Annual Report Annual Report Annual Financial Statements

ANNUAL REPORT ANNUAL REPORT ANNUAL FINANCIAL STATEMENTS

Board Overview & Corporate Governance 42 | Five Year Review 45 | Management 46 |

Sustainability Report 30 | Retail 34 | Commercial 36 | Property 38 |

Board of Directors 14 | Chairman’s Statement 16 | Managing Director’s Report 20 | Financial Report 26 |

CONTENTS

ANNUAL FINANCIAL STATEMENTS 48 | 05

4 ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 01 SERVICE SERVICEGIVING OUR CUSTOMERS e understand that any consumer’s Wexperience of a brand is predicated upon the quality of the service that they receive. We’re committed to ensuring that every member of the wider Engen Botswana family, no matter where they come into contact with our brand, leaves with a smile. We strive to ensure they never experience anything but stellar service from each and every one of our people. In fact, we’d accept nothing less. 01 SERVICE OUR VALUES PERFORMANCE We actively pursue, define, measure and 01 recognise excellence in all business activities.

OWNERSHIP We are responsible and accountable for our 02 actions and performance. We are committed to continuously finding new and better ways to deliver value to the business.

EMPOWERMENT Our Employees have the capability, authority and 03 resources to act and perform in their roles. They are trained to be competent in their current jobs and their potential is developed to meet the current and future needs of the Company.

TEAMWORK We work together as one team to realise Engen’s 04 Vision - to the benefit of the whole organisation. INTEGRITY We demonstrate ethical, fair and transparent behaviour. 05 Our actions earn trust and respect from others.

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 7 We believe that a strong set of values to guide the very actions and ethos of a business are crucial. At Engen Botswana, we live true to our Vision and Values in every thing that we do.

8 ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 01

SERVICE FINANCIAL HIGHLIGHTS

31 March 2011 195.58 THEBE NET ASSET VALUE 31 December 2011 200.92 THEBE 31 December 2012 234.57 THEBE PER SHARE 31 December 2013 275.24 THEBE 31 December 2014 279.06 THEBE 0 50 100 150 200 250 300

31 March 2011 92,337 MIL ATTRIBUTABLE 31 December 2011 83,413 MIL 31 December 2012 120,263 MIL PROFIT 31 December 2013 128,202 MIL 31 December 2014 63,962 MIL 0 20 000 40 000 60 000 80 000 100 000 120 000 140 000

31 March 2011 312,381 MIL ORDINARY 31 December 2011 320,912 MIL 31 December 2012 374,660 MIL SHAREHOLDERS INTEREST 31 December 2013 439,612 MIL 31 December 2014 445,720 MIL 0 50 100 150 200 250 300 350 400 450 500

31 March 2011 57.81 THEBE EARNINGS PER 31 December 2011 52.22 THEBE 31 December 2012 75.30 THEBE SHARE 31 December 2013 80.27 THEBE 31 December 2014 40.80 THEBE 0 10 20 30 40 50 60 70 80 90

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 9 ABOUT ENGEN

Engen Botswana Limited is a downstream petroleum marketer that markets petroleum 100% ENGEN LIMITED COMPANY products and provides convenience services ENGEN LIMITED STRUCTURE through an extensive retail network. Incorporated in South Africa

Engen Limited’s majority shareholder is Petronas, the Malaysian national oil and gas company, which holds 80% of shares. Through 70% 30% this association, Engen has global support PETROLEUM INVESTMENT LOCAL HOLDINGS Ltd. SHAREHOLDERS in all areas of our business. South African- Mauritius based Pembani Group, formerly Worldwide African Investment Holdings (WAIH), holds 20% of the company. Today, Engen enjoys a significant presence in 16 sub-Saharan 100% African countries and the Indian Ocean islands. Engen’s expansion plan is focused ENGEN BOTSWANA Ltd. exclusively in these regions in terms of its EPIC 2016 Vision and Strategy for growth.

Engen combines a proud record of 100% operational excellence and dynamism ENGEN MARKETING with a strong commitment to the BOTSWANA (Pty) Ltd. economies, communities and environments of the countries it operates in.

Extensive storage and distribution infrastructure, including: 1500 depots, 40 terminals, SERVICE AND lubricant FILLING STATIONS TONS warehouses, a bitumen 600 ENGEN FILLING OF PRODUCT PER 16SUB SAHARAN plant and HOUR INCLUDING STATIONS HAVE LUBRICATING OILS aviation CONVENIENCE STORES COUNTRIES facilities. BLENDING PLANT (IN DURBAN, SA) TOTALLING TO Engen supplies the bulk fuel volume requirements of our South African market, 320,000 our affiliates in Lesotho, 135,000 Botswana and Swaziland, LITRES PER DAY/ and half of our Namibian ON A SINGLE BARRELS PER DAY operation’s needs. SHIFT

10 ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 01 SERVICE OUR PRESENCE

“Engen Botswana Limited is the only listed oil company in Botswana. Our citizen empowerment drive is Our majority shareholder, Petroleum Investment Holdings Limited Mauritius, holds 70% of equity, demonstrated by our broad- and it in turn is 100% owned by Engen Limited, based shareholding, with based in South Africa. As a result, we have greater access to relevant infrastructure in South over 1,100 Batswana holding Africa and Botswana. This ensures improved 30% of our equity. “ product availability in the landlocked country.

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 11 KAZUNGULA

MAUN

NATA TUTUME RAMOKGWEBANA

SEBINA MOPIPI ORAPA FRANCISTOWN LETLHAKANE GHANZI

SELEBI-PHIKWE CHARLES HILL SEROWE

PALAPYE

RAMOKGONAMI

MAHALAPYE

KANG

MOLEPOLOLE MOCHUDI

GABORONE

LOBATSE

ENGEN FILLING STATIONS

12 ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 02 INNOVATION GIVING OUR CUSTOMERS INNOVATION

y its very definition, innovation means the Bintroduction of new and more effective processes or solutions. For us, it means making every effort to ensure that what we offer our customers is more than simply a place to fuel their vehicle. It is an unwavering dedication to ensure that we provide nuanced fuel and convenience solutions to make their journey a more enjoyable one and their experience a more pleasurable one. BOARD OF

Shabani is an experienced leader, administrator and academic 02 with over 30 years of work experience. In 2011, he was appointed Deputy Vice Chancellor of the Botswana International University of Science and Technology (BIUST), where he is in charge of finance and administration. He has executed a similar role at the University of Botswana and previously headed the Business Faculty at that institution. Shabani is a member of INNOVATION several Boards, including BIUST, the Botswana Accountancy College, the Institute of Development Management, and TA DR. SHABANI NDZINGE, 57 (CHAIRMAN) Shebube (Proprietary) Limited. He is a former Board Member Independent Non-Executive Director of the Botswana Development Corporation and the University BA, Dar Es Salaam; MS, Delaware; PhD, Kent of Botswana.

Chimweta studied Accounting and Finance at the University of Zambia and worked briefly as a computer programmer before joining first Citibank and then Caltex. He was rapidly promoted to Managing Director of Caltex Zambia before joining Chevron as a Regional Manager for Commercial Business in Chevron’s associated companies based in South Africa. Chimweta was appointed Managing Director of Engen Botswana in 2012, and has over 25 years’ experience in the oil industry in Southern Africa. CHIMWETA MONGA, 55 (MANAGING DIRECTOR) Executive Director MBA University of Lincolnshire and Humberside (UK), Bachelor of Accounting and Finance (Zambia)

Vhulahani joined Engen Petroleum as a Senior Tax Analyst in 2001. He has since been promoted to Trading Manager for Southern Africa. He is responsible for managing Engen’s trading portfolio for all its African affiliates and the marine fuels business in South Africa. He has extensive experience in trading, supply and tax.

VHULAHANI BVUMBI, 39 Non-Executive Director BCom, University of the North; Higher Diploma in Tax Law, UCT

John joined the Engen Botswana Board at the end of 2012. He joined Mobil Oil in 1980, Engen’s forerunner, as a Technical Engineer in its Cape Town office. He has extensive technical knowledge and experience of the lubricants industry and has also worked extensively in the sales department. John sits on the Boards of three other subsidiaries of the Group, Engen Swaziland and Engen Lesotho, as well as South Africa-based Reatile Gaz.

JOHN KENNEDY, 60 Non-Executive Director Diploma in Mechanical Engineering; Cape Technikon

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 15 DIRECTORS

Anthony has extensive experience in developing and formulating business strategy, economics and finance. He has worked in private equity, venture capital, investment banking, corporate finance and managing consulting, and has developed a thorough understanding of the Southern African region. He is the founder and Managing Director of private equity fund manager VPB (Proprietary) Limited and founded corporate finance company AMS Capital. He sits on various Boards in Botswana and in the region, including the South African Venture Capital Association and the African Venture Capital Association. ANTHONY SIWAWA, 48 He is a sought-after speaker throughout Africa and the United Independent Non-Executive Director States. BSc Hons, Aston; MBA, Chicago

Frederik is a Director of three Petronas subsidiaries in Malaysia, namely Petronas Ethylene Malaysia, Petronas Polyethylene Malaysia, and Petronas Polypropylene Malaysia. He joined Engen Petroleum in 1993 as a retail pricing executive and has served in various capacities throughout the group. He is currently the General Manager of the International Business Division.

FREDERIK KOTZE, 48 Non-Executive Director Business Science Hons, Stellenbosch: MBA Stellenbosch

Andrew worked briefly as a research chemist before becoming a Chartered Accountant. He joined Engen in 1988 as an internal auditor and has held various positions within the group. He was appointed General Manager for Finance in 2010. His background in chemistry, coupled with his extensive knowledge of Engen’s business, make him a valued Board Member for Engen Botswana.

ANDREW BRYCE, 59 Non-Executive Director BSc University of Natal-Pietermaritzburg, BSc Hons, Stellenbosch, BCompt Hons, UCT; CA (SA)

Robert serves as Chairman on several audit committees of private and public companies, and acts as an Independent Non-Executive Board Member. A retired partner of PricewaterhouseCoopers Gaborone, in charge of audit and business advisory services, he has gained extensive professional and commercial experience in audit, taxation and business services. He currently offers consulting and advisory services to various organisations.

ROBERT MATTHEWS, 71 Independent Non-Executive Director Fellow: Botswana Institute of Chartered Accountants (BICA); Fellow: Institute of Chartered Accountants in England and Wales (ICAEW)

16 ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 CHAIRMAN’S STATEMENT

02 INNOVATION

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 17 Summary

SOLID SAFETY, OPERATIONAL AND FINANCIAL PERFORMANCE

BOARD PROCESSES ENHANCED

TRANSITION TO CLEANER METAL-FREE FUELS ACCELERATED

EMPOWERING OUR CITIZENS IMPROVING FUEL SECURITY “Against this backdrop of increased levels of competition, and notwithstanding the freeze of Government-controlled margins for most of other year, the Company managed to increase gross profit by 1% over the previous year - a good performance in difficult circumstances.”

DR. S. NDZINGE, CHAIRMAN

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 18 CHAIRMAN’S STATEMENT

02 Business Environment The recovery of the global economy remained subdued with many developed and emerging markets revising downwards their economic growth forecasts for the year. This had a negative

INNOVATION impact on the local economy which to a large extent is dependent on buoyant global markets. Commodity prices dropped, which had an effect on local commodity producing establishments. The prices of crude oil softened eventually closing the year at just under USD 50/barrel. While this had a positive impact on the Botswana economy EMPOWERING by way of higher disposable incomes and lower levels of inflation, the effect was detrimental to OUR CITIZENS the Company due to the accumulated inventory IMPROVING FUEL revaluations losses. The elections held in October 2014 were endorsed as peaceful, transparent, free and SECURITY fair by independent election observers. This demonstrated the entrenchment of democracy It is my pleasure to present Engen in Botswana and boosted the confidence of the Botswana’s 2014 Annual Report on private business sector in the stability of the operating environment behalf of the Board of Directors. The Company performed relatively In 2014, the Botswana economy achieved a higher well under difficult and turbulent level of Gross Domestic Product growth estimated global economic conditions. This at 5.2 pct compared to the previous year. Headline performance was attributable to the inflation was managed well within the Bank of strong business fundamentals of the Botswana target range of between 3 and 6 pct. Government maintained a stable macroeconomic Company. environment by ensuring a fine balance between fiscal, monetary and exchange rate policies which resulted in a stable real effective exchange rate and promoted domestic competitiveness.

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 19 Industry Developments Outlook The state oil company, Botswana Oil Limited, We remain confident that the Botswana economy was officially launched in October 2014. This will continue to be resilient in 2015 despite was a welcome development that will facilitate the global economic recovery which remains the transformation of the petroleum industry in uncertain. Gross Domestic Product growth is Botswana. The state oil company will be tasked forecast to be at around 4.9 pct for 2015 and will with the management of Government strategic continue to be positive in the foreseeable future. It reserves, ensuring security of supply, diversifying is for this reason that we reaffirm our commitment the sources of fuel, procurement of fuel on behalf to invest and grow our business and be part of the of Government, and facilitating citizens’ economic country’s economic development. empowerment. The state oil company will construct additional fuel storage capacity within In conclusion, I would like to thank the Board of Botswana in order to increase national strategic Engen Botswana Limited, investors, staff, and all reserves. Stable energy supplies, as you will stakeholders for the support given to the company appreciate, are a prerequisite towards sustainable throughout 2014 and look forward to the same economic development. levels of support into the future.

We commend the Government of Botswana for DR. S. NDZINGE, CHAIRMAN responding to our request to dismantle the slate under-recovery position which persisted for most of 2013 and was eventually converted to a slate payable position at the end of 2014.

Government controlled fuel margins continued to be very tight for most of the year under review, having not been adjusted for three consecutive years since December 2011. This position exerted a lot of pressure on the profitability of the Company until December 2014, when a modest margin increase was allowed. While the margin increase was welcomed, it fell far short of the level of increase that was required to offset the increase in operating expenditure during the preceding three years.

“Gross Domestic Product growth is forecast to be at around 4.9 pct for 2015 and will continue to be positive in the foreseeable future.”

20 ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 MANAGING DIRECTOR’S REPORT

02 INNOVATION

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 21 Summary

STRONG PERFORMANCE TO SEE SHAREHOLDERS REWARDED

CUSTOMER SATISFACTION STRONG

STRONG BRAND POSITIONING

SUPPORTING OUR CUSTOMERS ENHANCING OUR PERFORMANCE “The Company continued to maintain very positive cash flows, to the extent that we were even able to make placements in high-yielding risk-free investments, enabling us to generate additional income.”

MR. C. MONGA, MANAGING DIRECTOR

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 22 MANAGING DIRECTOR’S REPORT

02 I am not alone in this assessment. Both investors and our shareholders effectively put their money where their mouths are and demonstrated their confidence in the Engen brand, management and people by supporting our share price on the Botswana Stock Exchange, and by driving the INNOVATION share price up by an impressive 20%. The share ended the year on 975 thebe/share, up from 810 thebe/share at the same time in the previous year.

I am pleased that we are able to reward this confidence with a dividend of 21 thebe. While SUPPORTING this is somewhat lower than last year’s dividend, the fact that we were able to declare one of this magnitude demonstrated that 2014 was, indeed, a OUR CUSTOMERS satisfactory year.

ENHANCING OUR Investor and shareholder support clearly indicates an understanding that we had to deal with many PERFORMANCE challenges over which we had little or no control such as the ongoing decline in international crude oil prices throughout the year. This resulted in There were far more positives than ongoing inventory revaluations which reduced the negatives in 2014, a year which could level of inventory gains from P78 million in 2013 to be categorised as “tough” given our just P7 million in the review period. The negative bottom line financial performance impact of this on our bottom line was significant. which saw profit for the year decline by some 49%. Despite the many It is important to note, however, that what could have been a challenging year as a result of the challenges faced - over which we sagging crude oil price was ameliorated by factors had no control - I believe our overall over which we did have control. One example is performance was satisfactory in the fact that our normalised operating expenses light of the challenging operating – after taking account of an abnormal provision environment. of P5million for a Health, Safety and Environment reserve – remained virtually unchanged from the previous year.

We also had positive feedback from our Customer Satisfaction Index survey. The survey is conducted twice a year to ask our customers to evaluate the performance of the company across all customer- facing departments – from depot and sales to credit. This year, we attained a rating of 75.4%, which is almost two percentage points higher than the International Business Rating of 73.6%.

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 23 Our fuel supply was consistent for most of the Operations year with no major disruptions experienced from Engen Botswana continues to face significantly any supply sources. However, an unplanned increased competition across all its operations. In shutdown of the Engen refinery in Durban resulted particular, there has been a marked increase in the in a constrained supply of Liquid Petroleum Gas number of retail facilities; price competitiveness (LPG). This negatively affected our sales of LPG for between players has increased; and a new a period of around four months, but the situation player has come into the market – Botswana Oil has since normalised. Company. At this point it is important to note that Engen Botswana supports Government’s initiative The Company continued to maintain very positive to launch a Government-owned oil company for cash flows, to the extent that we were even able the specific purposes of maintaining strategic to make placements in high-yielding risk-free reserves, including importation of fuel; exploration investments, enabling us to generate additional of alternative supply sources – highly important to income. Our cash positive situation enabled us to reduce reliance on a single source of supply; and fund projects from internally generated sources possible supply to the industry, provided that this rather than having to raise capital on the open is done efficiently. market. Against this backdrop of increased levels of Another area of success was the extent to which competition, and notwithstanding the freeze of receivables were well managed, closing the Government-controlled margins for most of the year at just 4% past due, compared to 6% in the year, the Company managed to increase gross previous reporting period. profit by 1% over the previous year – a good performance in difficult circumstances.

