements, the Directors’ and Auditors’ Reports for the year ended 31st March 20155. To approve the Financial Statements6. To approve the Directors’ Remuneration 7. To approve the Auditors’ Remuneration

8. To note the re-appointment of the following Directors in terms of Rule 83(i) of the Society, who are eligible for re-election and have put themselves up for re-election:

• Mrs.FANTANTsetsele• Mr.KGOSIDIILECross• Mr.MOLEFEPius

9. ToappointKPMGasauditorsoftheSocietyforanewterm.

10. To receive and consider questions and or comments from Shareholders in relation to the above matters.

By order of the BBS Board

Sipho H. ShowaBoard Secretary



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Board of Directors Board of Directors (cont.)

Cross KgosidiileChairman

Simon HirschfeldDirector

Tsetsele C.FantanDirector

Gerald N.ThipeDirector

KelebamangMotlhankaDirector

FrederickSelolwaneDirector

Kelapile NdobanoDirector

Pius K. MolefeManaging Director

Mareledi SegotsoDirector

James KamyukaDirector


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Executive Management Executive Management (cont.)


Pearl Ramokate-NkoaneHead of Finance

Keona B.MphetlheHead of Corporate Services

Sipho H.ShowaHead of Communications& Marketing/ Board Secretary

Freddie RakwadiHead of InformationTechnology

ThelmaO’ReillyHead of Banking

Susan L. NtsimaHead of Operations

Julia NtsholeHead of Risk

Punah MoyoHeadofProjects& Strategy


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Board Chairman’s Statement

In last year’s statement, I shared my belief in the dedication of our Staff members to the Society and I have not been disappointed as our latest performance indicates.AttainingaprofitofP72million,upby6%fromthatrecordedinthelastfinancialyear(P68million)inthesechallengingeconomictimesisagreatachievement. So, at the outset I would like to thank them for their hard work and to congratulate them on this performance.Financial performance

InadditiontotheSociety’sprofitabilityasindicatedabove,totalassetsincreasedby15%fromP3.045billionasatMarch2014toP3.496billioninMarch2015.Ourlongtermloansandadvances,afterimpairments,grewby16%toP2.934billionfromP2.526billioninMarch2014.CashandcashequivalentsandinvestmentswithbanksincreasedbyP38.744millionor12%.

However,shorttermloansandadvancesdecreasedby3%fromP78.9millionasat31March2014toP76.5millionbecauseofthedesire by our customers to save rather than spend their investments.

Ourcosttoincomeratiomovedfrom57%inMarch2014to58%asatMarch2015mainlybecauseofworkbeingdoneontheDemutualisationProject.

Nonetheless,adividendamountofP60.304millionwaspaidtoshareholdersbeinganincreaseof2%comparedtoadividendofP59.125millionpaidintheprioryear.

Update on the demutualisation process

TheprojecttoconvertBotswanaBuildingSocietyintoacommercialbankisontrack.SincemylastupdatetoyouIampleasedtoinform you that there have been a lot of significant developments in this regard. We have since completed the business plan for the envisaged bank and I am confident that it will be a welcome addition to the market. An application to become a company will also be lodged with the Registrar of Companies as this is a crucial step to becoming a bank in that the business must first change from the status of a building society.

Further, we will submit the actual application for a banking license with the Bank of Botswana during the month of October 2015 subjecttoyouapprovingtherelevantresolutionsasIwillexplainbelow.WehavebeenadvisedthatfeedbackfromtheBankofBotswana on the banking license application takes up to 6 months. Therefore, at the maximum, we should receive a response on the application in March 2016. Clearly, these time lines attest to the proximity of realizing the BBS dream which is to become a fully- fledged bank.

In the meantime, we will continue to engage with shareholders and other stakeholders on the demutualisation process using various means of communication such as this Report, general meetings as well as individual meetings, where appropriate.

Further, as part of the preparations to become a commercial bank, we have been working very hard to ensure that the commercialised BBS will operate on a solid governance platform. To this end, we recently enhanced our various risk management policies to ensure that the business, in its present and future forms, is sustainable. Thus, our enterprise wide risk management methodology and philosophy provides a risk management approach that ensures that the following are adhered to:

• Clear assignment of responsibilities;• A common enterprise-wide risk management framework and process, and;• Theidentificationofuncertainfutureeventsthatmayinfluencetheachievementofbusinessplansandstrategicobjectives.



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Board Chairman’s Statement (cont.) Pego ya ga Modulasetilo

To this end, I would like to thank fellow Board Members and Management for working tirelessly to ensure that the Society’s risk management practices are strengthened.

Special General Meeting on the demutualisation

After this statutory Annual General Meeting, we will meet with you in a Special General Meeting, whose date is to be set, to consider and approve resolutions pertaining to the demutualisation of BBS. Without approval of these resolutions we cannot proceed to submit the application to the Bank of Botswana for a banking license as indicated above. Therefore, I encourage you to reflect thoroughly on the proposed resolutions when they are put before you and debate them openly with us leading to a meaningful conclusion.

Board

As reported to you at the last general meeting, we took the decision to look further to enhance the Board by appointing an additional Non-Executive Director with strong experience in matters such as finance, governance and leadership. Thus, we welcomed Mr. KelapileNdobano,currentlyDeputySecretary-MacroeconomicPolicyintheMinistryofFinanceandDevelopmentPlanning,totheBoard. Mr. Ndobano is also a member of the BBS Demutualisation Committee and the BBS Tender Committee.

It is equally important to ensure that the Board has the right processes in place to ensure that it is operating efficiently and effectively, and is assisting to set the agenda for the business to succeed. This will continue to be a priority for us as Directors.

Outlook

We remain confident in the long term growth prospects of Botswana Building Society which will further be enhanced by commercialising the business. This reflects our belief that we will continue to see a demand for banking products and services but that more importantly, we can offer Batswana superior and reasonably priced service in this regard. This view is supported by a study, involving both customers and non-customers of BBS, that we did recently in order to inform the business model of the banking institution we are setting up.

As a result, we look to the future with confidence that the successor entity to Botswana Building Society will continue the tradition of delivering value to all our stakeholders, including attractive shareholder returns.

Thank you.


Mo pegong yame ngogola, ke ne ka bua ka go dira ka natla ga babereki ba BBS.Kajalo,gabaantshwabisangwagaonojaakamaduoaronaasupa.GoborediriledipoelotsaP72million,elekoketsegoya6%mogotsangwagaoofetileng (P68million)ebilemodikgwetlhongtsere lengmogotsone,kephitlhelelo e kgolo thata.Ke kamooke eletsanggo simolola fela kagobaleboga le go ba akgolela maduo a mantle a.Maduo

Mogodimogadipoelotseredidirileng,tlhwatlhwayotlheyadithototsaBBSeoketsegileka15%etswakgwagoP3.045billionkaMopitlo2014goyakwagoP3.496billionkaMopitlo2015.Madiareaadimangsechabagorekakanagoagadikagoaoketsegileka16%ayakwagoP2.934billiongotswakwagoP2.526billionkaMopitlo2014.Madiareabolokilengkwadibankengoneaoketsegileka12%(P38.744million).

Madiareaadimangbathokanakwanakgatlhanonglediabetsaboneoneafokotsegileka3%atswakwagoP78.9millionkaMopitlo2014goyakwagoP76.5millionseelesesuposagorebabeeletsibadiabetsaBBSbadumelamogobolokengmadiabone.

Boturujwagotsamaisakgwebojonebooketsegilegotswamogo57%kaMopitlo2014goyakwago58%kaMopitlo2015gobakwa segolobogolo ke gore re semeletse ka tiro ya go fetola BBS go nna banka e e feletseng.

Lefagontsejalo,morokotsowaP60.304milliononewaduelwababeeletsielekoketsegoya2%mogooonengoduetswekaMopitlo2014waP59.125million.

Tekodiso ka tiro ya go nna banka

Tiro ya go fetola Botswana Building Society go nna banka e tsweletse sentle. E sale pego yame ya ngogola, ke itumelela go lo itsise gore go segilwe tema e bonalang fela thata mo tirong e. Re ne ra wetsa lenaneo la go tsamaisa kgwebo e ya banka e ke dumelang faetlaamogelesegamosechabeng.Kopoyagonnakompone,seloseretshwanetsengrannasonepelegarennabanka,leyonee tla isiwa kwa ofising ya Mokwadisi wa Dikompone.

Moragogamoo,kopojaanongyagoletlelelwagodirarelebankaetlaisiwakwaBankengyaBotswanakakgwediyaPhalane2015 mme se se tlaabo se ikaegile ka gore a lona babeeletsi lo tlaabo lo rebotse ditshutiso tse re tla di lo rolelang mo phuthegiong e efaphegileng.Ketlatlhalosasemoragonyanamopegongyonee.Resetserelomilwetsebegorefaresenagotsenyakopoyagonnabanka,baBankayaBotswanabonebatlatlhokadikgwedidikannathatarogoesekaseka.Kajalo,resolofelagofiwaphetoloka Mopitlo 2016 fa gotwe go diegilwe. Ditiragalo tse le dinako tsa tsone di supa ka fa re leng gaufi ka teng go diragatsa toro ya rona ya go nna banka e e feletseng.

Mme re tla tswelela re buisanya le babeeletsi le bana le seabe ba bangwe ka tiro ya go nna banka re dirisa metlhale e e farologanyeng jaakapegoyonee,diphutegotsabotlhekanakabongwelebongwe,fagotlhokega.

Gape, re ntse re le mo tirong ya go baakanyetsa go nna banka, re tsweletse ka go tlhomamisa gore re tokafatsa le go thatafatsa ditsamaisotsarona.KekamooresatswanggotokafatsaditsamaisotsegoreBBSetsweleleedirasentlegoyapele.Ditsamaisotse di akaretsa go tlhalosa ka botlalo tse di latelang:


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Pego ya ga Modulasetilo (tsweletso)

• Go papamatsa gore ditiro mo BBS ka go farologanya ke maikarabelo a bo mang.• Go nna le tsamaiso e le nngwe, kgwebo ka bophara, go dibela gore e seka ya tsena mo dipharagobeng le gone gore fa go ka

diragalajaloekainolwajangmoseretseng.• Go nna le ponelopele ka maikaelelo a go akanyetsa dilo tse di ka amang lenaneo la kgwebo le maikaelelo a lone ka tsela epe

fela.

Kajalo,kebatlagoakgolalegolebogaKhuduthamagaleBotsamaisigodirakanatlamotirongeekesatswanggoenankola.

Phuthego e e faphegileng go tla go buisanya ka go nna banka

Moragogabokopanojwaronajwangwagalengwaga,retlannalesebakasagonnalejobofaphegileng,jonakoyajonelotlaebolelelwang, go tla go sekaseka le go dumalana ka ditshutiso tsa go nna banka. Ga re kake ra tswelela ka go tsenya kopo ya rona yagonnabankakwaBankengyaBotswanafaditshutisotsedisarebolwa.Kajalo,kelokopagorenakoelotlabewangpeleditshutiso tseo ka yone lo di sekaseke kwa tlhwaafalo le ka phuthologo gore re tle re kgone go nna le ditumalano tse di maleba.

Khuduthamaga

Jaakakebegilengogola,reneratsayatshwetsoyagooketsabolengjwaKhuduthamagakagonnalelelokolelenanglekitsoeetseneletsengmogotsamadi,tsamaisoyakgweboleboeteledipele.Kajalo,reneraamogelaRreKelapileNdobanoyoadirangelemogolwanekwaLephatenglaMadileDitogamaanolaPusoyaBotswana.RreNdobanogapeomodikomitingtsaKhuduthamagaya BBS tsa theko le thekiso ya dithoto le go fetola BBS go nna banka.

GobotlhokwagapegoreKhuduthamagaenneleditsamaisogoekaelagoreediredilojanggorekgweboetleeatlege.RetlatswelelakagobayatsekwasetlhoengreleKhuduthamaga.

Tebelopele

Re na le tshepho ya gore go ya pele, Botswana Building Society e tla tswelela ka go gola, selo se se tla tiisiwang ke go nna banka. KetumeloyaronagoreretlatswelelakagobonaBatswanabadirisaditlamelotsadibankalegonegorerona,rekafasechabadithusotsedibotokaebilediseturu.Redumelajalokagorerenerabotsolotsabadirisibaditlamelotsaronalebareeletsanggobangokagoreretleretlhaloganyesentletsebaditlhokangjaakareipaakanyetsagonnabanka.

Kajalo,regatelapelerelemokotiagorebankaeetlatswangmoBotswanaBuildingSociety,etlatsweletsatemayagofasechabaditlamelo tse di ba ungwelang, go akarediwa le morokotso o o bonalang.

Kealeboga.

Cross KgosidiileModulasetilo


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Managing Director’s Report

We continue to be inspired by our theme, “Customer service excellence”, because we believe strongly that for us to continue as a sustainable business, we must provide superior service to our customers. That is why we have carried over the theme from the last financial year.

The BBS team, therefore, is working very hard to live up to the theme because we want to be the top choice for banking experience now and in the future. The dedication, passion and pride of all BBS employees throughout the country underline our blue print for trying our level best to provide our patrons with the best customer experience and to appeal to the next generation of customers.

