ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 … · Darius Maunye explained that only one wife can be registered. Should it be requested to register a second wife, either a Divorce

ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2011

BUCHANAN HOUSE89 LOVEDAY STREET

P.O. BOX 3201JOHANNESBURG 2000

TEL. NO.: 011 208 1005 / 086 122 2462FAX NO.: 011 208 1026 / 086 726 6633

Administered by

Registrat ion number: 1947/001443/07

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the ELEVENTH ANNUAL GENERAL MEETING of members of THE BUILDING & CONSTRUCTION INDUSTRY MEDICAL AID FUND will be held in the RECEPTION ROOM at METRO CENTRE, 158 LOVEDAY STREET, BRAAMFONTEIN, (OPPOSITE CIVIC THEATRE - LOVEDAY STREET cnr DE KORTE STREET) ON SATURDAY, 09 JUNE 2012 AT 10H00, for the purpose of transacting the following business:

Please note: Admission to the meeting will be on production of a valid membership card. Registration will be from 09H00 to 10H00 and the meeting will commence at 10H00.

A G E N D A

1. To confirm the minutes of the tenth Annual General Meeting held on 11 June 2011.

2. To receive and consider the Report of the Board of Trustees for the year ended 31 December 2011, together with the Statement of Financial Position as at 31 December 2011 and the Statement of Comprehensive Income for the year ended 31 December 2011, together with the report of the Auditors.

3. To confirm Board of Trustees.

4. To confirm Trustee Remuneration.

5. To appoint the auditor for the ensuing year.

6. To transact any other business that may be transacted at an annual general meeting.

(Notices of motions to be placed before the annual general meeting must please be in writing and must reach the principal officer not later than seven days prior to the date of the meeting).

BY ORDER OF THE BOARD OF TRUSTEES7 May 2012

THE BUILDING & CONSTRUCTION INDUSTRY MEDICAL AID FUNDMINUTES OF THE TENTH ANNUAL GENERAL MEETING OF THE BUILDING & CONSTRUCTION INDUSTRY MEDICAL AID FUND, HELD IN THE RECEPTION ROOM, GROUND FLOOR, AT METRO CENTRE, 158 LOVEDAY STREET BRAAMFONTEIN, ON SATURDAY, 11 JUNE 2011, AT 10H00.

1. PRESENT: Mr C De Kock - Chairperson Ms E Gilbert (member) - Trustee Mr E Koji (member) - Trustee Mr J Mpe (member) - Trustee Members - 23 present

IN ATTENDANCE: MrBleRoux - PrincipalOfficer Mr D Maunye and Mesdames S Lowings, H Baker, Y Disney, L Lekhathe - representing the Administrator

2. APOLOGIES: Mr W Soutter Mr Mamesha Mr Ndaiza 3. OPENING AND NOTICE OF MEETING: The notice dated 9 May 2011 calling the meeting was duly publicised as per the Rules of the Scheme. Mr De Kock apologised for the late start. By 10h15 the necessary quorum was present and the chairperson welcomed all and the meeting was declared duly constituted. 4. CONFIRMATION OF THE MINUTES OF THE NINTH ANNUAL GENERAL MEETING HELD ON 31 JULY 2010: The minutes of the ninth annual general meeting held on 31 July 2010, having been circulated, were adopted after being unanimously accepted. Mr P Maila proposed and Mr Motsamai seconded. 5. TO RECEIVE AND CONSIDER THE ANNUAL FINANCIAL STATEMENTS, AUDITORS REPORT AND ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2010: It was reported that the Board of Trustees had reviewed and approved the Annual Financial Statements.

Mr P Maila queried the “outstanding claims provision” on page 11 of the Annual Financial Statements. MrDeKockexplainedthatthefinancialstatementsaresetuponthelastdayofthefinancialyear.Even though claims may have been processed the payment might not yet have been made, so allowance is madeinthefinancialstatementstocoverthis.Thesearenotadditionalclaims.

Mr Maila also requested an explanation of the remuneration of the Board of Trustees. Mr De Kock explained that all meeting attendance is paid at the same amount whether it be Audit, Board of Trustees (BoT) or Marketing meetings. It was explained that to have a quorum for the Board of Trustee Meetings 50% of the Trustees must be present. Full numbers constitute 4 trustees representing members and 4 trustees representing employers. A minimum of 2 member representatives and 2 employers representatives plus 1 must be present. Therefore 5 out of 8 must attend. No quorum, no meeting.

An explanation of the “Credit Risk” was asked for. Mr De Kock explained that this is not credit given to membersforbenefits.Thisreferstotheriskofinterestreceivedonmoniesinvested.Iffundsaremanaged well there is less risk, etc.

As therewereno furtherquestions regarding theFinancialStatements theywereput to thefloor for approval. The motion was proposed by Mr Maila and seconded by Mr Monjane and unanimously agreed to.

Action

BCIMA/AGM11.06.2011

6. CONFIRMATION OF THE BOARD OF TRUSTEES FOR 2011: The current Board of Trustees comprised the following members: Employer Trustee Employee Trustee Mr C De Kock Mr R Daizana Mr C Froneman Ms E Gilbert Mr K Heisi Mr E Koji Mr W Soutter Mr J Mpe ConfirmationoftheappointmentoftheBoardofTrusteeswasproposed,secondedandunanimouslyaccepted.

7. TRUSTEE REMUNERATION: TheChairpersonconfirmed that theTrustees’ remuneration for theyearunder reviewwasR500per meeting attended. It was agreed to increase the remuneration to R750 per meeting attended for the 2011 year, for time spent at the meeting as well as increased travelling costs.

A member from Cavaleros Construction suggested that they would be happy for the trustee remuneration to go up to R1 000 per meeting attended. The Board members were happy with the amount of R750 and the increase to R750 was duly approved by the members. 8. APPOINTMENT OF AUDITORS FOR THE ENSUING YEAR: The Chairperson proposed that the current Auditor Ransome Russouw be re-appointed for the ensuing year.

The proposal was agreed to. 9. GENERAL: The Chairperson stated that no notice of any motions had been received but invited those present to raise any general matters pertaining to the Fund only. Any queries regarding claims or membership were to be referred to the staff of the Fund present.

9.1 A member raised a question of registering a second wife and children. Can only the children from the second wife be registered? Darius Maunye explained that only one wife can be registered. Should it be requested to register a second wife,eitheraDivorceDecreeorDeathCertificatemustbesubmitted.MrDeKocksaidthattheFund needs to address the issue of registering children from different wives as the children are dependants because of the father and not the mother. Refer to Rule 4:21:3 Subsequent to the meeting, following discussion at various meetings of the Board of Trustees, the following criteriaappliesforregisteringofprincipalmember’sdependants: 1. Childrenbearingthefather’ssurname. 2. Only one wife and children bearing her surname. 3. Adoption Documentation. 4. Court Order. 5. Documentation from Welfare for foster care. 6. Fullbirthcertificate. 7. Clinic/hospitalcardreflectingbothparents’fullnames. 9.2 Mr Maila wanted to know who decides to increase the members’ contributions - The Board of Trustees or the Fund? Mr De Kock explained that the Administrator and the Board of Trustees check the income and costs as well as the claims record. The decision is then made once the costs are balanced against the income. Forthelastcoupleofyearsanindependentactuaryhadreportedonthefiguresbeforethefinaldecision is made by the Board of Trustees.

Action

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BCIMA/AGM11.06.2011

9.3 A member asked whether it would be possible for the fund to meet with the members before increasing contributions? Mr De Kock explained it would be impossible to meet with the members of the fund regarding contribution increases. Increases in contributions can also not be measured on what salary increases are going to be. The claims and payment history for the previous year must be evaluated before deciding on contribution increases.

DariusMaunyeappealedtomemberstohelpgrowthefund’smembershipsowemightbeabletohave reduced increases in contributions - more members are needed!

A member then commented that the Board of Trustees keep changing their statements in meetings. At the last meeting it was said that changes would not be made without consulting members.

Mr De Kock replied that it was impossible to consult with all members of the Fund regarding all issues. Thereforetheyconsultwithexpertsinthefieldforguidance.

