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Annual Report 2008 - Annual Report

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Annual Report 2008 - Annual Report Powered By Docstoc
					OXYGEN              medical scheme




             Annual
             Report
             For the year ended
             31 December 2007




   Licensed Financial Services Provider
                                                                                   TABLE OF CONTENTS
                                  REGISTERED                        POSTAL
                                  OFFICE ADDRESS                    ADDRESS
                                                                                   A.    AN OVERVIEW OF THE SCHEME
                                                                                   1.    Terms of registration 5
Oxygen Medical Scheme:            Old Mutual Healthcare (Pty) Ltd   PO Box 90
                                                                                   2.	   The	Scheme’s	benefit	options	5
                                  Mutualpark                        Howard	Place
                                  Jan Smuts Drive                   7450           3.	   Benefit	options	with	a	savings	plan	5
                                  Pinelands
                                  7405                                             4.    Transfer of risk 6
                                                                                   5.    Management of the Scheme 7
Principal Officer:                8 Floor, K Block
                                   th
                                                                    PO Box 90      6.    Actuarial services 9
James van Vught                   Mutualpark                        Howard	Place
                                  Jan Smuts Drive                   7450
                                                                                   7.	   Professional	indemnity	and	fidelity	insurance	9
                                  Pinelands
                                  7405
                                                                                   B.    THE TRUSTEE REPORT

Scheme Administrator:             Mutualpark                        PO Box 90      1.    Highlights of the year 11
Old Mutual Healthcare (Pty) Ltd   Jan Smuts Drive                   Howard	Place
                                                                                   2.    Challenges 11
                                  Pinelands                         7450
                                  7405                                             3.    Management of the Scheme 12

                                                                                   4.    In the industry 12
Investment Managers:              Mutualpark                        PO Box 1014
SYmmETRY Multi-managers           Jan Smuts Drive                   Cape	Town      5.    Looking ahead 13
(a division of Old Mutual Life    Pinelands                         8000
                                                                                   6.    Sub-committees 14
Assurance	Company	South	          7405
Africa Limited)                                                                          ƒ   Audit Committee

                                                                                         ƒ   Human Resources and Remuneration Committee
Actuaries:                        Mutualpark                        PO Box 90
Old Mutual Healthcare Actuarial   Jan Smuts Drive                   Howard	Place
                                  Pinelands                         7450           C.    OUR FINANCIAL POSITION
                                  7405
                                                                                   1.    Investment strategy 17

External Auditors:                MSC House                         PO Box 4609    2.    Performance in 2007 17
KPMG Inc.                         1 Mediterranean Street            Cape	Town      3.	   Operational	statistics	per	benefit	option	20
                                  Foreshore                         8000
                                  Cape	Town                                        4.    Outstanding claims 22
                                  8001
                                                                                   5.    Managing our insurance risk 22
                                                                                   6.	   Material	non-compliance	22
Internal Auditors:                Ernst & Young House               PO Box 656
Ernst & Young                     35	Lower	Long	Street              Cape	Town      7.	   Corporate	governance	and	risk	management	23
                                  Cape	Town                         8000
                                  8001
                                                                                   ANNEXURE: AUDITED SUMMARISED ANNUAL FINANCIAL STATEMENTS
A   AN OVERVIEW OF THE SCHEME                                     AN OVERVIEW OF THE SCHEME
                                                                                              A


                                    1. TERMS OF REGISTRATION


                                    Oxygen	Medical	Scheme	is	a	not-for-profit	open	
                                    medical scheme that is registered in terms of the
                                    Medical Schemes Act No.131 of 1998, as amended. In
                                    terms of the registration, Santam Limited has issued a
                                    guarantee in favour of the Scheme, and this has been
                                    lodged	with	the	Registrar	of	Medical	Schemes.


                                    2. THE SCHEME’S BENEFIT OPTIONS


                                    Oxygen Medical Scheme offers nine benefit
                                    options to employers and members of the
                                    public:

                                    ƒ   Essential
                                    ƒ   Essential CareCross
                                    ƒ   Progressive ONECARE
                                    ƒ   Core Plus
                                    ƒ   Standard
                                    ƒ   Standard Plus
                                    ƒ   80% Plan
                                    ƒ   Elite Plus
                                    ƒ   Premium Plus



                                    3. BENEFIT OPTIONS WITH A SAVINGS PLAN


                                    Savings	plans	enable	members	of	a	medical	scheme	
                                    to set aside funds to cover any future healthcare costs
                                    that	are	not	covered	by	the	standard	benefits	offered	
                                    under	a	benefit	option.

                                    The	Scheme	offers	savings	plans	on	five	of	its	
                                    benefit	options,	i.e.	Progressive	ONECARE,	Standard,	
                                    Standard Plus, Elite Plus and Premium Plus. Members



    AN OVERVIEW OF THE SCHEME
                                A   pay	an	agreed	amount	of	up	to	25%	of	their	gross	
                                    contributions into a savings account, and they can use
                                    this	to	pay	a	portion	of	their	healthcare	costs.


    4                                                                                     5
A   AN OVERVIEW OF THE SCHEME                                                                                                                                           AN OVERVIEW OF THE SCHEME
                                                                                                                                                                                                    A


    This	presents	a	long-term	benefit	for	members	as	any	unused	money	accumulates	              5. MANAGEMENT OF THE SCHEME
    in	their	savings	plan,	and	interest	is	paid	at	a	fixed	rate	that	is	agreed	by	the	Board	
    of Trustees.
                                                                                                The following Trustees served on the Board during the course of the year:
    The	Scheme’s	liability	to	members	in	terms	of	their	savings	plan	is	reflected	as	a	
    financial	liability	in	the	annual	financial	statements.	This	is	repayable	on	termination	
    of	membership,	in	terms	of	Regulation	10	of	the	Act.                                          MEMBER-ELECTED TRUSTEES:                                                              A     B

                                                                                                   ƒ   André Davids – Chairman                                                         15     15
    4. TRANSFER OF RISK
                                                                                                   ƒ   Mbovana Sithole                                                                 15     15
    The Scheme entered into risk arrangements with the following
    organisations to provide services for the year:                                                ƒ   Andrew	Wright	(resigned on 30 November 2007)                                    15     15


    ƒ   CareCross Health (Pty) Ltd
                                                                                                   ƒ   Michael Wright                                                                  15     15
    ƒ   ONECARE Health (Pty) Ltd
    ƒ   Preferred Provider Negotiators (Pty) Ltd
                                                                                                  TRUSTEES APPOINTED BY OLD MUTUAL:                                                     A     B
    ƒ   Webshelf	Investments	NR	10	(Pty)	Ltd,	trading	as	Dental	Risk	Company
                                                                                                   ƒ   Gordon Anthony	(appointment	terminated	on	31	May	2007)                           6     6
    Through	risk	arrangements,	the	above	organisations	manage	the	claims	experience	
    below	an	agreed	claims	ratio.	If	they	achieve	this,	they	are	remunerated	in	line	with	
    certain agreed terms.                                                                          ƒ   Jaydee Filmalter (appointment	terminated	on	31	May	2007)                         6     5


                                                                                                   ƒ   Chris Boonzaaier (appointed	on	1	July	2007)                                      7     6


                                                                                                   ƒ   Johan Hartman                                                                   15     15


                                                                                                   ƒ   Mike Sikhakhane                                                                 15     8


                                                                                                   ƒ   Jerry van Niekerk	(appointed	on	1	April	2007,	resigned	on	30	June	2007)          6     1


                                                                                                   ƒ   Bertie van Wyk	(appointed	on	1	April	2007,	resigned	on	31	May	2007)              5     0



                                                                                                A = the total number of meetings that Trustees could have attended in 2007
                                                                                                B	=	the	actual	number	of	meetings	attended	during	their	term	of	office	in	2007

                                                                                                Because of the resignation of Trustees during the year, one member-elected trustee
                                                                                                and	one	trustee	appointed	by	Old	Mutual	joined	the	Board	of	Trustees	on	31	
                                                                                                January	2008.	This	makes	up	the	full	complement	of	Trustees.




    6                                                                                                                                                                                          7
A   AN OVERVIEW OF THE SCHEME                                                                                                                                    AN OVERVIEW OF THE SCHEME
                                                                                                                                                                                              A


    Meet the Trustees                                                                               The	remuneration	of	Trustees,	which	is	proposed	and	adopted	each	year	at	the	
                                                                                                    annual	general	meeting,	is	set	out	in	the	full	set	of	annual	financial	statements.	

    ANDRÉ DAVIDS
                                                                                                    6. ACTuARIAL SERVICES
    André has been the Financial Manager for the National Bargaining Council for the clothing
    industry since 2002. He holds a B.Comm (Accounting) from the University of the Western
    Cape	and	a	B.Compt	Hons	(Accounting)	from	UNISA.	He	has	been	a	trustee	of	the	Oxygen	
                                                                                                    The	Scheme’s	actuaries	played	an	important	support	role	to	the	Scheme	throughout	
    Medical	Scheme	since	2003,	and	was	appointed	chairman	from	February	2005,	a	position	
                                                                                                    the	year	in	the	analysis	of	data,	the	compilation	of	reports,	as	well	as	providing	
    which	he	still	holds	(the	chairman	is	elected	annually).	He	has	also	served	on	the	Audit	
    Committee and various ad hoc committees.                                                        advice	and	guidance.	This	was	particularly	evident	during	the	review	of	benefits	and	
                                                                                                    contributions during the second half of the year.

    CHRIS BOONZAAIER
                                                                                                    7. PROFESSIONAL INDEMNITy AND FIDELITy INSuRANCE
    Chris	has	been	involved	in	the	financial	services	sector	since1977.	After	holding	
    various	general	management	positions	at	Old	Mutual	and	Metroplitan	Life,	he	set	up	an	
    international	business	consultancy	in	2004.	His	qualifications	include	a	BA	Hons	(Business	&	
                                                                                                    In	terms	of	the	Medical	Schemes	Act,	Santam	Limited	has	provided	the	Scheme	with	
    Administration) and an MBA.
                                                                                                    a	guarantee	of	R10	000	000	per	claim,	with	a	maximum	of	R20	000	000	per	year.