At the outset, I also want to thank the BBS team for meeting the needs of our customers. I know that everyone in the business is working very hard to strengthen our culture of service particularly that it is a key part of the foundation of our future entity.Performance highlights

Ourresultsindicatethatweperformedalotbetterthanhadbeenanticipated.WhiletheChairmanMr.CrossKgosidiilehasprovidedan overall picture of the performance, I would like to highlight how a few of our portfolios performed: Total mortgages and advances atP3.010billionmakeup86%ofthetotalassetsoftheSociety.Longtermloansgrewby16%toreachP2.934billioninMarch2015comparedtoP2.526billioninMarch2014.

IndefinitePeriodSharesatP809.145millionare11%higher than lastyear’samountofP726.712million.FixedPeriodPaidUpSharesincreasedbyP12.731millionor3%fromabalanceofP426.982millionrecordedinMarch2014whileSubscriptionSharesincreasedbyP2.399milliontoP58.972millionasattheendofMarch2015.Thegrowthinourvarioussharesportfolioscomparedtothe reduction in short loans, which are taken against such shares, as reported by the Chairman, highlights the fact that shareholders were particularly keen on saving rather than using the shares as collateral for loans or in redeeming such shares.

Savingsaccountsbalancesincreasedby10%orP52.972millionfromP528.111millioninMarch2014toP581.083millioninMarch2015whilefixeddepositsrecordedasignificantgrowthofP326.815milliontoreachabalanceofP445.369million.

We are changing, for the better

AstheChairmanMr.Kgosidiilenotesinhisstatement,preparatoryworktoconverttheSocietyintoacommercialbankisongoing.Some of our competitors are also changing while others are improving their businesses. Therefore, with change everywhere, BBS cannot afford to be left behind. We are focused on becoming one of the leading home grown commercial banks to everyone we serve: customers, shareholders and many other stakeholders. At the same time, we want to remain true to our purpose of offering excellent customer service.



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Managing Director’s Report (cont.)

Community Service

Our desire for excellent customer service does not only end and begin within our premises. We also care a great deal about our communities whom we support through our Corporate Social Responsibility Fund. We take pride in making investments in the communities where we do business and various others across the country. Therefore, in the year under review, we donated a total of P687,893.33tovariousdeservingorganisationsinthecountry.

Board

I would, once again, like to thank the BBS Board for its guidance and support throughout the year. They have been key to our achievements this year as they have been throughout the years.

Partners

BBS shareholders, customers and various other stakeholders remain our pillar of strength. We would like to thank them for electing to be a part of this great organization particularly as we seek to change the model of our business.

Le ka moso bagaetsho

Pius Komane MolefeManaging Director

Pego ya ga Mookamedi

Re tsweletse ke go kgothadiwa ke maitlamo a rona a go isetsa badirisi ditlamelo tsa rona ka manontlhotlho ka gore re dumela gore ke yone fela tsela e e ka dirang gore re tswelele re dira sentle re le kgwebo.

Kajalo,baberekibaBBSbadirakanatlagodiragatsamaitlamoakagorerebatla go nna rona ba ntlha fa go tla mo go isetseng setshaba ditlamelo tsa banka gompieko le isago. Maikemisetso a, go dira ka natla le go nna motlotlo ke badiri ba BBS botlhe ka tiro ya bone a gatelela maikaelelo a rona a go leka kabojotlhegothusabadirisibaditlamelotsaronakamaatlametlolegonegongoka ba basha.

KekamookebatlanggolebogababerekibaBBSgodirakanatla.Keaitsegore mongwe le mongwe wa bone o dira ka natla go tlhabolola ka fa re thusang sechabakateng,segolobogolokagorebonatlakejonemotheowakgweboyarona gompieno le isago.Maduo

Maduoaronaasupafaredirilebotokagonalejaakareneresolofetse.EreModulasetilowaKhuduthamagaRreCrossKgosidiileasetseabuilekabopharagorereredirilejang,kebatlagogatelelakafaditlamelodingwetsaronadidirilengkateng:MadiotlheakadimoakanakaP3.010billion,ele86%yatlhwatlhwayadithototsotlhetsaBBS.Kaboone,madioneagoagakanagorekadikagoaoketsegileka16%goyakwagoP2.934billionkaMopitlo2015atswakwagoP2.526billionkaMopitlo2014.

Diabe tsa IndefinitePerioddi oketsegile ka 11%go tswa kwagoP726.712million di ya kwagoP809.145million.Diabe tsaFixedPeriodPaidUptsonedioketsegilekaP12.731millionkanaka3%momadingaP426.982millionkaMopitlo2014fatsaSubscriptiontsonedioketsegilekaP2.399milliongoyakwagoP58.972millionkaMopitlo2015.Kgoloyadipeeletsotsadiabeka go farologana fa e tshwantshanngwa le kwelo tlase ya dikadimo tse di dirwang go dirisiwa tsone diabe tse e supa fa badirisi ba ditlamelo tsa BBS ba ne ba ikaeletse go boloka gona le go dirisa madi a bone.

Matloleapolokelooneaoketsegileka10%kanaP52.972millionatswakwagoP528.111millionkaMopitlo2014goyakwagoP581.083millionkaMopitlo2015faletlolelapolokelolemadiatsewangmoragogasebakasesedumalanwenglonelegodilekaP327milliongoyakwagoP445.369million.

Re a fetoga go itokafatsa

JaakaModulasetilowaKhuduthamagaRreKgosidiileasetseabuile,tiroyagotlhagolatselagonnabankaeefeletsengetsweletse.Bangwe ba re phadisanyang nabo le bone ba leka go fetola dipopego tsa dikgwebo tsa bone go nna dibanka fa ba bangwe bone batlhabololatsebasetsengbadidirile.Kajalo,eregonalediphetogogongwelegongwe,BBSgaekakeyasalelakwamorago.Re ikemiseditse go nna banka ya maemo a ntlha e bile e tlholega mono go thusa badirisi ba ditlamelo tsa rona le baema nokeng ba rona botlhe. Le gale, mo phetogong e, re batla go sa fapogeng mo moonong wa rona wa go fa sechaba ditlamelo tsa maemo a ntlha.


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Pego ya ga Mookamedi (tsweletso)

Tirisanyo le setshaba

Maikaelelo a rona a go thusa sechaba a tswelela le kwa ntle ga madirelo a rona. Re kgathala thata ka Batswana ba bangwe ke kamoorebaemangnokengkaletlolelaronalatirisanyolesechaba.Kajalo,reitumelelagorerebonerethusitsemakalanaalemmalwalefatshelenokabophara.Mongwagengwamadioosatswanggofeta,rentshitsemadiaakanakaP687,893.33gothusa mekgatlho e e farologanyeng.

Khuduthamaga

KeeletsagolebogelaKhuduthamagayaBBSkemonokengledikgakololotsayonemongwagengoosatswanggofeta.Ennileleseabe se se bonalang mo diphitlhelelong tsa rona ngwaga one le tse di fetileng.

Bana le seabe

Babeeletsi ba BBS, badirisi ba ditlamelo tsa yone le baema nokeng ba bangwe ka go farologana ba tsweletse ka go nna seikokotlelo sarona.RebatlagobalebogagomenaganegobobatseretswetshoyagonnabontlhabongwejwaBBSsegolobogolojaakaretsweletse ka go leka go itlhabolola.

Le ka moso bagaetsho.

Pius Komane MolefeMookamedi


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Corporate Governance

BBS Board

Botswana Building Society (BBS) has a Board of Directors appointed in terms of the Building Societies Act and the BBS Rules. The BBS Board, working closely with BBS Executive Management, has committed itself to high levels of ethical leadership, integrity and governance. It thus understands that for Botswana Building Society to continue being a sustainable and profitable business and key stakeholder in the economy that delivers attractive returns to its shareholders and customers, it must ensure that it provides the necessary oversight so that its reputation remains solid. The BBS Board also recognises the need to have strong risk management frameworks and practices as this ensures that the business remains viable and competitive.BBS Board Governance and Structure

The role of the BBS Board is to provide strategic direction to the business of the Society guided by the various constitutive documents, including the Board Charter. In addition, the BBS Board has adopted relevant corporate governance principles as laid outintheKingCodeonCorporateGovernancetoenhanceitseffectiveness.

Currently, there are ten (10) Board Members whose terms are renewable every three (3) years in line with the BBS Rules. According to the Rules, there can be no less than 5 (five) and not more than 20 (twenty) Directors and the Board determines an appropriate number within this range. As stated above, presently, it has been determined that the optimal number is ten (10) Directors.

Current Directors are:

• Mr.CrossKgosidiile Board Chairman• Mr.PiusKomaneMolefe Managing Director• Mrs. Tsetsele Cecilia Fantan• Mrs. Mareledi Segotso• Mr. Simon Hirschfeld• Mr.JamesNfambaKamyuka• Mr. Frederick Selolwane• Mr.KelebamangMotlhanka• Mr. Gerald Nyadze Thipe• Mr.KelapileNdobano (Appointed 29 August 2014)

In addition to the Board Charter, Botswana Building Society also has charters in place to guide its various Committees being:

• Tender Committee• Finance and Audit Committee• Demutualisation Committee• Human Resources and Remuneration Committee



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26 27


Corporate Governance (cont.)

Board and Board Committee meetings

The BBS Board and its Committees respectively meet at least four times a year to consider business and strategic issues, consider and approve financial results, budgets, monitor progress of matters delegated to Executive Management and generally help set the tone of the business.

A summary of meetings and attendance by Directors is indicated below.

BBS Board Meeting

Tender Committee Meeting

Human Resources and Remuneration Committee Meeting

Finance and Audit Committee Meeting

Demutualisation Committee Meeting

Cross Kgosidiile

9/9

Pius K. Molefe 9/9 7/7 5/5 4/4

Tsetsele C. Fantan

6/9 5/5 4/4

Mareledi Segotso

7/9 4/5 5/8

Simon Hirschfeld

9/9 6/7

James N. Kamyuka

7/9 7/8 4/4

Frederick Selolwane

8/9 7/7 4/4

Kelebamang Motlhanka

9/9 6/7 8/8

Gerald N. Thipe

9/9 4/5 8/8 4/4

Kelapile Ndobano*

3/9 2/7 1/4

*Mr.NdobanojoinedtheBBSBoardinAugust2014hencethefewermeetingsthatheattendedcomparedtotheotherDirectors.


26


28 29


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

Finance and Audit Committee

TheFinanceandAuditCommittee ischairedbyMr. JamesN.Kamyuka.TheotherCommitteeMembersareMr.KelebamangMotlhanka, Mr. Gerald Thipe and Mrs. Mareledi Segotso.

Its role is to provide the Board with additional assurance regarding the efficacy and reliability of the financial and risk information. It also assists the Board in discharging its duties in the exercise of its oversight role relating to the safeguarding of assets, the operation of adequate systems, control processes and the preparation of accurate financial reporting and statements in compliance with all applicable legal requirements and accounting standards.

Tender Committee

The Tender Committee is chaired byMr. Frederick Selolwane. Its other Members areMr. Simon Hirschfeld, Mr. KelebamangMotlhanka,Mr.KelapileNdobanoandtheManagingDirectorMr.PiusMolefe.

It assists the Board in discharging its duties by reviewing the Society’s tendering and procurement policies and practices to ensure thattheTenderRulesandProcurementProceduresarerecognisedas“bestpractice”,thatalltendersareconductedinafairandethical manner and that no conflict of interest exists with any Board Member or employee of the Society connected to the tendering and procurement processes.

Human Resources and Remuneration Committee

The Chairman of the Human Resources and Remuneration Committee (HRRC) is Mr. Gerald N. Thipe. Other Members are Mrs. TsetseleFantan,Mrs.MarelediSegotsoandtheManagingDirectorMr.PiusMolefe.TheHRRCassiststheBoardofDirectorsinhuman resources as well as remuneration related matters.

Demutualisation Committee

TheChairmanoftheDemutualisationCommitteeisMrs.TsetseleC.Fantan.IthasasitsotherMembersMr.JamesKamyuka,Mr.KelapileNdobano,Mr.FrederickSelolwane,Mr.GeraldThipeandtheManagingDirectorMr.PiusMolefe.

The Demutualisation Committee’s role is to provide oversight on the implementation of the Society’s demutualisation strategy.

Appointments/Resignations

In line with the BBS Rules, a third of the Directors resigned during the year under review and were duly re-elected having offered themselves to be considered for re-appointment. These were:

• Mrs. Mareledi Segotso • Mr. Frederick Selolwane • Mr. Gerald Thipe

In terms of resignations, no Director left the Board during the year under review. A new director,Mr. Kelapile Ndobano, wasappointed to the Board during the year.

Director’s remuneration

BBS Board fees are structured as indicated below:

• TheBoardChairmanispaidaonce-offretainerfeeofP30,000andasittingallowanceofP6,000permeeting.HeattendsBoard Meetings only.

• Other Directors are paid once-off retainers of P25, 000 each and sitting allowances of P5, 000 permeeting. The sittingallowance is applicable both for Board and Board Committee meetings.

Duringtheyearunderreview,atotalofP977,826waspaidtowardsBoardfeesandrelatedexpensescomparedtoP808,000inthepreviousyear.TheincreaseinfeeswaslargelyasaresultofmoreworkontheDemutualisationProject.

Conflict of interest

BBS Directors are required to notify the Society, through the Board Secretary, in reasonable time of conflicts or potential conflicts of interest that they may have in relation to their dealings with the business.

In addition, as a matter of entrenched practice, BBS Directors declare conflicts of interest, if any, at each of their meetings.

Further, BBS Directors are required to declare their shareholding in other entities and in the Society every year in line with corporate governance requirements. This information is also submitted to the Bank of Botswana as per its oversight role over BBS as mandated bytheMinistryofFinanceandDevelopmentPlanning.