9.4 Mr Maila said that medical aid information must reach members well before the meeting date. He felt that members were resigning because of not receiving information on time. Darius Maunye replied that the Employer Trustees must report back to the company as well as the workers after meetings. This way employees will be kept informed.

Mr Koji asked members to encourage co-workers to attend meetings. They can then discuss any problems they may have.

9.5 A member from Gothic Construction said that previously only skilled people were encouraged to join the medicalaid.WhowillshowtheyoungerworkersthebenefitsofjoiningtheFund? Mr De Kock replied that the Administrator was appointed to administer the day to day running of the fund, i.e. claims, etc. A marketing committee has now been set up to visit companies to recruit members and explainthebenefitsofmedicalaidtoemployees.TheFundoriginatedfromtheBargainingCouncilwho made it a condition of employment to belong to the fund.

Employees concerns are going to be addressed in a focused way to grow the fund to enable contribution costs to be kept down. 9.6 A member mentioned that BCIMA must “watch out for people from other medical aids confusing our members by talking badly of the Fund”. He said that BCIMA is a good fund and must be protected and kept going. He suggested that in the contract of employment membership of the medical aid and provident fund should be made compulsory. Mr De Kock explained that other funds are commercial funds and that shareholders must be paid from the available funds. BCIMA is owned by the members therefore membership must grow to keep the fund strong.

With BCIMA a single contribution is paid which covers the whole family. The members will have to approach their Unions for assistance with getting employers to make medical aid a condition of employment. The Fund cannot do this.

Mr le Roux commented that Bonitas had had their Trustees removed and were placed under curatorship bytheCouncilforMedicalSchemes.Membersmustinformthefundofany“badmouthing’ofthefundso that he can contact the medical aid concerned to sort out the problem. 9.7 Mr Chakane commented that more attendance was needed at meetings. 10. CLOSURE: There being no further business, the Chairperson thanked those present for attending. He declared the meeting closed at 11h40.

DATE CHAIRPERSON

Action

BCIMA/AGM11.06.2011

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CONTENTS Statement of responsibility by the Board of Trustees Statement of corporate governance by the Board of Trustees Report of the independent auditors to the members of The Building and Construction Industry Medical Aid Fund Report of the Board of Trustees Statementoffinancialposition Statement of comprehensive income Statement of changes in funds and reserves Statementofcashflows Notestotheannualfinancialstatements

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THE BUILDING AND CONSTRUCTION INDUSTRY MEDICAL AID FUNDANNUAL FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2011

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STATEMENT OF RESPONSIBILITY BY THE BOARD OF TRUSTEESThetrusteesareresponsibleforthepreparation,integrity,andfairpresentationoftheannualfinancialstatementsofTheBuildingandConstruction IndustryMedicalAidFund.Thefinancialstatementspresentedonpages5 to35havebeenprepared in accordance with International Financial Reporting Standards (IFRS) and the SAICA Medical Schemes Accounting Guide for the year ended 31 December 2011 and include amounts based on judgements and estimates made by management. Thetrusteesconsiderthatinpreparingtheannualfinancialstatementstheyhaveusedthemostappropriateaccountingpolicies, consistently applied and supported by reasonable and prudent judgements and estimates. Thetrusteesaresatisfiedthattheinformationcontainedintheannualfinancialstatementsfairlypresentstheresultsofoperationsfortheyearandthefinancialpositionoftheschemeatyear-end.Thetrusteesalsopreparedtheotherinformationincludedintheannualreportandareresponsibleforbothitsaccuracyanditsconsistencywiththefinancialstatements. The trustees are responsible for ensuring that accounting records are kept. The accounting records disclose with reasonable accuracythefinancialpositionoftheschemetoenablethetrusteestoensurethattheannualfinancialstatementscomplywith the relevant legislation. The Building and Construction Industry Medical Aid Fund operated in a well-established control environment, which is well documented and regularly reviewed. This incorporates risk management and internal control procedures, which are designed to provide reasonable, but not absolute, assurance that assets are safeguarded and the risks facing the business are being controlled. Thegoingconcernbasishasbeenadoptedinpreparingthefinancialstatements.Thetrusteeshavenoreasontobelievethat the scheme will not be a going concern in the foreseeable future, based on forecasts and available cash resources. Thesefinancialstatementssupporttheviabilityofthescheme. Thescheme’sexternalauditors,RansomeRussouwCharteredAccountants(SA),areresponsibleforauditingtheannualfinancialstatements,andtheirreportispresentedonpage4. ThefinancialstatementswereapprovedbytheBoardofTrusteeson19April2012andaresignedonitsbehalfby:

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STATEMENT OF CORPORATE GOVERNANCE BY THE BOARD OF TRUSTEESThe Building and Construction Industry Medical Aid Fund is committed to the principles and practice of fairness, openness, integrity and accountability in all dealings with its stakeholders. The trustees are proposed and elected by the members of the scheme and the employers. Board of Trustees The trustees meet regularly and monitor the performance of the administrators. They address a range of key issues and ensure that discussion of items of policy, strategy and performance is critical, informed and constructive.

Alltrusteeshaveaccesstotheadviceandservicesoftheprincipalofficerand,whereappropriate,mayseekindependentprofessional advice at the expense of the scheme, to support them in their duties. Internal Control The administrators of the scheme maintain internal controls and systems designed to provide reasonable assurance as totheintegrityandreliabilityofthefinancialstatementsandtosafeguard,verifyandmaintainaccountabilityforitsassetsadequately. Such controls are based on established policies and procedures and are implemented by trained personnel with the appropriate segregation of duties. No event or item has come to the attention of the Board of Trustees that indicates any material breakdown in the functioning of key internal controls and systems during the year under review. Transparency and Ethics The scheme conducts is affairs according to high ethical values and in a manner that contributes to the welfare of the key stakeholders.Wearecommittedtoopencommunicationwithourstakeholdersaboutthescheme’sfinancialandbusinesstargets and to treat them fairly in all our business dealings. Risk assessment and Evaluation The Trustees have developed a risk register which lists the key risks that are facing the scheme. The risks are continually evaluated and assessed to ensure that the necessary plans are implemented to control and manage these risks. The performance of the Board of Trustees and Board sub-committees are evaluated against agreed terms of reference and performance targets.

19 April 2012

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THE BUILDING AND CONSTRUCTION INDUSTRY MEDICAL AID FUNDREPORT OF THE BOARD OF TRUSTEES


The Board of Trustees hereby presents its report for the year ended 31 December 2011.

1 DESCRIPTION OF THE MEDICAL SCHEME

1.1 Terms of registration TheBuildingandConstruction IndustryMedicalAidFund isanot-for-profitclosedmedicalschemeregistered in terms of the Medical Schemes Act 131 of 1998 (the Act), as amended. TheschemeisexemptfromprovidingprescribedminimumbenefitsintermsoftheprovisionsofSection29(1)(o)of the Act, until 31 December 2014. 1.2 BenefitoptionwithinTheBuildingandConstructionIndustryMedicalAidFund Theschemeoffersonebenefitoptionwhichisrestrictedtoemployees,employedbyemployersintheconstructionindustry. 2 MANAGEMENT

2.1 BoardofTrusteesinofficeduringtheyearunderreview

Name DetailsJ Tubb Chairperson (Employer Trustee) Appointed 24 November 2011C Froneman Employer TrusteeW Soutter Employer Trustee Appointed 02 June 2011E Koji Member TrusteeE Gilbert (Alternate: L Lekgoathi) Member TrusteeJ Mpe Member Trustee Appointed 10 February 2011R Daizana (Alternate: J Rabothata) Member TrusteeC de Kock Employer Trustee Resigned 03 October 2011K Heisi Employer Trustee Resigned 11 October 2011M Schutte Employer Trustee Resigned 02 June 2011

2.2 PrincipalOfficer Mr B Le Roux HalRoux Healthcare Solutions (Pty) Ltd Universal House PO Box 1554 15 Tambach Road Rivonia Sunninghill Park 2149 Sandton 2.3 Registeredofficeaddressandpostaladdress Universal House PO Box 3201 15 Tambach Road Johannesburg Sunninghill Park 2000 Sandton 2.4 Medical Scheme Administrator during the year Universal Healthcare Administrators (Pty) Ltd Universal House PO Box 1411 15 Tambach Road Rivonia Sunninghill Park 2128 Sandton Accreditation number: ADMIN:5