Our brand positioning continued to be one of our significant strengths which enabled us to grow our business in a highly competitive market.

Our portfolio continued to be well diversified, which is important for the sustainability of the business over the long term. We have a well dispersed retail network and our commercial division continues to supply the mining, construction and manufacturing industry sectors.

During the review period, we retained all our major commercial accounts, despite the fact that we had to go out to tender for two of them.

Lubricants was one of our standout success stories in the year with sales volumes increasing by 8% over those of 2013.

Our retail business continued to be the largest contributor to sales, having contributed 57% of our volumes, and the commercial business 43%.

24 ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 MANAGING DIRECTOR’S REPORT

02 The Company was involved in a number of Health, Safety promotional activities during the year in order to and Environment increase sales at our retail outlets. Corner Bakery Achieving the highest levels of health and safety continued to be a strong differentiator in our is one of the cornerstones of our business. To this convenience offering. This has given us a strong end we are pleased to report we had excellent competitive advantage, as no other oil company INNOVATION Health, Safety, Environment and Quality (HSEQ) offers a similar product. performance at our Dumela Depot with no recordable incidents throughout the year. We expect to grow the Corner Bakery footprint in line with the growth in our network which included Corporate Social Investment the opening of a new retail outlet in December in Our involvement in the community remains an Ghanzi. Construction commenced on three more important aspect of our operations and focus. outlets, with two revamps completed and a further A highlight of the year was the donation of a one started during the review period. library to Mogorosi Primary School in Serowe. We equipped a disused classroom at the school The Smile programme, which was introduced to with a server and 10 terminals, to enable the measure levels of customer service at our retail students to have access to and become familiar outlets through “mystery motorists”, saw Engen with Information Technology. We also provided Marketing Botswana achieve the highest level air conditioners, books and furniture. This was of customer service of all the international Engen the second CSI project of this nature that we had companies. undertaken in the past two years. In January 2014, a new transporter was appointed Non-core Assets to haul product on behalf of Engen. While this Finally, our non-core assets consisting of equity resulted in an increase in delivery costs, the new holdings in shopping malls in Palapye and Maun operator conformed to Engen’s safety standards performed very well. We enjoyed occupancy in and there were no reported incidents during the these locations. Because of demand in these areas year. and growth of these towns, we expect occupancy to improve. A risk assessment was undertaken at the Francistown depot with a view to increasing pumping capability while reducing the risk of contamination and spills. The recommendations of this risk assessment have been incorporated into the 2015 budget and will be implemented in the course of the year.

We expect to grow the Corner Bakery footprint in line with the growth in our network which included the opening of a new retail outlet in December in Ghanzi.

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 25 Looking Ahead The saturation of the market with oil companies and the resultant heightened levels of competition will continue to challenge Engen in the months and years ahead. Nevertheless, I am confident that we are more than prepared to meet this challenge. We will be growing our business in a sustainable manner by expanding our network of service stations into judiciously selected areas.

We will also be looking to expand our commercial portfolio by focusing on attracting more long-term accounts.

There will, however, always be challenges as we move forward. The oil price, for example, will continue to be one of our major risks. There are forecasts that the oil price will bottom in 2015 and thereafter start to climb again.

We always remain cognisant of the risk of environmental contamination, particularly at our large storage facilities. We have undertaken a risk assessment to determine the areas of risk and what must be done to address these, and we remain vigilant at all times.

It is also vitally important that we continue to comply with laws of the country. Staff have been trained to understand and ensure they avoid situations which could lead to transgressions of important legislation and this will remain an ongoing focus for the Company.

In conclusion, I would like to thank all Engen’s staff, shareholders and retailers for supporting the Company in these difficult times, sharing the same vision and working towards attaining the goals of the Company.

MR. C. MONGA, MANAGING DIRECTOR

26 ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 FINANCIAL REPORT

02 REVENUE DOWN INNOVATION 0.8% GROSS PROFIT DOWN

FINANCIAL RESULTS 26.9% IN BRIEF PROFIT BEFORE TAX DOWN 45.4% PROFIT AFTER TAX DOWN 49.9% EARNINGS PER SHARE DOWN TO 40.8 THEBE FROM 80.3 THEBE PER SHARE

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 27 Sales volumes and revenues held steady for the Inventory Revaluations year. Revenues declined by an insignificant 0.8%, The significant decrease in international oil however the decrease in the international oil price prices necessitated downward revaluations resulted in gross profits declining by 26.9%. of inventories throughout the year in line with International Financial Reporting Standards. We were also negatively affected by the Consequently, this had a negative effect on the weakening of the local currency against the Rand. profitability for 2015. Inventory losses for 2014 However, mitigation plans have been put in place amounted to P31.8 million compared to inventory to hedge against losses resulting from foreign gains of P78.2 million for 2013. exchange contracts. Slate over-recovery The slate over recovery position was maintained The retail price of fuel sold in Botswana is fixed throughout the financial year. according to a slate mechanism and retail margins are tight in order to lock value for consumers. The The Company’s cash position remains strong and Company was in a slate over-recovery throughout this has allowed us to pay a dividend of 11 thebe the year. By the end of the year, the slate balance per share. payable was P91.6 million, as at 31 December 2014. Outlook Our Business Process Improvement programme, which seeks to enhance Group profitability, has so far yielded good progress, and further benefits will be unlocked in 2015.

We expect Engen’s performance to improve in the year ahead. We are planning to increase our profit and add more value for shareholders in order to again pay a healthy dividend. We have so far maintained a healthy dividend yield over a number of years, and this is likely to continue.

28 ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 03 CARE

GIVING OUR CARECUSTOMERS ngen Botswana has an unshakeable focus on ensuring only the highest levels of Ehealth, safety and environmental concern, and this strict belief and practice is shared with 03 our customers. We practice every task we do with the utmost care to ensure that the health, safety and comfort of our customers a priority. SUSTAINABILITY REPORT

Now, however, organisations are extending their focus on corporate citizenship to include “sustainability”, a relatively new concept in the business arena (although it has been a rallying cry for environmentalists for decades). Business sustainability is, and increasingly will be, central to the change that companies, markets and society will have to navigate as a progressively more uncertain future unfolds. 03 SENSITIVE Engen Botswana has committed itself to adopting and implementing sustainable business practices, CARE as the need for a leaving a sustainable impact upon TOWARDS the communities in which we have a presence is HEALTH, SAFETY, key to our way of doing business. This report discusses the Group’s performance in ENVIRONMENT AND the three recognised pillars of corporate citizenship and business sustainability: People (society); QUALITY Planet (environment); and Profit (economic). Ever since its establishment People in Botswana, Engen This Sustainability pillar has both an internal and external component. has strived to be a good corporate citizen. Corporate Internal Focus Sustainability begins at home. The sustainability citizenship is generally of any business depends on the ability of the defined as a company’s role organisation to attract and retain appropriately in, or responsibilities towards, skilled employees. society. Others go further and extend this definition to include the way in which a company creates higher standards of living and quality of life in the communities in which it operates while still preserving profitability for stakeholders.

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 31 Engen Botswana, which is concerned about “To this end we are pleased to the sustainability of the organisation, strives to manage its employees in a sustainable way; it report we had excellent Health, strives to be a “Responsible Employer.” Safety, Environment and Quality (HSEQ) performance at our What does that mean? It means putting our People Dumela Depot with no recordable first. It means going beyond remuneration and valuing their talents; fostering their professional incidents throughout the year.” development; preserving their health and safety; ensuring that they are informed; and promoting the exchange of knowledge, diversity, and the quality of life in the workplace.

In fact, for Engen Botswana, the adage, “our people are our most important asset,” is a driving force within the organisation. While many may pay lip service to this philosophy, we recognise that the retention and motivation of employees has to be a key sustainability priority for the Company and forms the cornerstone of our HR strategy.

Engen Botswana devotes 3% of its annual budget towards the training and development of our People.

The integrated Talent Management programme provides numerous training and development interventions designed to up-skill and multi- skill employees. In addition, the Company offers training interventions to close employees’ skill gaps. In addition, the Company’s Health and Wellness programme is designed to have a positive effect This, it is hoped, will increase opportunities for on the lives of our individual employees. It is growth and development within the Company and geared to assist employees in dealing with their enable more predictable succession planning. physical, mental and financial wellbeing.

Despite our efforts in this regard, 2014 saw staff Also on health issues, Engen Botswana is acutely turnover increase. We lost five individuals - all aware of the potential risk to employees who are subsequently replaced - largely as a result of constantly exposed to hydrocarbons. As a result, disciplinary issues. We participated in the Global all at-risk employees, particularly those working Remuneration Solutions annual salary survey at our depots, are required to undergo medical in an effort to ensure we remain competitive in examinations every six months. Botswana’s dynamic and ever-changing labour market.

We also have several retention strategies in place which go beyond remuneration. These include employee assistance programmes including educational assistance, and low interest loans.

32 ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 SUSTAINABILITY REPORT

External Focus Traditionally, the focus of corporate citizenship has been outwards, towards creating “higher standards of living and quality of life” for communities in which organisations operate. This is an area to which Engen has devoted considerable attention and funding towards.

Like any business, Engen Botswana is reliant on the community we serve for our very sustainability. 03 cornerstone of responsible corporate citizenship It is from these communities that we draw our for specific types of businesses including those customers; the more prosperous the community,

CARE whose daily activities impact on the environment the more potential customers there are for the and planet’s natural resources - mining, oil or Company as we move into our shared future. manufacturing. With education vital to the future sustainability of Engen Botswana falls into this group. We communities and the country as a whole, Engen are acutely aware that our actions can have is proud to partner with Government to provide ramifications far beyond our own organisation and better educational facilities to the country’s far into the future. disadvantaged communities.

Compliance with the laws of the country regarding Our major project in the review period was the health, safety and the environment, is therefore provision of library facilities at our adopted absolutely essential for an organisation like Engen school, Mogorosi Primary School. The handover of Botswana. We deal with substances that can the fully equipped library, with its painted walls, prove toxic to the environment and humans alike tiled floor, air-conditioning, cosy children’s corner, if not handled correctly. educational books and bookshelves, was attended by Councillor Gaerobale of Moiybane and other For this reason, Engen Botswana’s approach to officials from the Ministry of Education and Skills Health, Safety and Environmental matters goes Development. beyond mere compliance with legislation. We recognise the impact our operations can have on In addition, we donated funds to various other the sustainability of our planet. causes and community building activities including P20,000 towards two sponsored walks, Therefore, we strenuously enforce our international one in Orapa and another in Gaborone. An amount parent company’s Health, Safety, Environment and of P5,000 was available to the SOS organisation to Quality (HSEQ) protocols that comply with the enable them to hold a Christmas Carols event for most strenuous health, safety and environment their beneficiaries. And, in the spirit of honouring protection requirements in the world. Our goal is those who have built a strong foundation for the to ingrain all aspects of HSEQ into the very fabric sustainability of our nation, we donated P5,000 of our organisation so that issues around health, to the Kweneng District Council to assist with the safety and the environment are always top of mind 50th Independence of Botswana celebrations in at all times. that region.

The focus throughout 2014 was the training of Planet all Engen Botswana management, personnel and contractors to comply with Engen International’s For many, sustainability is about the environment, new HSEQ procedures. saving the planet, and being “green.” This focus on the environment has long been regarded as

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 33 We introduced a new Loss of Primary Containment Training will continue throughout 2015 to keep (LOPC) policy to mitigate the risk of further employees motivated and to avoid complacency occurrences, and training has taken place to which is often the biggest cause of accidents. ensure compliance at all depots.

Inspections at all service stations were Profit undertaken on an ongoing basis. Refresher Ultimately, the first two sustainability pillars training was provided to petrol attendants as well – Planet and People – would collapse without as those involved in storage to ensure they remain the third, Profit. Profit is about the business consistently aware of their responsibilities. of the business, its financial and operational sustainability. Our innovative Safety Training Observation Programme (STOP) is proving most successful We recognise that conducting the Group’s affairs in ensuring compliance with safety regulations with integrity and following sound corporate in all areas, from forecourts to storage depots. governance practices will ensure the long-term Essentially, this programme empowers employees sustainability of the business. to take immediate action when non-compliant behaviour or activities are observed. Employees While, as a Botswana-based company, Engen on the ground monitor each others’ behaviour, as Botswana is not regulated by the King III Code well as that of customers and contractors. Should of Corporate Governance, we have nevertheless they observe potentially dangerous behaviour - for actively chosen to follow its prescriptions. example, smoking on the forecourt - they have been trained to address the issue immediately. We have also adopted a host of risk-related Employees are also encouraged to report on their policies and protocols which are designed to STOP observations every month. Their reports are promote or guarantee the sustainability of the examined by the HSEQ committee and, where organisation as a business. necessary, action is taken to avoid recurrence of unacceptable actions in future. RETAIL

There were several factors which contributed to SENSITIVE this, including national and local promotions; the advantages of our Quick Shop and Corner Bakery offerings; ongoing training of staff at our retail TOWARDS outlets; and our ability to meet consumer demand HEALTH, SAFETY, for fuel in peak periods. The success of our “Farmer’s Dream – Win ENVIRONMENT AND a Tractor” promotion – which ran from July 03 through October, underscored the importance of targeted, well-run promotions of this kind. Fuel QUALITY sales increased markedly for the duration of this CARE campaign. Despite increased competition and a depressed market, the The momentum gained was maintained during December. Strategic planning resulted in all Retail Division performed well relevant departments within Engen Marketing ahead of the market, achieving Botswana pulling together to ensure a steady supply of fuel to our service stations to meet the growth of around 4% and heightened holiday season demand. As a result, reaching its targets for the year. we moved more than 3 million litres of fuel above budget in that month.

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 35 Once again, fuel attendants at all filling stations Although security remains a concern at all our received training designed to improve service. Our service stations with airtime and cigarettes a excellent performance in the Smile programme, particular target, there were no major security which is designed to encourage fuel attendants incidents in the review period at any of our outlets. and cashiers in our stores to perform better and deliver excellent service to customers, indicates Three new service stations – two with Quick that this training is achieving its objectives. Shops – were scheduled to come on stream in the Botswana has consistently maintained a position first quarter of 2015. in the top three of all Engen’s international businesses, and in 2014 was number one.

While the opening of a new service station in Ghanzi, an area where we had not been represented before, was a clear highlight of the year, so too was the fact that all our existing outlets remained open and operational.

All Quick Shops performed well and participated in our national Farmers’ Dream promotion, while several also ran local promotions. The Corner Bakery brand is growing rapidly, attracting a loyal following for its fresh food and bakery products such as pies and bread, with some stores selling more than 1,000 loaves of bread per day.

We will therefore be expanding the Corner Bakery footprint and rolling out more stores in 2015. All new Engen service stations with Quick Shops will also include a Corner Bakery as part of their initial design. Sales at our Wimpy and Barcelos partner brands were also satisfactory.

Although security remains a concern at all our service stations with airtime and cigarettes a particular target, there were no major security incidents in the review period at any of our outlets.

36 ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 COMMERCIAL

In addition, an unscheduled shutdown at the Engen refinery in Durban left us without a supply of Liquid Petroleum Gas (LPG) for almost four SENSITIVE months. As we are a major supplier of LPG, this negatively affected the division’s performance for TOWARDS the year. HEALTH, SAFETY, There was also very little ad hoc business coming in – a result of a general slowdown in the economy 03 and few Government projects coming on stream ENVIRONMENT AND – putting additional pressure on the sales team. Nevertheless, their efforts ensured that turnover CARE QUALITY losses were largely kept in check and that all major contracts were renewed for a further three- The Commercial Division sales year period. In addition, we acquired a number of new customers, including a large mine, and the volumes ended the year just pipeline for business going forward looks healthy. 4% down on the previous year despite facing numerous Another plus for Engen was the performance of our lubricant distributors in 2014. Appointed just challenges. This included a year before, their efforts saw lubricant sales several major three-year increase by some 10%. They were no doubt assisted by our introduction of a lower sulphur contracts drawing to an end and content lubricant in response to environmental one of our largest customers demands. forced to trim production Lubricants continue to contribute a significant during the review period. portion of our gross margin.

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 37 38 ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 PROPERTY

In 2014, four sites were identified for development. One, in Ghanzi – an area where Engen was not previously represented – came on stream in the review period. The other three, at Mmamashia, SENSITIVE Tsabong, and Moshupa, were scheduled for TOWARDS completion in the second quarter of 2015. Three sites were revamped in 2014. One, on the HEALTH, SAFETY, national highway to Francistown (A1) in Palapye, 03 is an extremely busy site and required a revamp of all pumps as well as the underground tanks ENVIRONMENT AND in order to reduce the risk of spillages and CARE QUALITY contamination of the surrounding areas. A similar revamp was undertaken in Tutume, while at Kazungula, we added an additional With increasing competition, diesel island with a canopy and also upgraded throughput at many filling the existing takeaway facility into a fully fledged stations has declined. This Corner Bakery. meant that decisions regarding In the current year, there are tentative plans to the development of new filling develop four additional sites in areas where we are not represented at present. Revamping and stations has to be far more upgrading of sites in the major cities will be strategic than ever before. ongoing.