Communication with stakeholders

The BBS Board is committed to ensuring that various BBS stakeholders, including shareholders, are kept informed of necessary information pertaining to the functioning of the business. One of the ways of doing so is through the Annual General Meeting where the financial performance of the Society is presented to shareholders and discussions are held on them and other pertinent matters of mutual interest.

In addition to the full set of results, BBS also publishes its half year results in the media to update stakeholders on the performance of the business.


30 31


Directors’ Report 32

Directors’ Responsibility Statement 33

Independent Auditors’ Report 34

Statement of Profit or Loss and other Comprehensive Income 36

Statement of Financial Position 37

Statement of Changes in Equity 38

Statement of Cash Flows 39

Notes to the Financial Statements 40

BOTSWANA BUILDING SOCIETY FINANCIAL STATEMENTSfor the year ended 31 March 2015


30 31



32 33


DIRECTORS’ REPORTfor the year ended 31 March 2015

DIRECTORS’ RESPONSIBILITY STATEMENTfor the year ended 31 March 2015

The Directors have pleasure in submitting their report together with the financial statements of Botswana Building Society for the year ended 31 March 2015.

Business activitiesThe Society is primarily involved in property finance and provision of banking services.

Financial results and positionThe Society’s financial results and position are reflected in the financial statements set out on pages 36 to 87. The results depict anincreaseof6.61%inoperatingincometoP201millionfromP189millionin2014,andanincreaseof6%inprofitsfortheyeartoP72millionfromP68millionin2014.

Dividends AgrossdividendofP60303731wasdeclaredandpaidtoIndefinitePeriodShareholders(2014:P59124503).

Board of directorsMr.CrossKgosidiile ChairmanMr.PiusK.Molefe ManagingDirectorMrs. Tsetsele C. Fantan MemberMr. Simon Hirschfeld MemberMrs. Mareledi Segotso MemberMr.KelebamangMotlhanka MemberMr.JamesKamyuka MemberMr. Gerald N. Thipe MemberMr. Frederick Selolwane MemberMr.KelapileNdobano (Appointed29August2014)Member

BBS Registered address AuditorsPlot13108-112 KPMGBroadhurst Plot67977,OffTlokwengRoadGaborone,Botswana FairgroundsOfficePark Gaborone, Botswana

Stated capital TheSocietyissued82.43millionIndefinitePeriodSharesduringthecurrentfinancialyear(2014:107.7million)atP1pershare. Events occurring after reporting dateThe directors are not aware of any matters or circumstances arising since the end of the financial year up until the date the financial statements were authorised for issue, not dealt with in the report or the financial statements that would significantly affect the operations of the Society or the results of its operations.

Directors’ responsibility statementThe directors are responsible for preparation and fair presentation of the financial statements of Botswana Building Society, comprising the statement of financial position at 31 March 2015, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information in accordance with International Financial Reporting StandardsandinthemannerrequiredbytheBuildingSocietiesAct(CAP42:03).

The directors are also responsible for such internal control as the directors determine 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.

The directors have made an assessment of the ability of the Society to continue as going concern and have no reason to believe that the business will not be a going concern in the year ahead.

The auditor is responsible for reporting on whether the financial statements are fairly presented in accordance with the applicable financial reporting framework.

Approval of annual financial statementsThe annual financial statements of Botswana Building Society as identified in the first paragraph, were approved by the board of directors on 29 June 2015 and signed on their behalf by:

Cross Kgosidiile James N. KamyukaBoard Chairman Chairman-Finance and Audit Committee


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INDEPENDENT AUDITORS’ REPORTto the members of Botswana Building Society

INDEPENDENT AUDITORS’ REPORTto the members of Botswana Building Society (Cont.)

We have audited the financial statements of Botswana Building Society, which comprise the statement of financial position at 31 March 2015, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other explanatory information, as set out on pages 36 to 87.

Directors’ responsibility for the financial statementsThe directors are responsible for the preparation and fair presentation of these financial statements in accordance with InternationalFinancialReportingStandards,andinthemannerrequiredbytheBuildingSocietiesAct(CAP42:03),andforsuchinternalcontrolas the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordancewith International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance 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.Theproceduresselecteddependontheauditor’sjudgment,includingtheassessmentoftherisksofmaterialmisstatementofthefinancial statements, whether due to fraud or error. In making those risk assessments, the auditor consider internal control relevantto the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriatein the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An auditalso includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, 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.

OpinionIn our opinion, these financial statements give a true and fair view of the financial position of Botswana Building Society at 31 March2015 and its financial performance and cash flows for the year then ended in accordance with International Financial ReportingStandardsandinthemannerrequiredbytheBuildingSocietiesAct(CAP42:03).

Report on other legal and regulatory requirementsInaccordancewithSection54oftheBuildingSocietiesAct(CAP42:03)weconfirmthatinouropinion;

• Botswana Building Society has kept proper books of account with which the financial statements are in agreement,• we have satisfied ourselves as to the existence and contents of mortgage bonds and other securities belonging to Botswana

Building Society, and• BotswanaBuildingSocietyhascompliedwithallthefinancialprovisionsoftheBuildingSocietiesAct(CAP42:03).

Chartered AccountantsPlot67977,OffTlokwengRoad,FairgroundPark,POBox1519,Gaborone,Botswana

KPMGCertified AuditorsDate: 29 June 2015Practising Member: Francois Roos (20010078.45)Place: Gaborone

KPMG,apartnershipdomiciledinBotswanaandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,a

Swiss cooperative.

AGDevlin*NPDixon-WarrenFJRoos***British **South African

VATNumber:P03623901112

Tel: +267 391 2400Fax: +267 397 5281Web: http://www.kpmg.com/


36 37


STATEMENT OF FINANCIAL POSITIONat 31 March 2015

Notes 2015 2014 P’000 P’000

Assets Cash and cash equivalents 6 66 714 106 946Fixed deposits with banks 7 286 579 207 603Short term loans and advances to customers 8 76 528 78 939Properties-in-possession 9 10015 6975Mortgage loans and advances to customers 10 2 933 904 2 526 238Intangible assets 11 7 694 2 979Propertyandequipment 12 96011 102200Other assets 13 19 006 12 641Total assets 3 496 451 3 044 521 Liabilities Customers’ savings and fixed deposit accounts 14 1 026 451 646 665Paidupandsubscriptionshares 15 498685 483555Withholding tax 16 3 649 3 348Borrowings 17 855 312 921 611Other liabilities 18 67 039 38 105Total liabilities 2 451 136 2 093 284 Equity Indefinite period shares 19 809 145 726 712Retained earnings 62 981 58 531Statutory reserve 20 109 189 101 994General market risk reserve 20 64 000 64 000Total equity 1 045 315 951 237

Total liabilities and equity 3 496 451 3 044 521

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEfor the year ended 31 March 2015

Notes 2015 2014 P’000 P’000

Interest income 21 303 958 284 578Interest expense 22 (139 511 ) (126 281 ) Net interest income 164 447 158 297 Fee and commission income 23 25 989 26 168Fee and commission expense 23 (1 050 ) (1 175 )Net fee and commission income 24 939 24 993 Revenue 189 386 183 290 Other operating income 24 11 671 5 293Operating income 201 057 188 583 Impairment loss on financial assets 25 4 818 6 979Personnelexpenses 26 55608 58047Depreciation and amortisation 27 7 291 7 263Operating lease expenses 28 2 843 2 042Other expenses 29 58 548 46 217Total expenses 129 108 120 548 Profit for the year 71 949 68 035

Total comprehensive income for the year 71 949 68 035 Basic and diluted earnings per share (thebe) 31 10.4 11.2


38 39


STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2015

Indefinite Statutory General Retained Total period reserve market earnings equity shares risk reserve P’000 P’000 P’000 P’000 P’000 Balance at 31 March 2013 619 030 95 190 64 000 56 425 834 645Total comprehensive income Profit - - - 68035 68 035Transactions with owners of the society Issue of new shares 107 682 - - - 107 682Dividends paid - - - (59 125 ) (59 125 )Transfers during the year - 6 804 - (6 804 ) - Total contributions and distributions 107 682 6 804 - (65 929 ) 48 557Balance as at 31 March 2014 726 712 101 994 64 000 58 531 951 237 Total comprehensive income Profit - - - 71949 71 949Transactions with owners of the society Issue of new shares 82 433 - - - 82 433Dividends paid - - - (60 304 ) (60 304 )Transfers during the year - 7 195 - (7 195 ) - Total contributions and distributions 82 433 7 195 - (67 499 ) 22 129 Balance at 31 March 2015 809 145 109 189 64 000 62 981 1 045 315 Refer to note 20 for details on the Society’s reserves

STATEMENT OF CASH FLOWSfor the year ended 31 March 2015

2015 2014 P’000 P’000

Cash flows from operating activities Interest receipts 303 226 284 266Commission receipts 25 989 26 168Interest payments (131 707 ) (124 634 )Commission payments (1 050 ) (1 175 )Other operating income 11 380 6 707Cash payments to employees and suppliers (99 689 ) (100 616 ) 108 149 90 716 Movement in: - Short term loans and advances 2 411 (12 120 ) - Mortgage loans and advances (412 484 ) (249 315 )- Propertyinpossession(net) (3040) (6069)- Other assets (9 176 ) 1 928- Customer savings and fixed deposit accounts 379 786 54 967Net cash received from / (used in) operating activities 65 646 (119 893 ) Cash flows from investing activities Purchaseofpropertyandequipment (9386) (3353)Proceedsfromdisposalofpropertyandequipment 9902 -Movement in fixed deposits with banks (78 976 ) 97 748Purchaseofintangibleassets - (1270)Net cash (used in) / received from investing activities (78 460 ) 93 125 Cash flows from financing activities Repayments of borrowed funds and debt securities (66 299 ) (27 888 )Proceedsfromissueofindefinitepaidupshares 15130 107682Proceedsfrom/(redemptionof)paidupandsubscriptionshares 48558 (45759)Dividends paid (24 807 ) (12 483 )Net cash (used in) / received from financing activities (27 418 ) 21 552 Movement in cash and cash equivalents (40 232 ) (5 216 )Cash and cash equivalents at beginning of the year 106 946 112 162Cash and cash equivalents at end of the year 66 714 106 946


40 41


NOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 March 2015

1. Reporting entity

BotswanaBuildingSocietyisdomiciledinBotswana.TheaddressoftheSociety’sregisteredofficeisPlot13108-112Broadhurst,Gaborone. The Society is primarily involved in property finance and the provision of banking services.

2. Basis of preparation

(i) Statement of complianceThe Society’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS’s) and the Building Societies Act (Cap 42:03) of Botswana. The financial statements are prepared under the historical cost basis except for the valuation of certain financial assets measured at fair value. The financial statements have been prepared using uniform accounting policies for like transactions and other events in similar circumstances.

The preparation of the Society’s financial statements requires the use of certain critical accounting estimates. It also requires Managementtoexercise its judgment intheprocessofapplyingtheSociety’saccountingpolicies.Theareasrequiringahigherdegreeofjudgmentorcomplexity,orareaswhereassumptionsandestimatesaresignificanttotheSociety’sfinancialstatementsare disclosed in the key sources of estimation uncertainty section of the financial statements below.

(ii) Functional and presentation currencyThefinancialstatementsarepresentedinBotswanaPula,whichistheSociety’sfunctionalandpresentationcurrency.Exceptasindicated,financialinformationpresentedinBotswanaPula,hasbeenroundedtothenearestthousand.

NOTES TO THE FINANCIAL STATEMENTS (cont.)for the year ended 31 March 2015

(iii) Key sources of estimation uncertainty

Allowances for credit lossesThe specific component of the total allowances for impairment applies to claims evaluated individually for impairment and is based upon management’s best estimate of the present value of the cash flows that are expected to be received. In estimating these cashflows,managementmakesjudgmentsaboutacounterparty’sfinancialsituationandthenetrealisablevalueofanyunderlyingcollateral. Each impaired asset is assessed on its merits, and the workout strategy and estimate of cash flows considered recoverable are separately approved by the Credit Risk Function. Collectively assessed impairment allowances cover credit losses inherent in portfolios of loans and advances with similar credit risk characteristicswhenthereisobjectiveevidencetosuggestthattheycontainimpairedloans,buttheindividualimpaireditemscannotyet be identified. In order to estimate the required allowance, assumptions are made to define the way inherent losses are modelled and to determine the required input parameters, based on historical experience and current economic conditions. The accuracy of the allowances depends on the reasonableness of estimated future cash flows for specific counterparty allowances and the model assumptions and parameters used in determining collective allowances.

Residual values of propertiesResidual values of properties are based on current estimates of the values of these assets at the end of their useful lives. The estimated residual values of the properties have been determined based on information provided by property experts.

Collateral valuationThe Society seeks to use collateral, where possible, to mitigate its risks on financial assets. The collateral comes in various forms such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories, other non-financial assets and credit enhancements such as netting agreements. The fair value of collateral is generally assessed, at a minimum, at inception and based on the Society’s quarterly reporting schedule. Some collateral, for example, cash or securities relating to margining requirements, is valued daily. To the extent possible, the Society uses active market data for valuing financial assets, held as collateral. Other financial assets which do not have a readily determinable market value are valued using models. Non-financial collateral, such as real estate, is valued based on data provided by third parties including mortgage brokers, housing price indices, audited financial statements and other independent sources.

