NICO HOLDINGS LIMITED Annual Report 2009 Annual Report 2009 NICO HOLDINGS LIMITED 2 contents Notes tothe ConsolidatedandSeparate FinancialStatements ofCashFlowsStatements Equity In Changes of Statements ofComprehensiveStatements Income ofFinancialPositionStatements Independent Auditors’ Report Certificate ofthe Actuary ofDirectors’Statement Responsibilities Board ofDirectorsandSecretary Directors’ Report Corporate Governance andCodeofEthics NBS Limited NICO Technologies Limited NICO Life InsuranceCompany Limited NICO GeneralInsuranceCompany Limited NIKO () Limited NIKO Insurance()Limited NICO Insurance()Limited NICO Asset ManagersLimited Mall City Executive Management Managing Director’s Report Board ofDirectorsandSecretary Chairman’s Statement Summarised ListofShareholders Five Year Highlights Mission, Vision and Values Statement

41 40 36 35 34 33 32 30 29 26 25 24 23 22 21 20 19 18 16 15 12 10 8 6 4 3 37 37 mission , v a ision corporate governance practices Integrity, care, ethical values, transparency, accountability, Mission S in financialservices T health andsafety, o create value for quality services, T Our Values all stakeholders o be the leader leader the be o vand Vision tatement l u

st es

a tement 3 Annual Report 2009 NICO HOLDINGS LIMITED Annual Report 2009 NICO HOLDINGS LIMITED 4 14,000 16,000 18,000 20,000 10,000 12,000 2,000 4,000 6,000 8,000 0 * Dividendpaidoutoftheyear’s profits Market (MKmillion) Capitalisation Price EarningsRatio (times) Price To Book Value (times) Net Asset Value Per Share(tambala) Share Price (tambala) Net Assets (MKmillion) Total Assets (MKmillion) Net Dividend paid per share (tambala) * Net Dividendpaidpershare(tambala) Net DividendPaid To Shareholders(MKmillion) Earnings perShare(tambala) Profit Before Tax (MKmillion) Gross Income(MKmillion)

6,058 2005 GROSS INCOME 9,016 2006 (Million Kwacha) 11,219 2007 FI 14,132 2008 V E YE 17,916 2009 A 17,062 1,804 6,058 2,816 2005 437 200 200 270 173 R HIGHLIGHTS 9.0 1.6 30 19 23,240 3,755 1,833 1,093 9,016 2006 360 229 176 4.9 2.0 22 74 1,000 1,200 1,400 1,600 2,000 2,200 2,400 2,600 1,800 2,800 3,000 3,200 200 400 600 800 0 35,342 11,219 8,344 2,837 1,729 2005 437 2007 800 800 272 250 129 6.2 2.9 Profit before 24 1,093 2006 (Million Kwacha) 44,293 14,132 9,909 4,725 2,667 2008 453 950 407 175 5.4 2.1 1,729 39 2007 2,667 2008 T 57,764 17,916 ax 9,387 6,272 3,237 2009 192 601 4.7 900 407 1.5 39 3,237 2009 140 180 200 100 120 160 20 40 60 80 10,000 20,000 30,000 40,000 50,000 60,000 0 0 2005 Earnings 17,062 2005 2006 T 23,240 otal 2006 (Tambala) (Million Kwacha) 2007 per 35,342 A 2007 ssets Share 2008 44,293 2008 1000 100 200 300 400 500 600 700 900 800 0 2009 57,764 2005 2009 Share Price 2006 (Tambala) 2007 10 15 20 25 30 40 0 5 1,000 2,000 3,000 4,000 5,000 6,000 7,000 2008 0 2005 1,804 Net Dividenper 2005 2009 2006 1,833 Net Share 2006 (Tambala) (Million Kwacha) 2007 A 2,837 ssets 2007 2008 4,725 2008 2009 6,272 2009 5 Annual Report 2009 NICO HOLDINGS LIMITED Annual Report 2009 NICO HOLDINGS LIMITED 6 (Malawian) HOLDINGS LIMITED MILLENNIUM (Malawian &Foreign) NICO EMPLOYEES TRUST, (Malawian &Foreign) GENERAL PUBLIC s u mm a sh of list rised ASSOCIATES C/O RACANE BANK,FMS C/O NATIONAL BANK,FMS C/O NATIONAL P OBOX 1524 BLANTYRE P/B 945, BLANTYRE P/B 945, a reholders MALAWI MALAWI 22.89% 10.0% 1.10% (American) AFRICAP LLC, (South African) SANTAM LIMITED, (Malawian) INVESTMENTS LIMITED MILLENNIUM (American) FINANCE , INTERNATIONAL SAN FELIPE 5847 P OBOX 3881 LIMITED HOLDINGS C/O NICO 20433 1818 HSTREET TEXAS 77057 SUITE 850HOUSTON 7536 TIGER VALLEY BLANTYRE PO BOX 501 DC OF AMERICA N.W. WASHINGTON

USA AFRICA SOUTH MALAWI STATES UNITED 100.00% 25.10% 27.91% 11.60% 1.35% 7 Annual Report 2009 NICO HOLDINGS LIMITED Annual Report 2009 NICO HOLDINGS LIMITED 8 George A. Jaffu Chairman as wereourclientsalbeittoadifferent degree. meltdown. As arepart ofthelargercommunity, werealsoaffected bythecrisis economic world general the of effects the following year challenging a was 2009 This was the result of retrenchments, retrenchments, of result the was This clients large our of some by withdrawals life group and pension large business, insurance general our for claims motor and fire both of incidence increased include which factors, several by affected negatively been has performance This MK2.6 billiononcorresponding year. grew by 19% toMK3.2billion-from tax before Profit billion. MK4.3 of year last future benefitsofMK5.2billion,upfrom before andtransfer tax topolicyholders’ to MK17.9 billion. This hasresultedinprofit billion MK14.1 from 27% by grew revenues The resultoftheseefforts isthatGroup products and,developing new markets. new creating products, our for penetration market deeper gaining business, existing our our strategicprioritiesofretaining to attention special paid we particular, In . core our on focus maintained we challenges, these Despite ch a a irm n ’ s

st a tement

countries onthe African continent. insurance brandrepresentedinfive recognisable only the NICO makes acquisition This . of Limited stake inSFGInsuranceHoldings(Private) was theacquisitionofasignificantequity products. Another milestoneintheGroup also introducednew groundbreaking businesses insurance The Card. Credit bank inMalawi tolaunch anInternational first the being by ground new broke also by rollingoutmorebranches. The Bank network branch their expand to continued Bank NBS services. new introducing and infrastructure by developing new products operating our grow to continued we In pursuitofourstrategicpriorities, Group hasbeencommendable. the for performance overall the challenges, exchange. However, despitethese stock exchange offoreign andshortage the from returns investment depressed

banking and insurance services to thousands of growers throughoutthecountry banking andinsuranceservicestothousandsofgrowers ofspecialist suppliers are NICOsubsidiaries,NBSBankandGeneral,key Just areattheheart asthehugeauctionfloors ofMalawi’s tobaccoindustry, so we maintain a high level of corporate corporate of level high a maintain we regard, this In business. doing of laws The Group’s core values areourunwritten the yearpershare. to39tambala for dividend total the brings share. This per tambala 24 of dividend final a recommend to pleased is Directors of Board the result, and performance the with line In focussing onourstrategicpriorities. continue to us to encouragement an is Group. This the in confidence of sign a as take we year,which the throughout remained flat.Oursharepriceheldfirm exchange stock the meltdown, economic is stillrecovering theeffects ofthe economy the that fact the of view In business by November 2010. by NICO. The Mallisexpected toopenfor led investors of consortium a by developed is theLilongweMall,which City isbeing This Lilongwe. in Mall shopping largest Malawi’s be will what of development the of commencement included year Other pre-occupationsduringthe advantage. competitive strong a NICO gives and markets these in developing opportunities on leverage to it enable will created been has that platform regional The bright. so looked NICO’sGoing forward, future hasnever Chairman George Jaffu difficult year. inhand during avery dedication tothetask for theirhardwork, commitmentand Management andstaff ateverylevel thank to like would I conclusion, In charities.donations todeserving we operate. This isover andabove our which in markets the all in levels various at involved are and life community in forhigh priority theGroup. We participate a remains Responsibility Social Corporate values, core same those with line In companies for theirinvaluable contribution. Group our all of directors to gratitude the year. Iwould alsolike torecordmy during support and guidance their for Committees andindeedtheentireBoard Board the thank to like would I regard, and inlinewithBoard mandates.Inthis researched well scrutinised, thoroughly ensure thatmatters for discussionare committees These meetings. board of conduct smooth facilitate to Committees active has Board The governance. 9 Annual Report 2009 NICO HOLDINGS LIMITED Annual Report 2009 NICO HOLDINGS LIMITED 10 Chairman George A. Jaffu Finance Director Director Finance Vizenge M. Kumwenda Director Robert W. Scharar & ChiefExecutive Director Managing Felix L. Mlusu Director Harold Bijoux Director Merrick W Oeschger pleasure ofworkingwithher. the had who NICO at us of all by greatly missed be will She years. nine for Holdings NICO at management senior of member invaluable an been had and died she when old years 49 only was Betty and Shamiso. three children, Ritchie, Thoko her to mother caring very a and Evans to wife loving a also was She woman. thinking positive and likeable very a and professional total a as both respected work, at colleague loved much a only not was Betty Blantyre on30March 2010. Hospital, Mwaiwathu at away passed she bravely very suffering After cancer. with diagnosed was she year the in Late 2009. throughout Secretary Company and Executive R H Group was Kacelenga Betty Company Secretary Betty Kacelenga