    MBOVANA SITHOLE

    Mbovana	studied	at	the	University	of	the	North	and	also	completed	various	training	courses	
    at	the	University	of	Pretoria.	He	is	currently	employed	as	the	Chief	Provisioning	Admin	
    Clerk	(transport)	at	the	Department	of	Education	in	Bloemfontein.	His	experience	includes	
    National	Chairman	and	Initiator	of	Student	Consultancy	and	Information	Network	Centre	as	
    well	as	Initiator	and	Developer	of	the	Tertiary	Students	Self-Reliance	Programme.


    MICHAEL WRIGHT

    After	obtaining	his	MBBCh	from	the	University	of	the	Witwatersrand,	Michael	specialised	
    in	obstetrics	and	gynaecology.	He	has	worked	in	private	practice	and	the	public	sector.	He	
    is	currently	a	part-time	consultant	at	the	Victoria	Hospital	in	Wynberg	and	lectures	at	the	
    University	of	Cape	Town.


    JOHAN HARTMAN

    Before	becoming	a	farmer	in	the	Limpopo	Province	in	1998,	Johan	was	the	CEO	of	the	
    Transvaal	Agricultural	Union	SA,	CEO	of	Intersport	SA	and	General	Manager	of	Drs.	Du	
    Buisson & Partners. He obtained a B.Comm (Accounting) from the University of Pretoria.


    MIKE SIKHAKHANE

    Mike serves as a trustee of Oxygen Medical Scheme and Metal Box Provident Fund. He is
    currently	the	HR	Director	at	Nampak	Bevcan	Division.	His	qualifications	include	a	B.Soc.
    Sci Hons (Human Resources) from the University of Natal-Durban and a PMD from the
    University	of	Cape	Town	Business	School.




    8                                                                                                                                                                                     9
A   AN OVERVIEW OF THE SCHEME                                             THE TRuSTEE REPORT




                                    1. HIGHLIGHTS OF THE yEAR


                                    With the registration of the Premium Plus option,
                                    all	the	Scheme’s	benefit	options	have	now	been	
                                    registered. The Registrar of Medical Schemes had
                                    previously	declined	the	registration	of	options	for	
                                    a number of schemes, including Oxygen. Reasons
                                    included above-average increases and concerns
                                    about the long-term sustainability of certain
                                    options.	After	the	submission	of	additional	
                                    information	and	a	comprehensive	business	plan,	
                                    the	Registrar	was	happy	to	approve	the	registration	
                                    of	the	various	options.

                                    A saving of R23 million in administration fees,
                                    negotiated	with	Old	Mutual	Healthcare,	has	resulted	in	
                                    added value being brought back into the Scheme.

                                    In 2007 the Scheme introduced a wellness
                                    programme	in	response	to	a	trend	in	the	market.	
                                    The	programme	not	only	encourages	members	to	look	
                                    after	their	health	but	also	provides	additional	benefits.	

                                    The Scheme received a boost of more than
                                    R7 million, including interest, from Old Mutual
                                    Healthcare. This stems from the administrator’s
                                    rigorous	process	to	evaluate	all	its	practices	from	
                                    which	income	has	been	earned.	In	this	way	it	could	
                                    identify income that may not have been adequately
                                    disclosed to the Scheme, in light of the changed
                                    business and regulatory environment.



                                    2. CHALLENGES


                                    At	the	beginning	of	2007,	we	set	out	to	increase
                                    our membership	and	improve	the	solvency of the
                                    Scheme.	We	were	unable	to	achieve	our	solvency	
                                    objective	because	of	the	very	high	number	of	



    THE TRuSTEE REPORT
                                B   claims	and	the	loss	of	membership.	The	Scheme	
                                    has	submitted	a	comprehensive	business	plan	to	
                                    the	Registrar	of	Medical	Schemes,	with	details	


    10                                                                                     11
THE TRuSTEE REPORT                                                                                                                                       THE TRuSTEE REPORT




of	our	longer-term	plans	for	achieving	growth	in	membership.	We	meet	quarterly	      stepped	in	to	curb	this	practice,	and	controls	have	been	introduced	to	monitor	the	
with	the	Registrar	to	provide	feedback.	                                             cost of consumables.

Until	2006	government	employees	made	up	17%	of	our	total	membership.	With	the	       The	healthcare	industry	remains	concerned	about	the	impact	that	prescribed
launch of the Government Employees Medical Scheme (GEMS), the Scheme lost            minimum benefits (PMBs) are having on the bottom line. Medical schemes
about	3	300	members	in	2007	who	opted	to	join	the	new	scheme.	This	accounted	        are	obliged	to	pay	in	full	for	PMBs,	the	basic	healthcare	basket	to	which	all	their	
for	a	significant	loss	in	membership	and	nearly	half	the	net	losses	for	the	year.	   members	are	entitled.	However,	there	are	no	controls	on	the	rates	that	providers	
What’s	more,	there	is	a	lower	claiming	trend	among	government	employees,	and	        may charge for this service.
we	have	felt	the	impact	from	a	claims	perspective	as	well.
                                                                                     The government has also indicated its concerns about high prices, and draft
Owing	to	the	current	economic	climate	in	South	Africa,	we	are	seeing	members	        legislation	has	been	tabled	to	make	tariff	negotiations	transparent	in	an	attempt	to	
“buying	down”,	that	is,	they	are	switching	to	lower	options	that	are	cheaper.	We	    drive	down	costs.	This	proposed	legislation	allows	collective	bargaining,	whereby	
have also found that younger members are choosing to forego medical cover            schemes	can	join	forces	to	negotiate	with	service	providers.	However,	we	are	aware	
altogether because of affordability.                                                 that	the	promulgation	of	this	legislation	may	well	take	some	time.

The	result	of	buying	down	is	that	members	often	find	that	such	options	offer	less
day-to-day benefits.	In	addition,	a	hospital	plan	such	as	the	Core	Plus	Option	      5. LOOKING AHEAD
does	not	have	a	savings	facility.	We	are	concerned	that,	without	enough	day-to-
day	benefits,	members	are	either	paying	these	costs	themselves,	or	they	are	being	
admitted	to	hospital.	We	have	seen	an	increase	in	hospital	admissions	for	medical	   Not	only	do	we	want	to	grow	the	membership	of	the	Scheme,	but	we	also	want	
management,	i.e.	hospitalisation	without	surgery.	This	trend	will	be	monitored	      to	make	sure	that	we	have	the	right profile of members. That is going to be
closely	going	forward.                                                               quite	a	challenge,	particularly	as	South	Africans	are	facing	a	tough	time	because	
                                                                                     of	economic	factors.	Many	people	see	healthcare	as	a	discretionary	expenditure;	
                                                                                     our	view	is	that	it	should	be	one	of	the	building	blocks	of	your	financial	planning.	
3. MANAGEMENT OF THE SCHEME                                                          Without	adequate	medical	cover,	you	could	face	financial	hardship,	for	example,	if	
                                                                                     you	are	hospitalised	as	a	result	of	a	serious	condition	or	accident.	

To	maximise	the	benefit	of	our	joint	venture	with	Old	Mutual	South	Africa,	the	      As	all	our	benefit	options	have	been	approved	by	the	Registrar	of	Medical	Schemes,	
Scheme’s	marketing,	sales	and	distribution	will	now	be	handled	by Old Mutual         we	will	now	market	the	Scheme	aggressively,	with	the	main	focus	being	on	the	
Health Solutions,	a	new	division	within	Old	Mutual.	We	are	looking	forward	to	the	   family market.
benefits	of	harnessing	Old	Mutual’s	sales	force	to	market	the	Scheme.

You are reminded that the election of Trustees	will	take	place	again	in	2009.	The	
Board	of	Trustees	consists	of	eight	members,	with	four	elected	by	members	and	
four	appointed	by	Old	Mutual.	They	usually	serve	a	term	of	three	years	and	may	be	
re-elected.


4. IN THE INDuSTRy


In the media you may have read about the high hospital tariffs and mark-
ups on consumables	that	private	hospitals	have	been	charging	members	and	
medical	schemes.	The	Scheme	negotiates	separately	with	each	hospital	group,	
and the Board of Trustees is satisfied that they have managed to negotiate tariff
increases	that	are	in	line	with	the	rest	of	the	industry.	The	government	has	



12                                                                                                                                                                          13
THE TRuSTEE REPORT                                                                                                                                                      THE TRuSTEE REPORT




In	our	drive	to	maximise	the	value	we	offer	our	members,	                                     Human Resources and Remuneration Committee
we	will	continue	to	find	ways	of	curbing non-healthcare
spending.                                                                                     This	committee	reviews	the	performance	of	the	Principal	Officer	as	Chief	Executive	
                                                                                              Officer	of	the	Scheme.	It	also	negotiates	the	annual	increase	of	the	Principal	
Our	benefit	options	are	designed	in	such	a	way	that	members	can	                              Officer’s	package.
enjoy	peace	of	mind,	knowing	that	they	will	be	covered	in	the	case	
of unpredictable high-cost events	such	as	hospitalisation.	We	will	revisit	the	               It	ensures	that	appropriate	human	resources	policies	are	in	place,	that	these	
structure	of	our	benefit	options	to	ensure	that	we	continue	to	achieve	this.                  are	adhered	to,	and	that	there	are	enough	members	with	the	right	skills	on	the	
                                                                                              management team.
In	responding	to	challenges	and	opportunities	in	the	industry,	medical	schemes	will	
be bound by revised legislation being tabled. This includes the National Health               The following Trustees served on this sub-committee in 2007:
Amendment Bill and the Medicines and Related Substances Amendment Bill.