Staff loansThe Society extends advances to staff at preferential interest rates that are below market rates. The fair value for these loans is the present value of all future cash receipts using a market interest rate for a similar loan. The difference between present value and amount advanced is expensed in profit or loss.

Intangible assetsSoftware acquired by the Society is stated at cost less accumulated amortisation and accumulated impairment losses. Subsequent expenditure on computer software is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. Amortisation is recognised in the income statement on a straight-line basis over the estimated useful life of the software, from the date that it is available for use. The estimated useful life is three to five years. Amortisation methods, useful lives andresidualvaluesarereviewedateachfinancialyearendandadjusted,ifnecessary.Therehavebeennochangesintheestimateduseful lives from those applied in the previous financial year.

3.1 Adoption of revised standards and interpretations

The following standard in issue from prior year became effective during the year ended 31 March 2015.

IAS 32: Financial Instruments: Presentation: Offsetting Financial Assets and Financial These amendments require entities to disclose information that will enable the users of the financial statements to evaluate the effect or potential effect of netting arrangements of financial assets and liabilities, including rights of set-off associated with the entity’s recognised financial assets and liabilities, on the entity’s financial position.The amendment had no impact in the 2015 financial statements of the Society.


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3.2 New standards and interpretations not yet effective

The following new standards and amendments to standards and interpretations are in issue and not yet effective for the year ended 31 March 2015, and have not been applied in preparing these financial statements. Defined Benefit Plans: Employee Contributions (Amendments to IAS 19)The 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:

• set out in the formal terms of the plan;• linked to service; and• independent of the number of years of service.

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. The amendments apply retrospectively for annual periods beginning on or after 1 July 2014 with early adoption permitted and therefore is relevant for the Society’s financial statements for the year ending 31 March 2016.

The Society does not have a defined benefit plan and, these requirements are therefore not expected to have any impact on its financial statements.

IFRS 14 Regulatory Deferral AccountsIFRS 14 provides guidance on accounting for regulatory deferral account balances by first-time adopters of IFRS. To apply this standard, the entity has to be rate-regulated i.e. the establishment of prices that can be charged to its customers for goods and servicesissubjecttooversightand/orapprovalbyanauthorisedbody.

The standard is effective for financial periods beginning on or after 1 January 2016 with early adoption permitted. This standard is not expected to have any impact on the Society’s financial statements for the year ending 31 March 2017.

Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)The amendments require business combination accounting to be applied to acquisitions of interests in a joint operation thatconstitutes a business.

Businesscombinationaccountingalsoappliestotheacquisitionofadditionalinterestsinajointoperationwhilethejointoperatorretainsjointcontrol.Theadditionalinterestacquiredwillbemeasuredatfairvalue.Thepreviouslyheldinterestinthejointoperationwill not be remeasured.

The amendments apply prospectively for annual periods beginning on or after 1 January 2016 and early adoption is permitted. These amendments are not expected to have any impact on the Society’s financial statements for the year ending 31 March 2017.


3.2 New standards and interpretations not yet effective (continued)

Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38) TheamendmentstoIAS16Property,PlantandEquipmentexplicitlystatethatrevenue-basedmethodsofdepreciationcannotbeused for property, plant and equipment.

The amendments to IAS 38 Intangible Assets introduce a rebuttable presumption that the use of revenue-based amortisation methods for intangible assets is inappropriate. The presumption can be overcome only when revenue and the consumption of the economic benefits of the intangible asset are ‘highly correlated’, or when the intangible asset is expressed as a measure of revenue.The amendments apply prospectively for annual periods beginning on or after 1 January 2016 and early adoption is permitted. As the Society currently uses the straight line method for its amortisation/depreciation computations, these amendments are not expected to have any impact on the Society’s financial statements for the year ending 31 March 2017.

Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)TheamendmentstoIAS16Property,PlantandEquipmentandIAS41Agriculturerequireabearerplant(whichisa livingplantused solely to grow produce over several periods) to be accounted for as property, plant and equipment in accordance with IAS 16 Property,PlantandEquipmentinsteadofIAS41Agriculture.TheproducegrowingonbearerplantswillremainwithinthescopeofIAS 41.

The amendments apply prospectively for annual periods beginning on or after 1 January 2016 and early adoption is permitted. These amendements are not expected to have any impact on the Society’s financial statements for the year ending 31 March 2017.

Equity Method in Separate Financial Statements (Amendments to IAS 27)The amendments allow an entity to apply the equity method in its separate financial statements to account for its investments in subsidiaries,associatesandjointventures. The amendments apply retrospectively for annual periods beginning on or after 1 January 2016 and early adoption is permitted. These amendments are not expected to have an impact on the Society’s financial statements for the year ending 31 March 2017.

Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)Theamendments require the fullgain tobe recognisedwhenassets transferredbetweenan investorand itsassociateor jointventure meet the definition of a ‘business’ under IFRS 3 Business Combinations. Where the assets transferred do not meet the definitionofabusiness,apartialgaintotheextentofunrelatedinvestors’interestsintheassociateorjointventureisrecognised.The definition of a business is key to determining the extent of the gain to be recognised. The amendments apply prospectively for annual periods beginning on or after 1 January 2016 and early adoption is permitted. The amendments are not expected to have an impact on the Society’s financial statements for the year ending 31 March 2017.


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3.2 New standards and interpretations not yet effective (continued)

Disclosure Initiative (Amendments to IAS 1)The amendments provide additional guidance on the application of materiality and aggregation when preparing financial statements. The amendments also clarify presentation principles applicable to the order of notes, other comprehensive income of equity accounted investees and subtotals presented in the statement of financial position and statement of profit or loss and other comprehensive income.

The amendments apply for annual periods beginning on or after 1 January 2016 and early application is permitted. These amendments are not expected to have any impact on the financial statements for the year ending 31 March 2017.

Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)The amendment to IFRS 10 Consolidated Financial Statements clarifies which subsidiaries of an investment entity are consolidated instead of being measured at fair value through profit and loss. The amendment also modifies the condition in the general consolidation exemption that requires an entity’s parent or ultimate parent to prepare consolidated financial statements. The amendment clarifies that this condition is also met where the ultimate parent or any intermediary parent of a parent entity measures subsidiaries at fair value through profit or loss in accordance with IFRS 10 and not only where the ultimate parent or intermediate parent consolidates its subsidiaries.

The amendment to IFRS 12 Disclosure of Interests in Other Entities requires an entity that prepares financial statements in which all its subsidiaries are measured at fair value through profit or loss in accordance with IFRS 10 to make disclosures required by IFRS 12 relating to investment entities.

The amendment to IAS 28 Investments in Associates and Joint Ventures modifies the conditions where an entity need not apply theequitymethod to its investments inassociatesor joint ventures toalign these to theamended IFRS10conditions fornotpresenting consolidated financial statements. The amendments introduce relief when applying the equity method which permits a non-investmententityinvestorinanassociateorjointventurethatisaninvestmententitytoretainthefairvaluethroughprofitorlossmeasurementappliedbytheassociateorjointventuretoitssubsidiaries.

The amendments apply retrospectively for annual periods beginning on or after 1 January 2016, with early application permitted.

These amendments are not expected to have any impact on the Society’s financial statements for the year ending 31 March 2017.


3.2 New standards and interpretations not yet effective (continued) IFRS 15 Revenue from contracts with customersThis standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers and SIC-31 Revenue – Barter of Transactions Involving Advertising Services. The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised.

The Society is currently in the process of performing a more detailed assessment of the impact of this standard on its financial statements and will provide more information in the financial statements for the year ending 31 March 2016. The standard is effective for annual periods beginning on or after 1 January 2017, with early adoption permitted under IFRS.

IFRS 9 Financial InstrumentsOn 24 July 2014, the IASB issued the final IFRS 9 Financial Instruments, which replaces earlier versions of IFRS 9 and completes theIASB’sprojecttoreplaceIAS39FinancialInstruments:RecognitionandMeasurement.

This standard will have a significant impact on the Society, which will include changes in the measurement bases of the Society’s financial assets to amortised cost, fair value through other comprehensive income or fair value through profit or loss. Even though these measurement categories are similar to IAS 39, the criteria for classification into these categories are significantly different. In addition, the IFRS 9 impairment model has been changed from an “incurred loss” model from IAS 39 to an “expected credit loss” model, which is expected to increase the provision for bad debts recognised by the Society.

The standard is effective for annual periods beginning on or after 1 January 2018 with retrospective application, early adoption is permitted and is therefore effective for the society’s financial statements for the year ending 31 March 2019.


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4. Significant accounting policies

The accounting policies have been consistently applied by the Society and are consistent with those used in the previous year, except where otherwise stated.

(a) Interest Interest income and interest expenses are recognised in profit or loss using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability (or where appropriate, a shorter period) to the carrying amount of the financial asset or liability. When calculating the effective interest rate, the Society estimates future cash flows considering all contractual terms of the financial instrument, but not future credit losses.

The calculation of the effective interest rate includes all fees paid or received that are an integral part of the effective interest rate. Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset or liability.

(b) Fees and commissionFees and commission income and expenses that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate. Other fees and commission income and expenses relate mainly to transaction and service fees, which are recognised as the services are performed and received.

(c) DividendsDividends paid are recorded in the society’s financial statements based on rates determined by the board of directors from time to time.

Dividends are recognised as a liability in the period in which they are declared by the directors. Dividends declared are regognised directly in equity.

(d) LeasesLeases 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.

Lease paymentsPaymentsmadeunderoperatingleasesarerecognizedinprofitorlossonastraightlinebasisoverthetermofthelease.Leaseincentives are considered as integral part of the total lease expense.

• Where the Society is the lessor The total contractual lease payments are recognised in profit or loss on a straight line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place. • Where the Society is the lesseeReceipts of operating lease payments from properties are accounted for as rental income on the straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required by the lessee by way of penalty is recognised as income in the period in which the termination takes place.


4. Significant accounting policies (continued)

(d) Leases (continued)Minimum lease payments made under finance leases are apportioned between the interest expense and the reduction of the outstanding liability. The interest expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

(e) Income taxTheSocietyisexemptfrompayingincometaxasperparagraph(vi),PartloftheSecondScheduleoftheIncomeTaxAct(Cap50:01).

Withholdingtaxof7.5%ispayableonthegrossvalueofdividendspaidtoBotswanaUnifiedRevenueServices.Thewithholdingtaxis payable in September and March annually when dividends are declared. (f) Financial instrumentsA financial asset or financial liability is measured initially at fair value plus, for an item not at fair value through profit and loss, transaction costs that are directly attributable to its acquisition or issue.

(i) ClassificationThe Society classifies its financial assets and liabilities in the following categories: • loansandreceivables;• available-for-sale;• fairvaluethroughprofitorloss;• heldtomaturity.

Management determines the classification of its investments at initial recognition.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than:

• those that the entity intends to sell immediately or in the short-term, which are classified as held for trading, and those that the entity upon initial recognition designates as at fair value through profit or loss;

• those that the entity upon initial recognition designates as available-for-sale; or• those for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration.

Loans and advances are accounted for on an amortised cost basis using the effective interest rate. Origination transaction costs and origination fees received that are integral to the effective rate are capitalised to the value of the loan and amortised through interestincomeaspartoftheeffectiveinterestrate.ThemajorityoftheSociety’sadvancesareincludedintheloansandreceivablescategory. They are stated net of allowances for specific and portfolio impairment.

Cash and cash equivalentsCash and cash equivalents comprise cash on hand and other short-term highly liquid investments that are readily convertible to aknownamountofcashandaresubjecttoaninsignificantriskofchangesinvalue.Cashandcashequivalentsaredisclosedatamortised cost in the statement of financial position and classified as part of loans and receivables.

Available-for-sale financial assetsAvailable-for-sale investments are those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices or financial assets that are not designated as another category of financial assets. Available-for-sale quoted investments are valued at market value using the bid/offer mid rate. Unlisted equity investments and instruments forwhich there is noquotedmarket price aremeasured using valuationmodels.Where the valuation models may not produce reliable measurement, the unquoted investments are stated at cost. Available-for-sale investments are marked to market and any gains or losses arising from the revaluation of investments are disclosed in equity as available for-sale reserves. On realisation of the investment, the available-for-sale reserves are transferred to profit or loss. Interest income, calculated using the effective interest method, is recognised in profit or loss. Dividends received on available-for- sale instruments are recognised in profit or loss when the Society’s right to receive payment has been established.


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(f) Financial instruments (continued)

Foreign exchange gains or losses on available-for-sale debt investments are recognised in profit or loss.

Financial assets at fair value through profit or lossThis category has two subcategories: financial assets held for trading, and those designated at fair value through profit or loss at inception. A financial asset is classified as held for trading if it is acquired or incurred principally for the purpose of selling or repurchasing in the near term or if it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit taking. Derivatives are also categorised as held for trading, unless they are designated as hedging instruments. Financial assets and financial liabilities are designated at fair value through profit or loss when:

• doing so significantly reduces measurement inconsistencies that would arise if the related derivatives were treated as held for trading and the underlying financial instruments were carried at amortised cost for loans and advances to customers or banks and debt securities in issue;

• certain investments, such as equity investments, are managed and evaluated on a fair value basis in accordance with a documented risk management or investment strategy and reported to key management personnel on that basis are designated at fair value through profit or loss; or

• financial instruments, such as debt securities held, containing one or more embedded derivatives that could significantly modify the cash flows, are designated at fair value through profit or loss.