11 Annual Report 2009 NICO HOLDINGS LIMITED Annual Report 2009 NICO HOLDINGS LIMITED 12 Managing Director & Director Managing Chief Executive Felix L. Mlusu last year. a profitofMK1.1 billionachieved during to compared MK1.2 of billion tax before profit a was performance this of result The mix. deposit unfavourable of because rates interest expected than higher and, exchange foreign of lack by However, thegrowth was dampened channels. delivery service user-friendly and, mobilisation deposit in Bank’s and focussed targeted marketing the of result the is This billion. MK5.2 to billion MK3.9 from 33% by grew income Totalbillion. MK23.2 to billion MK15.4 the year. Depositsgrew by 51%from during with business do to bank after sought most the be to continued Bank The BAN markets. new developing and, products into ourexisting markets, developing new deeper penetrating business, existing retaining to paid was attention special In linewiththeGroup’s strategicpriorities, hard work andcommitmentofourstaff. the to due achieved been has result This period fromMK2.6billiontoMK3.2billion. previous than higher 19% was tax before Profit billion. MK4.3 from billion MK5.2 andpolicyholders’tax future benefitsof MK14.1 billion,resultinginaprofitbefore at year corresponding than higher 27% MK17.9 at were revenues billion Gross better thanmarket expectations. challenges ouroverall performance was these However, despite etc. exchange, depressed investment returns onthestock exchange, foreign of shortage claims, fire large claims, motor of incidence high by our operationswere adversely affected While we registeredimpressive growth, O affected ourclients,alsohadanimpactonbusinessesinoneway oranother. largely becauseoftheeffects oftheworldeconomicmeltdown. whichThe factors The yearunderreviewhasbeenoneofthemostchallenging inrecenttimes years Ma VER K na VIEW IN G D ging irector

’ s re the Bank’s future prospects look very very look prospects Bank’sfuture the products, innovative and new its and thisstrongoperatingplatformWith competitive advantage. healthy a bank the given has and, clientele been positively welcomed by thebank’s an internationalCreditCard. This has introduce to Malawi in bank first the ground breakingmilestonewas being most The services. and products new launched Bank the Furthermore, the country. throughout ATMslocated 49 and branches 30 has It ATMs. of number largest and Bank boastsofthelargestbranch network year. the The during launched ATMswere Newof representation. branches and points its increasing by platform operating people, theBank continued to grow its philosophy bankingtothe oftaking our with line in result, this Despite p ort MK824.2 million. 10% from down MK740.3 million of tax before profit a is result overall The year. the during significantly improved million by 25%.Ourpremiumcollection MK531 from down million MK396 was income investment Gross exchange. stock the on returns depressed to due planned as perform not did portfolio investment The improved lossratios. produced which underwriting risk selective and sound through achieved was profit underwriting of 18%. level of This increase profit ofMK371millionfromMK314, an underwriting in year. resulted last This over billion MK6.55 to billion MK5.58 from 17% by grew premium insurance General business. the for implications positive and lasting long have will took we actions account. underwriting We believe thatthe the on profit a realise to able were we challenges, these However,despite corrective actiontoaddressthem. of theotherchallenges, we tookimmediate words, we letthemwalk away. Inrespect to seekthosepremiumselsewhere. Inother uneconomical premiumswe allowed them where clientswere pressingfor cheap by strongfinancialsecurity. Therefore, we believe we have goodproductsbacked Our policyisnever tocompeteonprice,as unusually largefireclaims. and claims motor of incidence high downtown, economic the of effects the of reduction ofinsurancecovers asaresult included irresponsible ratinginthemarket, dogged by several challenges, which was business of line this in Performance GENERAL INSURANCE better. looked never have prospects growth proceeds, forex tobacco handle to commercial allow to policy Government of change the Following community. farming tobacco the of supporter financial active an also is bank indeed. The good

Nico Lifepaths11/22/0912:26PMPage3 Composite Group growth. to contribution greater for set firmly been profitability. We believe thefoundation has role intermsofGrouprevenues and increasing an assuming is business of line this spread, geographical our of view In backed by strongmarketing support. products innovative and new of introduction the of account on 40% of growth highest the registered business life Individual year. last the over 5% of increase an billion, MK2.4 overall surplusisMK2.52billionfrom The billion. MK3.29 to billion MK2.57 from 28% by grew revenues year.Gross the during growth strong register to continued business pensions and life The LIFE INSURANCE

C M Y CM MY CY CMY K 13 Annual Report 2009 NICO HOLDINGS LIMITED Annual Report 2009 NICO HOLDINGS LIMITED 14 stand bystand themallthetime.Indeed itdoes. belief andtrust thattheNICObrandwill the in us to come clients Our clients. our of confidence the of sign clear a is through theimproved operating systems, achieved by ourdedicatedstaff and been has which growth, overall Our of specialisation. teams usingwell honedskillsintheirareas managed by highlyqualifiedmanagement The resultisthatallouroperationsare level for remainsahighpriority theGroup. every at training staff professionalism, systems, andaseriousquestfor operating improving these of Because level. superior a at and effectively faster,deliver ourservices efficiently, to us enabling are systems operating improved systems. These operating our of automation through improve to continue processes business Our strategies. targeted ofourclear,implementation focussed and effective of result the is This activities. business core our through organically to notethatourgrowth hasbeenachieved pleasing is it downturn, economic world Despite thechallenges andeffects ofthe G the year re-affirms thegrowth potential. of part latter the during products exciting good. The introductionofthreenew remain prospects growth company’s The portfolio. investment diverse 11% growth arisingfromthegrowing downturn, investment incomeregistered despite theeffects oftheeconomic year.However, the during flat generally was exchange stock the on Trading was 4%below lastyear. lines business major three the for surplus organisations. Overall, thenetunderwriting those in retrenchments staff of result a as clients large our of some from withdrawals was affected by somelargepensions result the growth, impressive registered While groupandpensionsbusinessalso ROU P P P ROS P E C TS given by the Board of Directors to whom All thisisduetothedirectionandsupport prospects for growth aregood. we have created, the Group’s potential and, our businesses and, the corporate advantage thecontinuedstrongperformance With of affirms thestrengthofNICObrand. another flagshipinvestment, which re- (architect’ssketchbelow). yet is This Mall’ City ‘Lilongwe the Lilongwe, in Mall shopping Malawi’s largest be will what of development the is milestone Another on the African continent. have apresenceinfive insurancemarkets It makes NICOtheonlyInsuranceGroupto is yet another milestone inthelife ofNICO. Zimbabwean law for foreign investors. This Insurance Holdings Limited in line with market through an acquisition of SFG the NICO brand entered the Zimbabwe In pursuit of this regional growth strategy, business, in most markets. makes us the preferred partner choice for gives us a strong competitive advantage and regional footprint. We have aplatform which produce positive resultsand consolidate our Our regional growth strategy continues to business growth. successfully –despiteapoorclimatefor new markets. We were abletodoallthis markets, develop new productsand,enter business, penetratedeeperintoexisting growth, we ourexisting managedtoretain In linewithourfour strategic prioritiesfor we have created. name brand the of proud naturally are We Managing Director Felix Mlusu so successfully. commitment in driving the Group forward levels for their dedication, hard work and I am indebted and also the staff at all

General Manager(Finance) Bernadette Nkhwazi Officer Operating Chief Chris Kapanga Managing Director Felix Mlusu NICO Zambia Chief Executive Titus Kalenga EXEC U NIKO Uganda Uganda NIKO OfficerChief Executive Ronald Zake Finance Director Vizenge Kumwenda Technologies NICO Executive Chief Nauman Ahmed NBSBank Chief Executive John Biziwick TI V E M A NA