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2 MANAGEMENT (continued) 2.5 Auditors Ransome Russouw Chartered Accountants (SA) 1st Floor PO Box 6706 8 Sherborne Road Cresta Parktown 2118 2193 2.6 Actuary Roseanne da Silva PO Box 70929 Roseanne da Silva and Associates cc Bryanston 2021 3 INVESTMENT STRATEGY OF THE MEDICAL SCHEME Thescheme’sinvestmentobjectivesaretomaximisethereturnonitsinvestmentsonalongtermbasisatminimal risk. The investment strategy takes into consideration both constraints imposed by legislation and those imposed by theBoardofTrustees.Detailsofinvestmentsaresetoutintheannualfinancialstatements. Investment decisions are made by the Board of Trustees to ensure that: - the scheme remains liquid; - investments are placed at minimum risk and the best possible rate of return; - investments are made in compliance with the regulations of the Act; - a risk assessment is performed. The scheme invested in equities, term deposits and money market instruments during 2011. This policy is reviewed regularly, taking into consideration compliance with the Act, the risk and returns of the various investment instruments and the surplus of funds available. 4 MANAGEMENT OF INSURANCE RISK The primary insurance activity carried out by the scheme assumes the risk of loss from members and their dependants that are directly subject to the risk. This risk relates to the health of the scheme members. As such the scheme is exposed to the uncertainty surrounding the timing and severity of claims under the contract. Theschememanagesitsinsuranceriskthroughbenefitlimitsandsub-limits,approvalproceduresfortransactions thatinvolvepricingguidelines,pre-authorisationandcasemanagement,serviceproviderprofilingandthemonitoring of emerging issues. The scheme uses several methods to assess and monitor insurance risk exposures both for individual types of risks insured and overall risks. The principal risk is that the frequency and severity of claims are greater than expected. Insurance events are, by their nature, random, and the actual number and size of events during any one year may vary from those estimated with established statistical techniques. There are no changes to assumptions used to measure insuranceassetsand liabilities thathaveamaterialeffectonthefinancialstatementsandthereareno terms and conditions of insurance contracts that have a material effect on the amount, timing, and uncertainty of the scheme’scashflows.

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5 REVIEW OF THE ACCOUNTING PERIOD’S ACTIVITIES 5.1 Operational statistics

2011 2010Average number of members during the accounting period 4,876 4,916 Number of members at 31 December 4,811 4,958 Average number of dependants during the accounting period 7,462 7,363 Number of dependants at 31 December 7,646 7,565 Averagenumberofbeneficiariesduringtheaccountingperiod 12,338 12,279 Numberofbeneficiariesat31December 12,457 12,523 Dependant ratio at 31 December 1.59 1.54 Netcontributionsperaveragebeneficiarypermonth(R) 455 420 Relevanthealthcareexpenditureperaveragebeneficiarypermonth(R) 338 335 Non-healthcareexpenditureperaveragebeneficiarypermonth(R) 67 60 Relevant healthcare expenditure as a percentage of gross contributions (%) 74.23 79.70 Non-healthcare expenditure as a percentage of gross contributions (%) 14.65 14.39 Averageageofbeneficiaries 30.38 30.68 Pensioner ratio at 31 December 2.94 3.08 Average accumulated funds per member at year end (R) 11,448 8,980 Breakdown of total amount paid to administrator: - Administration fees (R) 7,614,265 6,986,008 - Investment data collation fees (R) 49,075 21,507 Return on investments as a percentage of investments (%) 5.07 6.15

5.2 Results of operations Theresultsoftheschemearesetoutintheannualfinancialstatements,andthetrusteesbelievethatnofurther clarificationisrequired.

5.3 Solvency ratio2011 2010

R R

Totalmembers’fundsperbalancesheet 55,594,926 45,023,223 Less: Available-for-sale reserve (519,173) (499,668)

Accumulated funds per Regulation 29 55,075,753 44,523,555

Gross contributions 67,407,853 61,868,974

Solvency ratio:(Accumulated funds/Gross annual contribution income x 100) 81.7% 72.0%

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6 ACTUARIAL SERVICES TheScheme’sactuarywasconsultedforthe2012budgetreviewandindeterminingthecontributionandbenefit levels for 2012. 7 EVENTS AFTER STATEMENT OF FINANCIAL POSITION DATE There have been no events that have occurred subsequent to the end of the accounting period that affect the annual financialreportandthatthetrusteesconsidershouldbebroughttotheattentionofthemembersofthescheme. 8 INVESTMENTS IN AND LOANS TO PARTICIPATING EMPLOYERS OF MEMBERS OF THE MEDICAL SCHEME AND TO OTHER RELATED PARTIES The scheme holds no investments in participating employers of scheme members. 9 RELATED PARTY TRANSACTIONS RelatedpartytransactionsaresetoutinNote14tothefinancialstatements. 10 AUDIT COMMITTEE An audit committee was established in accordance with the provisions of the Act. The committee is mandated by the Board of Trustees by means of written terms of reference as to its membership, authority and duties. The committee consistsoffivemembers,ofwhichtwoaremembersoftheBoardofTrustees.Themajorityofthemembers,including thechairperson,arenotofficersofthemedicalschemeoritsthirdpartyadministrator.Thecommitteemetontwo occasions during the course of the year. In accordance with the provisions of the Act, the primary responsibility of the committee is to assist the board of trusteesincarryingoutitsdutiesrelatingtothescheme’saccountingpolicies,internalcontrolsystemsandfinancial reportingpractices.Theexternalauditorsformallyreporttothecommitteeoncriticalfindingsarisingfromauditactivities. Thecommittee,duringtheyearunderreviewanduptothedateofapprovalofthefinancialstatements,comprised:

Name DetailsM Reid ChairpersonT Davies IndependentC Fontaine (Alternate: R Harris) IndependentE Koji TrusteeJ Tubb Trustee Appointed 24 November 2011C de Kock Trustee Resigned 03 October 2011

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5.4 Reserve accountsMovements in the reserves are set out in the Statement of Changes in Funds and Reserves. There have been no unusual movements that the trustees believe should be brought to the attention of the members of the scheme.

5.5 Outstanding claimsThebasisofcalculationoftheoutstandingclaimsprovisionisdiscussedinNote5totheannualfinancialstatementsandthisisconsistentwiththeprioryear.MovementsintheoutstandingclaimsprovisionaresetoutinNote5totheannualfinancialstatements. There have been no unusual movements that the trustees believe should be brought to the attention of the members of the scheme.



11 BOARD OF TRUSTEES AND AUDIT COMMITTEE MEETING ATTENDANCE The following schedule sets out the Board of Trustees and Audit Committee meeting attendances. Trustee’s remunerationisdisclosedinNote10totheannualfinancialstatements.

Trustee/Committee MemberBoard

MeetingsAudit

Committee Meetings

Other Sub Committee Meetings

A B A B A B* C Froneman 5 4 - - - -* K Heisi 4 - - - - -* M Schutte 2 1 - - - -* R Daizana (Alternate: J Rabothata) 5 2 - - - -* J Rabothata 3 0 - - - -* E Gilbert (Alternate: L Lekgoathi) 5 5 - - - -* J Mpe 5 4 - - - -* W Soutter 3 3 - - 2 2* E Koji 5 5 2 2 2 1* J Tubb 1 1 - - - -* C de Kock 4 4 1 1 2 2

M Reid - - 2 2 - -T Davies - - 2 1 - -C Fontaine - - 2 1 - -R Harris - - 1 1 - -

A - Total possible number of meetings could have attended. B - Actual number of meetings attended. * Trustee/Alternate Trustee

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11 NON-COMPLIANCE WITH THE ACT In accordance with the Council for Medical Schemes circular 11/2006 the scheme is required to report all non-compliance with the Act noted during the course of the audit irrespective of whether the auditor considers the non-compliance as material or immaterial. 12.1 Payment of contributions Section 26(7) of the Act requires contributions to be paid to a scheme not later than three days after payment thereof becoming due. Whilst every effort is made to enforce this requirement the onus is on the member/employer group to ensurecompliance.Duringthefinancialyearcertaincontributionswereidentifiedthatwerenotpaidtothescheme within three days of becoming due. The non-compliance could increase the liquidity risk to the scheme. Credit control procedures are followed to collect outstanding amounts. Members are suspended when contributions are not paid. As a result payment of claims for suspended members are withheld until outstanding amounts have been settled. 12.2 Board of Trustees Section 57(1) of the Act requires a medical scheme to have a Board of Trustees to manage the business contemplated by the medical scheme in accordance with the applicable laws and the rules of such medical scheme. The rules of the scheme provide for a minimum of eight trustees. Due to the resignation of K Heisi, on 11 October 2011, the Board consisted of only seven trustees. TheBoardofTrusteesisintheprocessofselectingasuitablecandidatetofillthevacancy.