The fair value designation, once made, is irrevocable. Subsequent to initial recognition, the fair values are re-measured at each reporting date. Gains and losses arising from changes therein are recognised in interest income for all dated financial assets and in non-interest income for all undated financial assets. Financial assets at fair value through profit or loss are measured at initial recognition and subsequently at fair value based on quoted market price using the bid/offer mid rate at the reporting date. If there is no quoted market price in an active market, the instruments are measured using valuation models. All changes in fair value are recognised in profit or loss.

Held-to-maturity investmentsHeld-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Society’s management has the positive intention and ability to hold to maturity. If the Society were to sell other than an insignificant amount of held-to maturity assets, the entire category would be reclassified as available-for-sale. Held-to-maturity fixed interest instruments, held in investment portfolios, are stated at amortised cost using the effective interest method, less any impairment losses.

(i) Derecognition of financial instrumets

Financial assetThe Society derecognises as financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive contractual cash flows in a transaction in which substantially all the risks and rewards of ownership are transferred or in which the Society neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.

Financial liabilityThe Society derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.

(ii) Offsetting of financial instrumentsFinancial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and liability simultaneously.




Held-to-maturity investments (continued)

(iii) Amortised cost measurementThe ‘amortised cost’ of a financial asset or financial liability is the amount at which the financial assets or financial liability is measured at initial recognition, minus principal repayments plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount less any reduction for impairment.

(iv) Fair value measurement‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Society has access at that date. The fair value of a liability reflects its non-performance risk.

(v) Fair value measurement

Assets carried at amortised costTheSocietyassessesateachreportingdatewhetherthereisobjectiveevidencethatafinancialassetorgroupoffinancialassetsareimpaired.Afinancialassetorgroupoffinancialassetsareimpairedandimpairmentlossesincurredifandonlyif,thereisobjectiveevidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (“a loss event”) and prior to the financial year-end-date, and that loss event has an impact on the estimated future cash flows of the financial asset orgroupoffinancialassetsthatcanbereliablyestimated.Objectiveevidencethatafinancialassetorgroupoffinancialassetsisimpaired includes observable data that comes to the attention of the Society about the following events:

• significant difficulty of the issuer or obligator;• a breach of contract, such as a default or delinquency in interest or principal payments;• the Society granting to the borrower, for economic or legal reasons relating to the borrower’s financial difficulty, a concession

that the Society would not otherwise consider;• it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;• the disappearance of an active market for the financial asset because of financial difficulties;• observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial

assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets held by the Society, including: adverse changes in the payment status of borrowers in the Society or national or local economic conditions that correlate with defaults on the assets in the Society.


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(v) Impairment of financial assets

Assets carried at amortised cost TheSociety first assesseswhether objective evidence of impairment exists individually for financial assets that are individuallysignificant, and individually or collectively for financial assets that are not individually significant. If the Society determines that no objectiveevidenceofimpairmentexistsforanindividuallyassessedfinancialasset,whethersignificantornot,itincludestheassetin a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

Ifthereisobjectiveevidencethatanimpairmentlossonloansandadvanceshasbeenincurred,theamountofthelossismeasuredas the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial assets’ original effective interest rate. The amount of the loss is recognised in profit or loss.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets in the Society and historical loss experience for assets with credit risk characteristics similar to thoseintheSociety.Historicallossexperienceisadjustedonthebasisofcurrentobservabledatatoreflecttheeffectsofcurrentconditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not currently exist.

Assets classified as available-for-saleTheSocietyassessesateachreportingdatewhetherthereisobjectiveevidencethatafinancialassetoragroupoffinancialassetsis impaired. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in profit or loss. Impairment losses recognised in profit or loss on equity instruments are not reversed through profit or loss. If, in a subsequent period,thefairvalueofadebtinstrumentclassifiedasavailable-for-saleincreasesandtheincreasecanbeobjectivelyrelatedtoan event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit or loss.

Renegotiated loansLoansthatareeithersubjecttocollectiveimpairmentassessmentorindividuallysignificantandwhosetermshavebeenrenegotiatedare no longer considered to be past due but are treated as new loans.

Arrears for renegotiated loans are capitalised to the customer account where the sum of arrears and penalty charged changes the loan to value ratio, the existing customer account is closed and a new one opened as the interest rates have to be reassessed.

Collateral repossessedThe Society’s policy is to determine whether a repossessed asset is best used for its internal operations or should be sold. Assets determined to be useful for the internal operations are transferred to their relevant asset category at the lower of their repossessed value or the carrying value of the original secured asset.

(g) Properties in possession

Propertiesinpossessionconsistofresidentialandcommercialpropertiesrepossessedfromdefaultingmortgageloanbondholders.Such properties are held with the express intention to sell in the short to medium term and are recorded at the lower of cost of repossession and net realisable value. Cost of repossession is determined with reference to the outstanding capital balance on the mortgage loan at the date of default. The net realisable value is determined with reference to current market values for comparable properties net of estimated marketing and selling expenses.



(h) Property and equipmentPropertyandequipmentaremeasuredatcostlessaccumulateddepreciationandaccumulatedimpairmentlosses.Costincludesexpenditures that are directly attributable to the acquisition of the asset. When parts of an item of property and equipment have differentusefullives,theyareaccountedforasseparateitems(majorcomponents)ofpropertyandequipment.

The gain or loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with the carrying amount of the item of property and equipment, and are recognised in profit or loss.

Freehold and leasehold land is not depreciated. Depreciation on other assets is provided on a straight line basis. This is from the time they are available for use, so as to write off their costs over the estimated useful lives taking into account any residual values. The residual value of an asset may be less than or equal to the assets carrying amount. In this case, the asset’s depreciation is nil until the carrying amount exceeds the residual value.

The estimated useful lives assigned to property and equipment are as follows:

Leasehold property the lower of 50 years or lease period Freehold property 50 - 80 yearsMotor vehicles 6 - 8 yearsComputer hardware 3 - 5 yearsEquipment, furniture and fittings 4 - 5 years

Theassets’ residualvaluesanduseful livesarereviewed,andadjusted ifappropriate,ateachreportingdate.Work-in-progressrepresent the amount of expenditure recognised in the course of construction. Assets which remain in work-in-progress until they have become available for use or commissioned, whichever is the earlier date. At the time these assets are transferred to the appropriate class of property and equipment as additions and depreciated.

(i) Intangible assetsCosts associated with maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated with identifiable and unique software products controlled by the Society and will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Expenditure which enhances or extends the performance of computer software programmes beyond their original specifications is recognised as capital improvement and added to the original cost of the software. Computer software acquisition costs recognised as intangible assets are amortised using the straight line method over their useful lives, not exceeding a period of five years.

(j) Impairment of non-financial assetsIntangibleassetsthathaveanindefiniteusefullifearenotsubjecttoamortisationandaretestedannuallyforimpairment.Assetsthataresubjecttoamortisationanddepreciationarereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthe carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). In determining value in use, the estimated future cash flows are discounted using a current market interest rate, which reflects the asset’s specific risks. An impairment loss is immediately recorded as an expense. Non-financial assets other than goodwill and other indefinite lived assets that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.


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(k) Customer’ savings and fixed deposit accountsAmounts due to customers on savings and fixed deposit accounts comprise deposits held on behalf of members of the public and corporate bodies and are initially recorded at the fair value of the consideration received. Such accounts are subsequently measured at amortised cost. All ordinary and special savings accounts are repayable on demand. Fixed deposits are repayable on maturity.

(l) BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest method.

BorrowingsobtainedfromtheDebtParticipationCapitalFundingLimited(DPCFL)loansatratesbelowtherulingmarketratesareoriginallyrecordedatamortisedcost,determinedbasedontheeffectiveinterestmethod.Underthismethod,thefairvalueoftheborrowing is measured as the present value of anticipated future cash flows discounted at an applicable market interest rate. The difference between the borrowing received and the amortised cost is recognised as income when the borrowing is received and unwinds to interest expense over the period of the loan based on the effective interest yield curve.

Shares which are redeemable on specific terms or at the option of the shareholder or which carry non-discretionary dividend obligations are classified as liabilities. The dividends on these shares are recognised in the profit or loss as interest expense.

(m) Retirement benefitsTheSocietyoperatesadefinedcontributionpensionfundforallitspermanentcitizenstaff.ThisfundisregisteredunderthePensionsandProvidentFundsAct(Chapter27:03).TheSocietycontributestothefund15%ofthepensionableearningsofthemembersandtheemployeescontribute7%oftheirpensionableearnings.TheSociety’scontributionsarerecognisedinprofitorlossintheyear in which they accrue. Other than regular contributions made in terms of the rules of the fund, the Society does not have any further liability to the fund.

(n) Other employee benefitsEmployees on contract receive terminal gratuities in accordance with their contracts of employment. An accrual is made for the estimated liability towards such employees up to the reporting date. All other employees are members of the Society’s pension scheme and do not qualify for such terminal gratuities. Employees’ entitlement to annual leave and other benefits is recognised when they accrue to employees. An accrual is recognised for the estimated liability for annual leave and other benefits as a result of services rendered up to the reporting date.



(o) Indefinite period shares and reservesThe Society classifies capital instruments as financial liabilities or equity instruments in accordance with the substance of the contractual terms of the instrument. The Society’s indefinite period shares are not redeemable at the option of the holders, and bear an entitlement to distributions that is non-cumulative and at the discretion of the Directors. Accordingly they are presented as a component within equity.

(p) Related party transactionsAll related party transactions are carried out on normal commercial terms and in the ordinary course of business.

(q) Other reservesAll related party transactions are carried out on normal commercial terms and in the ordinary course of business.

General market risk reserveUnderparagraph73oftheBotswanaBuildingSocietyAct(cap42:03),ageneralreservefundisestablishedbyasocietyotherthanthe statutory reserve fund and is built up out of profit and not set aside for any specific purpose. The Board shall transfer to the general reserve, out of the profits of the society or out of other reserves, such amounts (if any) as it deems necessary and may draw upon the general reserve for such purpose including transfer to other reserves, as it deems fit, regard being had at all times to the adequacy of the general reserve.

Statutory reserveUnderparagraph39oftheBuildingSocietiesAct(42:03),theSocietyistoestablishafundknownasthestatutoryreservefund.Attheendofeveryfinancialyearasocietyshallpayintothestatutoryreservefundanamountnotlessthan10%ofitsnetprofits.Asociety may charge against the statutory reserve fund any net loss remaining to the society in any year after applying to such loss any undistributed profits brought forward from previous years.

(r) Fixed deposits with banksFixed deposit investment are fixed term deposit investments with regulated banks that have risk ratings above “non-investment grade–Baa3,perMoody’sratings”,withoriginalmaturitiesofonemonthormorefromtheacquisitiondatethataresubjecttoaninsignificant risk of changes in their fair value, and are used by the Society in the management of its loan commitments.

Fixed deposit investments are carried at amortised cost in the statement of financial position.


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5. Financial risk management

Introduction and overviewThe Society manages the enterprise wide risks assumed by the Society through the Risk Department. The Society will be adopting the Basel II Risk Management Framework for the management of risks it is exposed to. The Risk Management Framework is also intended to enhance the Society’s management of its capital.

The Society has exposure to the following risks from its use of financial instruments:

• Credit risk• Interest rate risk• Liquidity risk• Operational risk

This notepresents information about theSociety’s exposure to eachof the above risks, theSociety’s objectives, policies andprocesses for measuring and managing risk, and the Society’s management of capital.

Risk Management frameworkThe Board of Directors has the overall responsibility for the establishment and oversight of the risk management framework. The Board has the following sub committees:

• Finance and Audit Committee• Human Resources Committee• Tender Committee• Demutulisation Committee

The above Board Sub-committees and Board convene on a quarterly basis. The Society’s Board and its committees are comprised of nine non-executive directors and one executive director. Management reports risk management matters to the Finance and Audit Committee.


5. Financial risk management (continued)

Risk management framework (continued)The Risk department focuses on different risk classes. The department currently manages the Asset and Liability Committee (ALCO), OperationalRiskandotherriskclassesandTreasuryactivities.TheSocietyhasembarkedonaprojecttoreviewtheenterprise-wide risk framework to ensure alignment to Basel II and ensure the Society remains well capitalised and its capital is reflective of the underlying economic risks it is exposed to.

The Society’s risk management policies are established to identify and analyse the risks faced by the Society, to set appropriate risk limits and controls, and monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered. The Society through its training and management procedures, aims to develop a disciplined and constructive control environment, in which all employees understand their roles and obligations. The Internal Audit Department is tasked with the responsibility of monitoring compliance with the Society’s risk management policies and procedures. The Internal Audit Department reports to the Finance and Audit Committee. The Board is responsible for reviewing the adequacy of the risk management framework in relation to the risks faced by the Society.

(i) Credit riskCredit risk is the risk of financial loss to the Society if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Society’s loans and advances to customers, balances with banks and investments in debt securities. For risk management reporting purposes, the Society considers and consolidates all elements of credit risk exposure (such as individual obligator default risk and sector risk).

For management of credit risk, the Society structures the level of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower. Such risks are monitored by the Credit Approvals Committee. The Board approves management’s lending limits and monitors loans and advances that are not performing.


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(i) Credit risk (continued)

Management of credit riskThe Board of Directors has delegated responsibility for the management of credit risk to Senior Management. The Risk department is responsible for oversight of the Society’s credit risk, including:

• Formulating credit policies in consultation with the business units, covering collateral requirements, credit assessments, risk grading and reporting, documentary and legal procedures, and compliance with regulatory and statutory requirements.