GEMENT Company Secretary Secretary Company Betty Kacelenga Chief Executive NIKOChief Executive Tanzania Manfred Sibande Insurance Company Limited General NICO Executive Chief Eric Chapola Chief Investment Officer NICO Limited Asset Managers Emmanuel Chokani 15 Annual Report 2009 NICO HOLDINGS LIMITED Annual Report 2009 NICO HOLDINGS LIMITED 16 14,500m The areaofthenew complex isabout complete anditwillopeninNovember 2010. project will costin the regionofMK3 billion to from ZambiaandMalawi Savings Bank. The financiers arePTA Bank fromKenya, Norsad Bank, LimbeLeaf, SucomaandMASM. Other the Pension Funds ofESCOM,Standard are NICOLife InsuranceCompany Limited, formulated theconcept.Financing theproject Holdings Limitedwhoacquiredthelandand Prime movers behindthescheme areNICO provide for all the needs of shoppers inoneconvenientprovide foralltheneedsofshoppers andsecurecomplex. City andbeyond. completeshoppingmallinLilongweasitwill This willbethefirst sinceithaseasyaccessfromallareasoftheCapital ideal forpotentialcustomers commercial areaofLilongwewhich haslacked afocusupuntilnow. The locationis NICO Centre. This prestigeandvibrantdevelopmentconsolidatesrevitalisesthe Bus linespremisesandsharestheblock withthecity’s well-knownlandmark,the in theheart ofOld Town inLilongwe.ItisbeingbuiltonthesiteofoldShire Lilongwe CityMallistheexcitingnewshoppingdevelopmentunderconstruction There isampleparkinginthecentreof one block comprisinganupperlevel ofshops. housing mostlysinglestorey shops,butwith will bebuiltinamodernvillagesquareformat buildings willnotbelinked physically. The Mall the will sharethespaceandparking, of theNICOCentre. While thetwobuildings L ilong 2 -addedtotheexisting 5,500m w e C Ma ity 2

ll for upgradinganddevelopment inthearea. Central regionandprovide afurtherstimulus the pattern ofshoppinginLilongwe andthe venture areconfidentthattheMallwillchange NICO Holdingsandtheirpartnersinthe in Malawi withparkingfor over 650cars. varied lineshops.Itwillbethelargestcentre Mr Price, Pep Storesand Truworths plus30 Stores andSparSupermarket, Woolworths, The tenantsinthenew complex includeGame branches withinshortwalking distance. All majorbankshaveand services. flagship enterprises such curios ashotels,restaurants, The Centreissurrounded by othercommercial entrances andexits. development witharoadway leadingtotwo 17 Annual Report 2009 NICO HOLDINGS LIMITED Chief Investment Officer 18 Annual Report 2009 NICO HOLDINGS LIMITED NICO Asset Managers Emmanuel Chokani Limited Bank ofMalawiasaPortfolio/Investment Manager. Reserve the with registered is It billion. MK28 of excess in management under assets has It investors. individual and institutional to products and services management investment of range premier a providing manager, investment specialist a is It Limited. Managers Asset NICO subsidiary, latest its launched Limited Holdings NICO 2009 In Introducing ournewest subsidiary N the expected returns ofthevarious asset research, this on Based function. Research investment cycle by ourEconomics/ the of review a and research economic top down approach focuses onmacro- The process. investment our in approach We combineatopdown andbottom up requirements. regulatory and profiles risk allocations, asset with predeterminedinvestment objectives, accordance in managed are Investments • Afocus onriskmanagement • Pro-active investment management • In-depthinvestment research returns by: of rates adjusted risk competitive achieve The company’s investment philosophy isto Chokani. Emmanuel Officer, has eightstaff, leadby ChiefInvestment 2010 it April 30 at As members. staff three with 2009 January of first the on The company commencedoperations A ico SSET M A NA

GERS LIMITED GERS decision making. making. decision investment our in considered are factors visits. Both quantitativeandqualitative company and interviews management analysis, competitor analysis, industry analysis, company on focus we approach, up bottom the For made. are decisions classes areforecast andinvestment • Clientadvisoryservice • Economicsandresearch Other • Duediligencereviews • Capitalraising • Project management • Financialprojectappraisal Corporate finance: • • Segregated fundmanagement • Pooled fundmanagement Fund Management: P management fund wealth/trust Institutions/private RO D U C TS

AN D D SER V I C ES NICO ZAMBIAOBJETIVES N reliable andsecurerelationshipthroughour a providing by - lives daily and activities risks they face intheircommercial insurable the from themselves protect Zambia in customers our help to is purpose says “ourTitus business challenges. all a Zambian,iswell equipped tomeet Kalenga, Executive Titus Chief by inception its since led Limited, Zambia Insurance NICO at team management senior The currency accounts. local 20% and Dollar US 80% of comprises book Kwacha. Malawi premium The billion 2.2 over just of premium written gross year insurance an with 2009 year the in share market 15% under just held and 55 of staff a boasts Limited Zambia Insurance NICO NICO Insurance Zambia Limited is licensed to deal exclusively inshort-termNICO InsuranceZambiaLimitedislicensedtodealexclusively insurance Limited outsideMalawi.ItcommencedoperationsinOctober1997, supervisedbythe T Pension andInsurance Authority ofZambiaundertheirInsurance Act No.27of1997. o identify gaps in the insurance insurance the in gaps identify o INS ico NICO Insurance Zambia Limited was the first company started by NICO Holdings Holdings NICO by started company first the was Limited Zambia Insurance NICO communities we operate in. T T market andfillthemwith business needsofclients. and un-paralleled service. o provide quality, superior superior quality, provide o o make adifference inthe T and profitable manner. o grow the business in in business the grow o T an effective, efficient Shareholders’ funds. innovative products. o meetpersonaland produce returns on T market share. o consistently T o increase increase o U covers, otherwiseknownasgeneralinsurance. covers, R A

NCE (Za NCE

m Livingstone andChipata. Kitwe, in offices branch including areas most in network agency and broker comprehensive a boasts Zambia NICO cover. liability officers’ and Directors’ offers country, that in insurers among unique Zambia, NICO covers. world-class provide to ability our complementing re-insurers, rated highly of support the have we Zambia, in risks large underwrite to capacity financial and technical unrivalled our Backing focus. astrongcustomer while maintaining of synergisticnetworkingpartnerships series a with operations combining thereby group NHL multi-national the of part as NICO InsuranceZambiaLimitedoperates of ourclienteleisutmostpriority”. mind of peace and security The settlement. claims to through underwriting operations, b i a) LIMITED a) NICO Zambia Chief Executive Titus Kalenga Zambia NICO 19 Annual Report 2009 NICO HOLDINGS LIMITED Annual Report 2009 NICO HOLDINGS LIMITED 20 Chief Executive Officer Executive Chief Uganda NIKO NIKO Uganda Uganda NIKO Ronald Zake

was highlighted. catch phrase, “One Team, OneDream” slogan, company the where retreat, year emphasised duringNIKO Uganda’s endof resource. are themostimportant This was staff that acknowledges fully Uganda, NIKO Ronald Zake, thechief executive officer for over 40tiedagents. and staff 16permanent has it Currently 2008/2009. of company insurance Ugandan growing credited ashaving beenthe fastest officially is It years. the over growth and consolidation witnessed has Uganda NIKO The Kampala-based company is100% ownedbyNICOHoldingsLimited. “One Team, OneDream” NIKO ins u r a (u nce g a nd market. Insurance Uganda the on impression lasting a make and these of advantage take to poised is Uganda Insurance NIKO and opportunities of number a presents 2010 beyond year and The successful productinthemarket. very a been has This processing. claim free extends tocover lossofusewithhassle- comprehensive motorpolicy which innovative an policy, Guard Motor the introduced It market. Ugandan the in initiative unique a as has, Uganda NIKO a) limited a) insurance services in insurance services Tanzania of range across-the-board its advertise to promotion quality on relies company The in NIKO Tanzania, acquiredinMarch 2005. shares 67.7% the holds of Holdings NICO Salaam. es Dar capital, bustling NIKO Insurance(Tanzania) Limitedhasoffices off Samora Avenue in Tanzania’s NIKO I NIK P ar Liber tnership O is d e h c t a m n U a tion ns ... u r Na a tur e v i s s e r p x E (Tance S y al P st r ecise ema tic nz downtown DaresSalaamoffice block central this from NIKO operates Tanzania product linesfor niche markets designed well from derive will reckons, he growth, Future name. brand good a by success toaggressive marketing backed company’s the attributes also Manfred include debitcardandcropinsurance. uniquely offered by the Tanzanian company products Singular the market. Tanzanian forinsurance productsspeciallytailored is attributed tothesuccessfullaunch of this and significant been has years five and dedicatedstaff. Growth over thepast industry. Manfredisassistedby 27loyal a majorplayer in Tanzania’s Insurance NIKO now company. is Tanzania the in July following 2005 NICOinvestment been theChiefExecutive Officer since Manfred Zenzo Sibande,aMalawian, has a ni a) L a) imited