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 39 40 ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 COMMUNICATION WITH CUSTOMERS IS KEY

04 COMMUNICATION very business is in the communications Ebusiness, by virtue of 04 the fact that our engagement with people has the ability to make or break our operations. We place immeasurable value on how we engage with our people, and at the very centre of that is how we communicate with our customers: openly, honestly and with the warm Engen Botswana demeanour they have come to expect. BOARD OVERVIEW AND CORPORATE GOVERNANCE

The Group is committed to the highest standards MAINTAIN of corporate governance and is working towards full implementation of the King III Code on Corporate Governance. We have been able to THE HIGHEST implement some of the recommendations already as we comply with all international accounting ETHICAL STANDARDS regulations and the Engen Group standardises best practices in corporate governance, while The Directors believe that being sensitive to country context. effective corporate governance Engen also has its own code of ethics which is an essential requirement for substantially complies with the recommendations contained in the King III Report and continues to the successful realisation of review areas requiring further attention. Engen Botswana’s business The following information is provided to give objectives. The Board is our stakeholders a better appreciation of Engen committed to the principles Botswana’s current procedures to ensure a high 04 of openness, integrity and standard of corporate governance. high ethical standing in the Board and fulfilment of Engen Botswana’s Committee Structure The Engen Botswana Board is comprised of seven corporate responsibilities. Non-Executive and one Executive Director and meets at least three times a year. Dr Shabani Ndzinge is the Chairman of the Board. All Non- COMMUNICATION Executive Directors have a wide range of skills and significant commercial and other experience, enabling them to bring independent judgment to Board deliberations and decisions. The Directors have access to the advice and services of the Company Secretary and are entitled at the Company’s expense to seek independent professional advice regarding the business.

The Management Committee is chaired by Chimweta Monga, the Managing Director, and includes all of the Group’s divisional managers. The Management Committee meets at least eleven times a year and deals with all operational, business and strategic development issues of the Group not specifically reserved for the Board.

The Audit Committee is comprised of four Non- Executive Directors, chaired by Andrew Bryce, and meets at least twice a year. The Audit Committee is regulated by specific terms of reference, which include the reviewing of the effectiveness of the Company’s internal controls, the monitoring

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 43 and approval of accounting policies, corporate International Financial Reporting Standards (IFRS). governance matters, and financial reporting. The Audit Committee receives reports from the The Board has put in place a structure with clearly Company’s internal and external auditors who defined lines of responsibility, segregation of attend its meetings and who have unrestricted duties and delegation of authority. There are also access to the Chairman and Audit Committee established business procedures for business members. This ensures their independence is in planning and capital expenditure, and information no way impaired. and reporting systems for monitoring Engen Botswana’s business and performance. The Remuneration Committee comprises of three Non-Executive Directors and is chaired by The Directors have delegated to Management Anthony Siwawa. It meets at least twice a year. the implementation of the company’s internal Its mandate is to regulate policy, approve senior controls throughout the business. These are management appointments and compensation, aimed at reducing the risk of error or loss in a cost determine the remuneration levels of staff, effective manner. They include financial controls including incentives, and ensure appropriate which enable the Board to meet its responsibility preparation for Management succession. to assure the integrity and accuracy of Engen Botswana’s accounting records. The Group’s Accountability and Control annual report, prepared from these records, The Directors are required by the Companies Act complies fully with the Companies Act, the BSE to prepare annual financial statements which listing requirements, and IFRS regulations. fairly present the financial position of Engen Botswana at the end of the financial year. The The risk management approach to audit is adopted financial statements are presented in conformity in the work of the internal auditors on the areas of with the revised Companies Act, the Botswana greatest risk to Engen Botswana. Stock Exchange (BSE) listing requirements and

44 ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 BOARD OVERVIEW AND CORPORATE GOVERNANCE

Disclosed below are details of directors’ remuneration and Ethics meeting attendance for the year ended 31 December 2014: In line with Engen’s formal Code of Ethics, all employees are required to maintain the highest DIRECTORS PULA ethical standards, ensuring that the Company S Ndzinge 195 000 business is conducted in a manner which, in all A M Siwawa 110 448 reasonable circumstances, is above reproach. A M Bryce 69 711

Going Concern J F Kennedy 69 711 The Directors are of the opinion that the business V Bvumbi 69 711 will be a going concern for the foreseeable future. For this reason, they continue to adopt the going F J Kotze 84 711 concern basis in preparing the Annual Financial R N Matthews 18 237 Statements. TOTAL 617 529 Directors and Management MEETINGS MEETINGS Shareholding MEETING ATTENDANCE HELD ATTENDED

The aggregate number of shares held by the Board Meetings 2014

Directors and management is nil. Full details are S Ndzinge (Chairman) 3 3 04 available at the Group’s registered office. C Monga (Managing Director) 3 3 Directors A M Bryce 3 3 The names of the Engen Board of Directors appear J F Kennedy 3 3 on page 12 and 13 of this report. During the year A M Siwawa under review, independent Non-Executive Director 3 3 Robert Matthews was appointed to the Board. V Bvumbi 3 3

COMMUNICATION This was the only change to the Board. F J Kotze 3 3

The Board thanks Management and staff for the R N Matthews 3 1 tremendous effort applied in running the Company. Audit Committee Meetings 2014 We would also like to thank our valued customers, A M Bryce (Chairman) 2 2 suppliers and shareholders and other stakeholders F J Kotze 2 2 for their ongoing support towards the success of V Bvumbi 2 2 Engen Botswana Limited. A M Siwawa 2 2

Remuneration Committee Meetings 2014

A M Siwawa (Chairman) 2 2

F J Kotze 2 2

J F Kennedy 2 2

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 45 FIVE YEAR REVIEW FOR THE YEAR ENDED 31 DECEMBER 2014

Supplementary Income Statement 31 December 31 December 31 December 31 December 31 March 2014 2013 2012 2011 2011 P’000 P’000 P’000 P’000 P’000

Historical cost net profit 66,267 130,217 120,404 83,413 92,337 Less: Inventory effects net of taxation 24,767 (60,974 ) (53,699 ) (33,901 ) (37,665 ) Inventory profits 31,753 (78,172 ) (68,845 ) (43,463 ) (50,220 ) Taxation @ 22% (6,986 ) 17,198 15,146 9,562 12,555 Replacement cost net profit 91,034 69,243 66,705 49,512 54,672

Weighted average number of shares in issue 159,722,220 159,722,220 159,722,220 159,722,220 159,722,220 Replacement cost earnings per share (thebe per share) 57.0 43.4 41.8 31.0 34.2 Historical cost earnings per share (thebe per share) 41.5 81.5 75.4 52.2 57.8 Dividend per share paid and provided (thebe per share) 10 10 6.0 6.0 23.0 Total dividend per share including proposed amount not provided for 21 30 38.0 39.0 63.0

Value Added Statement The value added statement is a summary of the wealth the Group has created and its distribution. 31 December 31 December 31 December 31 December 31 March 2014 2013 2012 2011 2011 P’000 P’000 P’000 P’000 P’000

Turnover 2,600,213 2,621,681 2,250,319 1,367,391 1,450,926 Net cost of products (2,308,912 ) (2,278,771 ) (1,895,803 ) (1,164,362 ) (1,147,635 ) Duties and levies (110,455 ) (95,510 ) (125,985 ) (51,488 ) (113,728 )

Total value added 180,846 247,400 228,531 151,541 189,563

To pay employees’ gross salaries, wages and benefits 13,521 14,302 13,139 9,871 11,378 To pay income taxes 30,342 44,847 40,716 24,826 28,666 To pay providers of capital 55,298 61,910 64,100 72,955 32,409 - net finance income (3,799 ) (1,340 ) (2,415 ) (1,927 ) (4,327 ) - dividends 59,097 63,250 66,515 74,882 36,736 Retained in the Group for future growth 81,685 126,341 110,576 43,889 117,110 - depreciation 17,662 13,966 13,065 9,464 14,212 - retained income for the year 64,023 112,375 97,511 34,425 102,898

Total value added 180,846 247,400 228,531 151,541 189,563

46 ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 MANAGEMENT

CHIMWETA MONGA Managing Director

THUSO PULE Distribution Manager

04 SANDY MFOSI Commercial Manager

PAUL SHABANE Health, Safety, Environment COMMUNICATION and Quality (HSEQ) Manager

BOBBY TLHABIWE Retail Manager

BRIAN SAMEKE Finance Manager

ISHMAEL MBULAWA Property Manager

FRANCINAH TSWAI Human Capital Manager

ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 47 ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014 48 ANNUAL FINANCIAL STATEMENTS

Directors’ Report 50 Statement of Profit or Loss and other Comprehensive Income 51 Statement of Financial Position 52 Statement of Cash Flows 53 Statement of Changes in Equity 54 Notes to the Financial Statements 56 Report of the Independent Auditors 93

05 AFS 05 48 GENERAL INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2014

DIRECTORS: S Ndzinge (Chairman) C C Monga (Managing Director) A M Siwawa A M Bryce F J Kotze V Bvumbi J F Kennedy R N Matthews (Appointed 2 June 2014)

PRINCIPAL ACTIVITIES: Petrochemical investments and property operations

PARENT COMPANY Petroleum Investment Holdings Limited Mauritius

ULTIMATE PARENT COMPANY: Petronas

TRANSFER SECRETARY: PricewaterhouseCoopers Fairgrounds Office Park Plot 50371 P O Box 1453, Gaborone

COMPANY NUMBER 1966/335

REGISTERED OFFICE: Plot 54026 Western Bypass 05 P O Box 867 Gaborone

AFS AFS AUDITOR: Ernst & Young, Botswana Engen Botswana Limited 49 Annual Consolidated Financial Statements

BANKERS: First National Bank of Botswana Limited Barclays Bank of Botswana Limited Standard Chartered Bank Botswana Limited Stanbic Bank Botswana Limited

COUNTRY OF INCORPORATION AND DOMICILE: Botswana

CURRENCY: Botswana Pula

APPROVAL OF ANNUAL FINANCIAL STATEMENTS The annual consolidated financial statements for the year ended 31 December 2014 were authorised for issue in accordance with a resolution of the directors and are signed on their behalf by:

Director

Director 24 March 2015 50 DIRECTORS’ REPORT FOR THE YEAR ENDED 31 DECEMBER 2014

FINANCIAL RESULTS Revenue decreased marginally by 0.8%. Total sales volumes grew by 0.5% between 2013 and 2014. While retail sales grew by 4%, commercial sales declined by 4% due to the completion of some infrastructure development projects that the group was supplying fuel to, and supply constraints on LPG during an unplanned shutdown of our affiliate refinery in Durban.

The gross profit decreased by 26.9% mainly due to the decline in international crude oil prices which necessitated the revaluation of inventories in line with International Financial Reporting Standards.

Foreign exchange gains decreased from P 9.7 million at the end of 2013 to P 1.4 million at the end of 2014. This was due to the depreciation of the Botswana Pula against the South African Rand.

Overall the group’s performance reflects a 49.9% decrease in net profit after tax.

CONCLUSION The Directors would like to thank our valued customers, suppliers, shareholders and all other stakeholders for their ongoing support towards the performance of Engen Botswana Limited. 05 AFS Engen Botswana Limited 51 Annual Consolidated Financial Statements STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2014

Group Company 2014 2013 2014 2013 Notes P’000 P’000 P’000 P’000

Revenue 2 2 600 213 2 621 681 65 897 69 836 Cost of goods sold (2 419 367 ) (2 374 281 ) - - Gross profit 180 846 247 400 65 897 69 836

Other income 3.1 25 4 704 1 945 4 120 Foreign currency gains 3.2 1 421 9 694 - - Administrative expenses (15 965 ) (22 828 ) - - Distribution and marketing expenses (66 306 ) (60 082 ) - - Other operating expenses (3 771 ) (5 598 ) (1 533 ) (1 412 ) Profit before finance costs and tax 96 250 173 290 66 309 72 544 Share of profit of joint ventures 8 2 593 3 114 - - Finance costs 3.3 (3 296) (1 340) - (35) Profit before tax 95 547 175 064 66 309 72 509 Taxation 4 (30 342) (44 847) (5 693) (5 767) Profit for the year 65 205 130 217 60 616 66 742 Profit for the year attributable to equity holders of the parent 65 205 130 217 60 616 66 742

Other comprehensive income Other comprehensive income to be reclassified to profit or loss in subsequent periods: Net losses of cash flow hedges (1 594 ) (2 583 ) - - Income tax effect related to items of other comprehensive income 4 351 568 - -

Other comprehensive loss net of tax (1 243 ) (2 015 ) Total comprehensive income for the year 63 962 128 202 60 616 66 742

Total comprehensive income for the year attributable to equity holders of the parent 63 962 128 202 60 616 66 742

Earnings per share (thebe) Basic earnings, profit for the year attributable to ordinary equity holders of the parent 5 40.8 80.3 Diluted earnings, profit for the year attributable to ordinary equity holders of the parent 5 40.8 80.3 52 STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 31 DECEMBER 2014

Group Company 2014 2013 2014 2013 Notes P’000 P’000 P’000 P’000

ASSETS Non-Current Assets Property, plant and equipment 7 254 156 244 378 1 257 1 050 Share of investments in joint ventures 8 18 460 20 136 4 524 4 524 Prepaid leases 9 5 579 6 116 - - Investments 10 37 37 10 10 Investments in subsidiaries 11 - - 72 226 72 326 278 232 270 667 78 017 77 910 Current Assets Inventories and accommodation 12 24 293 31 906 - - Trade and other receivables 13 125 773 107 891 - - Tax receivable 4 2 009 - 579 419 Prepaid leases 9 540 540 - - Cash and cash equivalents 14 410 430 320 092 38 316 37 104 Forward exchange contract asset 242 - - - 563 287 460 429 38 895 37 523 TOTAL ASSETS 841 519 731 096 116 912 115 433

EQUITY AND LIABILITIES Equity Stated capital 15 8 138 8 138 8 138 8 138 Non distributable reserves 2 200 2 200 344 344 Cash flow hedge reserve - ( 1 243 ) - - 05 Retained earnings 435 382 430 517 104 531 103 012 Total equity 445 720 439 612 113 013 111 494

AFS Non-Current Liabilities Deferred tax liabilities 4 3 771 5 928 38 41 Deferred operating lease liability 20.2 1 063 2 366 - - Provisions 16 48 322 43 789 - - 53 156 52 083 38 41 Current Liabilities Trade and other payables 17 341 056 235 323 3 861 3 898 Deferred operating lease liability 20.2 985 206 - - Tax payable 4 - 2 629 - - Forward exchange contract liability 602 1 243 - - 342 643 239 401 3 861 3 898 Total Liabilities 395 799 291 484 3 899 3 939 TOTAL EQUITY AND LIABILITIES 841 519 731 096 116 912 115 433 Engen Botswana Limited 53 Annual Consolidated Financial Statements STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2014

Group Company 2014 2013 2014 2013 Notes P’000 P’000 P’000 P’000

Cash flows from operating activities Profit before tax 95 547 175 054 66 309 72 509 Adjustments for: Interest received 2 (9 105 ) (4 605 ) (2 008 ) (1 458 ) Loss on disposal of property, plant and equipment 3.2 2 238 3 300 - - Dividends received from subsidiary 2 - - (63 889 ) (68 378) Finance costs 3.3 3 296 1 340 - 35 Share of profit of joint ventures 8 (2 593 ) (3 114 ) - - Depreciation 7 17 662 13 966 30 12 Deferred lease liability 334 415 - - Fair value loss of forward contracts - 2 015 - - Health, safety and environment provision 16 620 4 627 - - Amortisation of prepaid leases 9 537 536 - - Operating profit before working capital changes 108 536 193 534 442 2 720 (Increase)/decrease in trade and other receivables (17 882 ) 51 560 - - Decrease/(increase) in inventories 7 613 (11 366 ) - - Increase in trade and other payables 106 364 21 350 64 259 Cash generated from operations 204 631 255 078 506 2 979 Interest received 2 9 105 4 605 2 008 1 458 Finance costs 3.3 (443) (35) - (35) Income taxes paid 4 (36 786 ) (46 901 ) (1 065 ) (1 174 ) Net cash flows from operating activities 176 507 212 747 1 449 3 228 Cash flows from investing activities Acquisition of property, plant and equipment to expand operations 7 (28 746 ) (18 284 ) (237 ) (494) Distributions from joint ventures 1 945 4 120 - - Proceeds from sale of property, plant and equipment 128 49 - - Dividends received from subsidiary - - 59 097 63 121 Net cash flows (used in)/from investing activities (26 673 ) (14 115 ) 58 860 62 627 Cash flows from financing activities Dividends paid 18 (59 097 ) (63 250 ) (59 097 ) (63 250 ) Forward exchange contracts (399 ) 2 016 - - Net cash flows used in financing activities (59 496 ) (61 234 ) (59 097 ) (63 250 ) Net increase in cash and cash equivalents 90 338 137 398 1 212 2 605 Cash and cash equivalents at the beginning of the year 320 092 182 694 37 104 34 499 Cash and cash equivalents at end of the year 14 410 430 320 092 38 316 37 104 54 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2014

Group Attributable to equity holders of the parent Non Cash flow Stated distributable hedge Retained Total Notes capital reserves(2) reserve (3) earnings equity P’000 P’000 P’000 P’000 P’000

31 December 2014 Balance, beginning of year 8 138 2 200 (1 243 ) 430 517 439 612 Profit for the year - - - 65 205 65 205 Other comprehensive income for the year - - 1 243 (1 243 ) - Total comprehensive income for the year - - 1 243 63 962 65 205 Dividends (1) 18 - - - (59 097 ) (59 097 ) At 31 December 2014 8 138 2 200 - 435 382 445 720