• Establishing the authorisation structure for the approval and renewal of credit facilities. Authorisation limits are allocated to the Credit underwriting unit which reports to the Head of Operations. Larger facilities require approval by the Credit Approvals CommitteeandtheGlobalRiskManagementCommittee.Anyloanswhicharemorethan5%oftheSociety’scapitalrequireapproval by the Board of Directors.

• Reviewing and assessing credit risk. The Society assesses all credit exposures in excess of designated limits, prior to facilities beingcommittedtocustomersbythebusinessunitconcerned.Renewalsoffacilitiesaresubjecttothesamereviewprocess.

• Limiting concentration of exposure to counterparties, geographies and industries (for loans and advances).

• Developing and maintaining the Society’s risk grading in order to categorise exposures according to the degree of risk of financial loss faced and to focus management on the attendant risks. The risk grading system is used in determining where impairment provisions may be required against specific credit exposures. The responsibility for setting risk grades lies with the Global Risk Management Committee.

• Reviewing compliance of business units with agreed exposure limits, including those for sector and individual exposure. Reports are provided to the Board every quarter.

• Providing advice, guidance and specialist skills to business units to promote best practice throughout the Society in themanagement of credit risk.



(i) Credit risk (continued) Loans and Loans and advances advances to to customers customers 2015 2014 P’000 P’000

Carrying amount Long term loans 2 933 904 2 526 238Short term loans 76 528 78 939 3 010 432 2 605 177

Individually impaired (specific) Residential 49 826 52 377Commercial 3 809 3 523 Gross amount 53 635 55 900Allowance for impairment (19 181 ) (18 458 ) 34 454 37 442 Collectively impaired Gross amount 2 904 289 2 492 426Allowance for impairment (4 839 ) (3 630 ) 2 899 450 2 488 796 Pastduebutnotimpairedcomprises: 30-60 days 117 224 269 64260-90 days 59 459 44 43490-180 days 35 640 62 752180 days + 48 290 47 853 260 613 424 681

Non performing loans 137 565 166 505

The Society writes off loan balances (and any related allowances for impairment losses) when the Society determines that the loans are uncollectable as per the impairment policy, refer to note 5(i)

Nonperformingloansasaproportionoftotalloans 4.6% 6.4%

Pastdueaccountsasaproportionoftotalloans 9% 17%

Number of loans individually impaired 78 82


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Impaired loans and securitiesImpaired loans are loans for which the Society determines that it is probable that it will be unable to collect all principal and interestdue according to the contractual terms of the loan agreements.

Past due but not impaired loansLoans where contractual interest or principal payments are past due but the Society believes that impairment is not appropriateon the basis of the level of security/collateral available and or the stage of collection of amounts owed the Society. Allowances for impairmentThe Society establishes an allowance for impairment losses that represents its estimate of incurred losses in its loan portfolio. Themain components of this allowance are the specific loss component that relates to individually significant exposures, and thecollective loan loss allowance established for Society’s homogeneous assets in respect of losses that have been incurred buthave not been identified.

Impairment policyThe Society writes off loan balances (and any related allowances for impairment losses) when the Society determines that the loansare uncollectable. This determination is reached after considering information such as the occurrence of significant changes in theborrower’s financial position such that the borrower can no longer pay the obligation, or that proceeds from collateral will notbe sufficient to pay back the entire exposure.

Bank balances TheSocietyheldbankbalancesofP353millionasat31March2015(2014:P315million)whichrepresentsitsmaximumcreditexposure on these assets. The bank balances are held with licensed financial institutions and consist of current, call and fixeddeposit accounts. Management has set exposure limits for the different financial institutions to minimise credit risk on bankbalances.





CollateralThe Society holds collateral against loans and advances to customers in the form of mortgage interests over property, cash andguarantees. Estimates of collateral fair values are assessed at the time of borrowing and are updated every three years or when aloan is individually assessed as impaired or when the customer requests further facilities against the same bond.

An estimate of the fair value of collateral and other tangible security enhancements held against financial assets is shown below:

Loans and Loans and advances advances to to customers customers 2015 2014 P’000 P’000

Against individual impaired Property 54478 58212Against collectively impaired Property 6240431 5549143Against short term loans not impaired Cash deposit 76 528 78 939Total 6 371 437 5 686 294 Carryingamountasaproportionofcollateralcover 47% 45%


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(ii) Liquidity riskLiquidity risk is the risk that the Society will encounter difficulty in meeting obligations arising from its financial liabilities.

Management of liquidity riskThe Society’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet itsliabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to theSociety’s reputation. The Society is exposed to daily calls on its available cash resources from deposits, maturing shares andloan draw downs. The Society does maintain cash to meet all these needs as experience shows that a minimum level ofreinvestment of maturing funds can be predicted with a high degree of certainty.

The Society sets limits on the minimum proportion of maturing funds available to meet such calls and borrowing facilities thatshould be in place to cover withdrawals at unexpected levels of demand. The liquidity position of the Society is monitoredon a daily basis. For regulatory purposes, the Building Societies Act, Section 42, requires the Society to maintain certainproportions of its liabilities in liquid assets. The Society also submits a monthly report to the Central Bank which includes theliquidity position. As at As at 31 March 31 March 2015 2014 P’000 P’000

Total statutory requirement 257 196 216 875 Total cash and cash equivalents, investments or authorized deposits 353 293 314 549 Surplus 96 097 97 674

Exposure to liquidity riskThe liquidity requirement is managed in accordance with the Building Societies Act, Section 42 which states that every societyshall, after making provisions to meet its liabilities other than those mentioned in this section, from day to day hold an amount incash or on authorised deposits or in approved investments as security for prompt repayment of fixed period and subscriptionshares and of deposits, loans and overdraft and for the payment of interest accrued thereon.

TheSocietywasgrantedavariationtotherequirementsofSection42.ThevariationnowpermitstheSocietytohold10%depositbalancesasliquidassetsascomparedtoholdinganaverageof25%ofdepositsasliquidassetsbefore1April2012.


(ii) Liquidity risk (continued)The Board of Directors sets limits on the level of risk that may be accepted. The Building Societies Act sets limits within which theSociety should operate as regards to concentrations of assets and liabilities. However, use of this limit regime does not preventlosses outside of these limits in the event of more significant market movements.

The table below show the undiscounted cash flows of the Society`s assets and liabilities on the basis of their earliest possiblecontractual maturity. The Society`s expected cash-flows on some financial assets and liabilities vary significantly from contractualcash-flows. For example, demand deposits from customers are expected to maintain a stable and increasing balance, andunrecognised loan commitments are not all expected to be drawn down immediately. Also, retail mortgage loans have anoriginal contractual maturity of up to 30 years but lower average expected maturities as customers take advantage of earlyrepayment periods. As part of the management of its liquidity risk arising from financial liabilities, the Society holds liquid assetscomprising cash and cash equivalents to meet liquidity requirements.

The summary of the Society’s contractual liquidity gap position is as follows:




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(ii) Liquidity risk (continued)

On demand 1-3 months 3-12 months 1-5 years Over 5 years Non financial Total instruments P’000 P’000 P’000 P’000 P’000 P’000 P’000

As at 31 March 2015 Financial assets Cash and cash equivalents 66 714 - - - - - 66 714Fixed deposits with banks 45 041 52 666 172 029 16 843 - - 286 579Short term loans and advances to customers 1 530 3 060 13 770 58 168 - - 76 528Propertyinpossession - - - - - 10015 10 015Mortgage loans and advances to customers 34 162 68 252 304 562 178 278 2 348 650 - 2 933 904Intangible assets - - - - - 7 694 7 694Propertyandequipment - - - - - 96011 96 011Other assets 245 490 2 203 5 485 - 10 583 19 006Total assets 147 692 124 468 492 564 258 774 2 348 650 124 303 3 496 451 Financial liabilities Customer savings and fixed deposit accounts 297 459 167 985 212 453 343 038 5 516 - 1 026 451Other liabilities 67 039 - - - - - 67 039Borrowings 1 945 49 342 87 623 503 017 213 385 - 855 312Paidupandsubscriptionshares - - - 498685 - - 498 685Indefinite period shares - - - - - 809 145 809 145Withholding tax - 3 649 - - - - 3 649Statutory reserve - - - - - 109 189 109 189General market risk reserve - - - - - 64 000 64 000Retained earnings - - - - - 62 981 62 981Total equity and liabilities 366 443 220 976 300 076 1 344 740 218 901 1 045 315 3 496 451Net Liquidity Gap (218 751 ) (96 508 ) 192 488 (1 085 966 ) 2 129 749 (921 012 ) -



As at 31 March 2014 Financial assets Cash and cash equivalents 106 946 - - - - - 106 946Fixed deposits with banks - 88 332 103 833 15 438 - - 207 603Short term loans and advances to customers 53 143 3 724 75 019 - - 78 939Propertyinpossession - - - - - 6975 6 975Mortgage loans and advances to customers 851 1 694 8 964 46 594 2 468 135 - 2 526 238Intangible assets - - - - - 2 979 2 979Propertyandequipment - - - - - 102200 102 200Other assets 269 530 1 043 8 011 - 2 788 12 641Total assets 108 119 90 699 117 564 145 062 2 468 135 114 942 3 044 521 Financial liabilities Customer savings and fixed deposit accounts 291 525 123 663 195 386 36 091 - - 646 665Other liabilities 38 105 - - - - - 38 105Borrowings 1 643 26 249 168 588 442 438 342 713 - 921 611Paidupandsubscriptionshares - - - 483555 - - 483 555Indefinite period shares - - - - - 726 712 726 712Withholding tax on dividends - 3 348 - - - - 3 348Statutory reserve - - - - - 101 994 101 994General reserve - - - - - 64 000 64 000Revenue reserve - - - - - 58 531 58 531Total equity and liabilities 331 273 153 260 303 954 962 084 342 713 951 237 3 044 521Net Liquidity Gap (223 154 ) (62 561 ) (186 390 ) (817 022 ) 2 125 422 (836 295 ) -


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(iii) Operational riskOperational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Society’s processes,personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arisingfrom legal and regulatory requirements and generally accepted standards of corporate behavior. Operational risks arise from all oftheSociety’soperationsandarefacedbyallbusinessentities.TheSociety’sobjectiveistomanageoperationalrisksoastobalancethe avoidance of financial losses and damage to the Society’s reputation with overall cost effectiveness and to avoid controlprocedures that restricts initiative and creativity.

The primary responsibility for the development and implementation of controls to address operational risk is assigned to SeniorManagement within each business unit. This responsibility is supported by the development of overall Society standards for themanagement of operational risk in the following areas:

1. Requirements from appropriate segregation of duties, including the independent authorisation of transactions 2. Requirements for the reconciliation and monitoring of transactions3. Compliance with regulatory and other legal requirements4. Documentation of controls and procedures5. Requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address

the risks identified.6. Requirements for the reporting of operational losses and proposed remedial action7. Development of contingency plans8. Training and professional development 9. Ethical and business standards 10. Risk mitigation, including insurance where this is effective.

Compliance with the Society’s standards is supported by a programme of periodic reviews undertaken by Internal Audit. The resultsof Internal Audit reviews are discussed with the Management of the business unit to which these relate and summaries submitted tothe Finance and Audit Committee and Executive Management of the Society.


(iv) Interest rate riskThe principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations in the cash flows or fair values offinancial instruments because of a change in market interest rates. Interest rates are managed principally through monitoring interestrate gaps and by having pre-approved limits for re-pricing bands. ALCO is the monitoring body for compliance with these limitsand is assisted by Treasury in its day-to-day monitoring activities. The management of interest rate risk against interest rate gaplimits is supplemented by monitoring the sensitivity of the Society`s financial assets and liabilities to various standard interest ratescenarios. Interest rate movements affect reported equity as increases or decreases in net interest income and the fair valuechanges are reported in the profit or loss.

Overall non-trading interest rate risk positions are managed by Treasury, which uses investment securities, advances to banks anddeposits from banks to manage the overall position arising from non-trading activities. The Society is precluded by the BuildingSocieties Act to the use of any derivatives to manage interest rate risk.