NIKO Tanzania Chief Executive Manfred Sibande Tanzania NIKO 21 Annual Report 2009 NICO HOLDINGS LIMITED Annual Report 2009 NICO HOLDINGS LIMITED 22 Chief Executive NICO NICO Executive Chief General Insurance Insurance General Company Limited General NICO Eric Chapola winners. the with poses MP Kanyumba, Lucius Minister, sports below, and President Associations the to cheque a over NICO GeneralCEO, EricChapolahanding pictures, the In years. six for competition International squash only country’s the of sponsor sole a been has General NICO world-class covers.underwrite to ability its complementing reinsurers highly-rated of support the has company the Malawi, in risks large underwrite technical to andfinancialcapacity In additiontoNICOgeneralunrivalled accidents andmany more. personal householders, and owners house burglary, profits, of loss fire, cargo, ,professional indemnity, marinehull& and roadconstruction covers, engineering building vehicle, motor include Products personal andcommercialinsurancecovers. NICO generaloffers awiderangeof Malawian market. the on highest the is ability. This payment has atriple intermsofitsclean A rating, Malawi insurancemarket .NICOGeneral the on unique is that service claims flexible and reliable a offers General NICO close toMK3.5billionfor the year 2010. of figure premium written gross a and 40% approximately of share market a with Malawi in insurer short-term leading the is NICO GeneralInsuranceCompany Limited COM NICO GENER NICO Insurance Company Limited (nowNICOHoldings Limited) which was incorporatedasacomposite started as a short-term division of the National National the of division short-term a as started NICO GeneralInsuranceCompany Limited PA insurance company in1970. NY LIMITED NY A L INS U R A NCE

insurance products and service to to service and products insurance safety at work and environmental environmental and work at safety T T awareness are values that define define that values are awareness in Malawi, delivering world class class world delivering Malawi, in our clientele whilst adding value value adding whilst clientele our insurance products andservice. o provide innovative and quality quality and innovative provide o o be the leading general insurer insurer general leading the be o Integrity, care, qualityservice, ethical standards, health and and health standards, ethical accountability, transparency, CORPORATE V M our corporate philosophy to allourstakeholders. ISSION Corporate Values Vision Mission , , V ISION ALUES &

NICO LIFE INS LIFE NICO Limited. It has since grown into a major financial player on the Malawi market with Limited. IthassincegrownintoamajorfinancialplayerontheMalawimarket NICO Life insurance company limited, a 100% owned subsidiary of NICO Holdings Holdings NICO of subsidiary owned 100% a limited, company insurance Life NICO for Malawi Defence Force andothercharitable events. various sporting events such asgolf, hockey, SportsFestivals activitiesthroughthesponsorshipof social responsibility termassurances NICO Life hasover thepast year beenactively involved in pensionplan theharvest • tikondwe festival policy • savings protectionpolicy • • endowment assurancewith profits • • child saver withprofits • • The following individuallife productsareoffered: annuities groupfuneral • groupmortgage • groupcreditlife • grouplife assurance • gratuity pensionschemes • pensionschemes non-contributory • definedbenefitpensionschemes • • • The following groupbenefitproductsareoffered: managed fundarrangement. the under funds eight and contracts administration are over onehundredpensionfundsunderdeposit administration andmanagedfundcontracts. There deposit under funds pension administers and policies insurance life group and individual writes Life NICO limited, began in1971 oftheNationalInsuranceCompany asthelifedivision lien endowment assurancewithprofits cash generatorendowment withprofits defined contributionpensionschemes assets inexcessofMK19.6 billionasat31December2009. U R A NCE COM NCE PA NY LIMITED NY Chris Kapanga NICO Life(for2009) OfficerChief Executive NICO HoldingsLimited, Chief OperatingOfficer, NICO Life 23 Annual Report 2009 NICO HOLDINGS LIMITED Annual Report 2009 NICO HOLDINGS LIMITED 24 Chief Executive NICO NICO Executive Chief Technologies Nauman Ahmed NICO Technologies

and firedetectionalarmsystems. CCTV control, access as well as systems (identification) ID supplies & WANs), (LANs infrastructure communications implements and designs technologies NICO Malawi. in support adequate provide to able are developers original whose software written party third on support provides company The solutions. identification based PVC secure only the provides company the Software, Microsoft and ID Works and hardware card data Using websites. including solutions software customized supports and develops company The NICO TE NICO probably theonlyITserviceprovider inthecountrywithaprofessionalindemnity Technologies was theinformationtechnology department ofNICOHoldings.Itis insurance cover. This underpinsthecompany’s commitmenttoservicedelivery. Incorporated in January 2002 asasubsidiaryofNICOHoldingsLimited, Incorporated inJanuary 2002 LIMITED chnologies and engineers. programmers certified and experienced by supported fully are services These locks andaudio/videointercom,etc. biometric readers,springandmagnetic and card prevention, and detection fire CCTV, rapidresponse communication, This includesdoorandgateaccess, control andfiredetectionsystems. The company suppliesintegratedaccess representation. InpursuitoftheBank’srepresentation. of points its increasing by platform It hascontinuedtogrow itsoperating stafftotal countof600. a has It country. the throughout located ATMs49 and branches 30 ATMswith of number largest and network branch The Bank now boastsofhaving thelargest banking industry. Malawi’s in players major the of one become to grown has Bank the then Since Exchange. Stock Malawi the on listing bank’s the following 60% to shareholding its reduced Holdings NICO 2008, In . increased itsshareholdingto74.5% NICO when 2000 in subsidiary Group NICO a became and Society Building New the from developed Bank NBS N bank has grown to become one of the major players inMalawi’sbank hasgrowntobecomeoneofthemajorplayers bankingindustry. subsidiary in 2000, when NICO increased its shareholding to 74%. Since then the the then Since 74%. to shareholding its increased NICO when 2000, in subsidiary NBS bankdevelopedfromtheNewBuildingSociety andbecameaNICOGroup B S B Following the listing in 2008 NICO’sFollowing thelistingin2008 holdingreducedto60%. a LIMITED nk farmer customers. specific needsofitsmany smallholder the for cater to Centre Agribusiness NBS an opened it 2009 In agro-industry. in player active an also is Bank The advantage. strengthened theBank’s competitive further has and Bank’sclientele the by welcomed positively been has This cards. debit and credit VISA accepted time inMalawi, oftheinternationally these was theintroduction, for thefirst in2009. services The mostsignificantof and products new launched also Biziwick John of leadership the under Bank The were openedin2009. people’, several new branches and ATMs the to banking ‘taking of philosophy Chief Executive NBSBank Chief Executive John Biziwick 25 Annual Report 2009 NICO HOLDINGS LIMITED Annual Report 2009 NICO HOLDINGS LIMITED 26 problems andtofindsolutions. tackle pro-actively to innovation, show ideas, with forward come to encouraged which thegroup operates,allstaff were in environment changing rapidly the In companies. operating the in based are competencies the of most as workforce, NICO HoldingsLimitedhasalean compromised. way any in not was demands, daily to adapt to ability their and people, the of quality the that ensured and company by ourstaff inthesuccessof participation the on focussed strategies resources human our advantage, In ordertoensureourcompetitive HUMAN RESOUR strategies, policiesandperformance. on decisions effective and constructive guaranteeing thus - businesses and sectors various their from - experience of wealth a provided expertise, and skills of terms in diversity, review. Directors’ The under period the during regularly met have controls, theBoard anditscommittees internal sufficient and direction proper management, effective ensure to order In toupholdthecode. maintained were staff and stakeholders authorities, and allourrelationshipswithregulatory integrity uncompromising with conducted atlarge.Businesswassociety therefore, and competitors suppliers, customers, employees, and managers directors, in dealingswithallstakeholders,including ofbehaviourhighest standards andethics the to committed values embraced Limited theseparameters,NICOHoldings Within generally acceptedcorporatepractices. theCodeofCorporatePractices endorse andConductas The BoardofDirectors transparency asadvocated bytheKingCommittee report onCorporateGovernance. and integrity accountability, of principles the to committed fully is Holdings NICO H COR A ND CODE OF ETHICS OF CODE ND e ader P OR A V GO TE CES A ERN NCE labour laws. of employmentandbroader equity principles its to adhered company The success. further and growth sustainable ensure tothe skillsandopportunities necessary highlymotivatedretain employees with and nurture to able were we that ensure resource policiesandprogrammesto human its optimise to strove company The development courses. knowledge and skills of section cross encouraged toparticipateinadiverse been have employees and endorsed been has learning life-long of principles The school textbooks totheNationalLibraries. secondary donated also Holdings NICO their branches throughoutMalawi. distributing HIV/AIDSbooksinBrailleto assisted theMalawi Unionfor theblindin during theyear underreview, NICOHoldings with disabilitiesthoughthesports,however, NICO hastodatebeeninvolved withpeople Responsibility programmes. CorporateSocial nation throughsustainable to thegrowth anddevelopment ofthe and safety, demonstratingitscommitment various activitiesinsports,education,health Investment programmes,NICOsponsors In additiontothenormalCorporateSocial needs ofthecommunitiesitoperatesin. the to sensitive remains and investments Social various through communities the supports Limited Holdings NICO INVESTMENT C OR P ORATE

SO C IAL

as a commitment to fighting this disease not only among its employees, but in the the in but employees, its among only communities thesemembers live in. not disease this fighting to commitment a as HIV and AIDS PolicyHoldings anditssubsidiary was launched on 14th July 2009 opportunity for theprivate sector toengageinefforts tocombat the pandemic,NICO therefore thereisneedfor morework intheprivate sector. Presented withanideal NICO believes thisisnolongerasocialorhealthproblembutbusinessproblem; is which of one ways, various in supporting itsefforts tocombattheHIVand AIDS pandemic. government the supported consistently has NICO NICO Group HIV and AIDS polic y launch Libraries inMalawi National of Chairman the to books the presenting here seen is Ltd., Holdings NICO of Manager Affairs Corporate -Banda, Linda Khombe National Libraries. to kwacha, million valued athalfa books, text English and Mathematics secondary donated NICO 2009 August In ways. various in Malawi of University the support to continue too subsidiaries NICO Polytechnic. atthelecturers for USA the in Programmes Degree Masters sponsored has and Malawi in standards education the improving to committed is group NICO 27 Annual Report 2009 NICO HOLDINGS LIMITED Consolidated and Separate Financial Statements For the year ended 31 December 2009

DIRECTORS’ REPORT

The Directors have pleasure in presenting their report and Consolidated and Separate Financial Statements of NICO Holdings Limited and its subsidiaries for the year ended 31 December 2009.