31 December 2013 Balance, beginning of year 8 138 2 200 772 363 550 374 660 Profit for the year - - - 130 217 130 217 Other comprehensive income for the year - - (2 015 ) - (2 015 ) Total comprehensive income for the year - - (2 015 ) 130 217 128 202 Dividends (1) 18 - - - (63 250 ) (63 250 ) At 31 December 2013 8 138 2 200 (1 243 ) 430 517 439 612

(1) The holders of ordinary shares are entitled to receive dividends as and when declared by the company. All ordinary shares carry one vote per share without restriction. All ordinary shares have similar rights. (2) Non distributable reserves arose from the capitalisation of a shareholder loan account and on the revaluation of property, plant and equipment. (3) The cash flow hedge reserve relates to gains and losses that are made on foreign forward exchange 05 contracts which are accounted for at fair value through other comprehensive income. AFS Engen Botswana Limited 55 Annual Consolidated Financial Statements STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2014

Company Non Stated distributable Retained Total Notes capital reserves(2) earnings equity P’000 P’000 P’000 P’000

31 December 2014 Balance, beginning of year 8 138 344 103 012 111 494 Profit for the year - - 60 616 60 616 Other comprehensive income for the year - - - - Total comprehensive income for the year - - 60 616 60 616 Dividends (1) 18 - - (59 097 ) (59 097 ) At 31 December 2014 8 138 344 104 531 113 013

31 December 2013 Balance, beginning of year 8 138 344 99 520 108 002 Profit for the year - - 66 742 66 742 Other comprehensive income for the year - - - - Total comprehensive income for the year - - 66 742 66 742 Dividends 18 - - (63 250 ) (63 250 ) At 31 December 2013 8 138 344 103 012 111 494

(1) The holders of ordinary shares are entitled to receive dividends as and when declared by the company. All ordinary shares carry one vote per share without restriction. All ordinary shares have similar rights. (2) Non distributable reserves arose on the revaluation of property, plant and equipment. 56 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation The financial statements are presented in Botswana Pula. The Group re-assesses whether or not it controls an investee The functional currency is also the Botswana Pula. The if facts and circumstances indicate that there are amounts in the financial statements have been rounded to changes to one or more of the three elements of control. the nearest thousand. The financial statements have been Consolidation of a subsidiary begins when the Group prepared on a historical cost basis except as modified by the obtains control over the subsidiary and ceases when the revaluation of certain financial instruments to fair value and Group loses control of the subsidiary. Assets, liabilities, the measurement of investment properties at fair value as income and expenses of a subsidiary acquired or disposed of indicated in the notes below. during the year are included in the statement of profit or loss and other comprehensive income from the date Statement of compliance the Group gains control until the date the Group ceases to The financial statements have been prepared in compliance control the subsidiary. with the International Financial Reporting Standards issued by the International Accounting Standards Board (“IASB”), Profit or loss and each component of other comprehensive Interpretations issued by the International Financial Reporting income (OCI) are attributed to the equity holders of Interpretations Committee of the IASB and the requirements the parent of the Group and to the non-controlling interests, of the Companies Act of Botswana (Companies Act, 2003). even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are Basis of consolidation made to the financial statements of subsidiaries to The consolidated financial statements comprise the financial bring their accounting policies into line with the Group’s statements of the Group and its subsidiaries as accounting policies. All intra-group assets and liabilities, at 31 December 2014. Control is achieved when the Group is equity, income, expenses and cash flows relating to exposed, or has rights, to variable returns from its transactions between members of the Group are involvement with the investee and has the ability to affect eliminated in full on consolidation. those returns through its power over the investee. 05 Specifically, the Group controls an investee if and only if the A change in the ownership interest of a subsidiary, without a Group has: loss of control, is accounted for as an • Power over the investee (i.e. existing rights that give it equity transaction. If the Group loses control over a subsidiary, AFS the current ability to direct the relevant activities of the it: investee) • Derecognises the assets (including goodwill) and liabilities • Exposure, or rights, to variable returns from its involvement of the subsidiary with the investee, and • Derecognises the carrying amount of any non-controlling • The ability to use its power over the investee to affect its interests returns • Derecognises the cumulative translation differences • When the Group has less than a majority of the voting recorded in equity or similar rights of an investee, the Group considers all • Recognises the fair value of the consideration received relevant facts and circumstances in assessing whether it • Recognises the fair value of any investment retained has power over an investee, including: • Recognises any surplus or deficit in profit or loss • The contractual arrangement with the other vote holders of • Reclassifies the parent’s share of components previously the investee recognised in OCI to profit or loss or retained earnings, as • Rights arising from other contractual arrangements appropriate, as would be required if the Group had directly • The Group’s voting rights and potential voting rights disposed of the related assets or liabilities. Engen Botswana Limited 57 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued)

Foreign currency translation

Functional currency Transactions in foreign currency are initially recorded in the loss reflects the Group’s share of the results of operations of the functional currency at a rate of exchange ruling on transaction joint venture. Any change in Other Comprehensive Income (OCI) date. Monetary assets and liabilities designated in foreign of those investees is presented as part of the Group’s OCI. In currencies are subsequently translated at rates of exchange addition, when there has been a change recognised directly in ruling at the reporting date. Non monetary assets and the equity of the joint venture, the Group recognises its share of liabilities that are measured in terms of historical cost in a any changes, when applicable, in the statement of changes in foreign currency are translated at the exchange rate at the equity. Unrealised gains and losses resulting from transactions date of the initial transaction. between the Group and the joint venture are eliminated to the extent of the interest in the joint venture. Foreign exchange translation gains or losses arising on the settlement of monetary items or on translating monetary The aggregate of the Group’s share of profit or loss of a joint items at rates different from those used when translating at venture is shown on the face of the statement of profit or loss initial recognition during the period or in previous financial and other comprehensive income outside operating profit and statements are taken to the statement of profit or loss and represents profit or loss after tax and non-controlling interests other comprehensive income in the year they arise. in the subsidiaries of the joint venture.

Investments in subsidiaries The financial statements of the joint venture are prepared Investments in subsidiaries are measured at cost in the for the same reporting period as the Group. When necessary, separate financial statements of the Company. adjustments are made to bring the accounting policies in line with those of the Group. Investments in joint ventures A joint venture is a type of joint arrangement whereby the After application of the equity method, the Group determines parties that have joint control of the arrangement have rights whether it is necessary to recognise an impairment loss on to the net assets of the joint venture. Joint control is the its investment in its joint venture. At each reporting date, the contractually agreed sharing of control of an arrangement, Group determines whether there is objective evidence that which exists only when decisions about the relevant activities the investment in the joint venture is impaired. If there is such require unanimous consent of the parties sharing control. The evidence, the Group calculates the amount of impairment as considerations made in determining joint control are similar to the difference between the recoverable amount of the joint those necessary to determine control over subsidiaries. venture and its carrying value, then recognises the loss as ‘Share of loss of a joint venture’ in the statement of profit or The Group’s investments in joint ventures are accounted for loss and other comprehensive income. using the equity method. Upon loss of the joint control over the joint venture, the Group Under the equity method, the investment in a joint venture measures and recognises any retained investment at its fair is initially recognised at cost. The carrying amount of the value. Any difference between the carrying amount of the investment is adjusted to recognise changes in the Group’s joint venture upon loss of joint control and the fair value of the share of net assets of the joint venture since the acquisition retained investment and proceeds from disposal is recognised date. Goodwill relating to the joint venture is included in the in the statement of profit or loss and other comprehensive carrying amount of the investment and is neither amortised nor income. Joint ventures are carried at cost in the separate individually tested for impairment. The statement of profit or financial statements of the company. 58 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Leases The determination of whether an arrangement is, or contains, Cost includes the cost of replacing part of such plant and equipment a lease is based on the substance of the arrangement at when that cost is incurred if the recognition criteria are met. inception date: whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the Costs also include the estimated costs of dismantling and removing arrangement conveys a right to use the asset. the assets where the obligation has been incurred when the asset was acquired or as a consequence of using the asset. Group as a lessee Finance leases, which transfer to the Group substantially all Subsequent costs are included in the asset’s carrying amount or the risks and benefits incidental to ownership of the leased recognised as a component, as appropriate, only when it is probable item, are capitalised at the inception of the lease at the that future economic benefits associated with the item will flow fair value of the leased property or, if lower, at the present to the Group and the cost of the item can be measured reliably. All value of the minimum lease payments. Lease payments are other repairs and maintenance expenditures are charged to the apportioned between the finance charges and reduction of statement of comprehensive income during the financial period in the lease liability so as to achieve a constant periodic rate which they are incurred. Depreciation commences when the assets of interest on the remaining balance of the liability. Finance are available for their intended use. Property, plant and equipment charges are reflected in profit or loss. are depreciated on a straight-line basis over the expected useful lives of the various classes of assets, after taking into account Capitalised leased assets are depreciated over the shorter of residual values. Each part of an item of property, plant and the estimated useful life of the asset and the lease term, if there equipment with a cost that is significant in relation to the total cost is no reasonable certainty that the Group will obtain ownership of the item is depreciated separately. by the end of the lease term. If reasonable certainty exists that ownership will be obtained by the group by the end of the Depreciation of an asset ceases at the earlier of the date that lease term, the leased asset is depreciated over its useful life. the asset is classified as held for sale or is included in a disposal 05 Minimum operating lease payments of an operating lease are group that is classified as held for sale or the date that the asset is recognised as an expense in profit or loss on a straight line derecognised. basis over the lease term. AFS The residual value of an asset may increase to an amount equal to Group as a lessor or greater than the asset’s carrying amount. If it does, the asset’s Leases where the Group does not transfer substantially all the depreciation charge is zero until its residual value subsequently risks and benefits of ownership of the asset are classified as decreases to an amount below the asset’s carrying amount. operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the Useful lives of the property, plant and equipment, the depreciation leased asset and recognised over the lease term on the same method, depreciation rates, and residual values are reviewed on an bases as rental income. Rental income or expenses related annual basis. Estimated useful lives of the assets are as follows: to minimum lease payments are recognised on a straight line basis over the lease term. Contingent rents are recognised as Leasehold buildings shorter of period of lease or 50 years revenue in the year in which they are incurred. Plant, equipment, and other 4 – 30 years

Property, plant and equipment Land is not depreciated as it is deemed to have an indefinite life. No Property, plant and equipment are stated at historical cost depreciation is provided on capital work-in-progress. The carrying excluding the costs of day to day servicing that are expensed, amounts of assets are reviewed at each reporting date to assess less accumulated depreciation and any impairment in value. if there are any indications of impairment. If any such indication Engen Botswana Limited 59 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Property, plant and equipment (continued) exists and where assets are recorded in excess of their recoverable The Group bases its impairment calculation on detailed budgets and amounts, assets or cash generating units are written down to their forecast calculations, which are prepared separately for each of the recoverable amounts. A cash generating unit is considered only when Group’s CGUs to which the individual assets are allocated. These the recoverable amount for the individual asset cannot be determined. budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and An item of property, plant and equipment is derecognized upon applied to project future cash flows after the fifth year. disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of Impairment losses of continuing operations, including impairment the asset (calculated as the difference between the net disposal on inventories, are recognised in the statement of profit or proceeds and the carrying amount of the asset) is included in the loss and other comprehensive income in expense categories statement of profit or loss and other comprehensive income in consistent with the function of the impaired asset, except the year the asset is derecognized. Improvements to assets held for properties previously revalued with the revaluation taken under operating leases are capitalized and depreciated over the to OCI. For such properties, the impairment is recognised in remaining lease term. Capital work in progress comprises costs OCI up to the amount of any previous revaluation. For assets incurred in constructing property, plant and equipment that are excluding goodwill, an assessment is made at each reporting directly attributable to the construction of the asset. Assets remain date to determine whether there is an indication that previously in capital work in progress until they are available for use. At that recognised impairment losses no longer exist or have decreased. time they are transferred to the appropriate class of property, plant If such indication exists, the Group estimates the asset’s or CGU’s and equipment additions. recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions Impairment of non-financial assets used to determine the asset’s recoverable amount since the last The Group assesses, at each reporting date, whether there is an impairment loss was recognised. The reversal is limited so that indication that an asset may be impaired. If any indication exists, or the carrying amount of the asset does not exceed its recoverable when annual impairment testing for an asset is required, the Group amount, nor exceed the carrying amount that would have been estimates the asset’s recoverable amount. An asset’s recoverable determined, net of depreciation, had no impairment loss been amount is the higher of an asset’s or cash-generating unit’s (CGU) recognised for the asset in prior years. Such reversal is recognised fair value less costs of disposal and its value in use. Recoverable in the statement of profit or loss and other comprehensive income amount is determined for an individual asset, unless the asset does unless the asset is carried at a revalued amount, in which case, not generate cash inflows that are largely independent of those the reversal is treated as a revaluation increase. from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is Decommissioning and rehabilitation of assets considered impaired and is written down to its recoverable amount. The expected cost of any committed decommissioning or restoration programme, discounted to its net present value, is In assessing value in use, the estimated future cash flows are provided and capitalised at the beginning of each project. The discounted to their present value using a pre-tax discount rate restoration costs are estimated using estimated cashflows that reflects current market assessments of the time value of based on current prices. The estimates are discounted at money and the risks specific to the asset. In determining fair value a rate that reflects current market assessments of the time less costs of disposal, recent market transactions are taken into value of money, and the risk specific to the provision. The account. If no such transactions can be identified, an appropriate capitalized cost is depreciated over the expected life of valuation model is used. These calculations are corroborated the asset and the increase in the net present value of the by valuation multiples, quoted share prices for publicly traded provision for the expected cost is included with finance costs. companies or other available fair value indicators. 60 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Decommissioning and rehabilitation of assets (continued) Subsequent changes in the initial estimates of rehabilitation and in connection with the borrowing of funds. Where surplus decommissioning costs that results from changes in the estimated funds are available for a short term out of money borrowed timing or amount of the outflow of resources embodying specifically to finance a project, the income generated from economic benefits required to settle the obligation or a change in such short term investments is also capitalized and reduced the discount rate are added to or deducted from the cost of the from the total capitalized borrowing cost. Where the funds related asset in the current period. Where the change results in used to finance a project form part of general borrowings, the a reduction in the liability, the cost deducted from the asset shall amount capitalized is calculated using a weighted average of not exceed the carrying amount of the related asset. If a decrease rates applicable to relevant general borrowings of the Group in the liability exceeds the carrying amount of the related asset, during the period. All other borrowing costs are recognized the excess is recognised immediately in the statement of profit or in the statement of profit and loss and other comprehensive loss and other comprehensive income. income in the period in which they are incurred.

Where the change results in an increase in the cost of the Inventories asset, the amount is capitalised as part of the cost of the item Inventories consist of petroleum products and are initially and depreciated prospectively over the remaining life of the recognised at cost and subsequently measured at the lower of item to which they relate. If there is any indication that the cost and net realisable value. Cost is determined on the first-in- carrying amount of the related asset is not fully recoverable, first-out (FIFO) method. The cost of inventories comprises of all an impairment test is conducted in accordance with the costs of purchase, cost of conversion and other costs incurred in impairment policy. These estimates are reviewed annually. bringing the inventories to their present location and condition. The cost of ongoing programmes to prevent and control pollution and to rehabilitate the environment is taken to profit Net realisable value is the estimated selling price in the ordinary or loss as incurred. Where a retail site or a depot is disposed course of business, less estimated costs of completion and the 05 of, the unutilised portion of the Disaster, Remediation and estimated costs necessary to make the sale. The amount of any Restoration (DRR) costs will be released to the statement of write-down of inventory to net realisable value and all losses profit or loss and other comprehensive income. of inventory are recognised as an expense in the period that

AFS the write-down or loss occurs. The carrying value of inventories Health, safety and environment costs derecognised is included in the cost of sales in the statement of Costs associated with the remediation of the environment profit or loss and other comprehensive income. where the company operates retail and commercial sites and depots are recognized in the statement of profit or loss and other Accommodation comprehensive income. The best estimate of the cost is made A contractual arrangement between two oil companies not taking into account probabilities of the occurrence of spillages. constituting a contract of sale, whereby the one oil company agrees to supply product to another oil company, with the Borrowing costs understanding that the specific volume or product is owed to Borrowing costs directly relating to the acquisition, the supplier until a like product and volume is returned to the construction or production of a qualifying capital project under supplier. Product loaned/borrowed at the accounting date is construction are capitalized and added to the project cost valued at the most recent product price. The adjustment to during construction until such time the assets are substantially most recent product price is included in the cost of sales in the ready for their intended use. Where funds are are borrowed statement of profit or loss and other comprehensive income. specifically to finance a project, the amount capitalised represents the interest and other costs that the entity incurs Engen Botswana Limited 61 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Cost of goods sold Cost of goods sold is normally the carrying value of inventories The following specific recognition criteria must also be met before sold and any net realizable value adjustments. Upon re- revenue is recognised measurement product loaned/borrowed is revalued and the corresponding entry is included in the cost of sales in the Sale of goods statement of profit or loss and other comprehensive income. Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the revenue Dividend distribution can be reliably measured. Petroleum product sales are stated net of Dividend distributions to the Group’s shareholders are discounts, rebates, value-added tax, customs duty and government recognized as a liability in the period in which the dividends levies and are adjusted for slate under/over recoveries. are declared by the Group’s shareholders. Dividends distributed are recognized in equity. Tax is withheld on The selling prices of certain petroleum products are subject to dividends distributed at the statutory rate of 7.5%. price control by the authorities. The selling prices are adjusted periodically to provide for the under or over-recoveries of changes Employee benefits in the various items of landed cost of these products. The price During the year, employees contributed to the Engen Botswana adjustments by the authorities are, for various reasons, not made Pension Fund and the Engen Retirement Fund. Both funds simultaneously with changes in landed cost and thus the situation are defined contribution funds. All Funds are governed by arises that oil companies, from time to time, are in a position of the Botswana Pension and Provident Funds Act of 1987. over or under-recovery of changes in cost. Membership of these funds is compulsory for all employees. In terms of the rules of the Funds, the company is committed to An accrual is made at year end for net under or over- contribute 9.5% of the employees’ pensionable emoluments. recoveries on controlled products. The defined contribution funds are not required to be actuarially valued. The Group’s contributions to the defined contribution Convenience income plans are charged to the statement of profit or loss and other Revenue is recognised on an accrual basis in accordance with comprehensive income in the year to which they relate. the substance of the relevant agreement. Convenience income comprises of fast food and quick shop income. Employee entitlements to annual leave, bonuses, and pension and severance benefits are recognised as incurred. A provision is made Interest for the estimated liability for annual leave as a result of services Revenue is recognized as the interest accrues using the rendered by employees up to the reporting date. Provision for effective interest rate method. bonuses is recognised when a present obligation exists to make such payments and a reliable estimate of the amount can be made. Operating lease rental income Revenue from minimum lease payments is recognised on a Revenue recognition straight line basis over the lease term. Contingent rentals Revenue is recognised at the fair value of the consideration received or incurred are accounted for as and when the rentals received or receivable net of discounts and related taxes and are received or incurred. consists primarily of the sale of products, refinery processing fees, rental income, convenience income, dividends received Dividends and interest received. Revenue is recognised to the extent Revenue is recognised when the shareholders’ right to receive that it is probable that the economic benefits will flow to the the payment is established. Company and Group and the revenue can be reliably measured. 62 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Taxes

Current income tax Current income tax assets and liabilities for the current and • where the deferred tax asset relating to the deductible prior periods are measured at the amount expected to be temporary difference arises from the initial recognition of recovered from or paid to the taxation authorities. The tax an asset or liability in a transaction that is not a business rates and tax laws used to compute the amount are those that combination and, at the time of the transaction, affects are enacted or substantively enacted by the reporting date. neither the accounting profit nor taxable profit or loss; and • in respect of deductible temporary differences associated with Current income tax relating to items recognised directly in investments in subsidiaries, associates and interests in joint other comprehensive income or equity is recognised in other ventures, deferred tax assets are recognised only to the extent comprehensive income or equity and not in profit or loss. that it is probable that the temporary differences will reverse Witholding taxes are paid to the government and they are a in the foreseeable future and taxable profit will be available portion of the total dividend that is declared. against which the temporary differences can be utilised.