The profile of assets and liabilities and the interest sensitivity gap is given below:




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(iv) Interest rate risk (continued)

Interest sensitivity gap analysis

0-3 months 3-12 months 1-2 years 2-5 years Over 5 years Non interest Total bearing P’000 P’000 P’000 P’000 P’000 P’000 P’000

As at 31 March 2015 Financial assets Cash and cash equivalents 66 098 - - - - 616 66 714Fixed deposits with banks 97 716 172 029 16 834 - - - 286 579Short term loans and advances to customers 76 528 - - - - - 76 528Propertyinpossession - - - - - 10015 10 015Mortgage loans and advances to customers 2 839 186 - 354 3 120 91 244 - 2 933 904Intangible assets - - - - - 7 694 7 694Propertyandequipment - - - - - 96011 96 011Other assets 8 423 - - - - 10 583 19 006Total assets 3 087 951 172 029 17 188 3 120 91 244 124 919 3 496 451 Financial liabilities Customers’ savings and fixed deposit accounts 743 112 195 762 87 494 83 - - 1 026 451Other liabilities - - - - - 70 688 70 688Borrowings 484 262 8 832 148 834 75 000 138 384 - 855 312Paidupandsubscriptionshares 498685 - - - - - 498 685Indefinite period shares and reserves - 809 145 - - - 236 170 1 045 315Total liabilities 1 726 059 1 013 739 236 328 75 083 138 384 306 858 3 496 451 Net interest sensitivity gap 1 361 892 (841 710 ) (219 140 ) (71 963 ) (47 140 ) (181 939 ) -



As at 31 March 2014 Financial assets Cash and cash equivalents 96 981 - - - - 9 965 106 946Fixed deposits with banks 88 332 119 271 - - - - 207 603Short term loans and advances to customers 78 939 - - - - - 78 939Propertyinpossession - - - - - 6975 6 975Mortgage loans and advances to customers 2 431 722 3 309 14 610 14 487 62 110 - 2 526 238Intangible assets - - - - - 2 979 2 979Propertyandequipment - - - - - 102200 102 200Other assets 7 669 - - - - 4 972 12 641Total assets 2 703 643 122 580 14 610 14 487 62 110 127 091 3 044 521 Financial liabilities Customers’ savings and fixed deposit accounts 424 755 110 394 110 868 648 - - 646 665Other liabilities - - - - - 41 453 41 453Borrowings 207 483 200 225 110 000 166 311 237 592 - 921 611Paidupandsubscriptionshares 483555 - - - - - 483 555Indefinite period shares and reserves - 726 712 - - - 224 525 951 237Total liabilities 1 115 793 1 037 331 220 868 166 959 237 592 265 978 3 044 521 Net interest sensitivity gap 1 587 850 (914 751 ) (206 258 ) (152 472 ) (175 482 ) (138 887 ) -


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(v) Capital managementTo monitor the adequacy of its capital, the Society uses ratios established by the Bank of Botswana. These ratios measure capitaladequacy by comparing the Society’s eligible capital with its reported assets and commitments at weighted amounts to reflecttheir relative risk. The Society is currently ensuring that it will comply with the requirements of Basel II when it comes into effect inJanuary 2016.

For prudential supervisory purposes, Tier 1 capital consists of indefinite period shares together with the general,statutory reserves and retained earnings reserves. The Society’s policy is to maintain a strong capital base so as to maintain investor,creditorandmarketconfidenceandtosustaingrowthofthebusiness.Theobjectiveistostrikeabalancebetweenthehigherreturns that might be possible with greater earnings and the advantages and security afforded by a sound capital position. TheSociety has complied with all externally imposed capital requirements throughout the period. The capital adequacy ratio was58.10%asat31March2015(2014:60.03%).ThehighratioisasaresultoftherequirementsoftheBuildingSocietiesAct(Section41) which requires the Society to hold certain amounts of permanent share capital (Indefinite shares) as a proportion of borrowings.TheminimumcapitaladequacyrateassetbytheBankofBotswanais15%.

2015 2014 P’000 P’000

Capital adequacyTier 1 capital Stated capital 809 145 726 712 Other revenue reserves 236 170 224 525 1 045 315 951 237 Tier 2 capital Collective impairment 4 839 3 630

Total unimpaired capital 1 050 154 954 867 Risk weighted assets Risk weight Duefromdomesticbanks(under1year) 20% 53947 38433Duefromdomesticbanks(over1year) 100% 16843 15438Residentialloans 50% 1317098 1129831Commercialloans 100% 299708 288665Propertyandequipment 100% 96011 102200Otherrealestate(PIP) 50% 5008 3488Otherassets 100% 19006 12641Total risk-weighted assets 1 807 621 1 590 696 Capitaladequacyratio 58.10% 60.03%Regulatoryrequirement 15% 15%


(vi) Valuation of financial instrumentsFinancial instruments carried at fair value are categorised in three levels by valuation method. The different levels have been definedas follows:

Level1:quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilitiesLevel 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., asprices) or indirectly (i.e., derived from prices).

This category includes instruments valued using: • quotedmarketpricesinactivemarketsforsimilarinstruments;• quotedpricesforidenticalorsimilarinstrumentsinmarketsthatareconsideredlessthanactive;or• othervaluationtechniqueswhereallsignificantinputsaredirectlyorindirectlyobservablefrommarketdata.

Level 3 inputs for the asset or liability that are not based on observable market data (unobservable inputs). This category includesall instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have asignificant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similarinstrumentswheresignificantunobservableadjustmentsorassumptionsarerequiredtoreflectdifferencesbetweeninstruments.

Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealerprice quotations.The following table analyses financial instruments measured at fair value, by the level in the fair value hierarchy intowhich the fair value measurement is categorised.

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in thefair value hierarchy. It does not include fair value information for assets and financial liabilities not measured at fair value if the carryingamount is a reasonable approximation of fair value.


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The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

31 March 2015Financial assets measured at fair value Note Designated Held to Loans and Other Total Level 1 Level 2 Level 3 Total financial at fair value maturity receivables liabilities - - - - - - - - - Financial assets not measured at fair value Cash and cash equivalents 6 - - 66 714 - 66 714 66 714 - - 66 714Fixed deposits with banks 7 286 579 - - - 286 579 - 286 579 - 286 579Short term loans and advances to customers 8 - - 76 528 - 76 528 - 76 528 - 76 528Mortgage loans and advances to customers

10 - - 2 993 904 - 2 993 904 - 2 993 904 - 2 993 904Other assets 13 - - 19 006 - 19 006 - 19 006 - 19 006 286 579 - 3 156 152 - 3 442 731 66 714 3 376 017 - 3 442 731 Financial liabilities measured at fair value - - - - - - - - - Financial liabilities not measured at fair value Other liabilities 18 - - - 67 039 67 039 - 67 039 - 67 039Borrowings 17 - - - 855 312 855 312 - 855 312 - 855 312 - - - 922 351 922 351 - 922 351 - 922 351


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The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

31 March 2014Financial assets measured at fair value Note Designated Held to Loans and Other Total Level 1 Level 2 Level 3 Total financial at fair value maturity receivables liabilities - - - - - - - - - Financial assets not measured at fair value Cash and cash equivalents 6 - - 106 946 - 106 946 106 946 - - 106 946Fixed deposits with banks 7 207 603 - - - 207 603 - 207 603 - 207 603Short term loans and advances to customers 8 - - 78 939 - 78 939 - 78 939 - 78 939Mortgage loans and advances to customers

10 - - 2 526 238 - 2 526 238 - 2 526 238 - 2 526 238Other assets 13 - - 12 641 - 12 641 - 12 641 - 12 641 207 603 - 2 724 764 - 2 932 367 106 946 2 825 421 - 2 932 367 Financial liabilities measured at fair value - - - - - - - - - Financial liabilities not measured at fair value Other liabilities 18 - - - 38 105 38 105 - 38 105 - 38 105Borrowings 17 - - - 921 611 921 611 - 921 611 - 921 611 - - - 959 716 959 716 - 959 716 - 959 716


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6. Cash and cash equivalents 2015 2014 P’000 P’000

Cash balances 5 308 5 337Balances with banks (call and current accounts) 60 613 45 431Money market balances 793 56 178 66 714 106 946 Interestratesoncurrent,callandmoneymarketaccountsrangefrom0%to8%.(2014:0%to6.56%)perannum 7. Fixed deposits with banks Redeemable within one year 269 736 192 165

Redeemable in greater than one year 16 843 15 438 286 579 207 603 Fixed deposits have a term of up to sixty months at interest rates ranging from 4%to11.05%(2014:6.4%to7.25%)perannum.FixeddepositsofP15million(2014:P15.1million)arepledgedassecurityagainstborrowings.Refernote17.

8. Short term loans and advances to customers

Short term loans and advances to customers 76 528 78 939 Short term loans are for periods of between twelve and sixty months, bearinterestof12%(2014:12%)perannumandaresecuredbyPaidup shares and Subscription shares. 9. Properties-in-possession

Balance at beginning of the year 6 975 906Repossessions during the year 3 904 6 733Disposals during the year (864 ) (400 )Write down during the year - (264 )Balance at the end of the year 10 015 6 975 Number of properties in possession - residential 11 5 The properties-in-possession are premises the Society has repossessed.

10. Mortgage loans and advances to customers 2015 2014 P’000 P’000

Gross amounts 2 957 924 2 548 327Impairment allowance (24 020 ) (22 089 )Carrying amount 2 933 904 2 526 238 Specific allowance for impairment Balance at the beginning of the year 8 519 7 768Impairment loss for the year 993 751Balance at the end of the year 9 512 8 519 General (collective) impairment Balance at the beginning of the year 3 630 3 314Impairment loss for the year 1 209 316Balance at the end of the year 4 839 3 630 Interest in suspense Balance at the beginning of the year 9 940 8 891Interest arising during the year (271 ) 1 049Balance at the end of the year 9 669 9 940 Mortgage loans are granted up to a maximum period of thirty years. The variable rate loansandadvancesamounttoP2.863billion(2014:P2.414billion)andP95million(2014:P134million)areatfixedratesofinterest.

Interestischargedatratesbetween8.25%and15.5%(2014:8.25%and15.5%)andloans are secured by a first mortgage bond against the financed property. The rate of interestonstaffmortgageloansis5%(2014:5%).TheSocietylendsupto90%ofthemarket value of the property being financed.

11. Intangible assets Cost Balance at the beginning of the year 7 886 6 616Acquisitions - 1 270Transfers from work in progress 6 157 -Balance at the end of the year 14 043 7 886 Accumulated Amortisation Balance at the beginning of the year 4 907 3 759Amortisation for the year 1 442 1 148Balance at the end of the year 6 349 4 907 Carrying amounts At beginning of the year 2 979 2 857At end of the year 7 694 2 979

The intangible assets consist mainly of costs incurred in respect of the system implemented in stages. The recoverable amount of this software was based on its value in use, determined by cash flows to be generated from the continuing use of the software. An averagegrowthrateof18%hasbeenappliedtoestimatethefuturecashflows.Thediscountratesreflectspecificrisksrelatingtothe operation. Any change in the inputs used is not expected to have a significant impact in estimated cash flows.




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12. Property and equipment

Freehold Freehold Leasehold Leasehold Equipment, Computer Motor WIP Total property land property land furniture hardware vehicles and fittings P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000

CostBalance at 1 April 2013 32 767 515 49 400 4 223 14 342 7 563 373 9 676 118 859Acquisitions - - - - 156 1 145 - 2 052 3 353Transfers 1 201 - - - 1 368 - - (2 569 ) -Disposals - - - - (12 ) - - - (12 )Balance at 31 March 2014 33 968 515 49 400 4 223 15 854 8 708 373 9 159 122 200Acquisitions - - - - 1 740 257 194 7 195 9 386Transfers - - 1 285 - 1 807 - - (9 249 ) (6 157 )Disposals - (135 ) (3 429 ) - (7 ) (19 ) - - (3 590 )Balance at 31 March 2015 33 968 380 47 256 4 223 19 394 8 946 567 7 105 121 839 Accumulated depreciation Balance as at 1 April 2013 - - 6 705 - 4 928 2 007 247 - 13 887

Charge for the year - - 1 318 - 3 374 1 382 41 - 6 115Disposals - - - - (2 ) - - - (2 )Balance at 31 March 2014 - - 8 023 - 8 300 3 389 288 - 20 000Charge for the year - - 1 437 - 2 936 1 433 43 - 5 849Disposals - - - - (6 ) (15 ) - - (21 )Balance at 31 March 2015 - - 9 460 - 11 230 4 807 331 - 25 828 Carrying amounts As at 31 March 2013 32 767 515 42 695 4 223 9 414 5 556 126 9 676 104 972As at 31 March 2014 33 968 515 41 377 4 223 7 554 5 319 85 9 159 102 200As at 31 March 2015 33 968 380 37 796 4 223 8 164 4 139 236 7 105 96 011

The Society owns several freehold and leasehold properties. The leasehold properties each has a lease term of fifty years. Aregisteroffreeholdandleaseholdpropertiesisavailableofthefollowingaddress:Plot13108-112Broadhurst,Gaborone,Botswana.




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13.Other assets 2015 2014 P’000 P’000

Rent debtors 995 664Rent deposits 11 -Staff debtors 8 519 7 669Prepaymentsandotherdebtors 7269 2788Accrued interest on fixed deposits 2 252 1 520 19 006 12 641 Staff debtors are unsecured loans and advances to staff for purchase of motor vehicles,furnitureandotherpersonaleffects.Theloansareadvancedat50%ofBotswanaprime lending rate per annum. The term of staff loans vary from 6 months to 60 months. 14. Customers’ savings and fixed deposit accounts

Fixed deposits 445 369 118 554Letsibogo savings 99 072 87 353Tlamelo mortgage savings 11 677 9 625Ordinary and special savings 193 996 204 038Lerako 176 337 227 095Lerako B 100 000 - 1 026 451 646 665 Fixed deposits have a term ranging from twelve months to sixty months and earn interestatbetween1.89%and11%(2014:1.60%and6.07%)perannum.The Letsibogo savings product is repayable on demand and earns interest between 0.5%to3.00%(2014:0.5%to5.00%)perannum.

Savings deposits are repayable on demand. The ordinary savings deposit accrues interestof0.25%(2014:0.25%)whilethespecialsavingsearninterestbetween0.5%and2.75%(2014:0.5%and2.75%)perannum.Tlamelomortgagesavingsaccountsearninterestat4.75%(2014:4.75%)annually.Lerakosavingsaccountsearninterestfrom4,25%(2014:between4.25%and7.75%)annually.

Interest earned on savings accounts is linked to the Botswana prime lending rate. 15. Paid up and subscription shares

Paidupshare 439713 426982Subscription shares 58 972 56 573 498 685 483 555 Paidupsharesareinvestedforaperiodofnotlessthan18monthsandmayberedeemedsubjecttotheBoard’sapprovalupon3months’notice.

Early redemption is permitted with a proportionate forfeiture of dividend accrual.

