annual report - botswana stock exchange annual report 2014.pdfuniversity of science and technology...

ANNUAL REPORTANNUAL REPORT

01

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SERVICEGIVING OUR CUSTOMERS

We understand that any consumer’s experience 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.

7ENGEN BOTSWANA LIMITED | ANNUAL REPORT 2014

OURVALUES

01PERFORMANCEWe actively pursue, define, measure and recognise excellence in all business activities.

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

03EMPOWERMENTOur Employees have the capability, authority and 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.

04TEAMWORKWe work together as one team to realise Engen’s Vision - to the benefit of the whole organisation.

05INTEGRITYWe demonstrate ethical, fair and transparent behaviour. Our actions earn trust and respect from others.

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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.


FINANCIALHIGHLIGHTS

NET ASSET VALUE PER SHARE

31 December 2014

31 December 2013

31 December 2012

31 December 2011

31 March 2011

0 50 100

200

300

150

250

279.06 THEBE

275.24 THEBE

234.57 THEBE

200.92 THEBE

195.58 THEBE

ORDINARY SHAREHOLDERS INTEREST

31 December 2014

31 December 2013

31 December 2012

31 December 2011

31 March 2011

0 50 150

100

350

300

500

250

200

450

400

445,720 MIL

439,612 MIL

374,660 MIL

320,912 MIL

312,381 MIL

ATTRIBUTABLE PROFIT

31 December 2014

31 December 2013

31 December 2012

31 December 2011

31 March 2011

0

20 00

0

40 00

0

80 00

0

140 0

00

60 00

0

120 0

00

100 0

00

63,962 MIL

128,202 MIL

120,263 MIL

83,413 MIL

92,337 MIL

EARNINGS PER SHARE

31 December 2014

31 December 2013

31 December 2012

31 December 2011

31 March 2011

0 2010 30 50 908040 7060

40.80 THEBE

80.27 THEBE

75.30 THEBE

52.22 THEBE

57.81 THEBE

01

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ABOUT ENGEN

16 1500

135,000

40TONS

320,000

SUB SAHARAN COUNTRIES

SERVICE AND FILLING STATIONS

600 ENGEN FILLING STATIONS HAVE CONVENIENCE STORES

BARRELS PER DAY

Extensive storage and distribution infrastructure, including: depots, terminals, lubricant warehouses,a bitumen plant and aviation facilities.

OF PRODUCT PER HOUR INCLUDING LUBRICATING OILS BLENDING PLANT (IN DURBAN, SA) TOTALLING TO

LITRES PER DAY/ON A SINGLE SHIFT

Engen supplies the bulk fuel volume requirements of our South African market, our affiliates in Lesotho, Botswana and Swaziland, and half of our Namibian operation’s needs.

100%ENGEN LIMITED

Incorporated in South Africa

30%LOCAL

SHAREHOLDERS

100%ENGEN

BOTSWANA Ltd.

70%PETROLEUM INVESTMENT

HOLDINGS Ltd.Mauritius

100%ENGEN MARKETINGBOTSWANA (Pty) Ltd.

Engen Botswana Limited is a downstream petroleum marketer that markets petroleum products and provides convenience services through an extensive retail network.

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

Engen combines a proud record of operational excellence and dynamism with a strong commitment to the economies, communities and environments of the countries it operates in.

ENGEN LIMITEDCOMPANY STRUCTURE


OURPRESENCE

“Engen Botswana Limited is the only listed oil company in Botswana. Our citizen empowerment drive is demonstrated by our broad-based shareholding, with over 1,100 Batswana holding 30% of our equity. “

Our majority shareholder, Petroleum Investment Holdings Limited Mauritius, holds 70% of equity, and it in turn is 100% owned by Engen Limited, based in South Africa. As a result, we have greater access to relevant infrastructure in South Africa and Botswana. This ensures improved product availability in the landlocked country.

01

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ENGEN FILLING STATIONS

KAZUNGULA

RAMOKGWEBANA

SEBINA

FRANCISTOWN

NATA

MAUN

CHARLES HILL

GHANZI

KANG

MOLEPOLOLE

MAHALAPYE

RAMOKGONAMI

PALAPYE

SELEBI-PHIKWESEROWE

MOPIPI

ORAPA

LETLHAKANE

TUTUME

LOBATSE

MOCHUDI

GABORONE

02

INNO

VATI

ON

By its very definition, innovation means the introduction 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.

GIVING OUR CUSTOMERS

INNOVATION

02


DR. SHABANI NDZINGE, 57 (CHAIRMAN)Independent Non-Executive Director

BA, Dar Es Salaam; MS, Delaware; PhD, Kent

Shabani is an experienced leader, administrator and academic 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 several Boards, including BIUST, the Botswana Accountancy College, the Institute of Development Management, and TA Shebube (Proprietary) Limited. He is a former Board Member of the Botswana Development Corporation and the University of Botswana.

CHIMWETA MONGA, 55 (MANAGING DIRECTOR)Executive Director

MBA University of Lincolnshire and Humberside (UK), Bachelor of Accounting and

Finance (Zambia)

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.

VHULAHANI BVUMBI, 39Non-Executive Director

BCom, University of the North; Higher Diploma in Tax Law, UCT

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.

JOHN KENNEDY, 60Non-Executive Director

Diploma in Mechanical Engineering; Cape Technikon

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.

BOARD OF02

INNO

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ON


ANTHONY SIWAWA, 48Independent Non-Executive DirectorBSc Hons, Aston; MBA, Chicago

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.

He is a sought-after speaker throughout Africa and the United States.

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

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.

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

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.

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

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.

DIRECTORS


CHAIRMAN’S STATEMENT

02

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DR. S. NDZINGE, CHAIRMAN

“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.”

EMPOWERING OUR CITIZENSIMPROVING FUEL SECURITY

SummarySOLID SAFETY, OPERATIONAL AND FINANCIAL PERFORMANCE

TRANSITION TO CLEANER METAL-FREE FUELS ACCELERATED

BOARD PROCESSES ENHANCED


CHAIRMAN’S STATEMENT

Business EnvironmentThe 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 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 by way of higher disposable incomes and lower levels of inflation, the effect was detrimental to the Company due to the accumulated inventory revaluations losses.

The elections held in October 2014 were endorsed as peaceful, transparent, free and fair by independent election observers. This demonstrated the entrenchment of democracy in Botswana and boosted the confidence of the private business sector in the stability of the operating environment

In 2014, the Botswana economy achieved a higher level of Gross Domestic Product growth estimated at 5.2 pct compared to the previous year. Headline inflation was managed well within the Bank of Botswana target range of between 3 and 6 pct. Government maintained a stable macroeconomic 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.

EMPOWERING OUR CITIZENSIMPROVING FUELSECURITYIt is my pleasure to present Engen Botswana’s 2014 Annual Report on behalf of the Board of Directors. The Company performed relatively well under difficult and turbulent global economic conditions. This performance was attributable to the strong business fundamentals of the Company.

02

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Industry DevelopmentsThe state oil company, Botswana Oil Limited, was officially launched in October 2014. This was a welcome development that will facilitate the transformation of the petroleum industry in Botswana. The state oil company will be tasked with the management of Government strategic reserves, ensuring security of supply, diversifying the sources of fuel, procurement of fuel on behalf of Government, and facilitating citizens’ economic empowerment. The state oil company will construct additional fuel storage capacity within Botswana in order to increase national strategic reserves. Stable energy supplies, as you will appreciate, are a prerequisite towards sustainable economic development.

We commend the Government of Botswana for 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.

OutlookWe remain confident that the Botswana economy will continue to be resilient in 2015 despite the global economic recovery which remains uncertain. 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. It is for this reason that we reaffirm our commitment to invest and grow our business and be part of the country’s economic development.

In conclusion, I would like to thank the Board of Engen Botswana Limited, investors, staff, and all stakeholders for the support given to the company throughout 2014 and look forward to the same levels of support into the future.

DR. S. NDZINGE, CHAIRMAN

“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.”


MANAGING DIRECTOR’S REPORT

02

INNO

VATI

ON


MR. C. MONGA, MANAGING DIRECTOR

“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.”

SUPPORTING OUR CUSTOMERS ENHANCING OUR PERFORMANCE

SummarySTRONG PERFORMANCE TO SEE SHAREHOLDERS REWARDED

STRONG BRAND POSITIONING

CUSTOMER SATISFACTION STRONG



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 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 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 satisfactory year.

Investor and shareholder support clearly indicates an understanding that we had to deal with many 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 ongoing inventory revaluations which reduced the level of inventory gains from P78 million in 2013 to just P7 million in the review period. The negative impact of this on our bottom line was significant.

It is important to note, however, that what could have been a challenging year as a result of the sagging crude oil price was ameliorated by factors over which we did have control. One example is the fact that our normalised operating expenses – after taking account of an abnormal provision 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%.

SUPPORTING OUR CUSTOMERS ENHANCING OUR PERFORMANCEThere were far more positives than negatives in 2014, a year which could be categorised as “tough” given our bottom line financial performance which saw profit for the year decline by some 49%. Despite the many challenges faced - over which we had no control - I believe our overall performance was satisfactory in light of the challenging operating environment.

02

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ON


Our fuel supply was consistent for most of the year with no major disruptions experienced from any supply sources. However, an unplanned shutdown of the Engen refinery in Durban resulted in a constrained supply of Liquid Petroleum Gas (LPG). This negatively affected our sales of LPG for a period of around four months, but the situation has since normalised.