Deferred tax The carrying amount of deferred tax assets is reviewed at Deferred tax is provided using the liability method on each reporting date and reduced to the extent that it is no temporary differences at the reporting date between the tax longer probable that sufficient taxable profit will be available bases of assets and liabilities and their carrying amounts for to allow all or part of the deferred tax asset to be utilised. financial reporting purposes. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it Deferred tax liabilities are recognised for all taxable has become probable that future taxable profit will allow the temporary differences, except: deferred tax asset to be recovered. • where the deferred tax liability arises from the initial 05 recognition of goodwill or of an asset or liability in a Deferred tax assets and liabilities are measured at the tax transaction that is not a business combination and, at the rates that are expected to apply to the year when the asset time of the transaction, affects neither the accounting profit is realised or the liability is settled, based on tax rates (and AFS nor taxable profit or loss; and tax laws) that have been enacted or substantively enacted • in respect of taxable temporary differences associated with at the reporting date. Also taking into account the manner of investments in subsidiaries, associates and interests in joint recovery of the underlying asset or liability. ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the Deferred tax relating to items recognised outside profit or loss temporary differences will not reverse in the foreseeable future. is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either Deferred tax assets are recognised for all deductible in other comprehensive income or directly in equity. temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable Deferred tax assets and deferred tax liabilities are offset if a profit will be available against which the deductible temporary legally enforceable right exists to set off current tax assets differences, and the carry forward of unused tax credits and against current income tax liabilities and the deferred taxes relate unused tax losses can be utilised except: to the same taxable entity and the same taxation authority.

Engen Botswana Limited 63 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Provisions Provisions are recognised when the Group has a present amortised cost using the effective interest rate method. obligation (legal or constructive) as a result of a past event, it Gains and losses are recognised in income when the trade is probable that an outflow of resources embodying economic and other receivables are derecognised or impaired, as well benefits will be required to settle the obligation and a reliable as through the amortisation process. estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, Trade and other receivables are included in current assets if they for example, under an insurance contract, the reimbursement are expected to mature within 12 months of the reporting date. is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a Cash and cash equivalents provision is presented in the statement of profit or loss and For the purpose of the consolidated statement of cash flows, other comprehensive income net of any reimbursement. cash and cash equivalents consist of cash and deposits on call in banks, net of outstanding bank overdrafts. Cash and Financial instruments cash equivalents are subsequently carried at amortised cost. Financial assets within the scope of IAS 39 are classified as Due to the short-term nature of these, the amortised cost loans and receivables and available-for-sale financial assets. approximates their fair value. When financial instruments are recognised initially, they are measured at fair value, including transaction costs. The Unquoted investments group and company recognise a financial instrument on its Unquoted investments are measured at amortised cost as they statement of financial position when it becomes a party to the are loan instruments. These investments are investments in contractual provisions of the instrument. debt instruments which are classified as loans and receivables and therefore measured at amortised cost. The Group determines the classification of its financial assets and financial liabilities on initial recognition and, where Amortised cost allowed and appropriate, re-evaluates this designation at each Loans and receivables are subsequently measured at financial year end. amortised cost. This is computed using the effective interest method less any allowance for impairment. The calculation All financial liabilities are recognised initially at fair value and takes into account any premium or discount on acquisition and in the case of loans and borrowings, plus directly includes transaction costs and fees that are an integral part of attributable transaction costs. the effective interest rate.

All regular way purchases and sales of financial assets are Fair value through profit or loss recognised on the trade date, which is the date that the Group Forward exchange contracts are derivatives that are classified commits to purchase the asset. Regular way purchases or as financial assets or liabilities at fair value through profit sales are purchases or sales of financial assets that require or loss. Financial instruments at fair value through profit or delivery of assets within the period generally established by loss are carried in the statement of financial position at fair regulation or convention in the marketplace. value with changes in fair value recognised in the Other Comprehensive Income line in the statement of profit or loss Loans and receivables and other comprehensive income. Trade and other receivables Trade and other receivables are subsequently measured at 64 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial instruments (continued)

Fair value The Group measures derivatives at fair value at each balance the fair value hierarchy, described as follows, based on sheet date and, for the purposes of impairment testing, uses the lowest-level input that is significant to the fair value fair value less costs of disposal to determine the recoverable measurement as a whole: amount of some of its non-financial assets. Also, fair values • Level 1 — Quoted (unadjusted) market prices in active of financial instruments measured at amortised cost are markets for identical assets or liabilities disclosed in Note 22. • Level 2 — Valuation techniques for which the lowest-level input that is significant to the fair value measurement is Fair value is the price that would be received to sell an asset directly or indirectly observable or paid to transfer a liability in an orderly transaction between • Level 3 — Valuation techniques for which the lowest-level input market participants at the measurement date. that is significant to the fair value measurement is unobservable

The fair value measurement is based on the presumption that For assets and liabilities that are recognised in the financial the transaction to sell the asset or transfer the liability takes statements on a recurring basis, the Group determines place either: whether transfers have occurred between levels in the • In the principal market for the asset or liability, or hierarchy by reassessing categorisation (based on the lowest- • In the absence of a principal market, in the most level input that is significant to the fair value measurement as advantageous market for the asset or liability a whole) at the end of each reporting period.

The principal or the most advantageous market must be The Group’s audit committee determines the policies and accessible by the Group. procedures for both recurring fair value measurements, such as derivatives, and non-recurring fair value measurements, 05 The fair value of an asset or a liability is measured using the such as impairment tests. At each reporting date, the valuation assumptions that market participants would use when pricing committee analyses the movements in the values of assets and the asset or liability, assuming that market participants act in liabilities which are required to be re-measured or reassessed AFS their economic best interest. as per the Group’s accounting policies. For this analysis, the valuation committee verifies the major inputs applied in the A fair value measurement of a non-financial asset takes into latest valuation by agreeing the information in the valuation account a market participant’s ability to generate economic computation to contracts and other relevant documents. benefits by using the asset in its highest and best use or by selling it to another market participant that would use the On an interim basis, the valuation committee presents the asset in its highest and best use. valuation results to the audit committee and the Group’s independent auditors. This includes a discussion of the major The Group uses valuation techniques that are appropriate in assumptions used in the valuations. the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable For the purpose of fair value disclosures, the Group has inputs and minimising the use of unobservable inputs. All determined classes of assets and liabilities based on the assets and liabilities for which fair value is measured or nature, characteristics and risks of the asset or liability and disclosed in the financial statements are categorised within the level of the fair value hierarchy as explained above. Engen Botswana Limited 65 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial instruments (continued)

Trade and other payables or purchased option (including a cash settled option or similar Trade and other payables are subsequently measured at provision) on the transferred asset, the extent of the Group’s amortised cost using the effective interest rate method. continuing involvement is the amount of the transferred asset Gains and losses are recognised in the statement of profit that the Group may repurchase, except that in the case of a or loss and other comprehensive income when the trade written put option (including a cash settled option or similar and other payables are derecognised as well as through the provision) on an asset measured at fair value, the extent of the amortisation process. Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price. Trade and other payables are short term in nature and are categorised as other financial liabilities at amortised cost for Derecognition of financial liabilities measurement purposes. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Interest relating to a financial liability is recognised in the statement of profit or loss and other comprehensive income in the period in Where an existing financial liability is replaced by another which it arises, based on the effective interest rate method. from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such Derecognition of financial assets an exchange or modification is treated as a derecognition A financial asset is derecognised when: of the original liability and the recognition of a new liability, • the rights to receive cash flows from the asset have expired; and the difference in the respective carrying amounts is • the Group has transferred its rights to receive cash flows recognised in the statement of profit or loss and other from the asset, or has assumed an obligation to pay the comprehensive income. received cash flows in full without material delay to a third party under a ‘pass through’ arrangement, and either (a) the Impairment of financial assets at amortised cost group has transferred substantially all the risks and rewards The group assesses at each reporting date whether a financial of the asset, or (b) the group has neither transferred nor asset or group of financial assets is impaired. The group retained substantially all the risks and rewards of the asset, assesses impairment of assets on an individual basis. but has transferred control of the asset. If there is objective evidence that an impairment loss on When the Group has transferred its rights to receive cash assets carried at amortised cost has been incurred, the flows from an asset and has neither transferred nor retained amount of the loss is measured as the difference between the substantially all the risks and rewards of the asset nor asset’s carrying amount and the present value of estimated transferred control of the asset, the asset is recognised to future cash flows (excluding future expected credit losses that the extent of the Group’s continuing involvement in the asset. have not been incurred) discounted at the financial asset’s Continuing involvement that takes the form of a guarantee original effective interest rate (i.e. the effective interest rate over the transferred asset is measured at the lower of the computed at initial recognition). The carrying amount of the original carrying amount of the asset and the maximum amount asset is reduced through use of a separate allowance account, of consideration that the Group could be required to repay. namely provision for doubtful debts account. The amount of When continuing involvement takes the form of a written and/ the loss shall be recognised in profit or loss. 66 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment of financial assets at amortised cost (continued) If, in a subsequent period, the amount of the impairment loss liabilities within the next financial year as they involve decreases and the decrease can be related objectively to an assessments or decisions that are particularly complex or event occurring after the impairment was recognised, the subjective, are discussed below: previously recognised impairment loss is reversed. Reversal of impairment losses on financial assets at amortised cost is Allowances for doubtful debts limited to the level that would have been the amortised cost This allowance is created where there is objective evidence, had the asset not been impaired with the impairment. Any for example the probability of insolvency or significant subsequent reversal of an impairment loss is recognised in financial difficulties of the debtor, that the group will not be other comprehensive income. able to collect all the amounts due under the original terms of the invoice based on past experience and debtors ageing at In relation to financial assets, a provision for impairment year end. An estimate is made with regard to the probability is made when there is objective evidence (such as the of insolvency and the estimated amount of debtors who will probability of insolvency or significant financial difficulties not be able to pay. The discount rate used to determine the of the debtor) that the Group will not be able to collect all of present value of the financial asset is the original effective the amounts due under the original terms of the invoice. The interest rate of the relevant instrument. Refer to note 13. carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are derecognised when Allowances for slow moving inventory they are assessed as uncollectible. Based on prior management practice, inventory that has not moved for a 12-month period is considered to be obsolete. Significant accounting judgments and estimates Obsolete and discontinued products are considered to have The preparation of financial statements in conformity with no value. The provision is raised based on the full cost or net International Financial Reporting Standards requires the realisable values of the product. Refer to note 12. 05 use of certain critical accounting estimates and judgments concerning the future. Estimates and judgments are Allowances for accommodation receivable continually evaluated and are based on historical factors This allowance is created where there is objective evidence, AFS coupled with expectations about future events that are for example mismatching of invoices with the other oil considered reasonable. In the process of applying the groups company, that the product receivable will not be recovered. accounting policies, management has made the following estimates that have a significant risk of causing material Asset retirement and removal obligations adjustment to the carrying amount of assets and liabilities Estimating the future costs of these obligations is complex within the next year. and requires management to make estimates and judgments regarding future cash flows and discount rates because most The key assumptions concerning the future and other key of the obligations will only be fulfilled in the future. Changing sources of estimation uncertainty and judgments at the technologies, political, environmental, safety, business and reporting date, that have a significant risk of causing a statutory considerations, could also influence the resulting material adjustment to the carrying amounts of assets and provisions.

Engen Botswana Limited 67 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Significant accounting judgments and estimates (continued) Management judgement is exercised when determining New and amended standards and interpretations the present value of expected future cash flows when the The Company applied for the first time certain standards and obligation to dismantle or restore the sites arises as well as amendments, which are effective for annual periods beginning the estimated useful life of the related asset. The useful lives on or after 1 January 2014. of the assets are considered to be equal to the remaining lease term under the assumption that the lease will not be Investment Entities (Amendments to IFRS 10, IFRS 12 renewed, and this impacts on the obligation. and IAS 27) The provision for the costs of decommissioning these sites These amendments provide an exception to the consolidation at the end of their economic lives has been estimated using requirement for entities that meet the definition of an investment existing technology, at current prices and discounted using a entity under IFRS 10 Consolidated Financial Statements and must real discount rate of 7.44% (December 2013 – 7.29%). be applied retrospectively, subject to certain transition relief. The exception to consolidation requires investment entities to account The Group’s asset retirement obligations are coupled with for subsidiaries at fair value through other comprehensive income. the estimated remaining useful lives of the asset to which These amendments have no impact on the Group, since none they relate. The carrying value of the dismantling and removal of the entities in the Group qualifies to be an investment entity costs provision as at 31 December 2014 is P43 074 702 under IFRS 10. (December 2013: P39 161 918) (Note 16). There is uncertainty regarding both the amount and timing of incurring these costs Financial Assets and Financial Liabilities - Amendments to IAS 32 Deferred taxes These amendments clarify the meaning of ’currently has a Deferred tax assets are recognised for unused tax losses legally enforceable right to set-off’ and the criteria for non- to the extent that it is probable that taxable profit will be simultaneous settlement mechanisms of clearing houses to available against which the losses can be utilised. Significant qualify for offsetting and is applied retrospectively. These management judgement is required to determine the amount amendments have no impact on the Group, since none of the of deferred tax assets that can be recognised, based upon the entities in the Group has any offsetting arrangements. likely timing and the level of future taxable profits together with future tax planning strategies. Recoverable Amount Disclosures for Non-Financial Assets – Amendments to IAS 36 Joint arrangements The amendments to IAS 36 Impairment of Assets clarify the The Group has a 40% and 25% interest in the Engen Palapye disclosure requirements in respect of fair value less costs Partnership and the Engen Maun Partnership respectively. It of disposal. The amendments remove the requirement to has joint control over both entities based on the contractual disclose the recoverable amount for each cash-generating unit terms of the partnership agreements. Both arrangements are for which the carrying amount of goodwill or intangible assets classified as joint ventures and all parties to the arrangement with indefinite useful lives allocated to that unit is significant. have rights to the net assets of the entities according to their These amendments have no impact on the Group as it has not respective interests. disposed of any cash-generating units. 68 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Standards and interpretations issued and not yet (continued) effective