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THE BUILDING AND CONSTRUCTION INDUSTRY MEDICAL AID FUNDSTATEMENT OF FINANCIAL POSITION


Notes 2011 2010R R

ASSETS

Non-current assetsAvailable-for-sale investments 2 583,323 563,818

Current assets 60,868,163 50,234,991 Trade and other receivables 3 1,406,182 1,887,184 Cash and cash equivalents 4 59,461,981 48,347,807

Total assets 61,451,486 50,798,809

FUNDS AND LIABILITIES

Members’ funds 55,594,926 45,023,223 Accumulated funds 55,075,753 44,523,555 Available-for-sale reserve 519,173 499,668

Current liabilities 5,856,560 5,775,586 Outstanding claims provision 5 4,600,000 4,250,000 Trade and other payables 6 1,256,560 1,525,586

Total funds and liabilities 61,451,486 50,798,809

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THE BUILDING AND CONSTRUCTION INDUSTRY MEDICAL AID FUNDSTATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2011

Notes 2011 2010R R

Net contribution income 7 67,407,853 61,868,974

Relevant healthcare expenditure (50,034,943) (49,311,171)Net claims incurred (50,034,943) (49,311,171) Claims incurred 8 (50,039,307) (49,551,121) Third party claim recoveries 4,364 239,950

Gross healthcare result 17,372,910 12,557,803

Managed care: management services 9 (898,423) (776,884)Administration expenditure 10 (8,974,103) (8,124,302)Broker commission (4,168) -

Net healthcare result 7,496,216 3,656,617

Other income 3,055,982 3,009,120 Investment income 11 3,044,377 3,008,475 Sundry income 12 11,605 645

Other expenditure Asset management fees - -

Net surplus for the year 10,552,198 6,665,737

Other comprehensive income 19,505 103,884 Unrealised gains on revaluation of available-for-sale investments (Note 2) 19,505 103,884

Total comprehensive income for the year 10,571,703 6,769,621

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THE BUILDING AND CONSTRUCTION INDUSTRY MEDICAL AID FUNDSTATEMENT OF CHANGES IN FUNDS AND RESERVES


Accumulated funds

Available-for-sale reserve

Total members’

fundsR R R

Balance at 1 January 2010 37,857,818 395,784 38,253,602

Totalcomprehensivedeficitfortheyear 6,665,737 103,884 6,769,621 Surplus for the year 6,665,737 - 6,665,737 Other comprehensive loss - 103,884 103,884

Balance at 1 January 2011 44,523,555 499,668 45,023,223

Total comprehensive income for the year 10,552,198 19,505 10,571,703 Net surplus for the year 10,552,198 - 10 552,198 Other comprehensive income - 19,505 19,505

Balance at 31 December 2011 55,075,753 519,173 55,594,926

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THE BUILDING AND CONSTRUCTION INDUSTRY MEDICAL AID FUNDSTATEMENT OF CASH FLOWS


Notes 2011 2010R R

Cashflowsfromoperatingactivities

Cashflowsfromoperationsbeforeworkingcapitalchanges 13 7,507,821 3,657,262

Working capital changes: - Decrease/(Increase) in trade and other receivables 481,002 (1,024,091) - (Decrease)/Increase in trade and other payables (269,026) 556,986 - Increase/(Decrease) in outstanding claims provision 350,000 (360,000)

Cash generated from operating activities 8,069,797 2,830,157

Cashflowsfrominvestingactivities

Interest received 3,021,160 2,987,511 Dividends received 23,217 20,964

Cash generated from investing activities 3,044,377 3,008,475

Net increase in cash and cash equivalents 11,114,174 5,838,632

Cash and cash equivalents at beginning of year 48,347,807 42,509,175

Cash and cash equivalents at end of year 4 59,461,981 48,347,807

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THE BUILDING AND CONSTRUCTION INDUSTRY MEDICAL AID FUNDNOTES TO THE ANNUAL FINANCIAL STATEMENTS


1 PRINCIPAL ACCOUNTING POLICIES The following are the principal accounting policies used by the scheme, which are consistent with those of the previous year. 1.1 Basis of preparation ThefinancialstatementsarepreparedinaccordancewithInternationalFinancialReportingStandards(IFRS)onthe historicalcostconvention,exceptforfinancialinstruments,whicharecarriedatfairvalue. Critical accounting judgements and areas of key sources of estimation uncertainty The scheme makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,rarelyequaltherelatedactualresults. Certaincriticalaccountingjudgementsinapplyingthescheme’saccountingpoliciesandkeyassumptionsconcerning thefutureandotherkeysourcesofestimationuncertaintyatthestatementoffinancialpositiondate,thathavea significantriskofcausingamaterialadjustmenttothecarryingamountsofassetsandliabilitiesinthenextfinancial year, are disclosed below. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The ultimate liability arising from claims made under insurance contracts There are some sources of uncertainty that need to be considered in the estimate of the liability that the scheme will ultimatelypayforsuchclaims.Initialestimatesaremadebytheadministrator’sstaffrelatingtothebestcalculations on reported claims and derived as the claims process develops. All estimates are revised and adjusted at year-end by management. New standards, amendments and interpretations effective in 2011 and relevant to the scheme The following new standards, amendments and interpretations are effective for the current financial year and relevant to the scheme:

TitleEffective date - Financial year

commencing on or after

Improvements to IFRS 7 Financial Instruments: Disclosures 1 Jan 2011Improvements to IAS 1 Presentation of Financial Statements 1 Jan 2011IAS 24 Related Party Disclosures 1 Jan 2011

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1 PRINCIPAL ACCOUNTING POLICIES (continued) 1.1 Basis of preparation (continued) New standards, amendments and interpretations not yet effective and not expected to be relevant to the scheme The followingnewstandards,amendmentsand interpretationsareeffective for thecurrentfinancialyearbutnot relevanttothescheme’soperations:



IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments 1 Jan 2011Amendments to IFRS 3 Business Combinations 1 Jan 2011Amendments to IAS 7 Consolidated and Separate Financial Reporting 1 Jan 2011Improvements to IAS 34 Interim Financial Reporting 1 Jan 2011Improvements to IFRIC 13 Customer Loyalty Programmes 1 Jan 2011Amendments to IFRIC 14 and IAS 19

TheLimitonaDefinedBenefitAsset,MinimumFundingRequirements and their Interaction 1 Jan 2011

New standards, amendments and interpretations not yet effective but expected to be relevant to the scheme The following new standards, amendments and interpretations are mandatory for accounting periods as indicated and are expected to be applicable to the scheme:

TitleEffective date -Financial year


Amendments to IFRS 7 Disclosures - Transfers of Financial Assets 1 Jul 2011Amendments to IAS 1 Presentation of Items of Other Comprehensive Income 1 Jul 2012IFRS 12 Disclosure of Interests in Other Entities 1 Jan 2013IFRS 13 Fair Value Measurement 1 Jan 2013IFRS 9 Financial Instruments 1 Jan 2013

16



1 PRINCIPAL ACCOUNTING POLICIES (continued) 1.1 Basis of preparation (continued) New standards, amendments and interpretations not yet effective and not expected to be relevant to the scheme The following new standards, amendments and interpretations are mandatory for accounting periods as indicated however it is not expected to be applicable to the scheme:



IAS 27 Separate Financial Statements (2011) 1 Jan 2013IFRS 10 Consolidated Financial Statements 1 Jan 2013IAS 19 EmployeeBenefits 1 Jul 2013IFRS 11 Joint Arrangements 1 Jul 2013IAS 28 Investment in Associates 1 Jul 2013