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. Our cash positive situation enabled us to fund projects from internally generated sources rather than having to raise capital on the open market.

Another area of success was the extent to which receivables were well managed, closing the year at just 4% past due, compared to 6% in the previous reporting period.

OperationsEngen Botswana continues to face significantly increased competition across all its operations. In particular, there has been a marked increase in the number of retail facilities; price competitiveness between players has increased; and a new player has come into the market – Botswana Oil Company. At this point it is important to note that Engen Botswana supports Government’s initiative to launch a Government-owned oil company for the specific purposes of maintaining strategic reserves, including importation of fuel; exploration of alternative supply sources – highly important to reduce reliance on a single source of supply; and possible supply to the industry, provided that this is done efficiently.

Against this backdrop of increased levels of competition, and notwithstanding the freeze of Government-controlled margins for most of the year, the Company managed to increase gross 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%.



The Company was involved in a number of promotional activities during the year in order to increase sales at our retail outlets. Corner Bakery continued to be a strong differentiator in our convenience offering. This has given us a strong competitive advantage, as no other oil company offers a similar product.

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. Construction commenced on three more outlets, with two revamps completed and a further one started during the review period.

The Smile programme, which was introduced to measure levels of customer service at our retail outlets through “mystery motorists”, saw Engen Marketing Botswana achieve the highest level of customer service of all the international Engen companies.

In January 2014, a new transporter was appointed to haul product on behalf of Engen. While this resulted in an increase in delivery costs, the new operator conformed to Engen’s safety standards and there were no reported incidents during the year.

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.

Health, Safety and EnvironmentAchieving the highest levels of health and safety is one of the cornerstones of our business. To this end we are pleased to report we had excellent Health, Safety, Environment and Quality (HSEQ) performance at our Dumela Depot with no recordable incidents throughout the year.

Corporate Social InvestmentOur involvement in the community remains an important aspect of our operations and focus. A highlight of the year was the donation of a library to Mogorosi Primary School in Serowe. We equipped a disused classroom at the school with a server and 10 terminals, to enable the students to have access to and become familiar with Information Technology. We also provided air conditioners, books and furniture. This was the second CSI project of this nature that we had undertaken in the past two years.

Non-core AssetsFinally, our non-core assets consisting of equity holdings in shopping malls in Palapye and Maun performed very well. We enjoyed occupancy in these locations. Because of demand in these areas and growth of these towns, we expect occupancy to improve.

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.

02

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ON


Looking AheadThe 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


FINANCIAL REPORT

FINANCIALRESULTS IN BRIEF

0.8%REVENUE DOWN

26.9%GROSS PROFIT DOWN

45.4%PROFIT BEFORE TAX DOWN

49.9%PROFIT AFTER TAX DOWN

EARNINGS PER SHARE DOWN TO 40.8 THEBE FROM 80.3 THEBE PER SHARE

02

INNO

VATI

ON


Sales volumes and revenues held steady for the year. Revenues declined by an insignificant 0.8%, however the decrease in the international oil price resulted in gross profits declining by 26.9%.

We were also negatively affected by the weakening of the local currency against the Rand. However, mitigation plans have been put in place to hedge against losses resulting from foreign exchange contracts.

The slate over recovery position was maintained throughout the financial year.

The Company’s cash position remains strong and this has allowed us to pay a dividend of 11 thebe per share.

Inventory RevaluationsThe significant decrease in international oil prices necessitated downward revaluations of inventories throughout the year in line with International Financial Reporting Standards. Consequently, this had a negative effect on the profitability for 2015. Inventory losses for 2014 amounted to P31.8 million compared to inventory gains of P78.2 million for 2013.

Slate over-recoveryThe retail price of fuel sold in Botswana is fixed according to a slate mechanism and retail margins are tight in order to lock value for consumers. The Company was in a slate over-recovery throughout the year. By the end of the year, the slate balance payable was P91.6 million, as at 31 December 2014.

OutlookOur 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.

CAREGIVING OURCUSTOMERS

03

CARE

Engen Botswana has an unshakeable focus on ensuring only the highest levels of health, safety and environmental concern,

and this strict belief and practice is shared with 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.

03


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.

Engen Botswana has committed itself to adopting and implementing sustainable business practices, as the need for a leaving a sustainable impact upon the communities in which we have a presence is key to our way of doing business.

This report discusses the Group’s performance in the three recognised pillars of corporate citizenship and business sustainability: People (society); Planet (environment); and Profit (economic).

People This Sustainability pillar has both an internal and external component.

Internal FocusSustainability begins at home. The sustainability of any business depends on the ability of the organisation to attract and retain appropriately skilled employees.

Ever since its establishment in Botswana, Engen has strived to be a good corporate citizen. Corporate citizenship is generally defined as a company’s role in, or responsibilities towards, 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.

SENSITIVE TOWARDSHEALTH, SAFETY, ENVIRONMENT AND QUALITY

SUSTAINABILITY REPORT

03

CARE


Engen Botswana, which is concerned about the sustainability of the organisation, strives to manage its employees in a sustainable way; it strives to be a “Responsible Employer.”

What does that mean? It means putting our People first. It means going beyond remuneration and valuing their talents; fostering their professional 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.

This, it is hoped, will increase opportunities for growth and development within the Company and enable more predictable succession planning.

Despite our efforts in this regard, 2014 saw staff turnover increase. We lost five individuals - all subsequently replaced - largely as a result of disciplinary issues. We participated in the Global Remuneration Solutions annual salary survey in an effort to ensure we remain competitive in 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.

In addition, the Company’s Health and Wellness programme is designed to have a positive effect on the lives of our individual employees. It is geared to assist employees in dealing with their physical, mental and financial wellbeing.

Also on health issues, Engen Botswana is acutely aware of the potential risk to employees who are constantly exposed to hydrocarbons. As a result, all at-risk employees, particularly those working at our depots, are required to undergo medical examinations every six months.

“To this end we are pleased to report we had excellent Health,

Safety, Environment and Quality (HSEQ) performance at our

Dumela Depot with no recordable incidents throughout the year.”


cornerstone of responsible corporate citizenship for specific types of businesses including those whose daily activities impact on the environment and planet’s natural resources - mining, oil or manufacturing.

Engen Botswana falls into this group. We are acutely aware that our actions can have ramifications far beyond our own organisation and far into the future.

Compliance with the laws of the country regarding health, safety and the environment, is therefore absolutely essential for an organisation like Engen Botswana. We deal with substances that can prove toxic to the environment and humans alike if not handled correctly.

For this reason, Engen Botswana’s approach to Health, Safety and Environmental matters goes beyond mere compliance with legislation. We recognise the impact our operations can have on the sustainability of our planet.

Therefore, we strenuously enforce our international parent company’s Health, Safety, Environment and Quality (HSEQ) protocols that comply with the most strenuous health, safety and environment protection requirements in the world. Our goal is to ingrain all aspects of HSEQ into the very fabric of our organisation so that issues around health, safety and the environment are always top of mind at all times.

The focus throughout 2014 was the training of all Engen Botswana management, personnel and contractors to comply with Engen International’s new HSEQ procedures.

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. It is from these communities that we draw our customers; the more prosperous the community, the more potential customers there are for the Company as we move into our shared future.

With education vital to the future sustainability of communities and the country as a whole, Engen is proud to partner with Government to provide better educational facilities to the country’s disadvantaged communities.

Our major project in the review period was the provision of library facilities at our adopted school, Mogorosi Primary School. The handover of the fully equipped library, with its painted walls, tiled floor, air-conditioning, cosy children’s corner, educational books and bookshelves, was attended by Councillor Gaerobale of Moiybane and other officials from the Ministry of Education and Skills Development.

In addition, we donated funds to various other causes and community building activities including P20,000 towards two sponsored walks, one in Orapa and another in Gaborone. An amount of P5,000 was available to the SOS organisation to enable them to hold a Christmas Carols event for their beneficiaries. And, in the spirit of honouring those who have built a strong foundation for the sustainability of our nation, we donated P5,000 to the Kweneng District Council to assist with the 50th Independence of Botswana celebrations in that region.

PlanetFor many, sustainability is about the environment, saving the planet, and being “green.” This focus on the environment has long been regarded as

SUSTAINABILITY REPORT

03

CARE

We introduced a new Loss of Primary Containment (LOPC) policy to mitigate the risk of further occurrences, and training has taken place to ensure compliance at all depots.

Inspections at all service stations were undertaken on an ongoing basis. Refresher training was provided to petrol attendants as well as those involved in storage to ensure they remain consistently aware of their responsibilities.

Our innovative Safety Training Observation Programme (STOP) is proving most successful in ensuring compliance with safety regulations in all areas, from forecourts to storage depots. Essentially, this programme empowers employees to take immediate action when non-compliant behaviour or activities are observed. Employees on the ground monitor each others’ behaviour, as well as that of customers and contractors. Should they observe potentially dangerous behaviour - for example, smoking on the forecourt - they have been trained to address the issue immediately. Employees are also encouraged to report on their STOP observations every month. Their reports are examined by the HSEQ committee and, where necessary, action is taken to avoid recurrence of unacceptable actions in future.

Training will continue throughout 2015 to keep employees motivated and to avoid complacency which is often the biggest cause of accidents.

ProfitUltimately, the first two sustainability pillars – Planet and People – would collapse without the third, Profit. Profit is about the business of the business, its financial and operational sustainability.