                                                                                                                                                                                 A      B
6. SuB-COMMITTEES
                                                                                                Johan Hartman – Chairman (appointed	by	Old	Mutual)                               5      5

Audit Committee                                                                                 Mbovana Sithole (member-elected) (elected on 19 June 2007)                       2      2

The	main	responsibility	of	this	sub-committee	is	to	help	the	Board	of	Trustees	to	
                                                                                                Michael Wright (member-elected)                                                  5      5
carry	out	their	duties	in	terms	of	accounting	policies,	internal	control	systems	and	
financial	reporting	practices.	The	internal	and	external	auditors	report	to	the	Audit	
Committee	on	critical	findings	that	they	make	during	their	audits.                              Mike Sikhakhane	(appointed	by	Old	Mutual)	(elected	on	22	March	2007)             5      2


The following people served on this sub-committee in 2007:                                      Gordon Anthony (resigned on 31 May 2007)                                         2      2


                                                                                      A   B   A = the total number of meetings that Trustees could have attended in 2007
                                                                                              B	=	the	actual	number	of	meetings	attended	during	their	term	of	office	in	2007
Ken	Baldwin	–	Chairman	(independent)                                                  3   3


Johan Hartman (appointed	by	Old	Mutual)                                               3   3


Jaydee Filmalter (appointed	by	Old	Mutual)	(appointment	terminated	on	1	April	2007)   1   1


Anthony Coombe	(independent)                                                          3   3


Lulama Duma (independent)                                                             3   3



A = the total number of meetings that Trustees could have attended in 2007
B	=	the	actual	number	of	meetings	attended	during	their	term	of	office	in	2007




14                                                                                                                                                                                     15
OuR FINANCIAL POSITION                                            OuR FINANCIAL POSITION



                             Please contact Oxygen Medical Scheme to obtain a full set
                             of	the	Scheme’s	audited	financial	statements	for	the	year	
                             ended 31 December 2007.



                             1. INVESTMENT STRATEGy


                             Our investment objectives were to:

                             ƒ   Ensure that there are enough funds to meet
                                 our	benefit	and	operating	expenses	as	they	
                                 become due
                             ƒ   To	make	adequate	provision	for	long-term	
                                 adverse claims
                             ƒ   To satisfy regulatory requirements
                             ƒ   To	maximise	our	investment	return	within	these	
                                 constraints

                             The	Scheme’s	investment	strategy	was	to	hold	29%	
                             of its total assets in equity, 11% in local bonds,
                             8% in international bonds, 1.5 times monthly
                             contributions in cash (but not more than the 20%
                             regulatory requirement), and the rest in other
                             interest-bearing assets.


                             2. PERFORMANCE IN 2007


                             Since	2005,	medical	schemes	have	seen	a	downward	
                             trend	in	operating	results.	The	Council	for	Medical	
                             Schemes	reported	that,	in	2006,	30	medical	schemes	
                             representing	71.6%	of	average	beneficiaries	had	
                             operating	deficits	greater	than	R18	million.	Oxygen	
                             Medical	Scheme	and	other	high-impact	schemes	were	
                             among these.

                             In	2007	the	Scheme	produced	a	negative	net	
                             healthcare result of R72.6 million. The net result
                             (including	investment	income)	was	a	loss	of	R25.6	
                             million	compared	to	a	positive	result	of	R44.2	
                             million	in	2006	because	of	large	cash	flow	injections.	
                             Even	though	there	was	an	increase	in	contribution	



OuR FINANCIAL POSITION
                         C   income	in	2007,	we	did	see	a	migration	of	members	
                             to	different	benefit	options	as	well	as	a	change	in	
                             savings income driven by legislation.



16                                                                                        17
OuR FINANCIAL POSITION                                                                                                                                                                      OuR FINANCIAL POSITION




As	shown	in	the	graph	below,	as	the	membership	of	the	Scheme	                                                               Our solvency ratio was as follows:
increased,	the	solvency	declined.	This	is	as	a	result	of	the	way	in	which	
solvency	is	calculated.	Although	you	would	expect	solvency	to	increase	with	
declining	membership,	this	did	not	materialise	in	2007.	This	can	be	attributed	to	                                                                                                 2007              2006
an	increase	in	the	average	age	of	our	members,	with	a	related	increase	in	claims,	
while	younger	healthy	members	are	opting	out	of	a	healthcare	arrangement	for	                                                 The accumulated funds ratio is calculated on the     R                 R
financial	reasons.	There	was	also	a	significant	move	of	government	employees	to	                                              following basis:
GEMS. These members have traditionally claimed less than other members.
                                                                                                                              Total	members’	funds	per	balance	sheet               286,167,246       307,106,853
                                                                                                                              Less:	Available-for-sale	investment	reserve          ( 7,693,730 )     (3,053,508 )


100,000                                                                                                               25%     Accumulated	funds	per	Regulation	29                  278,473,466       304,053,345



80,000                                                                                                                20%     Gross contributions                                  1,584,963,832     1,550,213,034


60,000                                                                                                                15%     Accumulated funds ratio                              17.6%             19.6%


40,000                                                                                                                10%   We	spent	16.48%	of	gross	contributions	on	non-healthcare	expenditure,	compared	
                                                                                                                            to	17.45%	in	2006.	Of	this,	11%	went	towards	administration	costs	(12%	in	2006).
20,000                                                                                                                5%
                                                                                                                            Our operational statistics for the year were as follows:

0                                                                                                                     0%

                                                                                                                                                                                   2007              2006
          JUN 04


                   APR




                               OCT


                                     JUN 05


                                              APR




                                                          OCT


                                                                JUN 06


                                                                         APR




                                                                                     OCT


                                                                                           JUN 07


                                                                                                    APR




                                                                                                                OCT
                                                    JUL




                                                                               JUL




                                                                                                          JUL
                         JUL




                                                                                                                                                                                   R                 R


                                                                                                                              Average	accumulated	funds	per	member                 3,383             3,380


                                                                                                                              Breakdown	of	total	amount	paid	to	administrator:
At	the	end	of	the	financial	year,	the	Scheme’s	solvency	ratio	was	17.6%,	down	from	
19.6% at the end of 2006. This decrease is due to the contribution increases and
                                                                                                                              - Administration fees                                153,850,982       154,550,574
the	poor	underwriting	result	for	the	2007	benefit	year.

                                                                                                                              	-	Managed	care:	management	services	                23,189,031        28,267,630


                                                                                                                              - Other                                              10,094,923        16,065,000



                                                                                                                            The	loss	ratio	for	the	Scheme	was	104.8%	and	there	was	a	claims	ratio	of	87.9%.

                                                                                                                            Of	the	nine	benefit	options,	only	the	80%	Plan	ended	the	year	with	a	positive	
                                                                                                                            net	healthcare	result,	that	is	before	investment	income.	The	only	options	that	
                                                                                                                            experienced	growth	over	2007	were	Essential	CareCross	and	Premium	Plus.	


18                                                                                                                                                                                                             19
        OuR FINANCIAL POSITION                                                                                                                                                                   OuR FINANCIAL POSITION




        3. OPERATIONAL STATISTICS PER BENEFIT OPTION



                                                                     PROGRESSIVE
                             ESSENTIAL      ESSENTIAL CARECROSS        ONECARE           CORE PLuS          STANDARD         STANDARD PLuS           80% PLAN           ELITE PLuS        PREMIuM PLuS              TOTAL



                          2007      2006    2007         2006      2007      2006     2007      2006    2007      2006     2007      2006     2007         2006      2007       2006    2007      2006      2007            2006


Number of members         4 427    10 804   7 147        2 432     3 830     8 578    21 533   24 784   22 360    20 770   12 992    13 158   5 109         5 848    4 043      3 585    864       N/A     82 305       89 959



Number	of	beneficaries	   7 672    18 160   11 468       5 319     6 540     15 774   55 119   63 012   57 811    58 817   33 875    35 615   9 784        11 443    7 899      7 221   2 137      N/A     192 305          15 361


Average number of
                          4 523    11 048   6 926        2 555     3 898     8 761    21 942   24 798   23 566    21 738   13 569    13 616   5 327         6 118    4 222      3 709    790       N/A     84 762       92 342
members for the year



Average number of
beneficiaries	for	the	    7 991    18 886   11 154       5 657     6 719     16 436   56 172   63 217   61 566    62 207   35 758    37 039   10 309       11 994    8 354      7 515   1 935      N/A     199 957      222 951
year



Dependant	ratio	to	
                           0.73     0.68     0.60        1.19      0.71       0.84     1.56     1.54     1.59      1.83     1.61      1.71     0.92         0.96      0.95      1.01     1.47      N/A      1.34            1.39
members



Average net
contributions	per	        R 855     R 724   R 771       R1 943    R1 150     R1 073   R1 361   R1 198   R1 436    R1 270   R1 922    R1 614   R1 835       R1 620    R2 650    R2 314   R1 821     N/A     R1 485       R1 301
member	per	month



Average net
contributions	per	        R 484     R 424   R 479        R 878     R 667     R 572    R 532     R 470   R 550     R 444    R 729     R 593    R 948        R 827     R1 340    R1 142   R 743      N/A      R 629           R 539
beneficiary	per	month



Relevant healthcare
expenditure	as	a	
                          94.78%   81.38%   89.66%      87.44%    108.36%   85.49%    85.19%   91.25%   76.09%   67.82%    80.96%   73.32%    79.63%      85.02%     96.66%    94.91%   71.92%     N/A     83.40%       80.60%
percentage	of	gross	
contributions



Non-healthcare
expenditure	as	a	
                          26.36%   26.55%   23.46%      12.61%    19.65%    21.08%    18.81%   20.25%   17.24%   17.82%    13.50%   14.34%    13.26%      14.14%     10.64%    10.91%   17.14%     N/A     16.48%       17.45%
percentage	of	gross	
contributions



Average age for
                            35       34       35          41        39         36       33       32       32       28        33        30       44              43     47        46       33       N/A       34              32
beneficiaries



Pensioner ratio
(beneficiaries	            12%       9%      9%          19%       17%        12%      9%        8%      8%        5%       8%        6%       21%          19%       29%       27%      9%        N/A      10%              9%
> 65 years)




        20                                                                                                                                                                                                             21
OuR FINANCIAL POSITION                                                                                                                               OuR FINANCIAL POSITION




4. OuTSTANDING CLAIMS                                                                 7. CORPORATE GOVERNANCE AND RISK MANAGEMENT


Please	refer	to	Note	3	in	the	summarised	annual	financial	statements	for	             The	Board	of	Trustees	is	bound	by	Section	57	of	the	Medical	Schemes	Act,	which	
movements	on	the	provision	for	outstanding	claims.	This	is	consistent	with	2006.	     places	certain	obligations	on	Boards	of	Trustees	in	terms	of	corporate	governance.	
There have been no unusual movements that the Trustees believe should be              The	Board	conducted	a	corporate	governance	review	in	2007	to	evaluate	the	skills	
brought to members’ attention.                                                        set	of	individual	trustees	as	well	as	determine	what	structures	are	in	place	to	
                                                                                      ensure	good	governance.	While	the	overall	assessment	was	acceptable,	there	are	
                                                                                      certain	areas	that	need	to	be	monitored	and	managed.	To	improve	its	compliance,	
5. MANAGING OuR INSuRANCE RISK                                                        the	Board	will	adopt	a	more	formal	approach	to	corporate	governance,	including	a	
                                                                                      framework	for	regular	assessment.