NATURE OF BUSINESS

The major activities of the Group are general insurance, life assurance and pension administration, banking, asset management and information technology. NICO Holdings Limited has 100% shareholding in NICO Insurance (Zambia) Limited, NIKO Insurance (Uganda) Limited, and NICO General Insurance Limited, and 66.67% shareholding in NIKO Insurance (Tanzania) Limited and 49% in SFG Holdings Limited, all offering short term insurance business. It has 100% shareholding in NICO Life Insurance Limited offering life assurance and pension administration, NICO Asset Managers Limited offering asset management services and NICO Technologies Limited offering information technology services; and 60% shareholding in NBS Bank Limited offering banking services.

REGISTERED OFFICE 29

The physical address of the Company’s registered office is:- 19 Glyn Jones

Chibisa House RIES

P O Box 501 A Blantyre MALAWI SIDI

FINANCIAL PERFORMANCE UB

The results and state of affairs of the Group and Company are set out in the accompanying consolidated and separate statements of financial position, statements of comprehensive income, statements of changes in 28 equity, statements of cash flows and associated accounting policies and notes. ND ITS S PROFIT

The profit for the year attributable to equity shareholders of the Group of MK1.95 billion, (2008 restated: CONSOLIDATED AND SEPARATE MK1.77 billion) has been added to retained earnings. FINANCIAL STATEMENTS DIVIDENDS

A dividend of MK438 million, (2008: MK285 million) representing MK0.42 per ordinary share (2008: MK0.27 per For the year ended 31 December 2009 ordinary share) was paid during the year. The Directors recommend a final dividend of MK250.3 million (MK0.24 per ordinary share) for the year ended 31 December 2009.

STAFFING

Staff complement for the Group stands at 844 as at 31 December 2009, (2008: 762). Human resource remains a major and key factor to the success of the Group. The NICO Group therefore remains committed to a major NICO HOLDINGS LIMITED A

NICO HOLDINGS LIMITED component of its Mission Statement; “To maintain professionalism by developing staff to their full potential”. The Group has maintained staff development programmes through training both locally as well as internationally.

t 2009 t 2009 r r l Repo l Repo a a Annu Annu Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 30 B For theyearended31December2009 Consolidated andSeparate FinancialStatements their numberisnotthreeoramultipleofthree,thenthenearestone-third,shallretirefromoffice. and Directorsappointedby Santam, Africap LLC,MillenniumHoldingsandInternationalFinanceCorporationorif Directors Executive excluding but Directors, the of third one Company, the of Meeting General Annual the At Executive Management Public Shareholders Millennium Holdings International FinanceCorporation Santam Africap LLC In termsofthememorandumandarticlesassociationBoard isconstituted asfollows: Mrs. Betty Kacelenga Mr. Merrick W Oeschger Mr. Mpumelelo Tyikwe Mr. Robert W. Scharar Mr. Harold A.R. Bijoux Mr. Alaudin Osman Mr. Vizenge Kumwenda Mr. Felix L.Mlusu Mr. George A. Jaffu oftheCompanyThe duringtheyear: following asDirectorsandSecretary served invitation. by The committeeattend ayear. meetsatleasttwice auditors external and internal Director, Finance Director, Managing The Directors. non-executive three internal auditors reporttotheBoardand ofDirectorsthroughtheFinance and Audit Committee. external Both The committeesystems. consistsof control internal and accounting of adequacy the monitors also committee This statements. financial and reports annual reviewing for responsible is Committee Audit and Finance The FINAN All boardcommittees have termsofreference andreporttothemainBoard. principles ofgoodcorporategovernance. Board committees wereto ensure thattheBoard established discharges itsdutieseffectively inaccordance with BOARD COMMITTEES SHAREHOLDING STRUCTURE

Africap (American) Santam Limited(South Santam African) General Public (Malawian andForeign) Millennium HoldingsLimited International FinanceCorporation(American) Millennium Investments Limited(Malawian) NICO Employee (Malawian andForeign)

O A RD OF DIRECTORS A DIRECTORS RD OF C E

AN D D AU D IT C O ------(Throughout theyear)Company Secretary Director (From 4December2009) Director (Upto31July 2009) Director (Throughout theyear) Director (Throughout theyear) Director (Throughout theyear) Finance Director(Throughout theyear) Managing DirectorandChiefExecutive Officer (Throughout theyear) Chairman (Throughout theyear) MM 2 1 1 1 2 2 ITTEE Directors Director Director Director Directors Directors ND SECRETND 100.00 22.89 10.00 25.10 27.91 11.65 2009 1.35 1.10 % A RY 100.00 22.85 25.10 27.91 11.65 2008 1.19 9.95 1.35 % For theyearended31December2009 Consolidated andSeparate FinancialStatements 26 March 2010 CHAIRMAN George A. Jaffu attheforthcomingre-appointment willbetabled Annual GeneralMeeting. as auditorsinrespectoftheCompany’s 31December2010 andaresolutionproposingtheir financialstatements Messrs KPMGCertifiedPublic Accountants (Malawi) have expressed theirwillingnesstocontinueinoffice AUDITORS invitation. by attend Auditors External and Director Director. Managing The Finance and Directors non-executive four of investments inproperties,money market investments andotherlongterminvestment decisions.Itconsists The Investment Committee isresponsiblefor approval ofinvestment proposals,likeinvestments, equity INVESTMENT COMMITTEE Managing DirectorandtheFinanceDirector. The External Auditors attend by invitation. to appointmentsof, andremunerationto,managementstaff. Itconsistsoftwonon-executive Directors,the The Appointments andRemuneration Committee actasanindependentforum responsiblefor issuesrelating APPOINTMENTS AND REMUNERATION COMMITTEE MANAGING DIRECTOR Felix L.Mlusu

31 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 32 For theyearended31December2009 Consolidated andSeparate FinancialStatements RES ST 26 March 2010 CHAIRMAN George A. Jaffu March 26 2010on andaresignedonitsbehalfby; Directors of board the by approved were Company the and Group the of statements financial The Approval ofthefinancialstatements affairs oftheGroupandCompany andoftheiroperatingresults andcashflows. The give Directorsareoftheopinionthatfinancialstatements atrue andfair viewofthefinancial ofthestate a remain not going concernfor atleastthenext twelvewill monthsfromthedateofthisstatement. Company and Group the that indicate to Directors the of attention the to come has Nothing fraud andotherirregularities. assets oftheGroupandCompanyadequatesystems andtomaintain ofinternalcontrolsprevent anddetect The forsuch Directorsalsoacceptresponsibility taking stepsasarereasonably opentothemsafeguard the • Makingjudgmentsandestimatesthatarereasonableprudent; • accountingpoliciesandapplyingthemconsistently; Selectionofsuitable • Maintenanceofproperaccountingrecords; • • for theDirectorsacceptresponsibility following:In preparingthefinancialstatements, enable and complywiththeMalawithem toensurethatthefinancialstatements Companies Company Act, 1984.and Group the of position financial the time any at accuracy reasonable with disclose records which accounting proper keep Company and Group the that ensure to Directors the requires also Act The Company asattheendof financialyear andoftheoperatingresultsfor thatyear. forStatements each financialyear whichFinancial give atrue andfair viewofaffairs ofthestate Separate oftheGroupand and Consolidated prepare to Directors the requires 1984, Act, Companies Malawi The A Group andCompany willcontinueinbusiness. Preparation onagoingconcernbasisunlessitisinappropriatetopresumethatthe offinancialstatements material departures beingdisclosedandexplained inthefinancialstatements; subjecttoany whenpreparingfinancialstatements, Compliance withapplicableaccountingstandards, TEMENT OF DIRECTORS’ DIRECTORS’ OF TEMENT P ONSI B ILITIES FOR THE FIN THE FOR ILITIES MANAGING DIRECTOR Felix L.Mlusu A NCI A L ST A TEMENTS