We recognise that conducting the Group’s affairs with integrity and following sound corporate governance practices will ensure the long-term sustainability of the business.

While, as a Botswana-based company, Engen Botswana is not regulated by the King III Code of Corporate Governance, we have nevertheless actively chosen to follow its prescriptions.

We have also adopted a host of risk-related policies and protocols which are designed to promote or guarantee the sustainability of the organisation as a business.


There were several factors which contributed to this, including national and local promotions; the advantages of our Quick Shop and Corner Bakery offerings; ongoing training of staff at our retail outlets; and our ability to meet consumer demand for fuel in peak periods.

The success of our “Farmer’s Dream – Win a Tractor” promotion – which ran from July through October, underscored the importance of targeted, well-run promotions of this kind. Fuel sales increased markedly for the duration of this campaign.

The momentum gained was maintained during December. Strategic planning resulted in all relevant departments within Engen Marketing Botswana pulling together to ensure a steady supply of fuel to our service stations to meet the heightened holiday season demand. As a result, we moved more than 3 million litres of fuel above budget in that month.

Despite increased competition and a depressed market, the Retail Division performed well ahead of the market, achieving growth of around 4% and reaching its targets for the year.


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Once again, fuel attendants at all filling stations received training designed to improve service. Our excellent performance in the Smile programme, which is designed to encourage fuel attendants and cashiers in our stores to perform better and deliver excellent service to customers, indicates that this training is achieving its objectives. Botswana has consistently maintained a position 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.

Three new service stations – two with Quick Shops – were scheduled to come on stream in the first quarter of 2015.

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.


In addition, an unscheduled shutdown at the Engen refinery in Durban left us without a supply of Liquid Petroleum Gas (LPG) for almost four months. As we are a major supplier of LPG, this negatively affected the division’s performance for the year.

There was also very little ad hoc business coming in – a result of a general slowdown in the economy and few Government projects coming on stream – putting additional pressure on the sales team. Nevertheless, their efforts ensured that turnover losses were largely kept in check and that all major contracts were renewed for a further three-year period. In addition, we acquired a number of new customers, including a large mine, and the pipeline for business going forward looks healthy.

Another plus for Engen was the performance of our lubricant distributors in 2014. Appointed just a year before, their efforts saw lubricant sales increase by some 10%. They were no doubt assisted by our introduction of a lower sulphur content lubricant in response to environmental demands.

Lubricants continue to contribute a significant portion of our gross margin.

The Commercial Division sales volumes ended the year just 4% down on the previous year despite facing numerous challenges. This included several major three-year contracts drawing to an end and one of our largest customers forced to trim production during the review period.


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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, Tsabong, and Moshupa, were scheduled for completion in the second quarter of 2015.

Three sites were revamped in 2014. One, on the national highway to Francistown (A1) in Palapye, is an extremely busy site and required a revamp of all pumps as well as the underground tanks in order to reduce the risk of spillages and contamination of the surrounding areas.

A similar revamp was undertaken in Tutume, while at Kazungula, we added an additional diesel island with a canopy and also upgraded the existing takeaway facility into a fully fledged Corner Bakery.

In the current year, there are tentative plans to develop four additional sites in areas where we are not represented at present. Revamping and upgrading of sites in the major cities will be ongoing.

With increasing competition, throughput at many filling stations has declined. This meant that decisions regarding the development of new filling stations has to be far more strategic than ever before.


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WITH CUSTOMERS IS KEYCOMMUNICATION

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Every business is in the communications business, by virtue of

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.

04


The Group is committed to the highest standards of corporate governance and is working towards full implementation of the King III Code on Corporate Governance. We have been able to implement some of the recommendations already as we comply with all international accounting regulations and the Engen Group standardises best practices in corporate governance, while being sensitive to country context.

Engen also has its own code of ethics which substantially complies with the recommendations contained in the King III Report and continues to review areas requiring further attention.

The following information is provided to give our stakeholders a better appreciation of Engen Botswana’s current procedures to ensure a high standard of corporate governance.

Board and Committee StructureThe Engen Botswana Board is comprised of seven 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-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

The Directors believe that effective corporate governance is an essential requirement for the successful realisation of Engen Botswana’s business objectives. The Board is committed to the principles of openness, integrity and high ethical standing in the fulfilment of Engen Botswana’s corporate responsibilities.

MAINTAIN THE HIGHESTETHICAL STANDARDS

BOARD OVERVIEW AND CORPORATE GOVERNANCE

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and approval of accounting policies, corporate governance matters, and financial reporting. The Audit Committee receives reports from the Company’s internal and external auditors who attend its meetings and who have unrestricted access to the Chairman and Audit Committee members. This ensures their independence is in no way impaired.

The Remuneration Committee comprises of three Non-Executive Directors and is chaired by Anthony Siwawa. It meets at least twice a year. Its mandate is to regulate policy, approve senior management appointments and compensation, determine the remuneration levels of staff, including incentives, and ensure appropriate preparation for Management succession.

Accountability and ControlThe Directors are required by the Companies Act to prepare annual financial statements which fairly present the financial position of Engen Botswana at the end of the financial year. The financial statements are presented in conformity with the revised Companies Act, the Botswana Stock Exchange (BSE) listing requirements and

International Financial Reporting Standards (IFRS).

The Board has put in place a structure with clearly defined lines of responsibility, segregation of duties and delegation of authority. There are also established business procedures for business planning and capital expenditure, and information and reporting systems for monitoring Engen Botswana’s business and performance.

The Directors have delegated to Management the implementation of the company’s internal controls throughout the business. These are aimed at reducing the risk of error or loss in a cost effective manner. They include financial controls which enable the Board to meet its responsibility to assure the integrity and accuracy of Engen Botswana’s accounting records. The Group’s annual report, prepared from these records, complies fully with the Companies Act, the BSE listing requirements, and IFRS regulations.

The risk management approach to audit is adopted in the work of the internal auditors on the areas of greatest risk to Engen Botswana.


EthicsIn line with Engen’s formal Code of Ethics, all employees are required to maintain the highest ethical standards, ensuring that the Company business is conducted in a manner which, in all reasonable circumstances, is above reproach.

Going ConcernThe Directors are of the opinion that the business will be a going concern for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Annual Financial Statements.

Directors and Management ShareholdingThe aggregate number of shares held by the Directors and management is nil. Full details are available at the Group’s registered office.

DirectorsThe names of the Engen Board of Directors appear on page 12 and 13 of this report. During the year under review, independent Non-Executive Director Robert Matthews was appointed to the Board. This was the only change to the Board.

The Board thanks Management and staff for the tremendous effort applied in running the Company. We would also like to thank our valued customers, suppliers and shareholders and other stakeholders for their ongoing support towards the success of Engen Botswana Limited.

Disclosed below are details of directors’ remuneration and meeting attendance for the year ended 31 December 2014:

BOARD OVERVIEW AND CORPORATE GOVERNANCE

DIRECTORS

S Ndzinge

A M Siwawa

A M Bryce

J F Kennedy

V Bvumbi

F J Kotze

R N Matthews

TOTAL

PULA

195 000

110 448

69 711

69 711

69 711

84 711

18 237

617 529

MEETING ATTENDANCE MEETINGS MEETINGSHELD ATTENDED

S Ndzinge (Chairman)

Board Meetings 2014

3

3

3

3

3

3

3

3

C Monga (Managing Director)

A M Bryce

J F Kennedy

A M Bryce (Chairman)

A M Siwawa (Chairman)

Audit Committee Meetings 2014

Remuneration Committee Meetings 2014

2

2

2

2

2

2

2

3

3

3

2

2

2

2

2

2

2

3

3

1

F J Kotze

F J Kotze

V Bvumbi

J F Kennedy

A M Siwawa

V Bvumbi

F J Kotze

R N Matthews

3 3A M Siwawa

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Supplementary Income Statement

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

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

The value added statement is a summary of the wealth the Group has created and its distribution.Value Added Statement

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

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

FIVE YEAR REVIEWFOR THE YEAR ENDED 31 DECEMBER 2014


MANAGEMENT

THUSO PULEDistribution Manager

PAUL SHABANEHealth, Safety, Environment and Quality (HSEQ) Manager

BRIAN SAMEKEFinance Manager

FRANCINAH TSWAIHuman Capital Manager

CHIMWETA MONGAManaging Director

SANDY MFOSICommercial Manager

BOBBY TLHABIWERetail Manager

ISHMAEL MBULAWAProperty Manager

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ANNUALFINANCIALSTATEMENTS

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Directors’ Report

Statement of Profit or Loss and other Comprehensive Income

Statement of Financial Position

Statement of Cash Flows

Statement of Changes in Equity

Notes to the Financial Statements

Report of the Independent Auditors

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51

52

53

54

56

93

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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 FairgroundsOfficePark Plot 50371 P O Box 1453, Gaborone

COMPANY NUMBER 1966/335

REGISTERED OFFICE: Plot 54026 Western Bypass P O Box 867 Gaborone AUDITOR: Ernst & Young, Botswana

GENERAL INFORMATIONFOR THE YEAR ENDED 31 DECEMBER 2014

49 Engen Botswana LimitedAnnual Consolidated Financial Statements

BANKERS: FirstNationalBankofBotswanaLimited BarclaysBankofBotswanaLimited StandardCharteredBankBotswanaLimited StanbicBankBotswanaLimited COUNTRY OF INCORPORATIONAND DOMICILE: Botswana

CURRENCY: Botswana Pula

APPROVAL OF ANNUAL FINANCIAL STATEMENTS Theannualconsolidatedfinancialstatements 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

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FINANCIAL RESULTSRevenue 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.