Novation of Derivatives and Continuation of Hedge Standards issued but not yet effective up to the date of Accounting – Amendments to IAS 39 issuance of the Company’s financial statements are listed These amendments provide relief from discontinuing hedge below. This listing of standards and interpretations issued accounting when novation of a derivative designated are those that the Company reasonably expects to have an as a hedging instrument meets certain criteria and impact on disclosures, financial position or performance when retrospective application is required. These amendments have applied at a future date. The Company intends to adopt these no impact on the Group as the Group has not novated its standards when they become effective. derivatives during the current or prior periods. IFRS 10 and IAS 28 Sale or Contribution of Assets IFRIC 21 Levies between an Investor and its Associate or Joint Venture IFRIC 21 clarifies that an entity recognises a liability for a levy – Amendments to IFRS 10 and IAS 28 when the activity that triggers payment, as identified by the The amendments are effective for annual periods beginning relevant legislation, occurs. For a levy that is triggered upon on or after 1 January 2016 and address the conflict between reaching a minimum threshold, the interpretation clarifies IFRS 10 and IAS 28 in dealing with the loss of control of that no liability should be anticipated before the specified a subsidiary that is sold or contributed to an associate or minimum threshold is reached. Retrospective application is joint venture. The amendments clarify that the gain or loss required for IFRIC 21. This interpretation has no impact on the resulting from the sale or contribution of assets that constitute Group as it has applied the recognition principles under IAS a business, as defined in IFRS 3 Business Combinations, 37 Provisions, Contingent Liabilities and Contingent Assets between an investor and its associate or joint venture, is consistent with the requirements of IFRIC 21 in prior years. recognised in full. Any gain or loss resulting from the sale or contribution of assets that do not constitute a business, Annual Improvements 2010-2012 Cycle however, is recognised only to the extent of unrelated In the 2010-2012 annual improvements cycle, the IASB investors’ interests in the associate or joint venture. The issued seven amendments to six standards, which included adoption of these standards does not have an effect on the 05 an amendment to IFRS 13 Fair Value Measurement. The Group, however, it will assess their impact in future. amendment to IFRS 13 is effective immediately and, thus, for periods beginning at 1 January 2014, and it clarifies in IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying AFS the Basis for Conclusions that short-term receivables and the Consolidation Exception - Amendments to IFRS 10, payables with no stated interest rates can be measured at IFRS 12 and IAS 28 invoice amounts when the effect of discounting is immaterial. The amendments are effective for annual periods beginning on This amendment to IFRS 13 has no impact on the Group as it or after 1 January 2016 and address issues that have arisen has implemented this treatment in the past financial years. in applying the investment entities exception under IFRS 10. The amendments to IFRS 10 clarify that the exemption (in Annual Improvements 2011-2013 Cycle IFRS 10.4) from presenting consolidated financial statements In the 2011-2013 annual improvements cycle, the IASB applies to a parent entity that is a subsidiary of an investment issued four amendments to four standards, which included entity, when the investment entity measures all of its an amendment to IFRS 1 First-time Adoption of International subsidiaries at fair value. Furthermore, the amendments to Financial Reporting Standards. The amendment to IFRS 1 is IFRS 10 clarify that only a subsidiary of an investment entity effective immediately and, thus, for periods beginning at 1 that is not an investment entity itself and that provides January 2014, and clarifies in the Basis for Conclusions that support services to the investment entity is consolidated. an entity may choose to apply either a current standard or All other subsidiaries of an investment entity are measured a new standard that is not yet mandatory, but permits early at fair value. The amendments to IAS 28 allow the investor, application, provided either standard is applied consistently when applying the equity method, to retain the fair value throughout the periods presented in the entity’s first IFRS measurement applied by the investment entity associate or financial statements. This amendment to IFRS 1 has no impact joint venture to its interests in subsidiaries. on the Group, since the Group is an existing IFRS preparer. Engen Botswana Limited 69 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying This standard does not apply to the Group as it is an existing the Consolidation Exception - Amendments to IFRS 10, IFRS preparer. IFRS 12 and IAS 28 (continued) The adoption of these standards does not have an effect on IAS 1 Disclosure Initiative – Amendments to IAS 1 the Group, however, it will assess their impact in future. The amendments to IAS 1 Presentation of Financial Statements are effective for annual periods beginning on or IFRS 11 Accounting for Acquisitions of Interests in Joint after 1 January 2016 clarify, rather than significantly change, Operations – Amendments to IFRS 11 existing IAS 1 requirements. The amendments are effective for annual periods beginning on or after 1 January 2016 and require an entity acquiring an The amendments clarify interest in a joint operation in which the activity of the joint • The materiality requirements in IAS 1 operation constitutes a business to apply, to the extent of its • That specific line items in the statement(s) of profit or loss share, all of the principles in IFRS 3, and other IFRSs, that do not and OCI and the statement of financial position may be conflict with the requirements of IFRS 11. Furthermore, entities disaggregated are required to disclose the information required in those IFRSs • That entities have flexibility as to the order in which they in relation to business combinations. The amendments also present the notes to financial statements apply to an entity on the formation of a joint operation if, and • That the share of OCI of associates and joint ventures only if, an existing business is contributed by the entity to the accounted for using the equity method must be presented joint operation on its formation. Furthermore, the amendments in aggregate as a single line item, and classified between clarify that for the acquisition of an additional interest in a joint those items that will or will not be subsequently reclassified operation in which the activity of the joint operation constitutes to profit or loss a business, previously held interests in the joint operation must not be remeasured if the joint operator retains joint control. This Furthermore, the amendments clarify the requirements standard has no impact on the Group as it does not have an that apply when additional subtotals are presented in the interest in a joint operation. statement of financial position and the statement(s) of profit or loss and other comprehensive income. The Group intends to IFRS 14 Regulatory Deferral Accounts adopt this standard and will assess its impact in future. IFRS 14 is effective for annual periods beginning on or after 1 January 2016 and allows an entity, whose activities are IFRS 15 Revenue from Contracts with Customers subject to rate regulation, to continue applying most of its IFRS 15 was issued in May 2014 and establishes a new five- existing accounting policies for regulatory deferral account step model that will apply to revenue arising from contracts balances upon its first time adoption of IFRS. The standard with customers. Under IFRS 15 revenue is recognised at an does not apply to existing IFRS preparers. Also, an entity amount that reflects the consideration to which an entity whose current GAAP does not allow the recognition of expects to be entitled in exchange for transferring goods rate-regulated assets and liabilities, or that has not adopted or services to a customer. The principles in IFRS 15 provide such policy under its current GAAP, would not be allowed a more structured approach to measuring and recognising to recognise them on first-time application of IFRS. Entities revenue. The new revenue standard is applicable to all that adopt IFRS 14 must present the regulatory deferral entities and will supersede all current revenue recognition accounts as separate line items on the statement of financial requirements under IFRS. Either a full or modified position and present movements in these account balances as retrospective application is required for annual periods separate line items in the statement of profit or loss and other beginning on or after 1 January 2017 with early adoption comprehensive income. The standard requires disclosures permitted. The Group is currently assessing the impact of on the nature of, and risks associated with, the entity’s IFRS 15 and plans to adopt the new standard on the required rate regulation and the effects of that rate regulation on its effective date. financial statements. 70 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation – Amendments to IAS 16 and IAS 38 In addition, government grants relating to bearer plants will The amendments clarify the principle in IAS 16 Property, Plant be accounted for in accordance with IAS 20 Accounting for and Equipment and IAS 38 Intangible Assets that revenue Government Grants and Disclosure of Government Assistance, reflects a pattern of economic benefits that are generated instead of IAS 41. These amendments are not expected to from operating a business (of which the asset is part) rather have any impact to the Group as the Group does not have any than the economic benefits that are consumed through use bearer plants. of the asset. These amendments are effective for annual periods beginning on or after 1 January 2016. As a result, the The amendments to IAS 27 Separate Financial Statements ratio of revenue generated to total revenue expected to be allow an entity to use the equity method as described in IAS generated cannot be used to depreciate property, plant and 28 to account for its investments in subsidiaries, joint ventures equipment and may only be used in very limited circumstances and associates in its separate financial statements. Therefore, to amortise intangible assets. These amendments are not an entity must account for these investments either: expected to have any impact to the Group given that the • At cost Group has not used a revenue-based method to depreciate its • In accordance with IFRS 9 (or IAS 39) non-current assets. Or • Using the equity method IAS 16 and IAS 41 Agriculture: Bearer Plants – The entity must apply the same accounting for each category Amendments to IAS 16 and IAS 41 of investments. The amendments to IAS 16 and IAS 41 Agriculture change the scope of IAS 16 to include biological assets that meet These amendments are effective for annual periods beginning the definition of bearer plants (e.g., fruit trees). Agricultural on or after 1 January 2016. A consequential amendment 05 produce growing on bearer plants (e.g., fruit growing was also made to IFRS 1 First-time Adoption of International on a tree) will remain within the scope of IAS 41. These Financial Reporting Standards. The amendment to IFRS 1 allows amendments are effective for annual periods beginning on or a first-time adopter accounting for investments in the separate AFS after 1 January 2016. As a result of the amendments, bearer financial statements using the equity method, to apply the IFRS plants will be subject to all the recognition and measurement 1 exemption for past business combinations to the acquisition requirements in IAS 16 including the choice between the cost of the investment. These amendments will not have any impact model and revaluation model for subsequent measurement. on the Group’s consolidated financial statements. Engen Botswana Limited 71 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

IFRS 9 Financial Instruments

Classification and measurement of financial assets Impairment All financial assets are measured at fair value on initial The impairment requirements are based on an expected credit recognition, adjusted for transaction costs if the instrument is loss (ECL) model that replaces the IAS 39 incurred loss model. not accounted for at fair value through profit or loss (FVTPL). The ECL model applies to: debt instruments accounted for at Debt instruments are subsequently measured at FVTPL, amortised cost or at FVOCI; most loan commitments; financial amortised cost or fair value through other comprehensive guarantee contracts; contract assets under IFRS 15; and income (FVOCI), on the basis of their contractual cash flows and lease receivables under IAS 17 Leases. Entities are generally the business model under which the debt instruments are held. required to recognise either 12-months’ or lifetime ECL, depending on whether there has been a significant increase in There is a fair value option (FVO) that allows financial assets credit risk since initial recognition (or when the commitment on initial recognition to be designated as FVTPL if that or guarantee was entered into). For some trade receivables, eliminates or significantly reduces an accounting mismatch. the simplified approach may be applied whereby the lifetime Equity instruments are generally measured at FVTPL. However, expected credit losses are always recognised. entities have an irrevocable option on an instrument-by- instrument basis to present changes in the fair value of Hedge accounting non-trading instruments in other comprehensive income (OCI) Hedge effectiveness testing is prospective, without the 80% (without subsequent reclassification to profit or loss). to 125% bright line test in IAS 39, and, depending on the hedge complexity, can be qualitative. A risk component of a Classification and measurement of financial liabilities financial or non-financial instrument may be designated as the For financial liabilities designated as FVTPL using the FVO, the hedged item if the risk component is separately identifiable amount of change in the fair value of such financial liabilities and reliably measureable. that is attributable to changes in credit risk must be presented in OCI. The remainder of the change in fair value is presented The time value of an option, any forward element of a forward in profit or loss, unless presentation of the fair value change contract and any foreign currency basis spread, can be in respect of the liability’s credit risk in OCI would create or excluded from the designation as the hedging instrument and enlarge an accounting mismatch in profit or loss. accounted for as costs of hedging.

All other IAS 39 Financial Instruments: Recognition and More designations of groups of items as the hedged item are Measurement classification and measurement requirements possible, including layer designations and some net positions. for financial liabilities have been carried forward into IFRS 9, These amendments are effective for annual periods beginning including the embedded derivative separation rules and the on or after 1 January 2018. The adoption of IFRS 9 will have criteria for using the FVO. an effect on the classification and measurement of the Group’s financial assets, but no impact on the classification and measurement of the Group’s financial liabilities. 72 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

Group Company Dec 2014 Dec 2013 Dec 2014 Dec 2013 Notes P’000 P’000 P’000 P’000

2. REVENUE Petroleum turnover 2 572 323 2 600 873 - - Convenience income 10 244 8 401 - - Rental income 8 541 7 802 - - Interest: bank and term deposits 9 105 4 605 2 008 1 458 Dividend income from subsidiaries - - 63 889 68 378 2 600 213 2 621 681 65 897 69 836

3. PROFIT BEFORE TAX Profit before tax is stated after the following:

3.1 Other income Other 25 4 704 1 945 4 120 25 4 704 1 945 4 120

3.2 Expenses Auditors Remuneration - current year 741 1 033 107 132 Depreciation (Note 7) 17 662 13 966 30 12 Operating lease rentals - land and buildings 82 564 - - - plant and equipment 1 703 1 236 - - Management and computer fees (Note 19) 7 177 6 437 - - 05 Provision for bad & doubtful debts (Note 13) - 929 - - Salaries and employment benefits 13 521 14 302 - - Loss on disposal of property, plant and equipment 2 238 3 300 - - AFS Foreign exchange gains 1 421 9 694 - - Inventory written down 288 4 020 - - Contributions to defined contribution funds 888 1 557 - -

3.3 Finance costs Unwinding of dismantling, removal and restoration provision (Note 16) 2 853 1 305 - - Finance costs arising from financial liabilities 443 35 - 35 3 296 1 340 - 35 Engen Botswana Limited 73 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

Group Company Dec 2014 Dec 2013 Dec 2014 Dec 2013 P’000 P’000 P’000 P’000

4.TAXATION Botswana normal taxation Current Company tax at statutory rate 27 357 39 817 905 1 001 Withholding tax on dividends from subsidiary 4 791 4 767 4 791 4 767 Deferred Attributable to temporary differences arising in the current year from property, plant and equipment (2 157 ) (305 ) (3 ) (1 ) 29 991 44 279 5 693 5 767

Reconciliation of tax rate % % % % Standard tax rate 22.0 22.0 22.0 22.0 Adjusted for: Exempt income (1.2) (3.0) (14.6) (14.3) Non-allowable expenses 4.4 3.6 1.3 0.4 Withholding tax on dividends from subsidiary 5.0 2.7 (0.1) (0.1) Prior year under provision 1.2 - - - Effective tax rate 31.4 25.3 8.6 8.0

Deferred tax liability Origination of temporary differences from property, plant and equipment (3 771 ) (5 928 ) (38 ) (41 ) Deferred tax liability (3 771) (5 928) (38) (41)

Tax (receivable)/payable Opening balance 2 629 5 251 (419) (246) Tax paid (36 786 ) (46 901 ) (1 065 ) (1 174 ) Charge for the year 32 148 44 279 905 1 001 Closing balance (2 009) 2 629 (579) (419)

5. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the group’s total comprehensive income for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. The following reflects the income and share data used in the basic earnings per share computations for the years 31 December 2014 and 31 December 2013.

Profit for the year 65 205 128 202 Profit for the year attributable to ordinary shareholders 65 205 128 202 Weighted average number of ordinary shares in issue 159 722 220 159 722 220

There have been no transactions involving ordinary shares or potential ordinary shares since the reporting date and before the completion of these financial statements. There is no dilution effect. 74 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

6. DIVIDENDS PAID AND PROPOSED In the current financial year, 2014, dividends of 10 thebe per ordinary share (totaling P15 972 222) were declared and paid. In addition, a final dividend of 11 thebe per share has been proposed and will be submitted for formal approval at the Annual General Meeting. As such, this dividend (totaling P17 569 444) has not been recognized as a liability as at 31 December 2014.

During the year ended 31 December 2013, dividends of 40.0 thebe per ordinary share (totaling P63 888 888) were declared and paid. Withholding taxes of 7.5% of gross dividends are deducted and paid to Botswana Unified Revenue Service.

Plant, Capital Land Leasehold equipment work in freehold buildings and other progress(1) Total P’000 P’000 P’000 P’000 P’000

7. PROPERTY, PLANT & EQUIPMENT – GROUP 31 December 2014 Balance at beginning of year At cost 4 189 153 640 136 673 30 305 324 807 Accumulated depreciation - (37 770 ) (42 659 ) - (80 429 ) Net carrying amount 4 189 115 870 94 014 30 305 244 378 Additions - 1 982 6 391 20 373 28 746 Dismantling and restoration costs (Note 16) - 1 060 - - 1 060 Transfers - 5 668 18 797 (24 465) - Disposals - Cost - (307) (5 182) (593) (6 082) - Accumulated depreciation - 295 3 421 - 3 716 Depreciation (Note 3.2) - (7 654 ) (10 008 ) - (17 66 ) Balance at end of year, net of accumulated depreciation 4 189 116 914 107 433 25 620 254 156 Balance at end of year 05 At cost 4 189 162 043 156 679 25 620 348 531 Accumulated depreciation - (45 129 ) (49 246 ) - (94 375 ) Net carrying amount 4 189 116 914 107 433 25 620 254 156 AFS

31 December 2013 Balance at beginning of year At cost 4 219 135 743 116 549 46 831 303 342 Accumulated depreciation- - (32 262) (44 628) - (76 890) Net carrying amount 4 219 103 481 71 921 46 831 226 452 Additions - 2 474 15 810 - 18 284 Dismantling and restoration costs (Note 16) - 16 957 - - 16 957 Transfers - - 16 526 (16 526 ) - Disposals - Cost (30 ) (1 534 ) (12 212 ) - (13 776 ) - Accumulated depreciation - 700 9 727 - 10 427 Depreciation (Note 3.2) - (6 208 ) (7 758 ) - (13 966 ) Balance at end of year, net of accumulated depreciation 4 189 115 870 94 014 30 305 244 378 Balance at end of year At cost 4 189 153 640 136 673 30 305 324 807 Accumulated depreciation - (37 770 ) (42 659 ) - (80 429 ) Net carrying amount 4 189 115 870 94 014 30 305 244 378 Engen Botswana Limited 75 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

Plant, Land Leasehold equipment freehold buildings and other Total P’000 P’000 P’000 P’000

7. PROPERTY, PLANT & EQUIPMENT – COMPANY 31 December 2014 Balance at beginning of year At cost 568 494 352 1 666 Accumulated depreciation - (12) (352) (616) Net carrying amount 568 482 - 1 050 Additions - 237 - 237 Depreciation (Note 3.2) - (30 ) - (30 ) Balance at end of year, net of accumulated depreciation 568 689 - 1 257 Balance at end of year At cost 568 731 352 1 651 Accumulated depreciation - (42) (352) (394) Net carrying amount 568 689 - 1 257

31 December 2013 Balance at beginning of year At cost 568 252 352 1 172 Accumulated depreciation - (252) (352) (604) Net carrying amount 568 - - 568 Additions - 494 - 494 Depreciation (Note 3.2) - (12 ) - (12 ) Balance at end of year, net of accumulated depreciation 568 482 - 1 050 Balance at end of year At cost 568 746 352 1 666 Accumulated depreciation - (264) (352) (616) Net carrying amount 568 482 - 1 050

(1) Capital work in progress includes all assets that are under construction and not yet in use as at the reporting date. These items of property, plant and equipment will be reallocated to the respective asset class on completion of the construction. (2) There are no restrictions on title. None of the property, plant and equipment has been pledged as security for liabilities. (3) There was no revaluation of property, plant and equipment in 2014.