1.2 Financial instruments Recognition Financialassetsandliabilitiesarerecognisedinthescheme’sstatementoffinancialpositionwhenitbecomesa party to the contractual provisions of the instrument. Such recognition presumes that the risks and rewards of ownership andthecontroloverthesefinancialassetsandliabilitiesarevestedinthescheme. Measurement Financialinstrumentsareinitiallymeasuredatfairvalueplus,inthecaseoffinancialassetsandliabilitiesnotatfair valuethroughprofitorloss,transactioncoststhataredirectlyattributabletotheacquisitionorissueofthefinancial asset or liability. Subsequent to initial recognition, these instruments are measured as set out below. Investments All purchases and sales of investments are recognised on the trade date, which is the date that the scheme commits to purchase or sell the asset. Cost of purchases includes transaction costs. Available-for-sale investments are subsequently carried at fair value. Unrealised gains and losses arising from changes in the fair value of the available-for-sale investments are included in the available-for-sale reserve and are taken to the statement of comprehensive income. Once the available-for-sale investment is sold, the realised fair value gain or loss on the available-for-sale investments is included in the statement of comprehensive income as investment income. Trade and other receivables Trade and other receivables are measured on initial recognition at fair value and are subsequently measured at amortised cost using the effective interest method. An appropriate allowance for estimated irrecoverable amounts is recognised in the statement of comprehensive income when there is objective evidence that the asset is impaired. Thisallowancerecognisedismeasuredasthedifferencebetweentheasset’scarryingamountandthepresentvalue oftheestimatedfuturecashflows.Permanentimpairmentsarewrittenofftothestatementofcomprehensiveincome whenidentified.

17



1 PRINCIPAL ACCOUNTING POLICIES (continued) 1.2 Financial instruments (continued) Cash and cash equivalents Cash and cash equivalents comprise cash on hand, deposits held on call with banks, other short-term liquid investments thatarereadilyconvertibletoaknownamountofcashandaresubjecttoaninsignificantriskofchangeinvalue. Financial liabilities Financial liabilities are measured on initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest method. Offset Wherealegallyenforceablerightofoffsetexistsforrecognisedfinancialassetsandfinancialliabilities,andthereis anintentiontosettletheliabilityandrealisetheassetsimultaneouslyortosettleonanetbasis,allrelatedfinancial effects are offset. Derecognition Financialassetsarederecognisedwhentherightstoreceivecashflowsfromthemhaveexpiredorwheretheyhave been transferred, and the scheme has also transferred substantially all risks and rewards of ownership. Afinancialliabilityisderecognisedwhenthecontractualobligation(depositcomponent)isdischargedasexpired. 1.3 Provisions Provisions are recognised when the scheme has a present legal or constructive obligation as a result of past events, forwhichitisprobablethatanoutflowofeconomicbenefitswillberequiredtosettletheobligation,andareliable estimate can be made of the amount of the obligation. Where the effect of discounting to present value is material, provisionsareadjustedtoreflectthetimevalueofmoney. 1.4 Outstanding claims Claimsoutstandingcompriseprovisionsforthescheme’sestimateoftheultimatecostofsettlingallclaimsincurred butnotyetreportedatthestatementoffinancialpositiondate.Claimsoutstandingaredeterminedasaccuratelyas possible on the basis of a number of factors, which include previous experience in claims patterns, claims settlement patterns, changes in the nature and number of members according to gender and age, trends in claims frequency, changes in the claims processing cycle, and variations in the nature and average cost incurred per claim. Estimated co-payments are deducted in calculating the outstanding claims provision. The scheme does not discount its provision for outstanding claims, since the effect of the time value of money is not considered material.

1.5 Insurance contracts Contractsunderwhichtheschemeacceptssignificantinsuranceriskfromanotherparty(themember)byagreeing tocompensatethememberorotherbeneficiaryifaspecifieduncertainfutureevent(theinsuredevent)adversely affectsthememberorotherbeneficiaryareclassifiedasinsurancecontracts.Thecontractsissuedcompensatethe scheme’smembersforhealthcareexpensesincurred.

18



1 PRINCIPAL ACCOUNTING POLICIES (continued) 1.6 Contribution income Contributions on member insurance contracts are accounted for monthly when their collection in terms of the insurance contract is reasonably certain. The earned portion of contributions received is recognised as revenue. Contributions are earned from the date of attachment of risk, over the indemnity period on a straight-line basis. 1.7 Relevant healthcare expenditure Relevant healthcare expenditure consists of net claims incurred. 1.8 Claims incurred and net claims incurred Claims incurred comprise the total estimated cost of all claims arising from healthcare events that have occurred in the year and for which the scheme is responsible, whether or not reported by the end of the year. Net claims incurred represent claims incurred, net of recoveries from members for co-payments, after taking into account recoveries from third parties. 1.9 Liabilities and related assets under liability adequacy test The liability for insurance contracts is tested for adequacy by discounting current estimates of all future contractual cashflows,includingrelatedcashflowssuchasclaimshandlingcosts,andcomparingthisamounttothecarrying valueoftheliabilitynetofanyrelatedassets(i.e.thevalueofbusinessacquired).Whereashortfallisidentified,an additionalprovisionismadeandtheschemerecognisesthedeficiencyinincomefortheyear. 1.10 Reimbursements from the Road Accident Fund (RAF) The scheme grants assistance to its members in defraying expenditure incurred in connection with the rendering of any health service. Such expenditure may be in connection with a claim that is also made to the RAF, administered in terms of the Road Accident Fund Act No. 56 of 1996. If the member is reimbursed by the RAF, they are obliged contractually to cede that payment to the scheme to the extent that they have already been compensated.

A reimbursement from the RAF is a possible asset that arises from claims submitted to the RAF and whose existence willbeconfirmedonlybytheoccurrenceornon-occurrenceofoneormoreuncertainfutureeventsnotwhollywithin the control of the scheme. The contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefitswillarise,theassetandtherelatedincomearerecognisedinthefinancialstatementsoftheperiodinwhich thechangeoccurs.Ifaninflowofeconomicbenefitshasbecomeprobable,theschemedisclosesthecontingent asset.Recoveries fromtheRAFarereflectedas thirdpartyclaimrecoveries in thestatementofcomprehensive income. 1.11 Investment income Investment income comprises interest, dividends and realised gains on available-for-sale investments. Interest income is recognised on a yield to maturity basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the scheme. Dividend income from investments is recognised when the right to receive payment is established. Realised gains arising on the sale of available-for-sale investments are recognised in the statement of comprehensive income.

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1 PRINCIPAL ACCOUNTING POLICIES (continued) 1.12 Impairment losses Thecarryingamountsofthescheme’sassetsarereviewedateachstatementoffinancialpositiondatetodetermine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the statement of comprehensive income. Calculation of recoverable amount Thescheme’sreceivablesarenotdiscountedduetotheshorttermnatureoftheirrecoverability. Reversals of impairment An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.An impairment loss isreversedonly to theextent that theasset’scarryingamountdoesnotexceedthe carrying amount that would have been determined if no impairment loss had been recognised.

20



2011 2010R R

2 AVAILABLE-FOR-SALE INVESTMENTS

Cost at beginning of year 63,605 63,605 Unrealised gains on revaluation 500,213 396,329

Fair value at beginning of the year 563,818 459,934

Unrealised gains on revaluation 19,505 103,884

Fair value at end of the year 583,323 563,818

The investment included above consists of: Listed equities on the JSE 583,323 563,818

Available-for-saleinvestmentsareclassifiedasnon-currentassets,unlesstheyareexpectedtoberealisedwithin twelvemonthsofthestatementoffinancialpositiondateorunlesstheywillneedtobesoldtoraiseoperatingcapital.

Aregisterofinvestmentsisavailableforinspectionattheregisteredofficeofthescheme.

2011 2010R R

3 TRADE AND OTHER RECEIVABLES

Insurance receivables Contributions outstanding 1,201,802 1,402,604 Recoveries from members for co-payments 1,734 3,541

1,203,536 1,406,145

Non-insurance receivables Interest receivable on investments 193,812 439,980 Prepaid expenses 8,834 14,247 Other receivables - 26,812

202,646 481,039

1,406,182 1,887,184

The carrying amounts of trade and other receivables approximate their fair values due to the short-term maturities of these assets.