Medical	schemes	are	exposed	to	risk	because	they	never	know	when	members	will	        During 2007 the executive management of the Board undertook a risk assessment
be	claiming	from	the	scheme	or	how	much	these	claims	will	be.	In	other	words,	the	    to	develop	a	risk	management	framework.	This	involved	identifying	the	key	risks	
health of a scheme is directly linked to the health of its members.                   that	affect	the	achievement	of	the	Scheme’s	objectives.	An	important	aspect	is	that	
                                                                                      risk	management	is	not	limited	to	the	downside	or	risk	avoidance,	but	is	also	about	
The Scheme uses a number of mechanisms to manage this insurance risk. These           taking	risk	knowingly.
include	benefit	limits	and	sub-limits,	approval	procedures	for	transactions	that	
involve	pricing	guidelines,	pre-authorisation	and	case	management,	profiling	of	      The	Board	recognises	the	need	to	develop	formal	reporting.	The	executive	team	will	
service	providers,	centralised	management	of	risk	transfer	arrangements,	and	the	     be	expanded	with	the	appointment	of	a	finance	manager,	responsible	for	overall	risk	
monitoring of emerging issues.                                                        monitoring,	to	report	on	the	management	of	the	risk	management	framework.	



6. MATERIAL NON-COMPLIANCE


While the Registrar of Medical Schemes has been made aware through our
business plan of the challenges we face, the Scheme had to address the                CHAIRMAN                     PRINCIPAL OFFICER
following non-compliance matters:
                                                                                      April 2008
Adequacy of reserves: The Medical Schemes Act requires all medical schemes
to have a solvency ratio of 25%. The Oxygen Medical Scheme achieved 17.6% in
2007,	compared	to	19.6%	in	2006.	However,	the	Trustees	are	confident	that,	with	
reserves	of	more	than	R360	million,	the	Scheme	is	in	a	position	to	adequately	
meet	member	claims.	Larger	schemes	like	Oxygen	are	less	prone	to	volatility	than	
smaller schemes.

Sustainability of benefit options: According to the Medical Schemes Act, all
benefit	options	must	be	self-supporting	in	terms	of	their	membership	and	financial	
performance,	as	well	as	being	financially	sound.	In	2007	the	Essential,	Essential	
Carecross, Progressive ONECARE, Core Plus, Standard, Standard Plus, Elite Plus,
and	Premium	Plus	options	did	not	meet	this	requirement.	The	Scheme	has	to	strike	
a	fine	balance	between	growing	its	membership	(by	being	priced	aggressively)	and	
ensuring its long-term sustainability.




22                                                                                                                                                                      23
ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS

                                                           THE REPORTS AND STATEMENTS SET OUT BELOW COMPRISE THE
                                                           SUMMARISED ANNUAL FINANCIAL STATEMENTS PRESENTED TO MEMBERS:


                                                           CONTENTS


                                                           1.	   Independent	Auditor’s	Report	to	the	Members	of	Oxygen	Medical	Scheme	2

                                                           2.    Balance sheet 3

                                                           3.    Income statement 4

                                                           4.    Statement of changes in funds and reserves 5

                                                           5.	   Notes	to	the	summarised	annual	financial	statements	6-23



                                                           A COPY OF THE COMPLETE SET OF THE ANNUAL FINANCIAL STATEMENTS
                                                           CAN BE OBTAINED FROM:


                                                           Principal Officer:
                                                           Mr James van Vught
                                                           Oxygen Medical Scheme
                                                           Mutualpark
                                                           8th Floor, Block K
                                                           Jan Smuts Drive
                                                           Pinelands 7405




ANNEXuRE:
AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS

24
ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS                                                                   ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS




1. INDEPENDENT AuDITOR’S REPORT TO THE MEMBERS OF OXyGEN MEDICAL SCHEME                  2. BALANCE SHEET
                                                                                         at 31 December 2007

Report on the Summarised Annual Financial Statements

The	summarised	annual	financial	statements	set	out	on	pages	3	to	23	have	been	
                                                                                                                                    NOTES                2007                 2006
derived	from	the	annual	financial	statements	of	Oxygen	Medical	Scheme	(the	
Scheme)	for	the	year	ended	31	December	2007.	These	summarised	annual	financial	                                                                             R                    R
statements	are	the	responsibility	of	the	Scheme’s	trustees.	Our	responsibility	is	to	
express	an	opinion	on	whether	these	summarised	annual	financial	statements	are	          ASSETS
consistent,	in	all	material	respects,	with	the	annual	financial	statements	from	which	
                                                                                         Non-current assets                                      363 112 682          405 181 372
they	were	derived.
                                                                                         Equipment                                                     6 793                5 035
We	have	audited	the	annual	financial	statements	of	Oxygen	Medical	Scheme	for	
the	year	ended	31	December	2007,	from	which	the	summarised	annual	financial	             Available-for-sale investments               2          363 105 889          405 176 337
statements	were	derived,	in	accordance	with	International	Standards	on	Auditing.	

In	our	report	dated	29	April	2008,	we	expressed	an	unqualified	opinion	on	the	           Current assets                                          141 671 218          127 584 846
annual	financial	statements	from	which	the	summarised	annual	financial	statements	
were	derived.                                                                            Insurance and other receivables                          51 259 066           88 116 408

In	our	opinion,	the	summarised	annual	financial	statements	are	consistent,	in	all	       Cash and cash equivalents                                90 412 152           39 468 438
material	respects,	with	the	annual	financial	statements	from	which	they	are	derived.

For	a	better	understanding	of	the	Scheme’s	financial	position	and	its	financial	         Total assets                                            504 783 900          532 766 218
performance	for	the	year	ended	31	December	2007	and	of	the	scope	of	our	audit,	
the	summarised	annual	financial	statements	should	be	read	in	conjunction	with	the	
annual	financial	statements	from	which	the	summarised	annual	financial	statements	       FUNDS AND LIABILITIES
were	derived	and	our	audit	report	thereon.	Detailed	annual	financial	statements	are	
available on request from the Scheme.                                                    Members’ funds                                          286 167 246          307 106 853

Report on Other Legal and Regulatory Requirements                                        Accumulated funds                                       278 473 466          304 053 345

                                                                                         Available-for-sale revaluation reserve                    7 693 780            3 053 508
As	required	by	the	Council	for	Medical	Schemes,	we	draw	your	attention	to	note	
10.	Non-compliance	matters,	which	details	instances	of	non-compliance	with	the	
Medical	Schemes	Act,	which	we	consider	to	be	material.
                                                                                         Current liabilities                                     218 616 654          225 659 365

KPMG INC.                                                                                Outstanding	claims	provision                 3           97 298 651           84 103 267
Registered Auditor
                                                                                         Savings	plan	liability                                   52 291 546           66 565 538

                                                                                         Insurance	and	other	payables                             69 026 457           74 990 560

PER AI VAN DER COLFF
Chartered	Accountant	(SA);	Registered	Auditor;	Director
                                                                                         Total funds and liabilities                             504 783 900          532 766 218
May 2008

1	Mediterranean	Street,	Foreshore,	Cape	Town,	8001	



2                                                                                                                                                                                3
ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS                                                                                     ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS




3. INCOME STATEMENT                                                                                  4. STATEMENT OF CHANGES IN FuNDS AND RESERVES
for the year ended 31 December 2007                                                                  for the year ended 31 December 2007



                                                         NOTES             2007              2006                                                                                AVAILABLE-
                                                                                                                                                                ACCU-                              TOTAL
                                                                               R                 R                                                                                FOR-SALE
                                                                                                                                                               MULATED                            MEMBERS’
                                                                                                                                                                                REVALUATION
                                                                                                                                                                FUNDS                              FUNDS
                                                                                                                                                                                  RESERVE
Net contribution income                                   4       1 510 459 894     1 441 402 203

                                                                                                     Balance as at 1 January 2007                               304 053 345         3 053 508      307 106 853
Relevant healthcare expenditure                                  (1 321 917 652)   (1 249 539 126)

Net claims incurred                                       5      (1 327 962 573)   (1 272 126 211)   Unrealised gain on revaluation of available-for-sale
                                                                                                                                                                            -      11 074 575       11 074 575
    Claims incurred                                              (1 329 836 790)   (1 274 130 717)   investments

    Third	party	claim	recoveries                                      1 874 217         2 004 506    Realised	gain	on	disposal	of	available-for-sale	
                                                                                                                                                                            -     (6 434 303)       (6 434 303)
                                                                                                     investments	recycled	to	net	surplus	on	disposal
Net	income/(expense)	on	risk	transfer	
                                                                      6 044 921        22 587 085    Surplus	recognised	directly	in	equity                                  -       4 640 272         4 640 272
arrangements