76 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

8. INTERESTS IN JOINT VENTURES The Group has a 40% and 25% interest in the joint arrangements, Engen Palapye Partnership and Engen Maun Partnership, respectively, which are involved in property letting.

The Group’s interest in both joint arrangements is accounted for using the equity method in the consolidated financial statements. The financial year end of both joint ventures is 31 December and is the same as the group. Summarised financial information of the joint arrangements, based on its IFRS financial statements, and the reconciliation with the carrying amount of the investment in the consolidated financial statements are set out below:

Group Company Dec 2014 Dec 2013 Dec 2014 Dec 2013 P’000 P’000 P’000 P’000

Engen Palapye Partnership Current assets 2 633 1 466 - - Non current assets 36 273 37 200 - - Current liabilities (470) (319) - - Equity 38 436 38 347 - - Group’s carrying amount of the investment 13 854 15 339 - -

Engen Maun Partnership Current assets 1 267 1 076 - - Non current assets 19 176 18 700 - - Current liabilities (321) (588) - - Equity 20 122 19 188 - - Group’s carrying amount of the investment 4 606 4 797 - - Total carrying amount of the investments 18 460 20 136 - - 05 Engen Palapye Partnership Revenue 6 168 5 581 - - AFS Rentals 5 616 5 100 - - Other 552 481 - - Interest income - 10 - - Direct operating expenses (1 077 ) (1 146 ) - - Profit for the year 5 091 4 445 - - Share of profit of joint venture 2 036 1 778 Engen Botswana Limited 77 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

Group Company Dec 2014 Dec 2013 Dec 2014 Dec 2013 P’000 P’000 P’000 P’000

Engen Maun Partnership Revenue 2 934 2 595 Rentals 2 680 2 383 Other 254 212 Fair value gain - 3 530 - Interest income 5 4 - Other income 10 - - Direct operating expenses (720) (785) - Profit for the year 2 229 5 344 - Share of profit of joint venture 557 1 336 - Total share of profits of the joint ventures 2 593 3 114 -

Non current assets comprise of the total investment properties owned by the joint arrangements. The Engen Maun investment property is held by way of a 50 year lease with the Tawana Land Board commencing 12 November 2003 with an option to renew for a further 50 years. The joint arrangement was entered into on 16 July 1993. The Engen Palapye investment property comprises of a shopping complex erected on Lot 68 in Palapye, measuring 16500 square metres held in terms of Tribal Lease Number L/E/4/788, commencing on 6 June 1982, for fifty years and registered under title deed number 9/83 dated 7 September 1983. The joint arrangement was entered into on 7 November 1991. Investment properties are stated at fair value, which has been determined, based on valuations performed by an independent professionally qualified valuer, as at 31 December 2014 and 31 December 2013 for the current and previous year respectively. The valuer has recent experience in the location and category of the investment property being valued. The fair value represents 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. The fair value is based on recent prices of similar properties in the same category and location.

The joint arrangements had no contingent liabilities or capital commitments as at 31 December 2014 and 2013. The joint arrangements cannot distribute their profits until they obtain consent from the four venture partners.

The values of the investment in joint arrangements in the company are shown below: Unlisted - - - Engen Palapye Partnership (At cost) - - 2 762 2 762 - Engen Maun Partnership (At cost) - - 1 762 1 762 - - 4524 4 524

9. PREPAID LEASES Balances at beginning of the year 6 656 7 192 - - Charge for the year (537 ) (536 ) - - 6 119 6 656 - -

Balances to be amortised within one year 540 540 - - Balances to be amortised after one year 5 579 6 116 - - 6 119 6 656 - -

Prepaid leases represent payments made for land use rights and are amortised over 20 years. 78 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

Group Company Dec 2014 Dec 2013 Dec 2014 Dec 2013 P’000 P’000 P’000 P’000

10. INVESTMENTS Unlisted - School debentures (At amortised cost) 37 37 10 10 37 37 10 10

The investments in debentures have no maturity date and no interest applies to them.

11. INVESTMENT IN SUBSIDIARIES Unlisted Holding Shares at cost: - BGI Properties Ltd 100% - - - 100 - Engen Marketing Botswana (Pty) Ltd 100% - - 72 209 72 209 - Rockyhill Properties (Pty) Ltd - - 17 17 - - 72 226 72 326

A listing of the Group’s principal subsidiaries is set out in Note 23. BGI Properties Ltd, Cavallo Engineering & Construction (Pty) Ltd and Ivory Properties (Pty) Ltd were deregistered in 2014.

12. INVENTORIES AND ACCOMMODATION Petroleum products purchased for resale - at cost 26 318 32 740 - - Provision for obsolete stock (525 ) (512 ) - - 05 Net accommodation (1 500) (322) - - - Accommodation receivable 447 144 1 509 878 - - - Accommodation payable (446 862 ) (1 498 577 ) - - AFS Allowance against accommodation receivable (1 782 ) (11 623 ) - - 24 293 31 906 - -

Settlement of accommodation balances is done primarily by fuel products. However, settlement in cash is possible upon agreement with the other oil company.

Engen Botswana Limited 79 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

Group Company Dec 2014 Dec 2013 Dec 2014 Dec 2013 P’000 P’000 P’000 P’000

13. TRADE AND OTHER RECEIVABLES Financial assets Trade receivables, net of allowance for impairment 116 387 98 732 - - Other receivables 6 477 5 164 - - 122 864 103 896 - - Non-financial assets Duties & Levies 308 308 - - Other receivables 2 601 3 687 - - 125 773 107 891 - -

Trade and other receivables are non-interesting bearing and are generally on 30-60 days’ terms. As at 31 December 2014, the ageing analysis of trade and other receivables is as follows:

2014 2013 2014 2013 P’000 P’000 P’000 P’000 Trade and other receivables at 31 December Neither past due nor impaired 119 898 97 390 - - Past due but not impaired - - Less than 30 days 1 671 3 870 - - Between 30 days and 60 days 502 612 - - Between 60 days and 90 days 84 14 - - More than 90 days 709 2 010 - - Total 122 864 103 896 - -

Past due but not impaired is based on time since recognition and after 30 days, the balances have no factors that would evidence impairment, management still considers these balances as fully recoverable.

As at 31 December 2014, trade receivables at nominal value of P928 930 (December 2013: P928 930) were impaired and fully provided for. Movements in the provision for impairment of receivables were as follows: 2014 2013 2014 2013 P’000 P’000 P’000 P’00 At beginning of year 929 - - - Charge for the year - 929 - - At end of year 929 929 - -

The allowance represents impairment losses on individually assessed financial assets only. 80 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

Group Company Dec 2014 Dec 2013 Dec 2014 Dec 2013 P’000 P’000 P’000 P’000

14. CASH AND CASH EQUIVALENTS For the purposes of the Statement of Cash Flows, cash and cash equivalents comprise the following: Cash on hand and at bank 233 185 286 587 2 986 3 599 Short term deposits 177 245 33 505 35 330 33 505 Cash resources 410 430 320 092 38 316 37 104

The short term deposits had variable effective interest rates of between 5% and 9% (December 2013 – 4% and 4.2%) for the year. At year end the short-term deposits were maturing within 60 days (December 2013:60 days). No interest is earned on cash amounts maintained in the Group’s current accounts. The Group has unutilised banking facilities with First National Bank of Botswana Limited of P2 500 000 (December 2013: P2 500 000) and unutilised contingent guarantee facilities of P2 100 000 (December 2013: P2 100 000).

15. STATED CAPITAL 159 722 220 ordinary shares at no par value 8 138 8 138 8 138 8 138 8 138 8 138 8 138 8 138 For capital management disclosures refer to Note 23.

16. PROVISIONS Dismantling and restoration costs Balance at beginning of year 39 162 20 900 - - Change in estimate (Note 7) 1 060 16 957 - - Finance costs (Note 3.3) 2 853 1 305 - - 05 43 075 39 162 - -

Health, safety and environment AFS Balance at beginning of year 4 627 - - - Charge for the year 620 4 627 - - 5 247 4 627 - -

Total provisions 48 322 43 789 - -

The provision for dismantling and restoration costs relates to petrochemical sites in locations in which Engen Botswana Limited has operations. The group is required to restore sites at the end of their useful lives to an acceptable condition consistent with the Group’s environmental policies and statutory regulations. The expected cost of any committed decommissioning or restoration programme, discounted to its net present value using a real pre tax discount rate of 7.44% (December 2013: 7.29%), is provided at the beginning of each project. The discount rate is determined by adjusting the South African risk free rate by the Botswana country risk. These estimates are reviewed at least annually. Any change to the provision as a result of a revision in estimate of dismantling and restoration costs or a revision in the discount rate must be accounted for in the same manner as the initial estimated cost. It is expected that most of these will be incurred in the next 9 to 40 years. Assumptions used to calculate the provision for dismantling and restoration costs were based on current information available. The change in estimate led to an increase (December 2013: increase) in the cost of certain property, plant and equipment as it related to the future costs Engen Botswana Limited 81 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

to dismantle the assets and restore the land. This change in estimates will affect the current and future depreciation. It is impracticable to allocate the change in estimate due to the number of items its applicable to and different useful lives thereof. The change in estimate emanated from the difference in exchange rates between the two reporting periods. Future cash outflows are expected to occur at the end of the useful lives of the sites.

The health, safety and environment provision relates to remediation of the environment that may be caused by spillage of petroleum products at each our retail, commercial and fuel depots. Probabilities of the spillages occurring have been used in order to determine the provision. Future cash outflows are expected to occur whenever a spill of petroleum products is made on the environment. Group Company Dec 2014 Dec 2013 Dec 2014 Dec 2013 P’000 P’000 P’000 P’000

17. TRADE AND OTHER PAYABLES Financial liabilities Trade payables 20 288 11 691 - - Related party payables (Note 19) 192 819 182 842 3 100 2 949 Other payables 12 941 8 174 761 949 226 048 202 707 3 861 3 898 Non-financial liabilities Duties & Levies 18 708 13 262 - - Leave pay 895 908 - - Slate payable 91 593 16 309 - - Other payables 3 812 2 137 - - 341 056 235 323 3 861 3 898

Trade payables are non interest bearing and are normally settled on 30 - 60 day terms. Other payables, duties and levies are non-interest bearing and have an average term of 30 - 60 day terms. For terms and conditions relating to related parties, refer to Note 19.

18. DIVIDENDS PAID Dividends declared during the year 59 097 63 250 59 097 63 250 Amount paid 59 097 63 250 59 097 63 250

Net Dividend per share (thebe) Declared and paid in the year - final dividend related to the prior year 30.0 42.0 30.0 42.0 - interim dividend for the current year 10.0 10.0 10.0 10.0 Proposed (not recognised as a liability) - final dividend for the current year 11.0 30.0 11.0 30.0

82 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

19. RELATED PARTY DISCLOSURES Related party transactions where control exists include Petroleum Investment Holdings Limited, which owns 70% of the Company’s shares. The remaining 30% of the shares are widely held. The ultimate parent of the Group is PETRONAS of Malaysia. During the year, the Group entered into transactions with fellow subsidiaries. Those transactions along with related balances at 31 December 2014 and 31 December 2013 are presented in the following table:

Group Company Dec 2014 Dec 2013 Dec 2014 Dec 2013 P’000 P’000 P’000 P’000

(i) Purchase of goods/services: Purchase of refined oil products - Engen Petroleum Limited 2 422 315 2 452 453 - -

Service fees for the provision of technical, accounting and computer support - Engen Petroleum Limited 7 177 6 437 - -

Dividends received from Engen Marketing Botswana (Proprietary) Limited - - 63 889 68 378

Rent paid to Joint Ventures 210 196 - -

Engen Petroleum Limited, a company incorporated in the Republic of South Africa, is a subsidiary of PETRONAS of Malaysia and is therefore an entity related through common control. The above transactions were carried out on commercial terms and conditions.

(ii) Outstanding balances arising from purchases of goods/ services 05 Purchase of refined oil products and services fees for technical, accounting and computer support - Engen Petroleum Limited (Note 17) 192 819 182 842 3 100 2 949

AFS (iii) Compensation of key management personnel Short-term employee benefits 4 725 4 375 - - Contributions to defined contribution funds 1 166 1 080 - Directors’ fees 618 590 618 590 Total compensation of key management personnel 6 509 6 045 618 590

The non-executive directors do not receive pension entitlement from the Group. A listing of the members of the Board of Directors is shown on page 48 of the financial statements

Terms and conditions of transactions with related parties The sales to and purchases from related parties are made at normal market prices. Outstanding balances at the year end are unsecured, interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For year ended 31 December 2014, the Group has not made any provision for doubtful debts relating to amounts owed by related parties (December 2013: Nil). This assessment is undertaken every financial year through examining the financial position of the related parties and the market in which the related parties operates. Related party balances are normally settled on 30 - 60 days terms.

Engen Botswana Limited 83 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

Group Company Dec 2014 Dec 2013 Dec 2014 Dec 2013 P’000 P’000 P’000 P’000

20. COMMITMENTS AND CONTINGENCIES 20.1 Capital expenditure commitments The Group has the following purchase commitments for property, plant and equipment incidental to the ordinary course of business. Approved and committed - - - - Approved but not committed 60 074 50 440 - - 60 074 50 440 - - These commitments will be financed from cash generated from normal business operations.

20.2 Operating lease commitments - group as a lessee Future minimum rentals under non-cancellable leases are as follows: Within one year 1 081 985 - - More than one year but not more than five years 1 913 2 994 - - More than five years - 2 181 - - 2 994 6 160 - -

Deferred operating lease - group as a lessee Current portion 985 206 - - Long term portion of lease 1 063 2 366 - - 2 048 2 572 - -

The majority of leases between Engen Marketing Botswana (Pty) Ltd and the various lessors are in respect of premises on which service stations have been built and sub-let by the Group to its dealers. These leases are for periods ranging between 3 and 50 years with annual escalations of between 7% and 10% per annum with renewal options. Due to straight lining, the difference between the expense and cash payments will lead to prepaid amounts or accruals on the statement of financial position.

20.3 Contingent liabilities The Group has provided the following guarantees at 31 December:

Bond to the Department of Customs & Excise for the movement of petroleum products from the Republic of South Africa and Namibia to Botswana and whilst in transit. 497 497 - -

Guarantee to Botswana Railways in respect of security for compliance with performance obligations in accordance with the fuel supply contract

3 974 3 974 - - 4 471 4 471 - - 84 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

20. COMMITMENTS AND CONTINGENCIES (continued)

20.3 Contingent liabilities (continued) The Group’s bankers issued guarantees in favour of the Department of Customs and Excise and Botswana Railways in terms of which the bankers (as guarantors) will reimburse the Department of Customs and Excise and Botswana Railways in the unlikely event that Engen default on their payments. This is limited to P497 000 and P3 974 000 respectively. In accordance with the agreed terms, any amounts paid by the bankers will be recovered from Engen. No liability is expected to arise.

20.4 Lease rentals receivable – group as a lessor Contingent lease rentals receivable are based on volumes sold and a value has not been attributed to these agreements. Other lease rentals relate to commercial property leases from third parties.

20.5 Legal claims In the ordinary course of business, the Group is a defendant in a litigation arising from trade claims. Although there can be no assurances, the Group believes, based on information currently available, that the ultimate resolution of the legal proceedings would not likely have a material adverse effect on the results of its operations, financial position or liquidity of the Group. The Group has not raised any liability in respect of these claims.