21



2011 2010R R

4 CASH AND CASH EQUIVALENTS

Call accounts 689,716 609,781 Current accounts 1,668,219 1,600,144 Money market instruments 15,401,377 10,715,193 Term deposits 41,702,669 35,422,689

59,461,981 48,347,807

The weighted average effective interest rates are: Money market instruments 5.61% 6.36% Term deposits 5.99% 7.06%

The average maturities are: Money market instruments 43 days 42 days Term deposits 123 days 181 days

The carrying amounts of cash and cash equivalents approximate their fair values due to the short-term maturities of these assets.

2011 2010R R

5 OUTSTANDING CLAIMS PROVISION

Balance at beginning of the year 4,250,000 4,610,000 Payments in respect of prior year (4,190,058) (4,429,282)

Over provision in prior year (Note 8) 59,942 180,718 Adjustment for current year 4,540,058 4,069,282

Balance at end of the year 4,600,000 4,250,000

Analysis of outstanding claims provisionEstimated gross claims 4,722,590 4,333,348 Less: estimated recoveries from member co-payments (122,590) (83,348)

Balance at end of the year 4,600,000 4,250,000

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5 OUTSTANDING CLAIMS PROVISION (continued) Process used to determine the assumptions Inordertoqualifyforbenefitsanyclaimmust,unlessotherwisearranged,besubmittedtotheschemenotlaterthan the last day of the fourth month following the month in which the healthcare service was rendered. The cost of outstanding claims is estimated as follows: - actual claims notified and assessed during the twomonths succeeding the financial year end of the scheme, relating to the year under review, and - an estimate of claims, using claims run off tables, for the third and subsequent months succeeding the financialyearendofthescheme.Historicalclaimsdevelopmentinformationisusedontheassumption that this pattern will occur again in the future. Eachnotifiedclaim isassessedonaseparate,casebycasebasiswithdueregard to theclaimcircumstances, information available from managed care: management services and historical evidence of the size of similar claims. The provisions are based on information currently available. However, the ultimate liabilities may vary as a result of subsequent developments. Therearereasonswhythismaynotbethecase,which,insofarastheycanbeidentified,havebeenallowedforby modifying the method. Such reasons include: - changes in processes that affect the development/recording of claims paid and incurred (such as changes in claims reversing procedures); - economic,legal,politicalandsocialtrends(resultingindifferentthanexpectedlevelsofinflationand/or minimummedicalbenefitstobeprovided); - changes in composition of members and their dependents; and - randomfluctuations,includingtheimpactoflargelosses. Theschemebelievesthattheliabilityforclaimsreportedinthestatementoffinancialpositionisadequateandno additional provision is required in terms of a liability adequacy test. Changes in assumptions and sensitivities to changes in key variables No sensitivity analysis has been presented as the process used to determine the estimated cost of outstanding claims presents with a high degree of accuracy.

23



2011 2010R R

6 TRADE AND OTHER PAYABLES

Insurance payables Reported claims not yet paid 221,562 418,615 Unpresented cheques 15,935 12,457 Net contributions received in advance 332,090 316,887 Amounts due to members 36,699 207,636

606,286 955,595

Non-insurance payables Fees due to the administrator 473,507 414,659 Audit fees payable 108,300 93,480 Managed care: management services payable 48,371 49,722 Other payables and accrued expenses 20,096 12,130

650,274 569,991

1,256,560 1,525,586

The carrying amounts of trade and other payables approximate their fair values due to the short-term maturities of these liabilities. The scheme accrues for audit fees as a constructive legal obligation arising from the requirement by the Medical Schemes Act to have a year-end audit performed.

2011 2010R R

7 NET CONTRIBUTION INCOME

Net contributions 67,407,853 61,868,974

8 RELEVANT HEALTHCARE EXPENDITURE

Current years claims 49,689,307 49,911,121

Movement in outstanding claims provision 350,000 (360,000) Over provision in prior year (Note 5) (59,942) (180,718) Adjustment for current year 409,942 (179,282)

Claims incurred 50,039,307 49,551,121

9 MANAGED CARE: MANAGEMENT SERVICES

Pharmacybenefitmanagement 898,423 776,884

24



2011 2010R R

10 ADMINISTRATION EXPENSES

Administrator’sfees 7,614,265 6,986,008 Investment data collation fees 49,075 21,507 Association fees 39,168 37,871 Audit fees 108,300 93,480 Bank charges 187,885 177,748 Fidelity guarantee and professional indemnity insurance 17,192 17,280 Fraud management services 354,584 337,870 Registrar’slevies 105,609 93,158 Trustee’sremunerationandconsiderationexpenses(refertotablebelow) 33,750 28,000 Legal fees - 3,631 Actuarial fees 19,984 19,494 Principalofficer'sfees 208,552 193,982 Marketing 162,621 - Other expenses 73,118 114,273

8,974,103 8,124,302

Trustee's remuneration and consideration expensesC de Kock 6,750 3,500 J Tubb 750 - C Froneman 3,000 2,000 K Heisi - 500 M Schutte 750 1,000 W Soutter 3,750 - R Daizana (Alternate: J Rabothata) 1,500 4,500 E Koji 7,500 2,500 E Gilbert (Alternate: L Lekgoathi) 5,250 1,000 J Mpe 4,500 2,500 S Molelekeng - 500 M de Castro - 1,500 W Makhubele - 5,000 G Swanepoel - 3,500 For meeting attendance 33,750 28,000

11 INVESTMENT INCOME

Income from available-for-sale investments Dividend income 23,217 20,964

Interest from cash and cash equivalents Interest on current accounts 24,252 25,040 Interest on money market instruments 686,184 658,469 Interest on term deposits 2,310,724 2,304,002

3,021,160 2,987,511

3,044,377 3,008,475 25



2011 2010R R

12 SUNDRY INCOME

Duplicate membership cards 95 645Other Income 11,510 -

11,605 645

13 CASH FLOWS FROM OPERATIONS BEFORE WORKING CAPITAL CHANGES

Surplus for the year 10,552,198 6,665,737 Adjustment for: Investment income (Note 11) (3,044,377) (3,008,475)

7,507,821 3,657,262

14 RELATED PARTY TRANSACTIONS Transactions with key management personnel Key management personnel are those persons having authority and responsibility for planning, directing and controlling theactivitiesofthescheme.KeymanagementpersonnelincludetheBoardofTrusteesandthePrincipalOfficer.

2011 2010R R

Trustee’s remuneration (Note 10) (33,750) (28,000)PrincipalOfficer’sfees(Note10) (208,552) (193,982)

Contributions and claims

Statement of comprehensive incomeNet contributions 88,121 58,246 Claims incurred 25,229 81,957

StatementoffinancialpositionContributions outstanding 1,830 1,680 Claims reported not yet paid - -

The terms and conditions of the related party transactions were as follows:

Transaction Nature of transaction and terms and conditions thereofNet contributions This constitutes the contributions paid by the related parties, in their individual

capacity as members of the scheme. All contributions were collected at the same terms as applicable to third parties.

Claims incurred This constitutes amounts claimed by the related parties, in their individual capacity as members of the scheme. All claims were paid out in terms of the rules of the scheme, as applicable to third parties.

26



2011 2010R R

Administration fees and Investment data collation fees 7,663,340 7,007,515

Balance due to Universal Healthcare Administrators (Pty) Ltd at the end of the year 473,507 414,659

Terms and conditions of the administration agreement The administration agreement is in terms of the rules of the scheme and in accordance with instructions given by the trusteesof thescheme.Theagreement isautomatically renewedeachyearunlessnotificationof termination is received. The scheme has the right to terminate the agreement subject to six calendar months written notice. Administration fees are payable monthly in arrears by the seventh day of each month. 15 INSURANCE RISK MANAGEMENT 15.1 Nature and extent of risks arising from insurance contracts The scheme issues contracts that transfer insurance risk. This section summarises these risks and the way the scheme manages them. 15.2 Insurancerisk-descriptionofbenefitoptions Thetypesofbenefitsofferedbytheschemeinreturnformonthlycontributionsareindicatedbelow: In-hospital benefits cover the costs incurred bymembers, whilst they are in hospital to receive pre-authorised treatment for certain medical conditions. Chronic benefits cover the cost of certain prescribedmedicines consumed bymembers for chronic conditions/ diseases, such as high blood pressure, cholesterol and asthma. Day-to-daybenefitscoverthecost(upto100%oftheNationalHealthReferencePriceListtariff)ofallout-of-hospital medical attention, such as visits to general practitioners and dentists as well as prescribed non-chronic medicines. Theabovebenefitsareextendedtotheprincipalmemberandtheircontributingdependants.