For theyearended31December2009 Consolidated andSeparate FinancialStatements certific P.C. Falconer QED Directors:  Registration Number1991/005277/07VAT Number 4320101498 Consulting Actuaries: w: www.qedact.co.za andwww.aon.co.za + B.Sc.,FASSA, FFA. C.A. RouxB.Com(Hons)CA(Chairman),R.D.Williams 26 March 2010 at as fund insurance plus life the policies, of amount fund 31 December2009. the exceed sinking not Insurance Life do and NICO Limited the Company by individual issued policies and liabilities Administration Deposit the under funeral, belief those and life, knowledge our unmatured of best under the to that certify hereby We N.J. Strohmenger M.Sc.,FASSA, FIA,J.L.Potgieter B.Com(Hon),FASSA, FIA,S.Lazic B.Sc.(Hons)FASSA, A.A.Faure B.Com.,FASSA, R.PatelB.Sc., FASSA, FIA B.Bus.Sc.,FASSA,R.D. Williams FIA,P.C. FalconerB.SC.,FASSA, FFA, R.I.ChauhanM.SC.(Econ),FASSA, FIA, G.Tognon B.SC.FASSA, FFA, a a of te CONSULTING + Executive *Ethiopian For QEDActuariesandConsultants(Pty)Limited CERTIFICATE OFTHEACTUARY ct ua + B.Bus.Sc.,FASSA, FIA(MD),Y. Aseffa*, G.M.FaganNDCA.,AM.MbekiM.A.(Soc), ry Actuarial, Healthcare &Retirement FundingConsultants The Place,1SandtonDrive,Sandhurst,Sandton,2196 P OBox1874,Parklands,2121Gauteng An AonGroup Company QED Actuaries&Consultants(Pty)Ltd Johannesburg, SouthAfrica Telephone: +27119447000 Fax: +27119448115

33 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 34 SH INDE For theyearended31December2009 Consolidated andSeparate FinancialStatements 20 March 2010 Certified Public Accountants andBusiness Advisors KPMG so far asconcernsthemembersofCompany. in ended accordance withInternationalFinancialReporting andtheprovisionsthen Standards ofMalawi Companies Act,year 1984, the for flows cash separate and consolidated its and performance financial separate and andofitsconsolidated and separatefinancialpositionofNICOHoldingsLimited at31December2009, inallmaterialrespects,giveIn ouropinion,thesefinancialstatements, atrue andfair view oftheconsolidated Op opinion. We believe thattheauditevidence we have issufficient obtained andappropriatetoprovide abasisfor ouraudit statements. financial the reasonableness ofaccountingestimatesmadeby management,aswell asevaluating theoverall of presentation control system.internal An auditalsoincludesevaluatingentity’s theappropriateness ofaccountingpoliciesusedandthe the of effectiveness the on opinion an expressing of purpose the for not but circumstances, inordertodesignauditproceduresthatare appropriate inthe fair ofthefinancialstatements presentation making In error. or those riskassessments,theauditorconsidersinternalcontrolsystem relevant totheentity’sfraud to preparationand due whether statements, financial the of misstatement material of risks the of the in financial statements. Thedisclosures proceduresselecteddepend ontheauditor’s and judgment,includingtheassessment amounts the about evidence audit obtain to procedures performing involves audit An misstatement. material from free are financial the statements whether assurance reasonable obtain to audit the perform and plan and requirements with ethical comply we that require standards Those Auditing. on Standards International with accordance in audit conducted We our audit. our on based statements financial these on opinion an express to is responsibility Our A estimates accounting that arereasonableinthecircumstances. making and policies; accounting appropriate applying and selecting error; or fraud to due whether thatarefreefrommaterial misstatement, the preparationandfairoffinancialstatements presentation 1984. internalcontrolsystem implementingandmaintaining relevantThis includes:designing, responsibility to statements in accordancewithInternationalFinancialReportingandtheprovisions Standards ofMalawi Companies Act financial these of presentation fair and preparation the for responsible are Directors Company’s The Directors’ responsibility for the financialstatements notes,assetoutonpages28to104.other explanatory which ofsignificantaccounting policiesandended, andthenotestofinancialstatements, includeasummary statements the of comprehensivechanges ofcashflows income,the statements andstatements forand inequity theyear then 2009, December 31 at position financial of statements the comprise which Group”), (“The We have auditedtheaccompanyingofNICOHoldingsLimited consolidatedandseparatefinancialstatements Report on the FinancialS u KPMG inion inion d A itors’ res itors’ REHOLDERS OF NICO HOLDINGS LIMITED HOLDINGS NICO OF REHOLDERS P ENDENT AU ENDENT p onsibility onsibility cooperative. A list of the names of the partners is available for inspection inspection for available is partners the of Swiss a names at theofficethe address. of list International, A KPMG of firm cooperative. member a is Malawi KPMG DITOR’S RE DITOR’S tatements Blantyre, Malawi P.O. Box508 MASM House,LowerSclaterRoad Public AccountantsandBusinessAdvisors KPMG P ORT THE TO

E-mail: Telefax: Telephone:

[email protected] (265) 01820575 (265) 01820744/391 ST In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements The independent auditors’ reportisonpage34. The aretobereadinconjunction withnotesfrompages 41 to financialstatements 104. Chairman Total equityattributable ofthecompany toequityholders ASSETS Non-controlling interest assets Intangible Property andequipment Non-current assets Total Equity Investment properties Interest-bearing loansandborrowings Long-term policyholdersliabilities Non-current liabilities Other investments andloanreceivables Severance pay provision Investment companies insubsidiary Deferred liabilities tax Loans andadvances tocustomers Total non-current liabilities Deferred assets tax Bank overdrafts Current liabilities Total non-current assets Interest-bearing loansandborrowings Inventories Current assets Unearned premiumprovision Amounts due from subsidiary companies Amounts duefromsubsidiary Trade payables Deferred acquisitioncosts Deposits andcustomeraccounts Trade receivables Other payables Other receivables Total current liabilities Loans andadvances tocustomers Total liabilities Income tax receivableIncome tax Total equityandliabilities Short-term investments signed onitsbehalfby: The ofthe GroupandCompany financialstatements were approved by the Board ofDirectors on26March 2010 andwere Cash andcashequivalents Total current assets Total assets Issued sharecapital Equity EQUITY AND LIABILITIES Share premium Revaluation reserve Other reserves Retained earnings A TEMENTS OF FIN OF TEMENTS A NCI

4.9.10 Notes A 40 20 33 21 42 22 34 27 34 29 33 23 36 37 24 38 25 39 26 27 28 29 18 30 30 30 31 19

L P 31,549,543 30,293,828 23,164,428 10,526,504 20,103,293 14,156,549 26,214,125 50,397,121 17,628,997 57,763,668 57,763,668 7,371,154 4,202,931 3,403,940 4,835,930 6,236,914 1,129,633 2,259,516 1,159,937 4,191,656 5,469,617 1,065,674 7,366,547 2,257,267 7,416,371 Managing Director 268,351 715,248 OSITION 281,965 791,975 428,859 569,097 218,429 135,692 995,150 693,374 89,827 52,152 47,113 2009 - - -

GROUP 21,839,596 38,902,270 15,354,556 20,713,443 23,600,974 44,314,417 44,314,417 11,722,153 6,379,060 15,087,186 17,062,674 7,228,858 2,462,854 2,026,092 1,834,753 2,944,207 3,126,665 3,292,175 1,076,704 5,412,147 1,192,165 4,649,014 5,515,177 4,427,345 Restated 139,700 271,076 763,133 925,208 779,204 428,859 956,983 203,213 213,651 84,355 41,838 78,195 52,152 21,317 2008 - - - 1,285,425 2,576,905 1,373,525 2,528,624 1,766,436 1,766,436 2,576,905 833,371 557,390 882,732 253,079 428,859 176,000 161,715 251,747 148,014 157,629 64,202 48,281 18,354 31,232 91,364 52,152 11,727 9,361 8,839 2009 933 COMPANY ------

1,592,698 1,788,160 1,788,160 1,174,689 1,174,689 Restated 851,651 693,678 500,282 428,859 151,948 198,561 613,471 195,462 176,000 414,910 247,197 24,479 95,257 117,964 15,765 40,286 80,597 22,499 58,041 52,152 13,765 5,900 2008 ------35 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 36 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements S

Gross earnedinsurancepremiums Revenue Unearned premiumadjustment Net written insurancepremiums Fees andcommissionincome Income frombankingoperations Investment income Total revenue Fair value adjustmentofinvestment properties Fair value adjustmentofavailable for saledebtsecurities. Gross Revenue Other income Insurance premiumcededtoreinsures Expenses Insurance contractsacquisitioncosts Net policyholdersclaimsandbenefits Bank interestexpense Administrative expenses policyholders’ benefits policyholders’ Profit beforefinancecostsandlongterm Finance costs Profit beforeincometaxexpense Long-term policyholdersbenefits Income tax expenseIncome tax Profit fortheyear foreign subsidiaries Foreign currency translationdifferences on income Other comprehensive Revaluation andequipment ofproperty financial assets Net change infair value ofavailable for sale Income tax onothercomprehensiveIncome tax income Other comprehensive incomefortheyearnetoftax Other comprehensive Total incomefortheyear comprehensive Non-controlling interest Attributable to Profit fortheyear Equity holdersoftheparentCompanyEquity