    Risk	transfer	arrangement	fees/premiums	paid          5       (181 296 014)     (120 944 613)
                                                                                                     Net	deficit	for	the	year                                   (25 579 879)                  -    (25 579 879)
    Recoveries from risk transfer arrangements            5         184 411 423       133 511 877
                                                                                                     Total	(deficit)/surplus	recognised	for	the	year            (25 579 879)        4 640 272      (20 939 607)
    Profit	share	arising	on	risk	transfer	arrangements    5           2 929 512        10 019 821

                                                                                                     Balance as at 31 December 2007                             278 473 466         7 693 780      286 167 246

Gross healthcare result                                             188 542 242       191 863 077

                                                                                                     Balance as at 1 January 2006                               157 764 362         7 908 897      165 673 259
Managed	care:	management	services                                  (31 756 392)      (33 451 666)

Broker service fees                                                (50 338 073)      (55 128 553)    Transfer	upon	amalgamation	                                102 095 367        23 370 662      125 466 029
Administration	expenditure                                        (176 623 538)     (180 712 555)

Net	impairment	losses	on	healthcare	receivables                      (2 461 574)       (1 178 300)   Unrealised gain on revaluation of available-for-sale
                                                                                                                                                                            -       7 589 236         7 589 236
                                                                                                     investments

Net healthcare result                                              (72 637 335)      (78 607 997)    Realised	gain	on	disposal	of	available-for-sale	
                                                                                                                                                                            -    (35 815 287)      (35 815 287)
                                                                                                     investments	recycled	to	net	surplus	on	disposal

                                                                                                     Deficit	recognised	directly	in	equity                                  -    (28 226 051)      (28 226 051)
Other income                                                         51 468 402       126 205 636

Net investment income                                     6          43 572 026        73 647 445
                                                                                                     Net	surplus	for	the	year                                    44 193 616                   -     44 193 616
Sundry income                                             7           7 896 376        52 558 191
                                                                                                     Total	surplus/(deficit)	recognised	for	the	year             44 193 616      (28 226 051)       15 967 565

Other expenditure                                                    (4 410 946)       (3 404 023)
                                                                                                     Balance as at 31 December 2006                             304 053 345         3 053 508      307 106 853
Asset management fees                                                (2 160 341)        ( 315 206)

Interest	paid	on	savings	accounts                                    (2 250 605)       (3 088 817)
                                                                                                     Transfer upon amalgamation:
                                                                                                     During	2006	all	the	assets	and	liabilities	of	Medical	Expenses	Distribution	Society	were	transferred	to	the	
Net (deficit)/surplus for the year                                 (25 579 879)        44 193 616    Scheme in terms of Section 63 of the Medical Schemes Act of South Africa. Total assets amounted to
                                                                                                     R	146	093	042	and	total	liabilities	to	R	43	997	675,	while	accumulated	funds	amounted	to	R	102	095	367.


4                                                                                                                                                                                                               5
ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS                                                                 ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS




5. NOTES TO THE SuMMARISED ANNuAL FINANCIAL STATEMENTS                                    Risk	transfer	premiums	are	recognised	as	an	expense	over	the	indemnity	period	
for the year ended 31 December 2007                                                       on	a	straight-line	basis.	If	applicable,	a	portion	of	risk	transfer	premiums/fees	is	
                                                                                          treated	as	prepayments.

                                                                                          Risk	transfer	premiums	and	recovery	of	claims	incurred	are	presented	in	the	income	
1. PRINCIPAL ACCOuNTING POLICIES                                                          statement and balance sheet on a gross basis. Amounts recoverable under such
                                                                                          contracts are recognised in the same year as the related claim.
The	accounting	policies	adopted	as	set	out	in	the	full	set	of	financial	statements	
have	been	applied	consistently	to	all	periods	presented	in	these	financial	               Claims recoveries relating to risk transfer arrangements are accounted for at
statements.	The	accounting	policies	set	out	below	are	selected	policies	from	the	full	    the	cost	the	Scheme	would	have	incurred,	had	it	not	entered	into	the	capitation	
set	of	policies	included	in	the	full	set	of	annual	financial	statements.                  agreement,	to	deliver	the	specified	benefits	to	its	members.

1.1 Statement of compliance                                                               Assets relating to risk transfer arrangements include balances due under risk
                                                                                          transfer	arrangements	for	outstanding	claims	provisions	and	claims	reported	not	
The	financial	statements	are	prepared	in	accordance	with	International	Financial	         yet	paid.	Amounts	recoverable	under	risk	transfer	arrangements	are	estimated	in	a	
Reporting	Standards	(IFRS)	and	its	interpretations	adopted	by	the	International	          manner	consistent	with	the	outstanding	claims	provisions,	claims	reported	not	yet	
Accounting	Standards	Board	(IASB)	and	in	accordance	with	the	requirements	of	the	         paid	and	settled	claims	associated	with	the	risk	transfer	arrangement.
South African Medical Schemes Act,1998.
                                                                                          Amounts	recoverable	under	risk	transfer	arrangements	are	assessed	for	impairment	
1.2 Basis of preparation                                                                  at	each	balance	sheet	date.	Such	assets	are	deemed	impaired	if	there	is	objective	
                                                                                          evidence, as a result of an event that occurred after its initial recognition, that
The	financial	statements	provide	information	about	the	financial	position,	results	       the Scheme may not recover all amounts due and that the event has a reliably
of	operations	and	changes	in	financial	position	of	the	Scheme.	These	have	been	           measurable	impact	on	the	amounts	that	the	Scheme	will	receive	under	the	risk	
prepared	under	historical	cost	convention,	except	for	available-for-sale	financial	       transfer arrangement.
assets,	which	are	carried	at	fair	value.	
                                                                                          1.5 Comparatives
The	Scheme’s	functional	and	presentation	currency	is	South	African	Rands.
                                                                                          Where	necessary,	comparative	figures	are	adjusted	to	conform	with	changes	in	
1.3 Outstanding claims provision                                                          presentation	in	the	current	year.

Claims	outstanding	comprise	provisions	for	the	Scheme’s	estimate	of	the	ultimate	         1.6 Critical accounting judgements and areas of key sources of estimation
cost	of	settling	all	claims	incurred	but	not	yet	reported	at	the	balance	sheet	date	      uncertainty
and	related	internal	and	external	claims	handling	expenses.	Claims	outstanding	are	
determined	as	accurately	as	possible	based	on	a	number	of	factors,	which	include	         The	preparation	of	the	financial	statements	necessitates	the	use	of	estimates	and	
previous	experience	in	claims	patterns,	claims	settlement	patterns,	trends	in	claims	     assumptions.	These	estimates	and	assumptions	affect	the	reported	amount	of	
frequency,	changes	in	the	claims	processing	cycle,	and	variations	in	the	nature	and	      assets,	liabilities	and	contingent	liabilities	at	balance	sheet	date	as	well	as	affecting	
average	cost	incurred	per	claim.                                                          the	reported	income	and	expenditure	for	the	year.	The	actual	outcome	may	differ	
                                                                                          from	these	estimates,	possibly	significantly.	
The	Scheme	does	not	discount	its	provision	for	outstanding	claims,	since	the	effect	
of the time value of money is not considered material.                                    Certain critical accounting judgements in applying the Scheme’s
                                                                                          accounting policies:
1.4 Risk transfer arrangements                                                            ƒ Provision for outstanding claims is made based on various factors as discussed
                                                                                             in Note 3.
Risk transfer arrangements are contracts entered into by the Scheme that relate to        ƒ The	Scheme’s	financial	instruments	are	measured	at	fair	value	as	indicated	
insurance	risk	mitigation.	Where	such	contracts	give	rise	to	a	transfer	of	significant	      in	Note	2	and	it	is	usually	possible	to	determine	their	fair	values	within	a	
insurance risk, it is accounted for as reinsurance contract. These contracts do not          reasonable range of estimates.
relieve	the	Scheme	of	its	direct	obligations	under	insurance	contracts	written.


6                                                                                                                                                                                 7
ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS                                                                                            ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS


PRINCIPAL ACCOuNTING POLICIES
Critical	accounting	judgements	and	areas	of	key	sources	of	estimation	uncertainty	(continued	from	page	7)

Fair	value	estimates	are	made	at	a	specific	point	in	time,	based	on	market	                                     3. OuTSTANDING CLAIMS PROVISION
conditions	and	information	about	the	financial	instrument.
                                                                                                                                                                        COVERED BY          NOT COVERED BY
These	estimates	are	subjective	in	nature	and	involve	uncertainties	and	matters	of	                                                                                     RISK TR ANSFER        RISK TR ANSFER
significant	judgement	(e.g.	interest	rates,	volatility,	estimated	cash	flows	etc.)	and	                                                                                ARR ANGEMENTS        ARR ANGEMENTS
therefore	cannot	be	determined	with	precision.
                                                                                                                2007

1.7 Surplus/(deficit) per benefit option                                                                        Provision for outstanding claims - incurred
                                                                                                                                                                            13 740 651           83 558 000
                                                                                                                but	not	yet	reported
The administration expense, management care: management services and
broker	fees	are	allocated	to	the	various	benefit	options	based	on	membership.
                                                                                                                Analysis of movements in outstanding claims
                                                                                                                Balance at beginning of year                                10 403 267           73 700 000
2. AVAILABLE-FOR-SALE INVESTMENTS                                                                               Payments	in	respect	of	prior	year                         (10 403 267)         (79 410 424)
                                                                              2007                      2006    Underprovision	in	the	prior	year                                        -       (5 710 424)
                                                                                    R                       R   Adjustment	for	current	year	(note	5)                        13 740 651           89 268 424
Fair value at the beginning of the year                              405 176 337               299 666 817      Balance at end of year                                      13 740 651           83 558 000
Additions                                                             26 854 977               814 164 042
Transfer	upon	amalgamation	                                                         -           97 059 111      Net exposure in respect of outstanding claims
Disposals                                                           (80 000 000)             (813 302 869)      Net outstanding claims                                      13 740 651           83 558 000
Unrealised gain on revaluation of available-for-sale investments      11 074 575                  7 589 236
Fair value at the end of the year                                    363 105 889               405 176 337      Total outstanding claims provision                                               97 298 651
                                                                                                                2006
The investments are managed by SYmmETRY Multimanagers, a division
                                                                                                                Provision for outstanding claims - incurred
of Old Mutual Life Assurance Company (South Africa) Limited and can be                                                                                                      10 403 267           73 700 000
                                                                                                                but	not	yet	reported
analysed as follows:

Bonds/gilts                                                        100 734 637                 64 482 464       Analysis of movements in outstanding claims
    Local                                                           65 758 509                 32 068 356       Balance at beginning of year                                 9 605 232           58 000 000
    International                                                   34 976 128                 32 414 108       Transfer	upon	amalgamation                                              -         8 400 000
Cash and money market instruments                                  187 830 101                241 690 037       Payments	in	respect	of	prior	year                          (9 605 232)         (69 112 974)
Property                                                              1 313 394                  5 440 052      Underprovision	in	the	prior	year                                        -       (2 712 974)
Unlisted shares                                                         109 077                    142 764      Adjustment	for	current	year	(note	5)                        10 403 267           76 412 974
Listed shares                                                       73 118 595                 93 396 310       Balance at end of year                                      10 403 267           73 700 000
Listed and unlisted debentures                                                 85                   24 710      Net exposure in respect of outstanding claims
                                                                   363 105 889                405 176 337       Gross outstanding claims                                    10 403 267           73 700 000

The	fair	value	of	the	SYmmETRY	Multimanager	funds	is	based	on	the	portfolio	
market value as at 31 December 2007.                                                                            Total outstanding claims provision                                               84 103 267




8                                                                                                                                                                                                         9
ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS                                                                   ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS


OuTSTANDING CLAIMS PROVISION	(continued	from	page	9)



                                                                                           ƒ   a	constant	proportionment	of	total	claims	arising	within	a	service	month	is	
                                                                 2007            2006
                                                                                               recognised	during	subsequent	months;
                                                                    R                  R
                                                                                           ƒ   the	claims	are	assumed	to	be	fully	run-off	within	10	months;
Analysis of outstanding claims provision                                                   ƒ   the	pattern	of	inflation	in	the	existing	data	will	be	projected	into	the	future;
Estimated gross claims                                     97 298 651      84 103 267      ƒ   any distortions as a result of once-off events are isolated from the claims data
Outstanding	claims	provision	relating	to	risk	transfer	
                                                                                               set;	and
                                                          (13 740 651)   (10 403 267)      ƒ   claims	are	assumed	to	have	a	stable	run-off	pattern.
arrangements
Balance at the end of the year                             83 558 000      73 700 000
                                                                                           Sensitivity of accumulated funds and solvency due to changes in the
                                                                                           outstanding claims provision
As	the	accounting	policy	relating	to	the	outstanding	claims	provision	considers	
current	estimates	of	all	contractual	flows,	in	terms	of	paragraphs	15	to	19	of	IFRS	       The	Scheme	believes	that	the	liability	for	claims	reported	in	the	balance	sheet	is	
4, no further liability adequacy test is required.                                         adequate.	However,	it	recognises	that	the	process	of	estimation	is	based	upon	
                                                                                           variables	and	assumptions	which	could	differ	when	claims	arise.
Process used to determine the assumptions:
                                                                                           The	impact	has	been	evaluated	by	looking	at	the	actual	run-off	pattern	from	the	
The	process	used	to	determine	the	assumptions	is	intended	to	result	in	a	neutral	          past	two	years	which	has	indicated	a	7%	underprovision	of	R	5	710	423	in	2007	
estimate	of	the	most	likely	or	expected	outcome.	The	sources	of	data	used	as	              and	a	4%	underprovision	of	R	2	712	974	in	2006.	
inputs	for	the	provision	are	internal,	using	detailed	studies	that	are	carried	out	
annually.	There	is	more	emphasis	on	current	trends,	and	where	in	early	months	             Using this level of sensitivity from actual, the effect on the outstanding
there	is	insufficient	information	to	make	a	reliable	best	estimate	of	outstanding	         claims provision, accumulated funds and solvency based on 6% would be:
claims,	prudent	assumptions	are	used.
                                                                                                                                   2007 ACTUAL       6% DECREASE      6% INCREASE
The Chain Ladder method is used to estimate the most likely cost of outstanding
claims.	This	method	extrapolates	the	development	of	paid	and	incurred	claims	to	                                                              R                   R               R
estimate	the	ultimate	claim	numbers	for	each	benefit	month	based	upon	observed	            Outstanding	claims	provision              83 558 000        78 544 520       88 571 480
development	of	earlier	months.	Run-off	triangles	(as	per	the	Chain	Ladder	method)	
                                                                                           Accumulated	funds	per	regulation	29      278 473 466       283 486 946      273 459 986
are	used	where	it	takes	time	after	the	treatment	date	until	the	full	extent	of	the	
claims	to	be	paid	is	known.	It	is	assumed	that	payments	will	emerge	in	a	similar	          Solvency                                     17.57%            17.89%           17.25%
way	in	each	service	month.	The	proportional	increase	in	the	known	cumulative	
payments	from	one	development	month	to	the	next	can	then	be	used	to	calculate	
payments	for	future	development	months.	                                                   4. NET CONTRIBuTION INCOME

The	accuracy	of	the	model	is	evaluated	against	actual	known	cumulative	payments	                                                                          2007                2006
experienced	after	the	balance	sheet	date	insofar	as	these	claims’	payments	
                                                                                                                                                             R                     R
relate	to	the	financial	year	end.	The	provision	is	revised	if	necessary,	as	with	
each	additional	month	of	claims	payment	data,	the	claims	incurred	and	hence	the	           Gross contributions                                    1 584 963 832       1 550 213 034
provision	at	balance	sheet	date	becomes	an	actual	known	amount.	
                                                                                           Less:	Savings	contributions	                            (74 503 938)       (108 810 831)

Assumptions                                                                                Net contribution income                                1 510 459 894       1 441 402 203


The assumptions that have the greatest effect on the measurement of the                    Gross	contribution	income	includes	contribution	adjustments	in	respect	of	
outstanding claims provision include:                                                      backdated	increases	(members	and	dependants	joining,	member	option	changes)	
                                                                                           and	backdated	decreases	(members	and	dependants	leaving,	member	option	
ƒ    the	claims	provision	is	not	discounted;                                               changes)	with	backdated	effective	dates.	The	value	of	the	current	year	adjustment	
                                                                                           amounted	to	R	5	133	956	(2006:	R	5	418	057).



10                                                                                                                                                                                11
ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS                                                                  ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS




5. RELEVANT HEALTHCARE EXPENDITuRE
                                                                                      Net income/(expense) on risk transfer
                                                                                      arrangements

                                                               2007            2006

                                                                  R               R   Risk	transfer	arrangement	premiums	paid                     181 296 014         120 944 613
                                                                                      Claims incurred                                             184 411 423         133 511 877
Claims incurred excluding claims incurred
                                                                                      Recoveries received from risk transfer arrangements        (184 411 423)       (133 511 877)
in respect of risk transfer arrangements
                                                                                      Profit	share	arising	on	risk	transfer	arrangements
Current year claims                                   1 034 662 904   1 096 578 659
                                                                                         Preferred	Provider	Negotiators	(Pty)	Ltd	profit	share     (2 929 512)        (10 019 821)
Managed	care:	healthcare	services                       95 055 296      83 864 299
     Scriptpharm	capped	arrangement                     94 986 487      82 709 475
                                                                                      Net	expense	on	risk	transfer	arrangement                    178 366 502         110 924 792
     Scriptpharm	loss	share                                 68 809       1 154 824
Movement	in	outstanding	claims	provision	(Note	3)       89 268 424      76 412 974
                                                                                      Service provider
     Underprovision	in	prior	year	(Note	3)               5 710 424       2 712 974    Carecross Health (Pty) Ltd
     Adjustment	for	current	year	(Note	3)               83 558 000      73 700 000
                                                                                      Nature of risk covered
Claims	paid	from	savings	accounts	                    ( 73 561 257)   (116 237 092)
                                                                                      Carecross	Health	(Pty)	Ltd	provides	primary	care	and	chronic	benefit	care	services	
                                                                                      to	the	beneficiaries	registered	on	the	Essential	option	of	the	Scheme.
                                                      1 145 425 367   1 140 618 840
                                                                                      Capitated Health Services agreement (Primary care and risk management)

                                                                                      Service provider
Claims incurred in respect of related
                                                                                      Onecare Health (Pty) Ltd
risk transfer arrangements

Current	year	claims	incurred	in	respect	of	related	                                   Nature of risk covered
                                                       170 670 772     123 108 610    Capitated	health	services	to	beneficiaries	on	the	Progressive	option.	The	primary	
risk transfer arrangements
                                                                                      healthcare	services	covered	include:	general	practitioner	consultations,	acute	
Movement	in	outstanding	claims	provision	               13 740 651      10 403 267    medication,	dental	benefits,	optical	benefits,	pathology,	radiology	and	surgical	
     Adjustment	for	current	year	(Note	3)               13 740 651      10 403 267    procedures	performed	normally	necessitating	hospital	admission.	The	major	
                                                                                      medical	healthcare	services	include:	hospital	benefit	management	costs,	disease	
                                                                                      and	maternity	management	services,	AIDS	and	HIV	prevention,	MRI,	CAT	scan	
                                                       184 411 423     133 511 877    management services.