14 RELATED PARTY TRANSACTIONS (continued)

Transactionswithpartiesthathavesignificantinfluenceoverthescheme UniversalHealthcareAdministrators(Pty)Ltdprovidesadministrationservicestotheschemeandhassignificant influenceovertheschemeasitparticipatesinthescheme’sfinancialandoperatingpolicydecisions,butdoesnot control the scheme. During the year the scheme entered into the following transactions with these related parties under terms that were no less favourable than those available from third parties: Universal Healthcare Administrators (Pty) Ltd

27

Transaction Nature of transaction and terms and conditions thereofContributions outstanding This constitutes outstanding contributions receivable. The amounts are due immediately.

No provision for doubtful debts has been raised on these amounts.Claims reported not yet paid These are claims that have been reported, but not yet paid due to the fact that the

scheme does a payment run twice a month. All claims are settled within 30 days of being received.



15 INSURANCE RISK MANAGEMENT (continued)

15.3 Risk management objectives and policies for mitigating insurance risk The primary insurance activity carried out by the scheme assumes the risk of loss from members and their dependants that are directly subject to the risk. This risk relates to the health of the scheme members. As such the scheme is exposed to the uncertainty surrounding the timing and severity of claims under the contract. Theschememanagesitsinsuranceriskthroughbenefitlimitsandsub-limits,approvalproceduresfortransactions that involvepricingguidelines,pre-authorisationandcasemanagement,serviceproviderprofilingaswellas the monitoring of emerging issues. The scheme uses several methods to assess and monitor insurance risk exposures both for individual types of risks insured and overall risks. The principal risk is that the frequency and severity of claims is greater than expected. Insurance events are, by their nature, random, and the actual number and size of events during any one year may vary from those estimated using established statistical techniques. The following tables summarise the concentration of insurance risk, with reference to the carrying amount of the insuranceclaimsincurred,byagegroupandinrelationtothetypeofriskcovered/orbenefitsprovided.

Age grouping (in years) In-hospital ChronicNon-PMB Day-to-day Total

2011 R R R R< 26 4,210,486 49,674 3,686,789 7,946,949 26 – 35 4,637,719 87,800 4,002,127 8,727,646 36 – 50 6,441,237 373,767 6,545,603 13,360,607 51 - 65 6,649,595 666,541 4,668,742 11,984,878 > 65 5,478,547 708,647 1,482,033 7,669,227

27,417,584 1,886,429 20,385,294 49,689,307

Movement in outstanding claims provision 350,000 Total (Note 8) 50,039,307

Age grouping (in years) In-hospital ChronicNon-PMB Day-to-day Total

2010 R R R R< 26 4,394,821 67,247 3,962,006 8,424,074 26 – 35 3,477,831 69,496 3,779,428 7,326,755 36 – 50 7,405,260 413,310 6,324,956 14,143,526 51 - 65 8,046,374 681,535 4,090,790 12,818,699 > 65 5,242,876 725,814 1,229,377 7,198,067

28,567,162 1,957,402 19,386,557 49,911,121

Movement in outstanding claims provision (360,000)Total (Note 8) 49,551,121

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15 INSURANCE RISK MANAGEMENT (continued)

15.3 Risk management objectives and policies for mitigating insurance risk (continued) Thescheme’sstrategyseeksdiversitytoensureabalancedportfolioandisbasedonalargeportfolioofsimilarrisks over a number of years and, as such, it is believed that this reduces the variability of the outcome. The strategy is setoutintheannualbusinessplan,whichspecifiesthebenefitstobeprovidedbyeachoption,thepreferredtarget market and demographic split thereof. The scheme has the right to change the terms and conditions of all contracts. Management information including contribution income and claims ratios by option, target market and demographic split, is reviewed monthly. There is also an underwriting review programme that reviews a sample of contracts on a quarterly basis to ensure adherence tothescheme’sobjectives. 15.4 Risk transfer arrangement The scheme did not enter into any risk transfer arrangements during the year. 15.5 Claims development Claims development tables are not presented since the uncertainty regarding the amount and timing of claims payments is typically resolved within one year. 15.6 Sensitivity to insurance risk Asensitivityanalysisisprovidedbelowreflectingtheimpactonthescheme’sreportedresultsfortheyearassuming a 1% increase/(decrease) in the cost of claims incurred with all other variables held constant.

Increase of 1%

Decrease of 1 %

R R2011In-hospital claims incurred (274,176) 274,176 Chronic Non-PMB claims incurred (18,864) 18,864 Day-to-day claims incurred (203,853) 203,853 Total (496,893) 496,893

2010In-hospital claims incurred (285,672) 285,672 Chronic Non-PMB claims incurred (19,574) 19,574 Day-to-day claims incurred (193,865) 193,865 Total (499,111) 499,111

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16 FINANCIAL RISK MANAGEMENT Thescheme’sactivitiesexpose it toavarietyoffinancial risks, including theeffectsofchanges inequitymarket prices and interest rates.The scheme’s overall riskmanagement programme focuses on the unpredictability of financialmarketsandseekstominimisepotentiallyadverseeffectsonthefinancialperformanceoftheinvestments that the scheme holds to meet its obligations to its members. Risk management and investment decisions are made by the Board of Trustees. 16.1 Market risk Currency risk TheschemeoperatesinSouthAfricaandthereforeitscashflowsaredenominatedinSouthAfricanRand(ZAR).No exposure exists to foreign currency risk. Interest rate risk Thescheme’sinvestmentpolicyistoholdthemajorityofallinvestmentsininterestbearinginstruments.Asignificant portionofthescheme’sinvestmentsisthereforeexposedtochangesinthemarketinterestrate. Thetablebelowsummarises thescheme’sexposure to interest raterisk. Included in the tableare thescheme’s investments at carrying amounts, categorised by the earlier of contractual re-pricing or maturity dates.

Up to 1 month

2 - 3 months

4 - 12 months

Non-interest bearing

(no stated maturity)

Carrying amount

R R R R R2011Available-for-sale investments - - - 583,323 583,323 Cash and cash equivalents 22,799,149 6,622,534 30,040,298 59,461,981 Total 22,799,149 6,622,534 30,040,298 583,323 60,045,304

2010Available-for-sale investments - - - 563,818 563,818 Cash and cash equivalents 19,504,084 - 28,843,723 48,347,807 Total 19,504,084 - 28,843,723 563,818 48,911,625

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16 FINANCIAL RISK MANAGEMENT (continued)

16.1 Market risk (continued) Interestraterisk(continued) A sensitivity analysis is provided below assuming a 1% increase/(decrease) in the market interest rate with all other variablesheldconstant.Onlycashandcashequivalentsaredirectlyexposedtofluctuationsinthemarketinterestrate.