Non-controlling interest Attributable to: Total incomefortheyear comprehensive Equity holdersoftheparentCompanyEquity

Basic anddilutedearningsper share(MK) The independentauditors’ reportisonpage34. The areto be readinconjunctionwithnotesfrompages41to financialstatements 104. t a com of tements p rehensi 4.9.10 Notes 20 21 12 13 14 15 16 10 17 11 6 6 7 8 9 6

16,780,775 (1,968,493) 2,306,787 (4,766,724) 17,916,197 (2,474,148) (3,707,257) 9,793,626 2,392,477 1,946,470 2,306,787 2,025,977 2,392,477 9,516,356 1,482,815 5,351,768 4,741,485 1,040,119 3,237,525 (930,738) (702,404) (913,896) (145,750) (277,270) 222,054 366,500 893,062 360,317 20,306 (28,845) 85,690 18,386 96,149 2009 1.87 v -

e income GROUP 13,424,153 14,131,571 3,402,439 (3,922,820) (1,663,527) (2,619,533) 1,136,146 (2,187,888) 8,098,224 1,029,686 2,048,006 4,346,839 2,590,790 2,001,490 2,324,153 2,324,153 2,001,490 1,768,509 7,855,882 (589,300) (242,342) Restated (552,545) (501,946) 465,973 469,867 322,663 232,981 148,442 276,147 93,003 (92,522) (35,941) (83,394) (27,869) 2008 1.70 1,658,888 1,296,335 1,249,803 1,029,824 1,029,824 1,029,824 1,029,824 1,029,824 1,029,824 (219,979) (362,553) 579,810 246,534 826,344 803,708 28,836 (46,532) 2009 ------COMPANY

1,063,289 1,086,075 Restated (435,544) 723,353 339,936 650,531 585,562 553,786 553,786 553,786 553,786 553,786 553,786 (64,969) (31,776) 21,010 1,776 2008 ------In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements S

In thousands of Malawi Kwacha t a ch of tements Reconciliation of movement in capital and reserves

Share Share Revaluation Translation Fair value General Retained Minority capital Premium reserves reserves reserve reserves earnings Total interest Total

GROUP Balance at 1 January 2008 52,152 428,859 439,151 14,851 27,869 195,150 1,727,976 2,886,008 486,986 3,372,994 Other comprehensive income Transfer from general reserves - - (1,345) - - (89,705) 91,050 - - - Revaluation surplus on property and equipment - - 602,571 - - - (175,870) 426,701 43,166 469,867 Deferred tax on revalued assets - - (83,394) - - - - (83,394) - (83,394)

Realised revaluation surplus - - - - (27,869) - - (27,869) - (27,869) a

Translation loss - - - (35,941) - - - (35,941) - (35,941) e in nges

Total other comprehensive income - - 517,832 (35,941) - (89,705) (84,820) 279,497 43,166 322,663 Profit for the year ------1,768,509* 1,768,509 232,981 2,001,490 Total comprehensive income for the year - - 517,832 (35,941) - (89,705) 1,683,689 2,048,006 276,147 2,324,153 Dividends to equity holders ------(285,000) (285,000) - (285,000) Balance at 31 December 2008 52,152 428,859 956,983 (21,090) - 105,445 3,126,665 4,649,014 763,133 5,412,147 qu ity

* The prior year profit has been restated due to severance pay under provision of MK97 million and understatement of MK21million relating to NICO Properties Limited share valuation see note 46 for further analysis.

The financial statements are to be read in conjunction with notes from pages 41 to 104. The independent auditors’ report is on page 34. 37 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 38 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements S

In thousands of Malawi Kwacha t a ch of tements Reconciliation of movement in capital and reserves

Share Share Revaluation Translation Fair value General Retained Minority Total capital Premium reserves reserves reserve reserves earnings Total interest Equity

GROUP Balance at 1 January 2009 52,152 428,859 956,983 (21,090) - 105,445 3,126,665 4,649,014 763,133 5,412,147 Other comprehensive income Transfer to general reserves - - (18,408) - - 37,654 (19,246) - - - Revaluation surplus on property and equipment - - 87,316 - - - - 87,316 8,833 96,149 Deferred tax on revalued assets - - (26,195) - - - - (26,195) (2,650) (28,845)

Realised revaluation surplus - - (4,546) - - - 4,546 - - - a

Transfer to fair value reserve - - - - 428,702 - (428,702) - - - e in nges Translation gain - - - 18,386 - - - 18,386 - 18,386

Total other comprehensive income - - 38,167 18,386 428,702 37,654 (443,402) 79,507 6,183 85,690 Profit for the year ------1,946,470 1,946,470 360,317 2,306,787 Total comprehensive income for the year - - 38,167 18,386 428,702 37,654 1,503,068 2,025,977 366,500 2,392,477 Dividends to equity holders ------(438,077) (438,077) - (438,077) qu Balance at 31 December 2009 52,152 428,859 995,150 (2,704) 428,702 143,099 4,191,656 6,236,914 1,129,633 7,366,547 (C ity

The financial statements are to be read in conjunction with notes from pages 41 to 104. The independent auditors’ report is on page 34. ontin u ed ) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements COMPANY Balance 2008 at1January 2008 Restated profit for the year* Dividend paid Restated balance at 31 December 2008 Restated balanceat31December 2008 Balance at 1 January 2009 restated Balance at1January 2009 2009 Profit for the year Dividend paid Balance at31December2009 The independentauditors’ reportisonpage34. The aretobereadinconjunctionwithnotesfrompages41 financialstatements 104. * MK21million relatingtoNICOProperties Limitedsharevaluation seenote46for furtheranalysis. The prioryear profit duetoseverance hasbeenrestated pay underprovisionof ofMK97millionandunderstatement 52,152 52,152 52,152 52,152 capital Share - - - - premium 428,859 428,859 428,859 428,859 Share - - - - Fair Value Reserves 562,596 577,303 14,707 14,707 14,707 0 - - Retained (285,000) 678,971 (438,077) Earnings 424,892 593,079 678,971 708,122 467,228 1,029,824 1,766,436 1,174,689 1,174,689 (285,000) (438,077) 905,903 553,786 Total 39 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 40 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements Ca Cash receiptsfromcustomers CASH FLOWS FROM OPERATING ACTIVITIES Cash payments toclients,employees andsuppliers Cash generatedfrom/(utilisedin)operations Income taxespaid Net cashflows from/(to)operatingactivities Proceeds andequipment fromdisposalofproperty CASH FLOWS (TO)/FROM INVESTING ACTIVITIES Investment andotherincomereceived loans receivables andinvestment insubsidiaries Net movements tootherinvestments and Additions toinvestment properties Additions andequipment toproperty Net cashflows (utilisedin)/frominvesting activities (Repayment of)/proceedsfromlong-termborrowings CASH FLOWS TO FINANCING ACTIVITIES Dividend paid Net cashflows utilisedinfinancingactivities Net increase/(decrease)incashandequivalents Cash andcashequivalents at1January Cash andcashequivalents at31December (Decrease)/increase innetworking capital ADDITIONAL STATUTORY INFORMATION The independentauditors’ reportisonpage34. The aretobereadinconjunctionwithnotesfrompages41 financialstatements 104. sh flo w st a tements 18, 19 Notes 20 29