                                                                                      ER24 Medical Service Programme
Total claims incurred                                 1 329 836 790   1 274 130 717
                                                                                      Service provider
                                                                                      ER24 EMS (Pty) Ltd
     Less	third	party	recoveries                        (1 874 217)     (2 004 506)

                                                                                      Nature of risk covered
Total net claims incurred                             1 327 962 573   1 272 126 211   Emergency	medical	care	network	services.	The	services	covered	include:
                                                                                      Medical advice and information hotline, emergency medical advice and assistance
                                                                                      hotline,	doctor	on	duty	24	hours	per	day,	emergency	response,	medical	



12                                                                                                                                                                             13
ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS                                                                             ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS


RELEVANT HEALTHCARE EXPENDITuRE, ER24	Medical	Service	Programme	(continued	from	page	13)



transportation,	inter-hospital	transfer,	medical	repatriation,	escorted	return	of	         6. NET INVESTMENT INCOME
minors,	in-hospital	medical	monitoring,	compassionate	visits	and	repatriation	of	
mortal remains.                                                                                                                                                    2007                 2006
                                                                                                                                                                      R                    R
Capitated Optometric Services
                                                                                           Available-for-sale	financial	assets	-	interest	income              27 341 162          25 480 261
Service provider                                                                           Cash and cash equivalents - interest income                         5 732 895           3 147 227
Preferred Provider Negotiators (Pty) Ltd.
                                                                                           Available-for-sale	financial	assets	-	dividend	income               4 063 666           1 416 942
Nature of risk covered                                                                     Net	realised	gain	on	available-for-sale	financial	assets            6 434 303          43 603 015
                                                                                                                                                              43 572 026          73 647 445
Optometric	services	rendered	by	a	participating	provider:
ƒ consultation,	incuding	tonometry	(glaucoma)	screening	and	visual	field	
   screening and one contact lens.                                                         Net realised gains on available-for-sale financial assets
                                                                                           Realised	gain	on	disposal	of	available-for-sale	financial	assets    6 434 303          43 603 015
Optometric	services	rendered	by	a	non-participating	provider:											
ƒ one	consultation	per	beneficiary	per	benefit	cycle.
                                                                                           7. SuNDRy INCOME
Capitated Diabetic Programme

Service provider                                                                                                                                                    2007                2006
CDE Holdings (Pty) Ltd                                                                                                                                                 R                    R

Nature of risk covered                                                                     Income	flow	from	change	in	regulatory	practice                      7 692 745           45 393 795
Diabetic	management	service	for	diabetic	patients,	which	encompasses	the	full	and	         Other income                                                          203 631             558 503
complete	care	of	diabetes	for	patients	including,	all	diabetic	medication,	accessories	
                                                                                           Recoveries	received	from	service	provider                                   -            6 605 893
and blood glucose meters. The risk of the administration of this service and the risk
of	hospitalisation	due	to	acute	diabetic	problems	lies	with	CDE.                                                                                               7 896 376           52 558 191


Dental Risk Programme
                                                                                           Income flow from change in regulatory practice:
Service provider                                                                           Following	an	enquiry	from	the	Registrar	of	Medical	Schemes	with	respect	to	secret	
Webshelf	Investments	NR	10	(Proprietry)	Limited	T/A	Dental	Risk	Company                    profits	and	bulking,	Old	Mutual	Healthcare	(Pty)	Ltd	employed	a	process	to	consider	
                                                                                           and	evaluate	all	their	practices	from	which	income	has	been	earned	to	identify	
Nature of risk covered                                                                     income	that	may	not	have	been	adequately	or	appropriately	disclosed	to	the	
Provides managed care or dental risk management services as the Scheme                     Medical Scheme. Where Old Mutual Healthcare (Pty) Ltd had not felt comfortable
requires from time to time. These services include but not limited to, dental              with	the	level	of	disclosure	during	the	reporting	period	under	review,	the	amounts	
benefit	structuring	advice,	in	and	out	of	hospital	dental	procedure	or	dental	             were	refunded	to	the	Scheme	including	interest.	The	period	under	review	was	1	
protocol	management.	The	Dental	Risk	Company	carries	the	risk	for	dental	                  January 2000 to 31 December 2005.
benefits relating to services rendered by Dental Providers to the active members
of	the	contracted	options.                                                                 The	capital	amount	brought	into	account	by	the	Scheme	in	2006	amounted	to	
                                                                                           R	27	390	120,	while	the	interest	thereon	amounted	to	R	18	003	675.	In	the	current	
                                                                                           year,	Old	Mutual	Healthcare	(Pty)	Ltd	disclosed	a	further	amount	owing	to	the	Scheme	
                                                                                           in	respect	of	VAT	amounting	to	R	3	834	617	on	the	capital	amount	allocated	in	2006	
                                                                                           and	the	interest	portion	thereon	amounting	to	R	3	858	128.	These	amounts	have	been	
                                                                                           brought into account by the Scheme in 2007.



14                                                                                                                                                                                        15
ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS                                                                                                               ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS




8. SuRPLuS/(DEFICIT) FROM OPERATIONS PER BENEFIT OPTION

The Scheme offers 9 benefit options as listed below:


                                                                 ESSENTIAL                                            STANDARD                                                            PREMIUM          DISCONTINUED
                                                  ESSENTIAL      CARECROSS         CORE PLUS        ELITE PLUS          PLUS          STANDARD       PROGRESSIVE         80% PLAN           PLUS               PLANS            TOTAL

2007                                                  R              R                 R                 R                R               R               R                  R                R                 R                  R



Net contribution income                            46 419 630     64 083 954       358 345 416       134 283 217      312 886 412     406 091 551      53 783 768        117 323 190       17 250 736           ( 7 980)      1 510 459 894




Relevant	healthcare	expenditure                   (43 992 967)   (57 456 658)     (305 285 624)     (140 203 840)    (273 297 819)   (333 176 577)    (60 003 624)       (93 427 293)     (16 486 286)         1 413 036     (1 321 917 652)


Net claims incurred                               (38 242 814)   (66 286 808)     (305 381 164)     (141 655 805)    (275 023 517)   (331 254 753)    (61 388 479)       (93 313 275)     (16 828 994)         1 413 036     (1 327 962 573)


     Claims incurred                              (38 354 469)   (66 296 840)     (305 713 927)     (141 662 567)    (275 175 537)   (331 655 552)    (61 561 924)       (93 328 372)     (16 828 994)          741 392      (1 329 836 790)


     Third	party	recoveries                           111 655            10 032        332 763               6 762        152 020         400 799         173 445                15 097                -        671 644           1 874 217


                                                   (5 750 153)     8 830 150               95 540      1 451 965        1 725 698      (1 921 824)      1 384 855          ( 114 018)         342 708                    -        6 044 921


     Risk	transfer	arrangement	premiums	paid      (35 411 595)   (57 027 379)                   -     (2 576 107)     (10 814 509)    (18 519 620)    (53 622 980)        (3 170 397)       ( 153 427)                   -    (181 296 014)


     Recoveries from risk transfer arrangements    29 474 061     65 857 529               95 540      3 831 473       11 703 211      15 155 823      55 007 835          2 814 440          471 511                    -      184 411 423


     Profit	share	on	risk	transfer	arrangements       187 381                 -                 -        196 599          836 996       1 441 973                  -         241 939              24 624                 -        2 929 512




Gross healthcare result                             2 426 663      6 627 296        53 059 792        (5 920 623)      39 588 593      72 914 974      (6 219 856)        23 895 897          764 450          1 405 056        188 542 242




Managed	care:	management	services                   ( 995 412)     ( 740 936)       (9 088 149)       (1 742 303)      (5 773 354)    (10 170 022)      ( 744 052)        (2 172 269)       ( 329 895)                   -     (31 756 392)


Broker service fees                                (1 677 641)    (2 359 311)      (11 948 905)       (4 485 477)     (10 747 209)    (14 433 603)     (1 885 225)        (2 096 990)       ( 703 712)                   -     (50 338 073)


Administration	expenses                            (9 481 005)   (11 696 617)      (46 026 355)       (8 875 883)     (28 389 766)    (50 035 643)     (8 131 607)       (11 193 574)      (2 806 021)              12 933    (176 623 538)


Net	impairment	losses                                ( 83 753)     ( 240 164)        ( 349 765)        ( 325 751)       ( 650 746)      ( 868 901)      ( 120 248)          ( 93 189)        ( 89 344)          360 287          (2 461 574)




Net healthcare result                              (9 811 148)    (8 409 732)      (14 353 382)      (21 350 037)      (5 972 482)     (2 593 195)    (17 100 988)         8 339 875       (3 164 522)         1 778 276       (72 637 335)




16                                                                                                                                                                                                                                         17
ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS                                                                                                                    ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS


SuRPLuS/(DEFICIT) FROM OPERATIONS PER BENEFIT OPTION (continued	from	page	17)




The Advanced option was discontinued at the end of the prior year.




                                                                                                                                          STANDARD                                                            DISCONTINUED
                                                                   ESSENTIAL          ADVANCED         CORE PLUS         ELITE PLUS         PLUS            STANDARD         PROGRESSIVE       80% PLAN           PLANS          TOTAL
2006                                                                     R                R                 R                 R                R                 R                 R               R               R                R



Net contribution income                                               96 025 338       59 580 989       356 345 218       102 970 036      263 673 598       331 179 984        112 817 073    118 961 393       ( 151 426)    1 441 402 203




Relevant	healthcare	expenditure                                     (80 566 690)      (58 164 964)     (325 133 935)     (110 731 792)    (222 091 324)     (253 297 943)      (99 617 532)   (101 140 903)       1 205 957 (1 249 539 126)


Net claims incurred                                                 (90 581 754)      (58 901 619)     (322 094 775)     (111 904 480)    (224 728 057)     (255 192 914)     (109 229 418)   (100 699 162)       1 205 968 (1 272 126 211)


     Claims incurred                                                (90 657 843)      (58 921 049)     (322 215 975)     (111 904 480)    (224 823 646)     (255 547 394)     (109 492 226)   (101 191 425)        623 321 (1 274 130 717)


     Third	party	recoveries                                                  76 089           19 430        121 200                   -            95 589        354 480           262 808         492 263         582 647        2 004 506


Net income on risk transfer arrangement                               10 015 064          736 655        (3 039 160)        1 172 688        2 636 733         1 894 971          9 611 886      ( 441 741)            ( 11)     22 587 085