15. Paid up and subscription shares (continued) 2015 2014 P’000 P’000

The Board may, at its discretion, from time to time issue paid up and subscription shares and all such shares shall accrue dividends distributed out of the available profits of the Society. The rates of dividend on the shares shall be fixed by the Board at the time of issue and subsequently from time to time as the Board may, in its discretion decide.Paidupsharesandsubscriptionsharesearncouponratesof4.15%and5%(2014:4.15%and5%)perannumrespectively. 16. Withholding tax

Tax liability 3 649 3 348

This relates to withholding tax on dividends and interest paid to the Society’s membersandcustomersandwhichisduetoBotswanaUnifiedRevenueServices.

17. Borrowings DPCFLloans 17228 26311Unsecuredlongterm–bonds 488087 487592Stanbic Bank Botswana Limited 112 452 150 167BancABC Botswana Limited 36 765 57 316StanlibInvestmentManagementServices(Pty)Ltd 200780 200225 855 312 921 611 Borrowings payable within one year DPCFLloans 9423 11707Unsecuredlongterm–bonds 47114 47414Stanbic Bank Botswana Limited 44 201 42 225BancABC Botswana Limited 23 132 23 340StanlibInvestmentManagementServices(Pty)Ltd 15040 11774 138 910 136 460 Borrowings repayable after one year DPCFLloans 7805 14604Unsecuredlongterm–bonds 440973 440178Stanbic Bank Botswana Limited 68 251 107 942BancABC Botswana Limited 13 633 33 976StanlibInvestmentManagementServices(Pty)Ltd 185740 188451 716 402 785 151




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17. Borrowings (continued) DPCFL loansVariousunsecuredDPCFLloansarerepayableoverperiodsto2018,bearinterestatratesbetween7.5%and9.5%perannumwithrepayments due semi - annually in arrears.

Stanbic Bank Botswana LimitedTheloanbearsinterestatBotswanaprimelendingrateless3.10%perannumandisrepayableover60monthscommencing19November2012.TheloanissecuredbyapledgeofadepositaccountwithabalanceofP15million(2014:P15.1million)atthereporting date.

BancABC Botswana LimitedTheloanisunsecured,bearsinterestatBotswanaprimelendingrateless3%perannumandisrepayableoverfiveyearscommencing2 November 2011.

Stanlib Investment Management Services (Pty) LtdThisisaroll-overoftheoriginalnotewithatotalsizeofthestructureatP200millionforadurationoftwoyearsandre-pricingevery91days. The quarterly interest payments are payable in arrears at the 91- day BoBC plus a margin of 528 basis points per annum.

Unsecured long term – bondsThese bonds are listed on the Botswana Stock Exchange and are summarised below: Number Maturity date Amount Type Interest P’000 rate2015BBS002 15December2016 140000 Fixed 12.00%BBS004 26November2019 75000 Fixed 11.10%BBS005 3December2023 150000 Fixed 11.20%BBS006 4 August 2018 110 000 Floating 91 days BOBC plus1.50%2014 BBS002 15December2016 140000 Fixed 12.00%BBS004 26November2019 75000 Fixed 11.10%BBS005 3December2023 150000 Fixed 11.20%BBS006 4 August 2018 110 000 Floating 91 days BOBC plus1.50%

18. Other liabilities 2015 2014 P’000 P’000

Accounts payable 36 315 19 981Other creditors 10 614 2 368Rental advances 980 -Dividend payable 8 938 7 316Bonus provision 10 192 8 440 67 039 38 105

Reconciliation of bonus provision Opening balance 8 440 9 108Paidduringtheyear (8219) (9068)Provision 9971 8400Closing balance 10 192 8 440

19. Indefinite period shares 2015 2014 P’000 P’000

Indefinite period shares 809 145 726 712 The shareholder shall not be entitled at any time to demand redemption, but the Society shall be entitled to redeem the Shares, upon 6 months’ notice, which may be tendered 12 months from the date of deposit.

The Board may, at its discretion, issue Indefinite period shares and all such shares shall accrue dividends distributed out of the available profits of the Society. The rates of dividends on the shares shall be fixed by the Board at the time of issue and subsequently from time to time as the Board may in its discretion decide. Asat31March2015Indefiniteperiodsharesearnacouponrateof8%(2014:8%).

20. Reserves

Statutory reserve

The statutory reserve fund is established in terms of Section 39 of the Building Society Act.TheActrequirestheSocietytosetasideaminimumof10%ofitsundistributedprofits into the reserve fund. The Society may charge against the reserve fund any net loss remaining after applying such loss against any undistributed profits brought forward from previous years. Balance at the beginning of the year 101 994 95 190Transfers in 7 195 6 804Balance at the end of the year 109 189 101 994

General market risk reserve

The general market risk reserve has been established in terms of Rule 73 of the Rules of the Botswana Building Society to cover general market risks. There are no restrictions on the application of funds in the general reserve. General market risk reserve 64 000 64 000 21. Interest income Cash and cash equivalents 25 322 19 478Long term loans and advances 268 958 255 329Short term loans and advances 9 678 9 771 303 958 284 578




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22. Interest expense 2015 2014 P’000 P’000 DPCFLloans 2624 3608Bonds 47 790 48 918Term loans 20 446 26 464Fixed period paid up and subscription shares 20 630 22 930Fixed deposits 25 656 6 141Savings accounts 22 365 18 220 139 511 126 281

23. Fee and commission income Commission on other services 7 872 7 740Transaction and loan origination fees 18 117 18 428 25 989 26 168 Fee and commission expense Interbank transaction fees 1 050 1 175 24. Other operating income Rental income 4 925 4 425Profitonsaleofpropertyandequipment 6333 6Sundry income 413 862 11 671 5 293 25. Impairment loss on financial assets Specific impairment 722 1 799General impairment 1 209 316Net loss on sale of properties in possession 2 887 4 864 4 818 6 979 26. Personnel expenses Salaries and wages 44 041 40 802Pensionfundcontributions 4080 3486Bonus accrual-current year 9 971 8 440Bonus accrual-prior year over provision - (40 )Leave pay accrual 1 350 1 033Other employee expenses - 33Fairvalueadjustment-offmarketstaffloans (3834) 4293 55 608 58 047

27. Depreciation and amortisation 2015 2014 P’000 P’000 Depreciation charge 5 849 6 115Amortisation charge 1 442 1 148 7 291 7 263 28. Operating lease expenses

Branch rentals 2 843 2 042

29. Other expenses Director’s fees 984 808Audit fees 1 500 1 500Audit fees - prior year over provision (517 ) -Advertising and marketing 5 836 5 152Computer maintenance expense 4 896 4 310Insurance 1 042 1 187Legal and professional expenses 16 958 8 697License fees 9 306 7 849Repairs and maintenance 2 912 2 994Stationery and printing 947 1 082Telephone and postage 5 415 4 263Travel and subsistence 1 100 834Office supplies 1 291 1 137Security expenses 1 729 1 544Subscriptions 131 140Other expenses 2 677 789Net input VAT not claimable 2 341 3 931 58 548 46 217

30. Dividend per share The dividend per share has been calculated by dividing the dividend declared to Indefinite period shareholders by the number of Indefinite period shares at the time of declaration.

Dividend to Indefinite period shareholders 60 304 59 125Indefinite period shares 795 266 684 181Dividend per share (thebe) 7.6 8.6




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31. Earnings per share 2015 2014 P’000 P’000 Basic earnings per share are calculated by dividing the net profit attributable to shareholders by the weighted average number of Indefinite shares during the year. Profitattributedtoshareholders 71949 68035Weighted average number of Indefinite shares in issue 692 865 607 002Earnings per share (thebe) 10.4 11.2

32. Operating lease commitments The Society had the following outstandingcommitments under operating leases for its branch premises at the reporting date:

Within one year 1 689 1 973Two to five years 4 507 4 109 6 196 6 082

33. Commitments Commitment in respect of mortgages approved but not yet disbursed 157 698 184 010

Capital expenditure - approved but not yet committed 27 933 43 081

Capital expenditure -approved and committed 3 335 3 912 Commitments will be met from the Society’s own resources.

34. Related party transactions 2015 2014 P’000 P’000 The Society transacts part of its business with related parties including directors and parties related to or under the control of the directors. Details of related party transactions of the Society are set out below: 34.1 Amounts due to related parties: Savings accounts Held by the Society’s Directors 1 316 1 444Held by the Society’s Executive members 937 1 018 2 253 2 462

Interest expense on savings accounts Held by the Society’s Directors 72 78Held by the Society’s Executive members 70 47 142 125 Share accounts Held by the Society’s Directors 12 987 14 181Held by the Society’s Executive members 716 1 124 13 703 15 305

Dividends on shares Held by the Society’s Directors 963 944Held by the Society’s Executive members 36 95 999 1 039 Borrowings LoanfromDebtParticipationCapitalFundLimited 17 228 26 311 Indefinite period paid-up shares Motor Vehicle Accident Fund 201 808 173 565BotswanaPrivatisationAssetHoldingCompany 171608 165501BotswanaPoliceServices 139876 130073Total amounts due to related parties 513 292 469 139

Dividends paid Motor Vehicle Accident Fund 14 555 15 557BotswanaPrivatisationAssetHoldingCompany 13240 13959BotswanaPoliceServices 10598 10971Total amounts due to related parties 38 393 40 487 TheBotswanaPrivatisationAssetHoldingCompanyandBotswanaPoliceServicesare wholly owned by the Government of Botswana.

TheDebtParticipationCapitalFundLimitedisawhollyownedGovernmentcompanyandhas outstanding loans with the Society as noted above. Interest paid on the loans amountedtoP2624000(2014:3608000)(Note17and22).




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34 Related party transactions (continued)

34.2 Amounts due from related companies 2015 2014 P’000 P’000 Mortgages Held by the Society’s Non Executive Directors 2 420 784Held by the Society’s Executive members 29 231 18 727Held by shareholders 34 6 938 31 685 26 449 Short term loans Held by the Society’s Executive members 161 94Held by the Society’ non executive members 102 4 263 98 Staff loans Held by the Society’s Executive members 2 144 1 444

Total amounts due from related parties 34 092 27 991 Advances are made to employees on concessionary terms in accordance with the conditions of employment.

Advances to directors and parties related thereto are in the normal course of business and considered to be adequately secured.

Advances to related parties at concessionary rates of interest are valued at the present value of expected future repayments of the advances discounted at a pre-tax discount rate that equates to the interest rate charged on similar loans to non-related parties. No impairment losses have been recorded against loans or mortgages to related parties. 34.3 Amounts paid to related parties 2015 2014 P’000 P’000 Related party Nature of transaction Board of directors Remuneration fees 984 808Executive management Remuneration 10 183 14 906Board of directors Interest expense 1 035 1 022Executive management Interest expense 106 142 12 308 16 878

34.3 Amounts received from related parties

Board of directors Interest income 144 89Executive management Interest income 1 673 1 059Shareholders Interest income 681 1 916 2 498 3 064

35. Events after the reporting period Therewerenomaterialevents thatoccurredafter the reportingdate that requireadjustment to theamounts recognised in thefinancial statements or that require disclosure in the financial statements. 36. Litigations The Society is defendant in a number of litigations which arise from its normal day to day operations. There are no significant exposures at reporting date. 37. Compliance with sections 39, 41 and 42 of the Building Societies Act

The Society complied with the requirements of Sections 39, 41 and 42 of the Building Societies Act, as varied by the Register of Building Societies.

38. Demutualisation

TheSocietyisinaprocessofconvertingfromasocietytoacommercialbank,subjecttoshareholders’approval.Managementhasbeen tasked to perform research, forecasts and competitor analysis relevant to enable the shareholders to support the decision to convert.

For further details in respect of the demutualisation, refer to the Board Chairman and Managing Director’s statement on pages 13 and 19 respectively.




88 PB


NOTES

Registered OfficeBBS HOUSEBroadhurst MallP.O. Box 40029, Gaborone, BotswanaTel: (+267) 3971 396Fax: (+267) 3903 029

BBS BRANCHESGABORONEBBS HOUSEBroadhurst MallP.O. Box 41481, Gaborone, BotswanaTel: (+267) 395 9167Fax: (+267) 390 3029

THUSANYO HOUSEOld Lobatse RoadP.O. Box 40029, Gaborone, BotswanaTel: (+267) 395 3001Fax: (+267) 395 3001

MAIN MALLThe MallP.O. Box 636, Gaborone, BotswanaTel: (+267) 395 1240Fax: (+267) 395 1240

FRANCISTOWNP.O. Box 131, Francistown, BotswanaTel: (+267) 241 3412Fax: (+267) 241 9072

SELIBE PHIKWEP.O. Box 249, Selibe Phikwe, BotswanaTel: (+267) 261 0798Fax: (+267) 262 2100

LOBATSEP.O. Box 159, Lobatse, BotswanaTel: (+267) 533 0262Fax: (+267) 533 1132

SEROWEPrivate Bag 0052, Serowe, BotswanaTel: (+267) 463 0936Fax: (+267) 463 0936

MAUNP.O. Box 467, Maun, BotswanaTel: (+267) 686 0631Fax: (+267) 686 0655

KASANEChobe Commercial BuildingPrivate Bag K43, Kasane, BotswanaTel: (+267) 625 2460Fax: (+267) 625 2459

Annual Report 201415 - BBS BBS... · • Mr. MOLEFE Pius 9. ... means of communication such as this Report, general meetings as well as individual meetings, where appropriate. Further,

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