CONCLUSIONThe 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.

DIRECTORS’ REPORTFOR 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 836Cost 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 120Foreign 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 544Share 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 509Taxation 4 (30 342 ) (44 847 ) (5 693 ) (5 767 )Profit for the year 65 205 130 217 60 616 66 742Profit 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 insubsequent 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 toequity 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 equityholders of the parent 5 40.8 80.3 Diluted earnings, profit for the year attributable to ordinaryequity holders of the parent 5 40.8 80.3

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2014

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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 050Share of investments in joint ventures 8 18 460 20 136 4 524 4 524Prepaid leases 9 5 579 6 116 - -Investments 10 37 37 10 10Investments in subsidiaries 11 - - 72 226 72 326 278 232 270 667 78 017 77 910Current Assets Inventories and accommodation 12 24 293 31 906 - -Trade and other receivables 13 125 773 107 891 - -Tax receivable 4 2 009 - 579 419Prepaid leases 9 540 540 - -Cash and cash equivalents 14 410 430 320 092 38 316 37 104Forward exchange contract asset 242 - - - 563 287 460 429 38 895 37 523TOTAL ASSETS 841 519 731 096 116 912 115 433 EQUITY AND LIABILITIES Equity Stated capital 15 8 138 8 138 8 138 8 138Non distributable reserves 2 200 2 200 344 344Cash flow hedge reserve - ( 1 243 ) - -Retained earnings 435 382 430 517 104 531 103 012Total equity 445 720 439 612 113 013 111 494 Non-Current Liabilities Deferred tax liabilities 4 3 771 5 928 38 41Deferred operating lease liability 20.2 1 063 2 366 - -Provisions 16 48 322 43 789 - - 53 156 52 083 38 41Current Liabilities Trade and other payables 17 341 056 235 323 3 861 3 898Deferred 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 898Total Liabilities 395 799 291 484 3 899 3 939TOTAL EQUITY AND LIABILITIES 841 519 731 096 116 912 115 433

STATEMENT OF FINANCIAL POSITIONFOR 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 - 35Share of profit of joint ventures 8 (2 593 ) (3 114 ) - -Depreciation 7 17 662 13 966 30 12Deferred 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 979Interest received 2 9 105 4 605 2 008 1 458Finance 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 228Cash 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 121Net cash flows (used in)/from investing activities (26 673 ) (14 115 ) 58 860 62 627Cash 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 605Cash and cash equivalents at the beginning of the year 320 092 182 694 37 104 34 499Cash and cash equivalents at end of the year 14 410 430 320 092 38 316 37 104

STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2014

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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 612Profit for the year - - - 65 205 65 205Other comprehensive income for the year - - 1 243 (1 243 ) -Total comprehensive income for the year - - 1 243 63 962 65 205Dividends (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 660Profit for the year - - - 130 217 130 217Other comprehensive income for the year - - (2 015 ) - (2 015 )Total comprehensive income for the year - - (2 015 ) 130 217 128 202Dividends (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 contracts which are accounted for at fair value through other comprehensive income.

STATEMENT OF CHANGES IN EQUITYFOR 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 494Profit for the year - - 60 616 60 616Other comprehensive income for the year - - - -Total comprehensive income for the year - - 60 616 60 616Dividends (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 002Profit for the year - - 66 742 66 742Other comprehensive income for the year - - - -Total comprehensive income for the year - - 66 742 66 742Dividends 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.

STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2014

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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation The financial statements are presented in Botswana Pula. The functional currency is also the Botswana Pula. The amounts in the financial statements have been rounded to the nearest thousand. The financial statements have been prepared on a historical cost basis except as modified by the revaluation of certain financial instruments to fair value and the measurement of investment properties at fair value as indicated in the notes below.

Statement of complianceThe financial statements have been prepared in compliance with the International Financial Reporting Standards issued by the International Accounting Standards Board (“IASB”), Interpretations issued by the International Financial Reporting Interpretations Committee of the IASB and the requirements of the Companies Act of Botswana (Companies Act, 2003).

Basis of consolidationThe consolidated financial statements comprise the financial statements of the Group and its subsidiaries asat 31 December 2014. Control is achieved when the Group is exposed, or has rights, to variable returns from itsinvolvement with the investee and has the ability to affect those returns through its power over the investee.Specifically, the Group controls an investee if and only if the Group has:• Power over the investee (i.e. existing rights that give it

the current ability to direct the relevant activities of the investee)

• Exposure, or rights, to variable returns from its involvement with the investee, and

• The ability to use its power over the investee to affect its returns

• When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• The contractual arrangement with the other vote holders of the investee

• Rights arising from other contractual arrangements• The Group’s voting rights and potential voting rights

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2014

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there arechanges to one or more of the three elements of control. Consolidation of a subsidiary begins when the Groupobtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities,income and expenses of a subsidiary acquired or disposed of during the year are included in the statement ofprofit or loss and other comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders ofthe parent of the Group and to the non-controlling interests, even if this results in the non-controlling interestshaving a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries tobring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group areeliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as anequity transaction. If the Group loses control over a subsidiary, it:• Derecognises the assets (including goodwill) and liabilities

of the subsidiary• Derecognises the carrying amount of any non-controlling

interests• Derecognises the cumulative translation differences

recorded in equity• Recognises the fair value of the consideration received• Recognises the fair value of any investment retained• Recognises any surplus or deficit in profit or loss• Reclassifies the parent’s share of components previously

recognised in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities.


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

Foreign currency translation

Functional currencyTransactions in foreign currency are initially recorded in the functional currency at a rate of exchange ruling on transaction date. Monetary assets and liabilities designated in foreign currencies are subsequently translated at rates of exchange ruling at the reporting date. Non monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated at the exchange rate at the date of the initial transaction.

Foreign exchange translation gains or losses arising on the settlement of monetary items or on translating monetary items at rates different from those used when translating at initial recognition during the period or in previous financial statements are taken to the statement of profit or loss and other comprehensive income in the year they arise.

Investments in subsidiariesInvestments in subsidiaries are measured at cost in the separate financial statements of the Company.

Investments in joint venturesA joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining joint control are similar to those necessary to determine control over subsidiaries.

The Group’s investments in joint ventures are accounted for using the equity method.

Under the equity method, the investment in a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the joint venture since the acquisition date. Goodwill relating to the joint venture is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. The statement of profit or

loss reflects the Group’s share of the results of operations of the joint venture. Any change in Other Comprehensive Income (OCI) of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the joint venture are eliminated to the extent of the interest in the joint venture.

The aggregate of the Group’s share of profit or loss of a joint venture is shown on the face of the statement of profit or loss and other comprehensive income outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the joint venture.

The financial statements of the joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the joint venture and its carrying value, then recognises the loss as ‘Share of loss of a joint venture’ in the statement of profit or loss and other comprehensive income.

Upon loss of the joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the joint venture upon loss of joint control and the fair value of the retained investment and proceeds from disposal is recognised in the statement of profit or loss and other comprehensive income. Joint ventures are carried at cost in the separate financial statements of the company.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued)

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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

LeasesThe determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date: whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.

Group as a lesseeFinance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant periodic rate of interest on the remaining balance of the liability. Finance charges are reflected in profit or loss.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. If reasonable certainty exists that ownership will be obtained by the group by the end of the lease term, the leased asset is depreciated over its useful life. Minimum operating lease payments of an operating lease are recognised as an expense in profit or loss on a straight line basis over the lease term.

Group as a lessorLeases where the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. Rental income or expenses related to minimum lease payments are recognised on a straight line basis over the lease term. Contingent rents are recognised as revenue in the year in which they are incurred.

Property, plant and equipment Property, plant and equipment are stated at historical cost excluding the costs of day to day servicing that are expensed, less accumulated depreciation and any impairment in value.


Cost includes the cost of replacing part of such plant and equipment when that cost is incurred if the recognition criteria are met.

Costs also include the estimated costs of dismantling and removing the assets where the obligation has been incurred when the asset was acquired or as a consequence of using the asset.

Subsequent costs are included in the asset’s carrying amount or recognised as a component, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance expenditures are charged to the statement of comprehensive income during the financial period in which they are incurred. Depreciation commences when the assets are available for their intended use. Property, plant and equipment are depreciated on a straight-line basis over the expected useful lives of the various classes of assets, after taking into account residual values. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.

Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale or is included in a disposal group that is classified as held for sale or the date that the asset is derecognised.

The residual value of an asset may increase to an amount equal to or greater than the asset’s carrying amount. If it does, the asset’s depreciation charge is zero until its residual value subsequently decreases to an amount below the asset’s carrying amount.

Useful lives of the property, plant and equipment, the depreciation method, depreciation rates, and residual values are reviewed on an annual basis. Estimated useful lives of the assets are as follows:

Leasehold buildings shorter of period of lease or 50 yearsPlant, equipment, and other 4 – 30 years

Land is not depreciated as it is deemed to have an indefinite life. No depreciation is provided on capital work-in-progress. The carrying amounts of assets are reviewed at each reporting date to assess if there are any indications of impairment. If any such indication


exists and where assets are recorded in excess of their recoverable amounts, assets or cash generating units are written down to their recoverable amounts. A cash generating unit is considered only when the recoverable amount for the individual asset cannot be determined.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss and other comprehensive income in the year the asset is derecognized. Improvements to assets held under operating leases are capitalized and depreciated over the remaining lease term. Capital work in progress comprises costs incurred in constructing property, plant and equipment that are directly attributable to the construction of the asset. Assets remain in capital work in progress until they are available for use. At that time they are transferred to the appropriate class of property, plant and equipment additions.

