Presentation

BBS Demutualisation Project

Key Points by

Pius Komane Molefe

Managing Director

What is BBS?

Botswana Building Society (“BBS”) currently a buildingsociety operating under the Building Societies Act.

This means that it is a mutual organisation that offersmainly mortgage loans, both residential and commercial,as well as savings and investment products.

What is “demutualisation”?

Demutualisation is the process through which a mutual

body such as a building society becomes a company

limited by shares. This company could then either be listed

on the stock exchange or closely held by its shareholders.

How is a building society

different to a bank?

Therefore, a building society does not offer

current/cheque accounts, unsecured/personal loans,

foreign exchange services, car loans, payment services

and treasury services amongst others.

To become a bank, BBS will first have to change from a

building society to a company. Once it has become a

company, it will then apply for a banking license to enable

it to operate as a commercial bank.

What challenges is BBS facing?

Currently, BBS is facing the following challenges:

• Increased competition from commercial banks.

• Narrow products and services range

• Uncompetitive interest rates.

• Declining profitability over a 5 year period.

So, why does BBS want to

demutualise?

• To be more competitive.

• To increase its products and services.

• To become part of the clearing system and thus no

longer rely on commercial banks to collect payments

on its behalf.

• Have Visa or Mastercard services

• To improve shareholder value.

• Create more employment opportunities

What is a “Conversion

Statement”

A Conversion Statement is the same as a Prospectus.

Generally, it is a legal document that provides details

about why BBS would like to become a commercial bank

and enables you as a Member/Shareholder to make an

informed decision whether to support the planned

demutualisation. It also provides details on how the

change from a Society to a company will be done

Possible questions by Members

(Shareholders)

• What will happen to my shares?

Members/Shareholders will be permitted to purchase shares

with their BBS shares in the new company up to 15% of the

total issued share capital subject to the Qualifying Date.

The Qualifying Date is the date of the Special General

Meeting where Members will vote to demutualize the Society

to a company limited by shares.

A Qualifying Member is a Member who will have held shares

for a period of not less than 12 months before the Qualifying

Date.

Members’ Questions Cont.

• What will happen to my savings accounts?

There will be no changes to savings accounts. The only change

will be on Paid Up Shares, Subscription Shares and Indefinite

Period Shares accounts as they will be converted either to

deposits or ordinary shares depending on the preference of the

customer.

• What will happen to my mortgage loan?

There will be no changes to any mortgage loan arrangements.

They will be carried over to the new BBS.

Members’ Questions Cont.

• How will BBS deal with carpetbaggers (those who

become shareholders simply to benefit financially from

the demutualisation process)?

In the Building Societies Amendment Act there is a clause that

places a 15% cap on shareholding in the new company. The

clause will be in place for 10 years.

The Qualifying date is also intended to block carpetbaggers.

Members’ Questions Cont.

Will the new BBS list on the Botswana Stock Exchange?

The decision whether or not to list on the BSE will be made by

Shareholders of the new entity.

In the meantime, however, discussions are ongoing with the

BSE to have shares of the envisaged commercial bank

tradable without having to list them in the normal manner but

through the Over the Counter Platform which is designed for

unlisted shares.

Members’ Questions Cont.

What will happen to my short loan?

Customers will still be able to take out short loans under the

new entity. For those with short loans currently, they will be

given the opportunity to clear them before the conversion or

to carry them over into the new BBS.

Members’ Questions Cont.

• Are those with savings or mortgages accounts allowed

to attend the Special General Meeting

BBS General Meetings are for Members/Shareholders only.

Therefore, only Indefinite Period, Paid Up Period and

Subscription Share holders will be allowed to attend the SGM

and decide on the demutualisation matter.

However, the interests of all BBS stakeholders, including

depositors and mortgage holders, will be protected at all times

during the process as will be noted from the Conversion

Statement.

Members’ Questions Cont.

• What is going to happen to employees when BBS

demutualizes?

Employment contracts of current BBS employees will simply be

taken over by the new business. Because of the increased

scope of the business, employees will also end up taking up

new roles due to increased opportunities.

Members’ Questions Cont.

• Will BBS change its name

As BBS will no longer be a building society it will have to change

from being referred to as such. However, in rebranding the

organization, the Board and Management will ensure that it

remains true to its roots and that it is a name that customers,

stakeholders and Batswana in general can easily identify and

relate to. For example, a decision might be made to retain the

acronym “BBS” and simply add the noun “Bank” to it thus

converting the name to “BBS Bank”. In that case the “BBS”

would carry the historical reference and goodwill of the entity but

this time not referring to a “building society”.

Role of Members (Shareholders)

in the Demutualisation Process

A Special General Meeting will be convened where

resolutions will be tabled for the change to take place.

Seventy five percent (75%) or more of Members present in

the meeting must then vote in favour of BBS becoming a

limited company.

Once this has happened, BBS will submit an application to

the Bank of Botswana to become a commercial bank.

Summary

Thank you