Dear Beneficiary

YOUR MEDICAL AID SUBSIDY

As you may know, the High Court ruled on 24 February 2022 that the Trust Deed of the Denel Medical Benefit Trust (“DMBT”) must be amended. The purpose of this communication is to provide you with an update of where the DMBT is in terms of implementing the Court Order.

To refresh everyone’s memory, the Court Order has three important implications, namely:

• Firstly, you may have elected that instead of receiving a medical aid subsidy from Denel which is paid by the DMBT, you will receive a regular payment from an insurer. This amount will be equal to 66.7% or 15% (depending on the Denel subsidy you are entitled to) of the Discovery Health Essential Comprehensive premium which comes into effect from 1 October 2022, plus 20% thereon. This total amount (hereafter called “The Amount”) is guaranteed to increase by inflation plus 4% on each 1 January, with the first increase being effective on 1 January 2023. Y
• Secondly, if you elected not to accept the above “settlement offer”, or you did not submit a signed option form to Denel, the DMBT will continue to pay Denel’s subsidy to Discovery Health on your behalf. As such, nothing will change for you. The Court Order makes provision that sufficient money must be left in the DMBT so that there is a very high chance that the DMBT will be able to meet Denel’s medical aid subsidy obligation to you.
• Thirdly, the excess assets of the DMBT, over and above that required to provide for the two sets of beneficiaries described above, will be paid to Denel. However, this payment to Denel will only be made once the money needed to secure the above benefits has been settled in full to the insurer.

The DMBT is in advanced negotiations with an Insurer to be the appointed insurer. It is essential that sufficient time be spent on this negotiation process as the DMBT Trustees must be comfortable that your interests are well looked after for many years still. At this time the DMBT Trustees believe that there is a very good chance that the policy terms and payment will be finalised by the end of July 2022, although we cannot provide any guarantee in this regard.

If we assume that the above target date is met and the implementation date is 1 August 2022, then the following will happen next:

• If you have accepted Denel’s offer:
• (a)the appointed Insurer will pay the current subsidy amount to Discovery Health on your behalf, so nothing changes in this regard.
• (b)The difference between The Amount and Denel’s subsidy (that is the money in (a) above) will be invested by the Insurer in a portfolio that earns money market returns. This money belongs to you but will be paid out at a later date (see below).
• (c)the Insurer will take steps to issue an individual policy in your name. It is expected that this process will take about three months which should result in completion around about 1 November 2022.
• (d)At the same time as the Insurer issues the individual policy, they will pay you the amount it has accumulated on your behalf as per (b) above. However, you will need to pay income tax on this amount.
• (e)Once the individual policy is in place, the Insurer will pay Discovery Health that part of The Amount you elect, with the balance being paid to you. Note that any amount paid to you will be subject to income tax.

You will receive a detailed statement showing what has been paid to Discovery Health and what amount will be paid to you together with the income tax thereon when the Insurer issues you with an individual policy.

• If you did not accept Denel’s offer, your benefits remain the same and Denel’s current medical aid subsidy will continue to be paid to Discovery Health.

The DMBT Trustees thank you for your patience while getting the Court Order implemented. We are getting close now and we will issue an update note once the DMBT has finalised the policy terms and paid the consideration to the Insurer.

Yours faithfully

PJ VAN DER MERWE

On behalf of THE TRUSTEES OF THE DENEL MEDICAL BENEFIT TRUST

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