Impairment of non-financial assets The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.

Impairment losses of continuing operations, including impairment on inventories, are recognised in the statement of profit or loss and other comprehensive income in expense categories consistent with the function of the impaired asset, except for properties previously revalued with the revaluation taken to OCI. For such properties, the impairment is recognised in OCI up to the amount of any previous revaluation. For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit or loss and other comprehensive income unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.

Decommissioning and rehabilitation of assetsThe expected cost of any committed decommissioning or restoration programme, discounted to its net present value, is provided and capitalised at the beginning of each project. The restoration costs are estimated using estimated cashflows based on current prices. The estimates are discounted at a rate that reflects current market assessments of the time value of money, and the risk specific to the provision. The capitalized cost is depreciated over the expected life of the asset and the increase in the net present value of the provision for the expected cost is included with finance costs.


Property, plant and equipment (continued)


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Decommissioning and rehabilitation of assets (continued)Subsequent changes in the initial estimates of rehabilitation and decommissioning costs that results from changes in the estimated timing or amount of the outflow of resources embodying economic benefits required to settle the obligation or a change in the discount rate are added to or deducted from the cost of the related asset in the current period. Where the change results in a reduction in the liability, the cost deducted from the asset shall not exceed the carrying amount of the related asset. If a decrease in the liability exceeds the carrying amount of the related asset, the excess is recognised immediately in the statement of profit or loss and other comprehensive income.

Where the change results in an increase in the cost of the asset, the amount is capitalised as part of the cost of the item and depreciated prospectively over the remaining life of the item to which they relate. If there is any indication that the carrying amount of the related asset is not fully recoverable, an impairment test is conducted in accordance with the impairment policy. These estimates are reviewed annually.The cost of ongoing programmes to prevent and control pollution and to rehabilitate the environment is taken to profit or loss as incurred. Where a retail site or a depot is disposed of, the unutilised portion of the Disaster, Remediation and Restoration (DRR) costs will be released to the statement of profit or loss and other comprehensive income.

Health, safety and environment costsCosts associated with the remediation of the environment where the company operates retail and commercial sites and depots are recognized in the statement of profit or loss and other comprehensive income. The best estimate of the cost is made taking into account probabilities of the occurrence of spillages.

Borrowing costsBorrowing costs directly relating to the acquisition, construction or production of a qualifying capital project under construction are capitalized and added to the project cost during construction until such time the assets are substantially ready for their intended use. Where funds are are borrowed specifically to finance a project, the amount capitalised represents the interest and other costs that the entity incurs

in connection with the borrowing of funds. Where surplus funds are available for a short term out of money borrowed specifically to finance a project, the income generated from such short term investments is also capitalized and reduced from the total capitalized borrowing cost. Where the funds used to finance a project form part of general borrowings, the amount capitalized is calculated using a weighted average of rates applicable to relevant general borrowings of the Group during the period. All other borrowing costs are recognized in the statement of profit and loss and other comprehensive income in the period in which they are incurred.

Inventories Inventories consist of petroleum products and are initially recognised at cost and subsequently measured at the lower of cost and net realisable value. Cost is determined on the first-in-first-out (FIFO) method. The cost of inventories comprises of all costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. The amount of any write-down of inventory to net realisable value and all losses of inventory are recognised as an expense in the period that the write-down or loss occurs. The carrying value of inventories derecognised is included in the cost of sales in the statement of profit or loss and other comprehensive income.

AccommodationA contractual arrangement between two oil companies not constituting a contract of sale, whereby the one oil company agrees to supply product to another oil company, with the understanding that the specific volume or product is owed to the supplier until a like product and volume is returned to the supplier. Product loaned/borrowed at the accounting date is valued at the most recent product price. The adjustment to most recent product price is included in the cost of sales in the statement of profit or loss and other comprehensive income.


Cost of goods soldCost of goods sold is normally the carrying value of inventories sold and any net realizable value adjustments. Upon re-measurement product loaned/borrowed is revalued and the corresponding entry is included in the cost of sales in the statement of profit or loss and other comprehensive income.

Dividend distributionDividend distributions to the Group’s shareholders are recognized as a liability in the period in which the dividends are declared by the Group’s shareholders. Dividends distributed are recognized in equity. Tax is withheld on dividends distributed at the statutory rate of 7.5%.

Employee benefitsDuring the year, employees contributed to the Engen Botswana Pension Fund and the Engen Retirement Fund. Both funds are defined contribution funds. All Funds are governed by the Botswana Pension and Provident Funds Act of 1987. Membership of these funds is compulsory for all employees. In terms of the rules of the Funds, the company is committed to contribute 9.5% of the employees’ pensionable emoluments. The defined contribution funds are not required to be actuarially valued. The Group’s contributions to the defined contribution plans are charged to the statement of profit or loss and other comprehensive income in the year to which they relate.

Employee entitlements to annual leave, bonuses, and pension and severance benefits are recognised as incurred. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the reporting date. Provision for bonuses is recognised when a present obligation exists to make such payments and a reliable estimate of the amount can be made.

Revenue recognitionRevenue is recognised at the fair value of the consideration received or receivable net of discounts and related taxes and consists primarily of the sale of products, refinery processing fees, rental income, convenience income, dividends received and interest received. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and Group and the revenue can be reliably measured.

The following specific recognition criteria must also be met before revenue is recognised Sale of goodsRevenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the revenue can be reliably measured. Petroleum product sales are stated net of discounts, rebates, value-added tax, customs duty and government levies and are adjusted for slate under/over recoveries.

The selling prices of certain petroleum products are subject to price control by the authorities. The selling prices are adjusted periodically to provide for the under or over-recoveries of changes in the various items of landed cost of these products. The price adjustments by the authorities are, for various reasons, not made simultaneously with changes in landed cost and thus the situation arises that oil companies, from time to time, are in a position of over or under-recovery of changes in cost.

An accrual is made at year end for net under or over-recoveries on controlled products.

Convenience incomeRevenue is recognised on an accrual basis in accordance with the substance of the relevant agreement. Convenience income comprises of fast food and quick shop income. InterestRevenue is recognized as the interest accrues using the effective interest rate method.

Operating lease rental incomeRevenue from minimum lease payments is recognised on a straight line basis over the lease term. Contingent rentals received or incurred are accounted for as and when the rentals are received or incurred. Dividends Revenue is recognised when the shareholders’ right to receive the payment is established.



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Taxes

Current income taxCurrent income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Current income tax relating to items recognised directly in other comprehensive income or equity is recognised in other comprehensive income or equity and not in profit or loss. Witholding taxes are paid to the government and they are a portion of the total dividend that is declared. Deferred taxDeferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except:• where the deferred tax liability arises from the initial

recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:

• where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Also taking into account the manner of recovery of the underlying asset or liability.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.



ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit or loss and other comprehensive income net of any reimbursement. Financial instrumentsFinancial assets within the scope of IAS 39 are classified as loans and receivables and available-for-sale financial assets. When financial instruments are recognised initially, they are measured at fair value, including transaction costs. The group and company recognise a financial instrument on its statement of financial position when it becomes a party to the contractual provisions of the instrument. The Group determines the classification of its financial assets and financial liabilities on initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year end.

All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus directlyattributable transaction costs.

All regular way purchases and sales of financial assets are recognised on the trade date, which is the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

Loans and receivablesTrade and other receivablesTrade and other receivables are subsequently measured at

amortised cost using the effective interest rate method. Gains and losses are recognised in income when the trade and other receivables are derecognised or impaired, as well as through the amortisation process.

Trade and other receivables are included in current assets if they are expected to mature within 12 months of the reporting date.

Cash and cash equivalentsFor the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and deposits on call in banks, net of outstanding bank overdrafts. Cash and cash equivalents are subsequently carried at amortised cost. Due to the short-term nature of these, the amortised cost approximates their fair value.

Unquoted investmentsUnquoted investments are measured at amortised cost as they are loan instruments. These investments are investments in debt instruments which are classified as loans and receivables and therefore measured at amortised cost.

Amortised costLoans and receivables are subsequently measured at amortised cost. This is computed using the effective interest method less any allowance for impairment. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the effective interest rate.

Fair value through profit or lossForward exchange contracts are derivatives that are classified as financial assets or liabilities at fair value through profit or loss. Financial instruments at fair value through profit or loss are carried in the statement of financial position at fair value with changes in fair value recognised in the Other Comprehensive Income line in the statement of profit or loss and other comprehensive income.



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Financial instruments (continued)

Fair value The Group measures derivatives at fair value at each balance sheet date and, for the purposes of impairment testing, uses fair value less costs of disposal to determine the recoverable amount of some of its non-financial assets. Also, fair values of financial instruments measured at amortised cost are disclosed in Note 22.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:• In the principal market for the asset or liability, or• In the absence of a principal market, in the most

advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within

the fair value hierarchy, described as follows, based on the lowest-level input that is significant to the fair value measurement as a whole:• Level 1 — Quoted (unadjusted) market prices in active

markets for identical assets or liabilities• Level 2 — Valuation techniques for which the lowest-level

input that is significant to the fair value measurement is directly or indirectly observable

• Level 3 — Valuation techniques for which the lowest-level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest-level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The Group’s audit committee determines the policies and procedures for both recurring fair value measurements, such as derivatives, and non-recurring fair value measurements, such as impairment tests. At each reporting date, the valuation committee analyses the movements in the values of assets and liabilities which are required to be re-measured or reassessed as per the Group’s accounting policies. For this analysis, the valuation committee verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.