Increase of 1%

Decrease of 1 %

R R2011Increase/(decrease) in surplus 893,540 (893,540)Increase/(decrease) in asset 893,540 (893,540)Increase/(decrease)inmembers’funds 893,540 (893,540)

2010Increase/(decrease) in surplus 454,285 (454,285)Increase/(decrease) in asset 454,285 (454,285)Increase/(decrease)inmembers’funds 454,285 (454,285)

Equity risk Sensitivityanalysis forequity risk illustrateshowchanges in the fair valueofequitysecuritieswill fluctuatedue tochangesinmarketprices,whetherthesechangesarecausedbyfactorsspecifictotheindividualequityissuer orfactorsaffectingallsimilarsecuritiestradedinthemarket.Theequitysecuritiesdescribedinthenotesareclassified as available-for-sale and are invested in Sanlam and Old Mutual. An increase/(decrease) of 10% in the share price would result in an impact of R58 332 (2010: R56 382) on the fair value of the investment. 16.2 Credit risk Thescheme’sfinancialassetscompriseavailable-for-saleinvestments,tradeandotherreceivablesandcashand cashequivalents.Thecarryingamountofthesefinancialassetsrepresentsthemaximumcreditexposureasfollows:

2011 2010R R

Available-for-sale investments 583,323 563,818 Insurance receivables 1,203,536 1,406,145 Non-insurance receivables 202,646 481,039 Cash and cash equivalents 59,461,981 48,347,807

61,451,486 50,798,809

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16 FINANCIAL RISK MANAGEMENT (continued) 16.2 Credit risk (continued) With respect to available-for-sale investments and cash and cash equivalents, the scheme limits its counterparty exposure by only dealingwith financial institutions that have high external credit ratings.The investment policy stipulatesthatcashandcashequivalentscanonlybeinvestedinfinancialinstitutionswithaminimumcreditratingof AA-, as issued by a reputable credit rating agency. The scheme has a policy of limiting the amount of credit exposure toanyonefinancialinstitutioninaccordancewiththelimitationonassetrequirementsspecifiedintheRegulationsto the Medical Schemes Act.

Credit risk in respect of trade and other receivables is controlled through the application of credit monitoring procedures. Section 26(7) of the Medical Schemes Act requires all contributions to be paid to the scheme within 3 days of becoming due. Whilst every effort is made to enforce this requirement the onus is on the member/employer group to ensure compliance. The rules of the scheme provide for suspension and ultimately termination of membership afterspecifiedperiodsofarrears.Theamountspresentedinthestatementoffinancialpositionarenetofimpairment allowances.

TotalNeither

past due nor impaired

Past due but not impairedImpaired30 days 60 days 90 days >90 days

R R R R R R R2011Insurance receivables 1,203,536 1,114,289 84,446 4,801 - - -

Non-insurance receivables 202,646 202,646 - - - - - Total 1,406,182 1,316,935 84,446 4,801 - - -

2010Insurance receivables 1,406,145

1,208,431 187,971 8,205 1,538 - -

Non-insurance receivables 481,039 481,039 - - - - - Total 1,887,184 1,689,470 187,971 8,205 1,538 - -

Amounts outstanding are not impaired, as they are within the normal expected recovery period for such amounts.

32



16 FINANCIAL RISK MANAGEMENT (continued) 16.2 Credit risk (continued) Thecreditqualityoffinancialassetsthatareneitherpastduenorimpairedhasbeenassessedonthebasisofhistorical information about counter party default rates, as follows:

Up to 1 month

2 - 3 months

4 - 12 months Total

R R R R2011Outstanding claims provision 2,767,090 1,325,104 507,806 4,600,000 Trade and other payables 1,256,560 - - 1,256,560 Total 4,023,650 1,325,104 507,806 5,856,560

2010Outstanding claims provision 2,638,589 1,379,662 231,749 4,250,000 Trade and other payables 1,525,586 - - 1,525,586 Total 4,164,175 1,379,662 231,749 5,775,586

2011 2010R R

Insurance receivables Group 1 - New members (less than 6 months) 102,147 142,620 Group 2 - Existing members (more than 6 months) 1,010,408 1,062,270 On demand 1,734 3,541

1,114,289 1,208,431 Non-insurance receivables On demand 202,646 481,039

1,316,935 1,689,470

16.3 Liquidity risk Prudentliquidityriskmanagementimpliesmaintainingsufficientcashandmarketablesecurities.Theavailabilityof fundingthroughliquidholdingcashpositionswithvariousfinancialinstitutionsensuresthattheschemehastheability to fund its day-to-day operations. Thetablebelowsummarisesthescheme’sfinancialliabilitiescategorisedbytheearlierofcontractualre-pricingor expected maturity dates.

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16 FINANCIAL RISK MANAGEMENT (continued) 16.4 Fair value estimation Valuation techniques and assumptions applied for the purpose of measuring fair value Thefairvalueofthepubliclytradedfinancial instrumentsheldasavailable-for-salesecuritiesisbasedonquoted marketpricesasatthestatementoffinancialpositiondate. In assessing the fair value of other financial instruments, the scheme uses a variety of methods and makes assumptions that are based on market conditions existing at each statement of financial position date. Other techniques,suchasestimateddiscountedvalueoffuturecashflows,areusedtodeterminefairvaluefortheremaining financialinstruments. Thefacevalueslessanyestimatedcreditadjustmentsforfinancialassetsandliabilitieswithamaturityoflessthan oneyearareassumedtoapproximatetheirfairvalues.Thefairvalueoffinancialliabilitiesfordisclosurepurposes isestimatedbydiscounting the futurecontractual cashflowsat thecurrentmarket interest rateavailable to the schemeforsimilarfinancialinstruments. Fairvaluemeasurementsrecognisedinthestatementoffinancialposition(fairvaluehierachy) For financial assets recognised at fair value, disclosure is required of a fair value hierachy which reflects the significanceoftheinputsusedtomakethemeasurements. Level 1 fair value measurement represents those assets which are measured using unadjusted quoted prices for identical assets. The predominance of market inputs is actively quoted and can be validated through external sources or reliably interpolated if less observable. Level 2 fair value measurement represents those assets which are measured using inputs other than quoted prices that are observable for the assets either directly (as prices) or indirectly (derived from prices). They are often based onmodelpricingtechniquesthatareeffectivelydiscountprospectivecashflowstopresentvalueusingappropriate sector-adjustedcreditspreadscommensuratewiththesecurity’sduration,alsotakingintoconsiderationissuer-specific credit quality and liquidity. Ifoneormoreofthesignificantinputsisnotbasedonobservablemarketdata,thentheinstrumentisincludedin Level 3. ThefollowingtablerepresentstheScheme’sassetsmeasuredatfairvalueat31December2011:

2011 2010R R

Level 1 *Available-for-sale investments 583,323 563,818

*TherewerenoinvestmentsclassifiedasLevel2and3.

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16 FINANCIAL RISK MANAGEMENT (continued)

16.5 Capital adequacy risk Thescheme’sobjectivewhenmanagingcapitalistosafeguarditsabilitytocontinueasagoingconcerninorderto providebenefitsforitsstakeholders. Theprincipalriskisthatthefrequencyandseverityofclaimsisgreaterthanexpectedandthatthereareinsufficient reserves to provide for their settlement. The Medical Schemes Act, 131 of 1998 requires a minimum solvency ratio, calculated as accumulated funds ex pressedasapercentageofgrosscontributions,of25%.Thescheme’ssolvencyratiowas81.7%at31December2011 (2010: 72%). 17 NON-COMPLIANCE WITH THE MEDICAL SCHEMES ACT In accordance with the Council for Medical Schemes circular 11/2006 the scheme is required to report all non-compliance with the Act noted during the course of the audit irrespective of whether the auditor considers the non-compliance as material or immaterial. 17.1 Payment of contributions Section 26(7) of the Act requires contributions to be paid to a scheme not later than three days after payment thereof becoming due. Whilst every effort is made to enforce this requirement the onus is on the member/employer group to ensurecompliance.Duringthefinancialyearcertaincontributionswereidentifiedthatwerenotpaidtothescheme within three days of becoming due. The non-compliance could increase the liquidity risk to the scheme. Credit control procedures are followed to collect outstanding amounts. Members are suspended when contributions are not paid. As a result payment of claims for suspended members are withheld until outstanding amounts have been settled. 17.2 Board of Trustees Section 57(1) of the Act requires a medical scheme to have a Board of Trustees to manage the business contemplated by the medical scheme in accordance with the applicable laws and the rules of such medical scheme. The rules of the scheme provide for a minimum of eight trustees. Due to the resignation of K Heisi, on 11 October 2011, the Board consisted of only seven trustees. TheBoardofTrusteesisintheprocessofselectingasuitablecandidatetofillthevacancy. 18 EVENTS AFTER STATEMENT OF FINANCIAL POSITION DATE There have been no events that have occurred subsequent to the end of the accounting period that affect the annual financialreportandthatthetrusteesconsidershouldbebroughttotheattentionofthemembersofthescheme.

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