21. SEGMENT REPORTING

Operating segment information The property letting segment is made up of the two joint ventures (Refer to Note 8). The Directors consider that on the basis of risks and returns and the Group’s organisational and reporting structure for management purposes there are primarily two operating segments, petrochemical activities and property letting business. Within the petrochemical activities there are two main business units, Commercial and Retail, the two segments have similar economic characteristics and the distribution channel is similar and as such have been aggregated as one segment; petrochemical activities segment. Petrochemical activities primarily involve the selling and distribution of fuel. All revenue is earned in Botswana and all assets are situated in 05 Botswana. Transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions with third parties. Amounts disclosed are based on the numbers included in the consolidated financial statements. AFS Engen Botswana Limited 85 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

21. SEGMENT REPORTING (continued) Petrochemical Property Activities Letting Eliminations Consolidated P’000 P’000 P’000 P’000 Year ended 31 December 2014 Segment Revenue External sales 2 582 567 - - 2 582 567 External rental income on investment property 8 541 - - 8 541 Interest: bank and term deposits 9 105 - - 9 105 Total Segment Revenue 2 600 213 - - 2 600 213 Results Depreciation (17 662 ) - - (17 662) Foreign exchange gains 1 421 - - 1 421 Finance costs (3 799 ) - - (3 799) Taxation (30 342 ) - - (30 342) Profit for the year after tax 63 868 2 593 - 66 461 Total assets 822 791 20 673 - 843 464 Total liabilities 395 799 - - 395 799 Capital Expenditure 28 746 - - 28 746

Year ended 31 December 2013 Segment Revenue External sales 2 609 274 - - 2 609 274 External rental income on investment property 7 802 - - 7 802 Interest: bank and term deposits 4 605 - - 4 605 Total Segment Revenue 2 621 681 - - 2 621 681 Results Depreciation (13 966) - - (13 966) Foreign exchange gains 7 679 - - 7 679 Finance costs (1 340) - - (1 340) Taxation (44 847) - - (44 847) Profit for the year after tax 127 345 2 429 - 129 774 Total assets 710 685 20 411 - 731 096 Total liabilities 291 484 - 291 484 Capital Expenditure 18 284 - - 18 284

2014 2013 P’000 P’000 Geographic information Revenues from external customers Botswana 2 600 213 2 621 681 Total revenue from external customers per the consolidated statement of profit or loss and other comprehensive income 2 600 213 2 621 681

The revenue information above is based on the location of the customers. Revenue from one customer amounted to P400 749 430 (2013: 387 730 838) arising from sales by the petro chemical activities segment. 86 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

Group Financial liabilities loans measured Total and amortised Carrying receivables cost amount Note P’000 P’000 P’000

22. FINANCIAL INSTRUMENTS 31 December 2014 Financial assets Investments – unlisted debentures 10 37 - 37 Trade and other receivables 13 112 206 - 112 206 Cash at bank and in hand 14 410 430 - 410 430

Financial liabilities Trade and other payables 17 - (226 048 ) (226 048 ) 522 673 (226 048 ) 296 625

31 December 2013 Financial assets Investments – unlisted debentures 10 37 - 37 Trade and other receivables 13 103 896 - 103 896 Cash at bank and in hand 14 320 092 - 320 092

Financial liabilities Trade and other payables 17 - (202 707 ) (202 707 ) 05 424 025 (202 707 ) 221 318 AFS Engen Botswana Limited 87 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

22. FINANCIAL INSTRUMENTS (continued) The accounting classification of each category of financial instruments, and their carrying amounts, are set out below.

Company Financial Fair liabilities value loans measured through Total and amortised profit or Carrying receivables cost loss amount Note P’000 P’000 P’000 P’000

31 December 2014 Financial assets Investments – unlisted 10 4 534 - - 4 534 Cash at bank and in hand 14 38 316 - - 38 316 Forward exchange contract asset - - 242 242

Financial liabilities Trade and other payables 17 - (3 961 ) - (3 961 ) Forward exchange contract liability - - (602 ) (602 ) 42 850 (3 961 ) (360 ) 38 529

31 December 2013 Financial assets Investments – unlisted 10 4 534 - - 4 534 Cash at bank and in hand 14 37 104 - - 37 104

Financial liabilities Trade and other payables 17 - (3 898 ) - (3 898 ) Forward exchange contract liability - - (1 243 ) (1 243 ) 41 638 (3 898 ) (1 243 ) 36 497

Total interest income and total interest expense calculated using the effective interest method for financial assets or financial liabilities that are not at fair value through profit or loss are as follows:

Group Company Total Total net Interest Interest gains and Interest Interest gains and income expense losses income expense losses P’000 P’000 P’000 P’000 P’000 P’000

December 2014 Loans and receivables/ payables 9 105 3 296 5 809 2 009 - 2 009

December 2013 Loans and receivables/ payables 4 605 1 340 3 265 1 458 35 1 423 88 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

22. FINANCIAL INSTRUMENTS (continued)

Financial risk management objectives and policies The main risks arising from the Group’s and Company’s financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk.

Interest rate risk Financial instruments that are sensitive to interest rate risk are bank balances and cash (refer note 14). Interest rates applicable to these financial instruments compare favourably with those currently available in the market and are only applicable to Botswana interest rates. The group’s policy is to minimise the interest rate risk exposure as such the group has no external debt and invests in the best interest yielding call and fixed deposits accounts.

The following table demonstrates the sensitivity to a reasonable possible change in interest rates at reporting date, with all other variables held constant, of the group and company’s profit before tax (through the impact on floating rate financial instruments) and equity at reporting date. The reasonable possible change is based on past trends of interest rates and expected future changes. The impact was calculated by applying the reasonable possible change to the exposures at reporting date, and with reference to the next 12 months. There is no direct impact on the Group and company’s equity apart from the after tax amount of the statement of profit or loss and other comprehensive income impact.

Group Company 2014 2013 2014 2013 P’000 P’000 P’000 P’000

Effect on profit before tax Increase of 1% in interest rates 4 104 3 201 383 371 Decrease of 1% in interest rates (4 104) (3 201) (383) (371) 05 AFS Engen Botswana Limited 89 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

22. FINANCIAL INSTRUMENTS (continued)

Financial risk management objectives and policies (continued)

Foreign currency risk The Group purchases its petroleum products in other countries and, as a result, is exposed to movements in foreign currency exchange rates. Foreign currency risk is managed at a senior level and monitored by the group management. Foreign currency risk is only with regard to transactions with a fellow subsidiary in South Africa payable in Rands. The Group and company uses foreign currency forward exchange contracts for trading purposes. The forward exchange contracts were implemented to manage foreign exchange exposure.

The following table demonstrates the sensitivity to a reasonably possible change in the South African Rand exchange rate, with all other variables held constant, of the Group and company’s profit before tax (due to changes in the fair value of monetary assets and liabilities). The reasonable possible change is based on past trends of foreign exchange rates and expected future changes. The impact was calculated by applying the reasonable possible change to the exposures at reporting date, and with reference to the next 12 months. There is no effect on the Group and company’s equity apart from the after tax amount of the statement of profit or loss and other comprehensive income impact.

2014 2013 P’000 P’000

Effect on profit before tax Increase of 10% in the ZAR rate (9 555 ) (17 506 ) Decrease of 10% in the ZAR rate 9 555 17 506 90 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

22. FINANCIAL INSTRUMENTS (continued}

Financial Risk Management The Group mitigates the risk of foreign exchange rate movements through the use of forward exchange contracts. The notional amount of coverage from forward contracts as at 31 December 2014 was P172 818 066 (31 December 2013: P172 818 066).

Currency profile The Pula equivalent values of amounts translated from foreign currencies at year end are as follows:

2014 2014 2013 2013 Pula Rand Pula Rand

Related party payables (Note 17) 192 819 326 235 625 217 182 842 060 216 089 145 Exchange rate 1.000 1.222 1.000 1.182

Credit risk The objective of credit risk management is to manage the Group and company’s exposure to credit. Credit risk arising from the inability of a counter-party to meet the terms of the Group and company’s financial instrument contracts is generally limited to the amounts disclosed in the statement of financial position.

It is the Group and company’s policy to enter into financial instruments with a diversity of creditworthy counterparties. Ongoing credit evaluation of the financial position of customers is performed. The granting of credit is made on application and is approved by the directors.

Therefore, the Group and company do not expect to incur material credit losses on its risk management or other financial instruments. With respect to the trade and other receivables that are neither past due nor impaired, there are no indications as of the reporting date that the debtors will not meet their payment obligations. Trade and other receivables that are past due but 05 not impaired are considered by management to be recoverable hence not impaired.

Bank balances are maintained with high credit rated banks and management’s estimate of credit quality on other receivables and AFS trade and other receivables is good based on strict credit rating.

The Group had a significant concentration of credit risk that arose from a fuel supply contract with a customer that accounted for 31% of the total balance of trade accounts receivable. The balance of 69% of the trade accounts receivable was widely distributed amongst many customers. The Group’s cash and cash equivalents were held between two international commercial banks that have a strong credit rating.

Credit risk exposures The Group and company’s maximum exposure to credit risk in the event the counterparties fail to perform their obligations as of 31 December 2014 in relation to trade and other receivables, other receivables and cash and cash equivalents is the carrying amount of those assets as indicated in Note 22. Other receivables are loans granted to staff and customers. Apart from trade and other receivables, no other financial assets are past due or impaired.

Liquidity risk Liquidity risk is the risk that the Group and company have insufficient funds available to fulfil their existing and future cash flow obligations. Several elements are regarded as fundamental in the management of liquidity. These include the maintenance of minimum levels of marketable and liquid assets; effective cash flow management; implementation of long term funding strategies; diversification of funding; and adequate contingency plans. Engen Botswana Limited 91 Annual Consolidated Financial Statements NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

22. FINANCIAL INSTRUMENTS (continued} The Group and company have access to banking facilities in excess of their current and anticipated future requirements. The Group’s and company’s borrowing powers are not limited by its Articles of Association.

The following table summarises the maturity profile of the group’s financial liabilities at 31 December 2014 based on contractual undiscounted payments:

Group Less than 1 to 3 3 to 12 1 to 5 > 5 1 month months months years years Total P’000 P’000 P’000 P’000 P’000 P’000

31 December 2014 Trade and other payables - 226 048 - - - 226 048 Forward exchange contract liability - 602 - - - 602 - 226 650 - - - 226 650

31 December 2013 Trade and other payables - 202 707 - - - 202 707 Forward exchange contract liability - 1 243 - - - 1 243 - 203 950 - - - 203 950

Company 31 December 2014 - 3 691 - - - 3 691 Trade and other payables - 3 691 - - - 3 691

31 December 2013 - 3 898 - - - 3 898 Trade and other payables - 3 898 - - - 3 898

FAIR VALUE MEASUREMENTS The following table provides fair value measurement hierarchy of the Group’s assets and liabilities.

Quantitative disclosures fair value measurement hierarchy for instruments as at 31 December 2014:

Fair value measurement using: Quoted prices in Significant Significant active observable unobservable markets inputs inputs Total (Level 1) (Level 2) (Level 3) Date of valuation P’000 P’000 P’000 P’000

Assets measured at fair value: Foreign exchange forward contracts 31 December 2014 242 - 242 -

Liabilities measured at fair value: Foreign exchange forward contracts 31 December 2014 602 - 602 -

There have been no transfers between level I and 2 during the year. 92 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2014

FAIR VALUE MEASUREMENTS (continued) Quantitative disclosures fair value measurement hierarchy for instruments as at 31 December 2013:

Liabilities measured at fair value: Foreign exchange forward contracts 31 December 2013 1 243 - 1 243 -

Fair values The directors consider the carrying amount of all financial instruments to approximate their fair value since the financial assets and liabilities have a short term to maturity and the interest rate on other receivables approximate the market rate. The fair value of foreign forward exchange contracts (FEC) is determined by comparing the average FEC to the closing FEC rate at each reporting date.

Capital management The Group and company define capital as the total equity of the Group and company as noted in the statement of changes in equity. The Group’s and company’s long-term objective for managing capital is to deliver competitive, secure and sustainable returns to maximise long-term shareholder value. Management is of the view that these objectives are being met. The Group and company are not subject to any externally-imposed capital requirements.

The Group and company aim to maintain capital discipline in relation to investing activities while growing the dividend per share. The Group and company do not have any long term debt. Cash retained in the Group and company is used to self-fund investing activities. 05 23. SUBSIDIARY COMPANIES Subsidiary companies of Engen Botswana Limited and that of Engen Marketing Botswana (Pty) Ltd, which are all incorporated in AFS Botswana, are as follows:

% Holding Business Description

Subsidiaries of Engen Botswana Limited Engen Marketing Botswana (Pty) Ltd 100 Marketing of petroleum products Rockyhill Properties (Pty) Ltd* 100 Dormant Subsidiary of Engen Marketing Botswana (Pty) Limited Engen Properties (Pty) Ltd* 100 Property owning

The major portion of the group’s activities are conducted by Engen Marketing Botswana (Pty) Ltd. The companies marked *are in the process of being deregistered.

24. EVENTS AFTER THE REPORTING PERIOD There are no events that occurred after the reporting period that may require adjustment of or disclosure in the annual financial statements. Engen Botswana Limited 93 Annual Consolidated Financial Statements

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ENGEN BOTSWANA LIMITED

REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements and the group financial statements of Engen Botswana Limited, which comprise the statement of financial position as at 31 December 2014, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 51 to 92.

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of Botswana (Companies Act, 2003) and 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.

AUDITORS’ RESPONSIBILITY Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION In our opinion, the financial statements give a true and fair view of the financial position of the Engen Botswana Limited Group and the Company as at 31 December 2014, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of Botswana (Companies Act, 2003).

Gaborone Practicing Member: T. Chitambo (20030022) 26 March 2015 Certified Auditor 94 NOTICE OF MEETING FOR THE YEAR ENDED 31 DECEMBER 2014

The Board of Directors has pleasure in submitting its report to the shareholders, together with audited financial statements for the year ended 31 December 2014.

Share Capital: Agenda Details of the company’s share capital are set out in note 15 to the financial statements. 1. To read the notice convening the meeting. 2. To receive and consider the audited financial statements for Results: the year ended 31 December 2014. The annexed financial statements adequately disclose the 3. To approve the dividends as recommended by the Directors: financial position and the results of the Group of the year • Final dividend declared by Directors of BWP0.11 per ended 31 December 2014. ordinary share at a total cost of BWP17 569 444 which dividend was paid on 24 April 2015 Holding Company: 4. Messrs F. J. Kotze, V. Bvumbi and R. N. Matthews who The company’s holding is Petroleum Investment Holdings retire in accordance with Article 62 of the Constitution, Limited and its ultimate holding company is PETRONAS of being eligible, offer themselves for re-election. Malaysia. 4a) To confirm the re-election of Mr. F. J. Kotze who retires Subsidiary Companies: in accordance with Article 62 of the Constitution and Details of the company’s subsidiaries are set out in note 23 to beiong eligible, offers himself for re-election. the financial statements. 4b) To confirm the re-election of Mr. V. Bvumbi who retires In terms of the company’s articles of association: Messrs: in accordance with Article 62 of the Constitution and F. Kotze, V. Bvumbi and R. Matthews have made themselves beiong eligible, offers himself for re-election. available for re-election. 4c) To confirm the re-election of Mr. R. N. Matthews who Auditors: retires in accordance with Article 62 of the Constitution and The auditors, Ernst and Young, retire at the forthcoming beiong eligible, offers himself for re-election. annual general meeting and offer themselves for re- appointment. 5. To appoint auditors for ensuing year and approve the remuneration for the past year’s audit. Gaborone 6. To transact such other business as may be transacted at an 22 May 2015 Annual General Meeting. 7. Every member entitled to attend and vote at the meeting NOTICE OF MEETING may appoint one or more persons as a proxy to attend, Notice is hereby given that the 49th Annual General Meeting speak and vote in his/her stead. of the company will be held at the Gaborone International Convention Centre, on Wednesdy 24 June 2015 at 10h00 for A proxy need not be a member of the company. the following business: Proxy forms should be forwarded to reach the company’s transfer offices or registered offices at least 48 hours before the time to meeting. Proxy forms are available from the company secretaries on request.

By order of the Board.

Pricewaterhouse Coopers (Proprietary) Limited Company Secretaries Gaborone

22 May 2015 95 FORM OF PROXY FOR THE YEAR ENDED 31 DECEMBER 2014

The 49th Annual General Meeting of the company will be held at the Gaborone International Convention Centre, on Wednesday 24 June 2015 at 10h00.

I/We of being member/ members of the above named company do hereby appoint:

of or failing him/her

of the Chairman of the meeting as my/our proxy to vote for me/ us on my/ our behalf at the 49th Annual General Meeting of the company will be on Wednesday 24 June 2015 at 10h00. Signed this day of 2015 Signature

NOTES 1. Every member entitled to attend and vote at the meeting 5. Documentary evidence establishing the authority of a is entitled to appoint one or more persons as a proxy to person signing this form of proxy in a representative attend, speak and vote in his/ her stead. Such proxy need capacity must be attached to this form unless previously not be a member of the company. recorded by the transfer secretaries of the company or waived by the chairman of the annual general meeting. 2. A member may insert the name/s of proxy/ies of the member’s choice in the space provided, with or without 6. The completion of lodging of this form shall not preclude deleting the words “the chairman of the annual general the relevant member from attending the annual general meeting”. Any such deletion must be initialed by the meeting and speaking and voting in person thereat to member. The person whose name stands first on the form the exclusion of any proxy appointed in terms hereof, of proxy and has not been deleted shall not be entitled to should such member wish to do so, provided that notice of act a proxy to the exclusive of those whose names follow. revocation of the proxy is lodged at the company’s transfer secretaries or registered offices before the meeting. 3. A member’s instruction to the proxy must be indicated by the insertion of the relevant number of votes exercisable 7. Forms of proxy must be lodged at the company’s transfer by that member in the appropriate space provided and by secretaries or registered office to be received not later written instruction (if any) regarding the re-election of the than forty-eight hours before the time of the meeting. specific directors. Failure to comply with the above will be deemed to authorize the proxy to vote or to abstain from TRANSFER SECRETARIES voting at the annual general meeting as he/she deems fit Pricewaterhouse Coopers (Pty) Ltd in respect of all votes cast and in respect exercisable by Fairgrounds Office Park Plot 50371 the member of his/ her proxy, but the total of the votes P O Box 1453 cast and in respect whereof abstention is recorded may not Gaborone exceed the total of the votes exercisable by the member or Registered Office by his/her proxy. Plot 54026 Western Bypass 4. Any alteration or correction made to this form of proxy P O Box 867 must be initialed by the signatory/ies. Gaborone Plot 54026 Western Bypoass PO Box 867 Gaborone