On an interim basis, the valuation committee presents the valuation results to the audit committee and the Group’s independent auditors. This includes a discussion of the major assumptions used in the valuations.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities based on the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.



Trade and other payablesTrade and other payables are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the statement of profit or loss and other comprehensive income when the trade and other payables are derecognised as well as through the amortisation process.

Trade and other payables are short term in nature and are categorised as other financial liabilities at amortised cost for measurement purposes.

Interest relating to a financial liability is recognised in the statement of profit or loss and other comprehensive income in the period in which it arises, based on the effective interest rate method.

Derecognition of financial assetsA financial asset is derecognised when:• the rights to receive cash flows from the asset have expired;• the Group has transferred its rights to receive cash flows

from the asset, or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass through’ arrangement, and either (a) the group has transferred substantially all the risks and rewards of the asset, or (b) the group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. When continuing involvement takes the form of a written and/

or purchased option (including a cash settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case of a written put option (including a cash settled option or similar provision) on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

Derecognition of financial liabilitiesA financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the statement of profit or loss and other comprehensive income.

Impairment of financial assets at amortised costThe group assesses at each reporting date whether a financial asset or group of financial assets is impaired. The group assesses impairment of assets on an individual basis.

If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through use of a separate allowance account, namely provision for doubtful debts account. The amount of the loss shall be recognised in profit or loss.



Financial instruments (continued)

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Impairment of financial assets at amortised cost (continued)If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Reversal of impairment losses on financial assets at amortised cost is limited to the level that would have been the amortised cost had the asset not been impaired with the impairment. Any subsequent reversal of an impairment loss is recognised in other comprehensive income.

In relation to financial assets, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the Group will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are derecognised when they are assessed as uncollectible. Significant accounting judgments and estimatesThe preparation of financial statements in conformity with International Financial Reporting Standards requires the use of certain critical accounting estimates and judgments concerning the future. Estimates and judgments are continually evaluated and are based on historical factors coupled with expectations about future events that are considered reasonable. In the process of applying the groups accounting policies, management has made the following estimates that have a significant risk of causing material adjustment to the carrying amount of assets and liabilities within the next year.

The key assumptions concerning the future and other key sources of estimation uncertainty and judgments at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and


liabilities within the next financial year as they involve assessments or decisions that are particularly complex or subjective, are discussed below: Allowances for doubtful debtsThis allowance is created where there is objective evidence, for example the probability of insolvency or significant financial difficulties of the debtor, that the group will not be able to collect all the amounts due under the original terms of the invoice based on past experience and debtors ageing at year end. An estimate is made with regard to the probability of insolvency and the estimated amount of debtors who will not be able to pay. The discount rate used to determine the present value of the financial asset is the original effective interest rate of the relevant instrument. Refer to note 13. Allowances for slow moving inventoryBased on prior management practice, inventory that has not moved for a 12-month period is considered to be obsolete. Obsolete and discontinued products are considered to have no value. The provision is raised based on the full cost or net realisable values of the product. Refer to note 12. Allowances for accommodation receivableThis allowance is created where there is objective evidence, for example mismatching of invoices with the other oil company, that the product receivable will not be recovered. Asset retirement and removal obligationsEstimating the future costs of these obligations is complex and requires management to make estimates and judgments regarding future cash flows and discount rates because most of the obligations will only be fulfilled in the future. Changing technologies, political, environmental, safety, business and statutory considerations, could also influence the resulting provisions.


Management judgement is exercised when determining the present value of expected future cash flows when the obligation to dismantle or restore the sites arises as well as the estimated useful life of the related asset. The useful lives of the assets are considered to be equal to the remaining lease term under the assumption that the lease will not be renewed, and this impacts on the obligation.The provision for the costs of decommissioning these sites at the end of their economic lives has been estimated using existing technology, at current prices and discounted using a real discount rate of 7.44% (December 2013 – 7.29%). The Group’s asset retirement obligations are coupled with the estimated remaining useful lives of the asset to which they relate. The carrying value of the dismantling and removal costs provision as at 31 December 2014 is P43 074 702 (December 2013: P39 161 918) (Note 16). There is uncertainty regarding both the amount and timing of incurring these costs Deferred taxesDeferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. Joint arrangementsThe Group has a 40% and 25% interest in the Engen Palapye Partnership and the Engen Maun Partnership respectively. It has joint control over both entities based on the contractual terms of the partnership agreements. Both arrangements are classified as joint ventures and all parties to the arrangement have rights to the net assets of the entities according to their respective interests.

New and amended standards and interpretationsThe Company applied for the first time certain standards and amendments, which are effective for annual periods beginning on or after 1 January 2014.

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)These amendments provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10 Consolidated Financial Statements and must be applied retrospectively, subject to certain transition relief. The exception to consolidation requires investment entities to account for subsidiaries at fair value through other comprehensive income. These amendments have no impact on the Group, since none of the entities in the Group qualifies to be an investment entity under IFRS 10.

Financial Assets and Financial Liabilities - Amendments to IAS 32These amendments clarify the meaning of ’currently has a legally enforceable right to set-off’ and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting and is applied retrospectively. These amendments have no impact on the Group, since none of the entities in the Group has any offsetting arrangements.

Recoverable Amount Disclosures for Non-Financial Assets – Amendments to IAS 36The amendments to IAS 36 Impairment of Assets clarify the disclosure requirements in respect of fair value less costs of disposal. The amendments remove the requirement to disclose the recoverable amount for each cash-generating unit for which the carrying amount of goodwill or intangible assets with indefinite useful lives allocated to that unit is significant. These amendments have no impact on the Group as it has not disposed of any cash-generating units.



Significant accounting judgments and estimates (continued)

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Novation of Derivatives and Continuation of Hedge Accounting – Amendments to IAS 39These amendments provide relief from discontinuing hedge accounting when novation of a derivative designatedas a hedging instrument meets certain criteria and retrospective application is required. These amendments haveno impact on the Group as the Group has not novated its derivatives during the current or prior periods.

IFRIC 21 LeviesIFRIC 21 clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached. Retrospective application is required for IFRIC 21. This interpretation has no impact on the Group as it has applied the recognition principles under IAS 37 Provisions, Contingent Liabilities and Contingent Assets consistent with the requirements of IFRIC 21 in prior years.

Annual Improvements 2010-2012 CycleIn the 2010-2012 annual improvements cycle, the IASB issued seven amendments to six standards, which included an amendment to IFRS 13 Fair Value Measurement. The amendment to IFRS 13 is effective immediately and, thus, for periods beginning at 1 January 2014, and it clarifies in the Basis for Conclusions that short-term receivables and payables with no stated interest rates can be measured at invoice amounts when the effect of discounting is immaterial. This amendment to IFRS 13 has no impact on the Group as it has implemented this treatment in the past financial years.

Annual Improvements 2011-2013 CycleIn the 2011-2013 annual improvements cycle, the IASB issued four amendments to four standards, which included an amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards. The amendment to IFRS 1 is effective immediately and, thus, for periods beginning at 1 January 2014, and clarifies in the Basis for Conclusions that an entity may choose to apply either a current standard or a new standard that is not yet mandatory, but permits early application, provided either standard is applied consistently throughout the periods presented in the entity’s first IFRS financial statements. This amendment to IFRS 1 has no impact on the Group, since the Group is an existing IFRS preparer.


Standards and interpretations issued and not yet effective

Standards issued but not yet effective up to the date of issuance of the Company’s financial statements are listed below. This listing of standards and interpretations issued are those that the Company reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. The Company intends to adopt these standards when they become effective.

IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28The amendments are effective for annual periods beginning on or after 1 January 2016 and address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets that constitute a business, as defined in IFRS 3 Business Combinations, between an investor and its associate or joint venture, is recognised in full. Any gain or loss resulting from the sale or contribution of assets that do not constitute a business, however, is recognised only to the extent of unrelated investors’ interests in the associate or joint venture. The adoption of these standards does not have an effect on the Group, however, it will assess their impact in future.

IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception - Amendments to IFRS 10, IFRS 12 and IAS 28The amendments are effective for annual periods beginning on or after 1 January 2016 and address issues that have arisen in applying the investment entities exception under IFRS 10. The amendments to IFRS 10 clarify that the exemption (in IFRS 10.4) from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value. Furthermore, the amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity itself and that provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity are measured at fair value. The amendments to IAS 28 allow the investor, when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interests in subsidiaries.


The adoption of these standards does not have an effect on the Group, however, it will assess their impact in future.

IFRS 11 Accounting for Acquisitions of Interests in Joint Operations – Amendments to IFRS 11The amendments are effective for annual periods beginning on or after 1 January 2016 and require an entity acquiring an interest in a joint operation in which the activity of the joint operation constitutes a business to apply, to the extent of its share, all of the principles in IFRS 3, and other IFRSs, that do not conflict with the requirements of IFRS 11. Furthermore, entities are required to disclose the information required in those IFRSs in relation to business combinations. The amendments also apply to an entity on the formation of a joint operation if, and only if, an existing business is contributed by the entity to the joint operation on its formation. Furthermore, the amendments clarify that for the acquisition of an additional interest in a joint operation in which the activity of the joint operation constitutes a business, previously held interests in the joint operation must not be remeasured if the joint operator retains joint control. This standard has no impact on the Group as it does not have an interest in a joint operation.