     Risk	transfer	arrangement	premiums	paid                        (45 774 246)        ( 844 862)       (9 118 764)       (1 150 354)      (5 272 849)       (8 763 970)      (44 651 797)     (5 367 760)            ( 11)   (120 944 613)


     Recoveries from risk transfer arrangements                       55 175 998        1 247 564         2 838 171         1 838 289        6 129 819         7 817 505         53 538 512      4 926 019                 -    133 511 877


     Profit	share	on	risk	transfer	arrangements                          613 312          333 953         3 241 433           484 753        1 779 763         2 841 436           725 171                -                -     10 019 821




Gross healthcare result                                               15 458 648        1 416 025        31 211 283        (7 761 756)      41 582 274        77 882 041         13 199 541     17 820 490        1 054 531     191 863 077




Managed	care:	management	services                                    (2 168 501)        ( 992 273)       (9 762 191)       (1 431 439)      (5 387 008)       (8 641 541)       (2 713 242)     (2 355 471)                -    (33 451 666)


Broker service fees                                                  (4 228 967)       (2 271 822)      (13 560 627)       (3 908 895)     (10 617 449)      (13 628 499)       (4 500 662)     (2 411 632)                -    (55 128 553)


Administration	expenses                                             (19 671 054)       (5 025 504)      (48 864 724)       (7 301 135)     (26 825 366)      (43 559 224)      (17 267 066)    (12 053 259)      ( 145 223)    (180 712 555)


Net	impairment	(losses)/gains                                         ( 217 513)         ( 99 656)              26 351       ( 87 531)       ( 610 259)        ( 707 101)         ( 79 982)        ( 2 260)        599 651       (1 178 300)




Net healthcare result                                               (10 827 387)       (6 973 230)      (40 949 908)      (20 490 756)      (1 857 808)       11 345 676       (11 361 411)        997 868        1 508 959     (78 607 997)




18                                                                                                                                                                                                                                        19
ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS                                                                   ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS




9. RELATED PARTy DISCLOSuRES                                                            Transactions and balances with entities that have significant influence
                                                                                        over the Scheme:
Parties with significant influence over the Scheme
                                                                                                                                                         2007                    2006
Old	Mutual	Life	Assurance	Company	(South	Africa)	Ltd,	a	company	within	the	Old	                                                                             R                       R
Mutual	(South	Africa)	Group,	has	an	agreement	with	the	Scheme,	the	terms	of	
                                                                                        Income statement
which	include	the	marketing	and	distribution	of	the	Scheme.	Preference	in	turn	is	
given	to	purchasing	services	from	Old	Mutual	(South	Africa)	Group.	                     The	Scheme	paid	the	following	expenses	to	
                                                                                        Old	Mutual	Healthcare	(Pty)	Ltd:
The following Old Mutual (South Africa) Group companies are considered                  - Administration fee (net of rebate)                      153 850 982           154 550 574
related parties to the Scheme with the relationship as indicated:
                                                                                        	-	Marketing	support	fee                                   10 094 923            12 565 000

ƒ    Old Mutual Healthcare (Pty) Ltd - Administrator                                    - HIV contract fee                                            925 965              1 203 935

ƒ    Old	Mutual	Life	Assurance	Company	(South	Africa)	Ltd	-	Marketing	and	              	-	Hospital	benefit	management	fee                         15 276 522            16 776 330
     distribution	service	provider                                                      	-	Pharmacy	benefit	management	fee                           5 053 102             5 293 298
ƒ    SYmmETRY Multimanagers - Investment manager
                                                                                        - Disease management fee                                     1 466 427                      -

Trustees, key management personnel and their close family members                       - Medical management fee                                      467 015                       -
                                                                                        	-	Drug	utilisation	review	fee                                       -             4 994 067
Trustees	and	key	management	personnel	are	those	persons	having	authority	and	
                                                                                        	-	Distribution	support	fee                                          -             3 500 000
responsibility	for	planning,	directing	and	controlling	the	activities	of	the	Scheme.	
Key	management	personnel	include	the	Chief	Executive	-	Principal	Officer	and	
members	of	management.	The	disclosure	deals	with	full-time	personnel	who	are	           The	Scheme	received	income	flowing	from	change	in	regulatory	practice	from	Old	Mutual	
compensated	on	a	salary	basis	(Chief	Executive	-	Principal	Officer,	Contracts,	Risk	    Healthcare (Pty) Ltd as discussed in note 7.
and	Operations	Executive	Managers),	and	Trustees	who	are	compensated	on	a	fee	
basis.	Related	parties	include	close	family	members	of	the	Board	of	Trustees	and	
                                                                                        The	Scheme	paid	the	following	expenses	to	Old	Mutual	
key	management	personnel.                                                                                                                          41 002 498            44 698 574
                                                                                        Life	Assurance	Company	(South	Africa)	Ltd:

                                                                                        	-	Network	management	fees                                   9 120 000           13 680 000
                                                                                        - Broker service fees                                      31 882 498            31 018 574


                                                                                        Balance sheet
                                                                                        Amounts	due	by/(to)	related	parties
                                                                                        Old Mutual Healthcare (Pty) Ltd                           (10 854 196)           27 796 078
                                                                                        	-	Income	flowing	from	change	in	regulatory	practice         7 080 570           45 393 795
                                                                                        - Administration fees due                                 (17 934 766)          (17 597 717)
                                                                                        Old	Mutual	Life	Assurance	Company	(South	Africa)	Ltd	     (11 920 000)          (13 710 805)
                                                                                        - Broker fees services due                                 (2 800 000)           (4 321 301)
                                                                                        	-	Network	management	fees	due                             (9 120 000)           (9 389 504)


                                                                                        Investments	held	with:
                                                                                        SYmmETRY Multimanagers                                    363 105 889           405 176 337


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ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS                                                                ANNEXuRE: AuDITED SuMMARISED ANNuAL FINANCIAL STATEMENTS


RELATED PARTy DISCLOSuRES (continued	from	page	21)



The terms and conditions of the related party transactions were as follows:              10. NON-COMPLIANCE MATTERS
Nature of transactions and terms and conditions thereof:
                                                                                         Adequacy of reserves
The administration agreement is in terms of the rules of the Scheme and in
accordance	with	instructions	given	by	the	Trustees	of	the	Scheme.	The	agreement	         In	terms	of	the	requirements	of	the	Medical	Schemes	Act	no	131	of	1998	(“Act”),	
is	automatically	renewed	each	year	unless	notification	of	termination	is	received.	      the	Scheme	must	maintain	accumulated	funds,	expressed	as	a	percentage	of	gross	
The	Scheme	has	the	right	to	terminate	the	agreement	within	6	calendar	months	            annual contributions, of 25% for the year ended 31 December 2007. The Scheme’s
written	notice.	The	outstanding	balance	bears	no	interest	and	is	due	within	30	days.     solvency	ratio	was	17.6%	at	31	December	2007	(2006:	19.6%).

The	managed	care	agreement	is	in	accordance	with	contractual	agreement	and	              Sustainability of benefit options
instructions given by the Trustees of the Scheme. The agreement is automatically
renewed	each	year	unless	notification	of	termination	received.	The	Scheme	has	the	       In	terms	of	section	33(2)	of	the	Act,	each	option	shall	be	self-supporting	in	terms	
right to terminate the agreement on 90 days notice. The outstanding balance bears        of	membership	and	financial	performance	and	be	financially	sound.	At	31	December	
no	interest	and	is	due	within	30	days.                                                   2007, the Essential, Essential Carecross, Core Plus, Elite Plus, Standard Plus,
                                                                                         Progressive,	Standard	and	Premium	Plus	options	did	not	comply	with	section	33(2).
The	broker	fees	paid	in	accordance	with	the	requirements	contained	in	the	Act.	The	
outstanding	balance	bears	no	interest	and	is	due	within	30	days.                         Contributions in terms of Section 26 (7) of the Act

Transactions with trustees and key management personnel and their close                  In	terms	of	section	26(7)	of	the	Act,	contributions	should	be	paid	within	three	days	
family members:                                                                          of	becoming	due.	There	was	evidence	that	the	Scheme	was	in	contravention	with	
                                                                                         this section of the Act.
                                                                     2007        2006
                                                                                         Composition of Audit Committee
                                                                        R           R
Compensation                                                     3 237 246   2 362 738   In	terms	of	section	36(10)	of	the	Act,	the	Board	of	Trustees	should	appoint	an	
Short-term	employee	benefits                                     2 085 839   1 476 998
                                                                                         audit	committee	consisting	of	at	least	five	members	of	which	at	least	two	should	be	
                                                                                         members of the Board of Trustees. At 31 December 2007 the Scheme only had one
Trustees remuneration and considerations                         1 151 407    795 740    member	of	the	Board	of	Trustees	as	a	representative	on	the	audit	committee.
Termination	benefits                                                     -     90 000

                                                                                         11. RECLASSIFICATIONS
Contributions and claims
                                                                                         Income Statement
Income statement
                                                                                         The	third	party	claim	recoveries	were	previously	disclosed	with	other	income	and	
Gross contributions received                                      137 185      70 092    have	now	been	included	in	the	relevant	healthcare	expenditure	note.	
Claims incurred                                                   131 823      46 154
                                                                                         This	has	been	reclassified	since	the	nature	of	this	income	is	directly	related	to	the	
(applicable	for	certain	trustees	and	key	management	personnel)                           expense	and	offsetting	is	permitted.


Balance sheet
                                                                                         12. POST BALANCE SHEET EVENT
Savings account balances                                           15 520      19 396
                                                                                         The	Scheme	launched	the	Premium	Plus	Option	at	the	beginning	of	the	2007	
                                                                                         financial	year	and	has	transacted	with	members	under	this	option	for	the	year.	The	
All	transactions	were	in	accordance	with	the	Act	and	the	Scheme	rules.                   Registrar,	with	retrospective	effect	from	the	beginning	of	the	year,	approved	the	
                                                                                         registration	of	this	option	subsequent	to	the	year-end.	


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