IFRS 14 Regulatory Deferral AccountsIFRS 14 is effective for annual periods beginning on or after 1 January 2016 and allows an entity, whose activities are subject to rate regulation, to continue applying most of its existing accounting policies for regulatory deferral account balances upon its first time adoption of IFRS. The standard does not apply to existing IFRS preparers. Also, an entity whose current GAAP does not allow the recognition of rate-regulated assets and liabilities, or that has not adopted such policy under its current GAAP, would not be allowed to recognise them on first-time application of IFRS. Entities that adopt IFRS 14 must present the regulatory deferral accounts as separate line items on the statement of financial position and present movements in these account balances as separate line items in the statement of profit or loss and other comprehensive income. The standard requires disclosures on the nature of, and risks associated with, the entity’s rate regulation and the effects of that rate regulation on its financial statements.

This standard does not apply to the Group as it is an existing IFRS preparer.

IAS 1 Disclosure Initiative – Amendments to IAS 1The amendments to IAS 1 Presentation of Financial Statements are effective for annual periods beginning on or after 1 January 2016 clarify, rather than significantly change, existing IAS 1 requirements.

The amendments clarify• The materiality requirements in IAS 1 • That specific line items in the statement(s) of profit or loss

and OCI and the statement of financial position may be disaggregated

• That entities have flexibility as to the order in which they present the notes to financial statements

• That the share of OCI of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss

Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement(s) of profit or loss and other comprehensive income. The Group intends to adopt this standard and will assess its impact in future.

IFRS 15 Revenue from Contracts with CustomersIFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2017 with early adoption permitted. The Group is currently assessing the impact of IFRS 15 and plans to adopt the new standard on the required effective date.



IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception - Amendments to IFRS 10, IFRS 12 and IAS 28 (continued)

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IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation – Amendments to IAS 16 and IAS 38The amendments clarify the principle in IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. These amendments are effective for annual periods beginning on or after 1 January 2016. As a result, the ratio of revenue generated to total revenue expected to be generated cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets. These amendments are not expected to have any impact to the Group given that the Group has not used a revenue-based method to depreciate its non-current assets.

IAS 16 and IAS 41 Agriculture: Bearer Plants – Amendments to IAS 16 and IAS 41The amendments to IAS 16 and IAS 41 Agriculture change the scope of IAS 16 to include biological assets that meet the definition of bearer plants (e.g., fruit trees). Agricultural produce growing on bearer plants (e.g., fruit growing on a tree) will remain within the scope of IAS 41. These amendments are effective for annual periods beginning on or after 1 January 2016. As a result of the amendments, bearer plants will be subject to all the recognition and measurement requirements in IAS 16 including the choice between the cost model and revaluation model for subsequent measurement.

In addition, government grants relating to bearer plants will be accounted for in accordance with IAS 20 Accounting for Government Grants and Disclosure of Government Assistance, instead of IAS 41. These amendments are not expected to have any impact to the Group as the Group does not have any bearer plants.

The amendments to IAS 27 Separate Financial Statements allow an entity to use the equity method as described in IAS 28 to account for its investments in subsidiaries, joint ventures and associates in its separate financial statements. Therefore, an entity must account for these investments either:• At cost• In accordance with IFRS 9 (or IAS 39)Or• Using the equity methodThe entity must apply the same accounting for each category of investments.

These amendments are effective for annual periods beginning on or after 1 January 2016. A consequential amendment was also made to IFRS 1 First-time Adoption of International Financial Reporting Standards. The amendment to IFRS 1 allows a first-time adopter accounting for investments in the separate financial statements using the equity method, to apply the IFRS 1 exemption for past business combinations to the acquisition of the investment. These amendments will not have any impact on the Group’s consolidated financial statements.



IFRS 9 Financial Instruments

Classification and measurement of financial assetsAll financial assets are measured at fair value on initial recognition, adjusted for transaction costs if the instrument is not accounted for at fair value through profit or loss (FVTPL). Debt instruments are subsequently measured at FVTPL, amortised cost or fair value through other comprehensive income (FVOCI), on the basis of their contractual cash flows and the business model under which the debt instruments are held.

There is a fair value option (FVO) that allows financial assets on initial recognition to be designated as FVTPL if that eliminates or significantly reduces an accounting mismatch. Equity instruments are generally measured at FVTPL. However, entities have an irrevocable option on an instrument-by-instrument basis to present changes in the fair value of non-trading instruments in other comprehensive income (OCI) (without subsequent reclassification to profit or loss).

Classification and measurement of financial liabilities For financial liabilities designated as FVTPL using the FVO, the amount of change in the fair value of such financial liabilities that is attributable to changes in credit risk must be presented in OCI. The remainder of the change in fair value is presented in profit or loss, unless presentation of the fair value change in respect of the liability’s credit risk in OCI would create or enlarge an accounting mismatch in profit or loss.

All other IAS 39 Financial Instruments: Recognition and Measurement classification and measurement requirements for financial liabilities have been carried forward into IFRS 9, including the embedded derivative separation rules and the criteria for using the FVO.

ImpairmentThe impairment requirements are based on an expected credit loss (ECL) model that replaces the IAS 39 incurred loss model. The ECL model applies to: debt instruments accounted for at amortised cost or at FVOCI; most loan commitments; financial guarantee contracts; contract assets under IFRS 15; and lease receivables under IAS 17 Leases. Entities are generally required to recognise either 12-months’ or lifetime ECL, depending on whether there has been a significant increase in credit risk since initial recognition (or when the commitment or guarantee was entered into). For some trade receivables, the simplified approach may be applied whereby the lifetime expected credit losses are always recognised.

Hedge accountingHedge effectiveness testing is prospective, without the 80% to 125% bright line test in IAS 39, and, depending on the hedge complexity, can be qualitative. A risk component of a financial or non-financial instrument may be designated as the hedged item if the risk component is separately identifiable and reliably measureable.

The time value of an option, any forward element of a forward contract and any foreign currency basis spread, can be excluded from the designation as the hedging instrument and accounted for as costs of hedging.

More designations of groups of items as the hedged item are possible, including layer designations and some net positions.These amendments are effective for annual periods beginning on or after 1 January 2018. The adoption of IFRS 9 will have 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.



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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 458Dividend 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 132Depreciation (Note 7) 17 662 13 966 30 12Operating lease rentals - land and buildings 82 564 - -- plant and equipment 1 703 1 236 - -Management and computer fees (Note 19) 7 177 6 437 - -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 - -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


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 001Withholding tax on dividends from subsidiary 4 791 4 767 4 791 4 767Deferred Attributable to temporary differences arising in the current yearfrom 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 22.0Adjusted for: Exempt income (1.2 ) (3.0 ) (14.6 ) (14.3 )Non-allowable expenses 4.4 3.6 1.3 0.4Withholding 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 001Closing 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.


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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 – GROUP31 December 2014 Balance at beginning of year

At cost 4 189 153 640 136 673 30 305 324 807Accumulated depreciation - (37 770 ) (42 659 ) - (80 429 )

Net carrying amount 4 189 115 870 94 014 30 305 244 378Additions - 1 982 6 391 20 373 28 746Dismantling and restoration costs (Note 16) - 1 060 - - 1 060Transfers - 5 668 18 797 (24 465) -Disposals - Cost - (307 ) (5 182 ) (593 ) (6 082 ) - Accumulated depreciation - 295 3 421 - 3 716Depreciation (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 At cost 4 189 162 043 156 679 25 620 348 531Accumulated depreciation - (45 129 ) (49 246 ) - (94 375 )

Net carrying amount 4 189 116 914 107 433 25 620 254 156

31 December 2013 Balance at beginning of year

At cost 4 219 135 743 116 549 46 831 303 342Accumulated depreciation- - (32 262 ) (44 628 ) - (76 890 )

Net carrying amount 4 219 103 481 71 921 46 831 226 452Additions - 2 474 15 810 - 18 284Dismantling and restoration costs (Note 16) - 16 957 - - 16 957Transfers - - 16 526 (16 526 ) -Disposals - Cost (30 ) (1 534 ) (12 212 ) - (13 776 ) - Accumulated depreciation - 700 9 727 - 10 427Depreciation (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 378Balance at end of year

At cost 4 189 153 640 136 673 30 305 324 807Accumulated depreciation - (37 770 ) (42 659 ) - (80 429 ) Net carrying amount 4 189 115 870 94 014 30 305 244 378


Plant , Land Leasehold equipment freehold buildings and other Total P’000 P’000 P’000 P’000 7. PROPERTY, PLANT & EQUIPMENT – COMPANY31 December 2014 Balance at beginning of year

At cost 568 494 352 1 666Accumulated depreciation - (12 ) (352 ) (616 )

Net carrying amount 568 482 - 1 050 Additions - 237 - 237Depreciation (Note 3.2) - (30 ) - (30 )Balance at end of year, net of accumulated depreciation 568 689 - 1 257Balance at end of year


Net carrying amount 568 689 - 1 257 31 December 2013 Balance at beginning of year


Net carrying amount 568 - - 568Additions - 494 - 494Depreciation (Note 3.2) - (12 ) - (12 )Balance at end of year, net of accumulated depreciation 568 482 - 1 050Balance at end of year

At cost 568 746 352 1 666Accumulated 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.


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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 PartnershipCurrent 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 - - Engen Palapye Partnership Revenue 6 168 5 581 - -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


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.


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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. BGIProperties Ltd, Cavallo Engineering & Construction (Pty) Ltd and IvoryProperties (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 ) - -Net accommodation (1 500 ) (322 ) - -- Accommodation receivable 447 144 1 509 878 - -- Accommodation payable (446 862 ) (1 498 577 ) - -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.



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’000Trade 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.


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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 cashequivalents comprise the following: Cash on hand and at bank 233 185 286 587 2 986 3 599Short term deposits 177 245 33 505 35 330 33 505Cash 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 138For 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 - - 43 075 39 162 - - Health, safety and environmentBalance 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



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 949Other payables 12 941 8 174 761 949 226 048 202 707 3 861 3 898Non-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 250Amount 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 10.0Proposed (not recognised as a liability) - final dividend for the current year 11.0 30.0 11.0 30.0


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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 computersupport - 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/servicesPurchase 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

(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 590Total 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.



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, plantand 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 normalbusiness 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 ofpetroleum products from the Republic of South Africa and Namibiato Botswana and whilst in transit. 497 497 - -

Guarantee to Botswana Railways in respect of security for compliancewith performance obligations in accordance with the fuel supply contract 3 974 3 974 - - 4 471 4 471 - -


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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 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.



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 567External rental income on investment property 8 541 - - 8 541Interest: bank and term deposits 9 105 - - 9 105Total Segment Revenue 2 600 213 - - 2 600 213Results Depreciation (17 662 ) - - (17 662)Foreign exchange gains 1 421 - - 1 421Finance costs (3 799 ) - - (3 799)Taxation (30 342 ) - - (30 342)Profit for the year after tax 63 868 2 593 - 66 461Total assets 822 791 20 673 - 843 464Total liabilities 395 799 - - 395 799Capital Expenditure 28 746 - - 28 746 Year ended 31 December 2013 Segment Revenue External sales 2 609 274 - - 2 609 274External rental income on investment property 7 802 - - 7 802Interest: bank and term deposits 4 605 - - 4 605Total Segment Revenue 2 621 681 - - 2 621 681Results Depreciation (13 966) - - (13 966)Foreign exchange gains 7 679 - - 7 679Finance costs (1 340) - - (1 340)Taxation (44 847) - - (44 847)Profit for the year after tax 127 345 2 429 - 129 774Total assets 710 685 20 411 - 731 096Total liabilities 291 484 - 291 484Capital Expenditure 18 284 - - 18 284

2014 2013 P’000 P’000 Geographic informationRevenues from external customers Botswana 2 600 213 2 621 681 Total revenue from external customers per the consolidated statement of profit or loss and othercomprehensive 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.


21. SEGMENT REPORTING (continued)

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Group Financial liabilities loans measured Total and amortised Carrying receivables cost amount Note P’000 P’000 P’000 22. FINANCIAL INSTRUMENTS31 December 2014 Financial assets Investments – unlisted debentures 10 37 - 37Trade and other receivables 13 112 206 - 112 206Cash 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 2013Financial assets Investments – unlisted debentures 10 37 - 37Trade and other receivables 13 103 896 - 103 896Cash at bank and in hand 14 320 092 - 320 092 Financial liabilities Trade and other payables 17 - (202 707 ) (202 707 ) 424 025 (202 707 ) 221 318



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 534Cash at bank and in hand 14 38 316 - - 38 316Forward 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 2013Financial assets Investments – unlisted 10 4 534 - - 4 534Cash 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


22. FINANCIAL INSTRUMENTS (continued)

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Group Company



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.

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)


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



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.

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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 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 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.



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 048Forward exchange contract liability - 602 - - - 602 - 226 650 - - - 226 650 31 December 2013 Trade and other payables - 202 707 - - - 202 707Forward exchange contract liability - 1 243 - - - 1 243 - 203 950 - - - 203 950 Company 31 December 2014 - 3 691 - - - 3 691Trade and other payables - 3 691 - - - 3 691 31 December 2013 - 3 898 - - - 3 898Trade 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.


22. FINANCIAL INSTRUMENTS (continued}

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

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

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.

23. SUBSIDIARY COMPANIES Subsidiary companies of Engen Botswana Limited and that of Engen Marketing Botswana (Pty) Ltd, which are all incorporated in Botswana, are as follows:

% Holding Business Description

Subsidiaries of Engen Botswana Limited Engen Marketing Botswana (Pty) Ltd 100 Marketing of petroleum productsRockyhill Properties (Pty) Ltd* 100 DormantSubsidiary of Engen Marketing Botswana (Pty) LimitedEngen 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 PERIODThere are no events that occurred after the reporting period that may require adjustment of or disclosure in the annual financial statements.



REPORT ON THE FINANCIAL STATEMENTSWe 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.

OPINIONIn 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).

Practicing Member: T. Chitambo (20030022)Certified Auditor

Gaborone26 March 2015

INDEPENDENT AUDITOR’S REPORTTO THE MEMBERS OF ENGEN BOTSWANA LIMITED

94

NOTICE OF MEETINGFOR THE YEAR ENDED 31 DECEMBER 2014

Share Capital: Details of the company’s share capital are set out in note 15 to the financial statements.

Results:The annexed financial statements adequately disclose the financial position and the results of the Group of the year ended 31 December 2014.

Holding Company: The company’s holding is Petroleum Investment Holdings Limited and its ultimate holding company is PETRONAS of Malaysia.

Subsidiary Companies: Details of the company’s subsidiaries are set out in note 23 to the financial statements.

In terms of the company’s articles of association: Messrs:F. Kotze, V. Bvumbi and R. Matthews have made themselves available for re-election.

Auditors: The auditors, Ernst and Young, retire at the forthcoming annual general meeting and offer themselves for re-appointment.

Gaborone 22 May 2015

NOTICE OF MEETINGNotice is hereby given that the 49th Annual General Meeting of the company will be held at the Gaborone International Convention Centre, on Wednesdy 24 June 2015 at 10h00 for the following business:

Agenda

1. To read the notice convening the meeting.2. To receive and consider the audited financial statements for

the year ended 31 December 2014.3. To approve the dividends as recommended by the Directors:

• Final dividend declared by Directors of BWP0.11 per ordinary share at a total cost of BWP17 569 444 which dividend was paid on 24 April 2015

4. Messrs F. J. Kotze, V. Bvumbi and R. N. Matthews who retire in accordance with Article 62 of the Constitution, being eligible, offer themselves for re-election.

4a) To confirm the re-election of Mr. F. J. Kotze who retires in accordance with Article 62 of the Constitution and beiong eligible, offers himself for re-election.

4b) To confirm the re-election of Mr. V. Bvumbi who retires in accordance with Article 62 of the Constitution and beiong eligible, offers himself for re-election.

4c) To confirm the re-election of Mr. R. N. Matthews who retires in accordance with Article 62 of the Constitution and beiong eligible, offers himself for re-election.

5. To appoint auditors for ensuing year and approve the

remuneration for the past year’s audit.6. To transact such other business as may be transacted at an

Annual General Meeting.7. Every member entitled to attend and vote at the meeting

may appoint one or more persons as a proxy to attend, speak and vote in his/her stead.

A proxy need not be a member of the company. 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) LimitedCompany SecretariesGaborone

22 May 2015

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.

95

FORM OF PROXYFOR 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/Weofbeing member/ members of the above named company do hereby appoint:

of or failing him/her

ofthe 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 2015Signature

NOTES1. Every member entitled to attend and vote at the meeting

is entitled to appoint one or more persons as a proxy to attend, speak and vote in his/ her stead. Such proxy need not be a member of the company.

2. A member may insert the name/s of proxy/ies of the member’s choice in the space provided, with or without deleting the words “the chairman of the annual general meeting”. Any such deletion must be initialed by the member. The person whose name stands first on the form of proxy and has not been deleted shall not be entitled to act a proxy to the exclusive of those whose names follow.

3. A member’s instruction to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that member in the appropriate space provided and by written instruction (if any) regarding the re-election of the specific directors. Failure to comply with the above will be deemed to authorize the proxy to vote or to abstain from voting at the annual general meeting as he/she deems fit in respect of all votes cast and in respect exercisable by the member of his/ her proxy, but the total of the votes cast and in respect whereof abstention is recorded may not exceed the total of the votes exercisable by the member or by his/her proxy.

4. Any alteration or correction made to this form of proxy must be initialed by the signatory/ies.

5. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form unless previously recorded by the transfer secretaries of the company or waived by the chairman of the annual general meeting.

6. The completion of lodging of this form shall not preclude the relevant member from attending the annual general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such member wish to do so, provided that notice of revocation of the proxy is lodged at the company’s transfer secretaries or registered offices before the meeting.

7. Forms of proxy must be lodged at the company’s transfer secretaries or registered office to be received not later than forty-eight hours before the time of the meeting.

TRANSFER SECRETARIESPricewaterhouse Coopers (Pty) LtdFairgrounds Office Park Plot 50371P O Box 1453GaboroneRegistered OfficePlot 54026Western BypassP O Box 867Gaborone

Plot 54026Western Bypoass

PO Box 867Gaborone

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