(11,332,122) (1,454,468) (1,443,881) (1,305,888) (2,954,336) 6,175,847 14,787,574 3,455,452 2,831,473 1,602,176 7,152,725 (623,979) (438,077) (548,707) (110,630) 976,878 (11,368) 1,653 2009 GROUP 11,625,504 (1,481,068) (8,437,593) (1,807,968) 2,998,940 4,838,450 1,655,858 1,303,376 6,175,847 1,337,397 (188,971) (212,092) 3,187,911 (285,000) (180,475) (769,104) 104,525 4,720 2008 (438,077) (368,252) (103,008) (516,878) (201,699) (26,659) 291,903 570,809 542,983 (26,494) 95,257 18,354 (76,349) (78,801) (76,903) (2,961) 1,629 2009 - COMPANY (285,000) (300,777) (336,334) (131,949) 159,360 (176,000) 371,947 659,368 321,469 (24,623) (30,727) (51,334) 46,547 31,682 63,575 95,257 71,170 2008 777 For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES 0 Investment properties - Note Long-term insurancerisk Note20 - • Note4.9 • • the following notes: accounting applying policies thathavein mostsignificanteffect canbefound ontheamountsrecognised inthefinancialstatements judgements critical and uncertainty estimation, of areas significant about Information the revision andfuture years iftherevision affects bothcurrent andfuture years. are recognisedintheyear inwhich the estimateisrevised iftherevision affects onlythatyear orintheyear of The estimatesandunderlyingassumptionsarereviewed onanongoingbasis.Revisions toaccountingestimates from othersources. Actual resultsmay differ fromtheseestimates. values ofassetsandliabilitiesthatarenotreadilyapparentthe basisofmakingjudgementsaboutcarrying and various otherfactors thatarebelieved theresultsofwhich tobereasonableunderthecircumstances, form liabilities, incomeandexpenses. The estimatesandassociatedassumptionsarebasedonhistoricalexperience estimates andassumptionsthataffect theapplicationofaccounting policiesandreportedamountsofassets The inconformitywithIFRSs preparationoffinancialstatements requiresmanagementtomake judgements, useofestimates andjudgements 2.3 available-for- salefinancialassetsaremeasured atfair value. investment measuredatfair property value; • financialinstruments atfair value throughprofitorlossaremeasuredatfair value; • • following: the The have consolidatedandseparatefinancialstatements beenpreparedonthehistoricalcostbasisexcept for basisofmeasurement 2.2 2010. March 26 The were consolidatedandseparatefinancialstatements authorisedfor issueby theBoard ofDirectorson Act, 1984. Standards Reporting Financial (IFRS) issuedby theInternational Accounting Board Standards (IASB) andprovisionsInternational oftheMalawi Companies with accordance in prepared been have statements financial The statement ofcompliance 2.1 2. offering information technology and60%shareholdinginNBSBank Limitedoffering services; bankingservices. administration, NICO Asset ManagersLimitedoffering assetmanagementandNICO Technologies Limited insurance business.Ithas100% shareholdinginNICOLife InsuranceLimitedoffering life assuranceandpension 66.67% and shareholding inNIKO Insurance(Tanzania)Limited, Limitedand49%inSFGHoldingsLimited,allofferingInsurance shortterm General NICO and Limited, (Uganda) Insurance NIKO Limited, (Zambia) Insurance asset managementandinformation technology. NICOHoldingsLimitedhas100% shareholdinginNICO The majoractivitiesoftheGroup aregeneralinsurance,life assuranceandpensionadministration, banking, subsidiaries (togetherreferred toasthe “Group”). The company islistedonMalawi Stock Exchange. forand Separatefinancialstatements theyearcomprisesCompany ended31December2009 andits the Company’s of registeredofficeaddress is:19 Malawi. The GlynJones,in ChibisaHouse,P.O. domiciled company Box 501, Malawi. Blantyre, liability Thelimited Consolidated a is Company) (The Limited Holdings NICO 1. reporting entity basis ofpre

1 Other - 21

investments aration

and NCI

loans A

receivable L ST A TEMENTS

41 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 42 For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES impact onearningspershare. Sincethechangerequirements ofthestandard. aspects,thereisno inaccountingpolicyimpactspresentation Comparative segmentinformation hasbeenre-presentedsothatitalsoisinconformitywiththetransition internally isprovided totheGroupExecutive Committee which istheGroup’s chief operatingdecisionmaker. the Groupdeterminesandpresentsoperatingsegmentsbasedontheinformation 2009, thatAs of1January In theCompany’s investments separatefinancialstatements, insubsidiariesarecarried atcostlessimpairmentlosses. control commencesuntilthe datethatcontrolceases. its activities. fromthedatethat The ofsubsidiariesareincludedinthefinancial statements financialstatements haspowerentity togovern benefitsfrom soas toobtain thefinancialandoperating policies ofanotherentity Company.the subsidiary UnderIAS 27, controlexists Consolidatedandseparatefinancialstatements, whenan directly capital or indirectly;theCompany canappoint,orprevent theappointmentofnotlessthanhalfDirectors share nominal the of half one than more holds Company the where exist to presumed is control 1984 Act Companies Malawi the Under Group. the by controlled are that Limited (Tanzania) Insurance NIKO Insurance (Zambia)Limited,NIKO Insurance(Uganda)Limited,NBSBank Limited,NICOassetManagersand Insurance Company Limited,NICOLife InsuranceCompany Limited,NICO Technologies Limited,NICO The include theCompany ConsolidatedandSeparateFinancialStatements itssubsidiaries; NICOGeneral subsidiaries (i) (a) comparativeentities. Certain amountshave beenreclassifiedtoconfirmwiththecurrent year’s presentation. andhaveconsolidated andseparatefinancialstatements beenappliedconsistentlyby theCompany andgroup The accountingpoliciessetoutbelow have beenappliedconsistentlytoallperiodspresentedinthese 3. available. decisions aboutresourceallocationtothesegmentandassessitsperformance andfor which discreteinformation is other components,whoseoperatingresultsarereviewed regularlyby theGroup’s Executive Committee tomake revenues andincurexpenses, includingrevenue andexpenses thatrelatetotransactionswithany oftheGroup’s An operatingsegmentisacomponentoftheGroupthatengagesinbusinessactivitiesfromwhich itmay earn ii. the change aspects,thereisnoimpactonearningspershare. inaccountingpolicyimpactspresentation Comparative information hasbeenre-presentedsothatitalsoisinconformitywiththerevisedSince standard. whereas allnon-owner changes ofcomprehensive arepresentedinthestatement income. inequity 1 of 2009. ofchangesAsas January aresult,theGrouppresentsinstatement allowner inequity changeseffective inequity,became which (2007), Statements Financial of Presentation 1, IAS revised applies Group The i. ofoperatingsegments Determinationandpresentation Presentationoffinancialstatements • • Effective theGrouphaschanged 2009, 1January itsaccountingpoliciesinthefollowing areas: 2.5 the nearestthousand. Company’s the functionalcurrency.also is Kwacha, which All financialinformation presentedinMalawi KwachaMalawi in hasbeenroundedto presented are statements financial separate and consolidated These f 2.4 2.

significant a basis ofpre

Determination andpresentation ofoperating segments Presentation offinancialstatements Basis ofconsolidation policies accounting in Changes unctional andpresentation currency aration (continued) ccounting policies NCI A L ST A TEMENTS ( TEMENTS contin u

ed ) For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES made anddisclosedseparatelyifmaterial. The methodsused,andtheestimatesmade,arereviewed regularly. provisions inprioryears oftheperiodinwhichestablished arereflectedinthefinancialstatements theadjustments are claims to Adjustments discounted. not are outstanding claims for Provisions trends. and experience events, such aschanges inclaimshandlingprocedures,inflation,judicialtrends,legislative changes andpast claims and makingallowanceindividual for claimsincurred butnotreported,theeffectsreviewing ofbothinternalandexternal by foreseeable assessed are outstanding Claims margin. prudential appropriate an and expenses claims incurred butunpaidatreportingdatewhetherreportedornot,andrelated internalandexternal claims handlingall settling of cost ultimate the of estimate Group’s the for provisions comprise outstanding Claims events from occurring during thefinancialyeararising together withadjustmentstoprioryear claimsprovisions. claims outstanding and paid of costs handling and settlement the comprise incurred Claims Claims toreflectany variationadjusted ifnecessary intheincidenceofriskduringperiodcovered by thecontract. to beearnedinthefollowing orsubsequentfinancialyears, computedseparatelyfor each insurancecontract The provision for unearnedpremiumscomprisestheproportionofgrosswritten which isestimated Unearned premium provision of risk,over period,basedonthepattern theindemnity oftherisksunderwritten. The earnedproportionofpremiumsisrecognisedasrevenue. Premiums areearnedfromthedateofattachment premiums written inprevious years. on premiums.Premium written includeestimatesfor ‘pipeline’ premiumsandadjustmentstoestimatesof Gross premiumswritten reflectbusinesswritten duringtheyear, andexclude any taxesordutiesbased Revenue (i) Recognition andmeasurement (c) allocates surplusesbetween “with profits”policyholdersandtheshareholders. The Life andPensions Fund isactuarially valued each year. Based ontheadviceofactuaries, theCompany (b) able tomake anadditionalinvestment tocover thelosses. allocated againsttheinterestsofGroupexcept totheextenthasabindingobligationandis thattheminority combination. Lossesinexcess applicable totheminority oftheminority’s interestinthesubsidiaries’ are equity original businesscombinationandthenon-controllinginterest’s shareofchanges sincethedateof inequity the from Group’sseparately therein.Non-controllinginterests consistoftheamountthoseinterestsatdate equity identified are subsidiaries consolidated of assets net the in interests Non-controlling (iii) Non-controlling interest eliminated are losses in thesameway asunrealisedgains,butonlytotheextent thatthereisnoevidence ofimpairment. Unrealised Statements. Financial Consolidated the preparing in eliminated are transactions, intra-Group from arising expenses and income unrealised any and transactions, and balances Intra-Group t (ii)

General insurance contracts ransactions eliminated onconsolidation Insurance contracts contracts Insurance Accounting for results oftheLife andPensions Fund NCI A L ST A TEMENTS (CONTIN TEMENTS U ED) 43 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 44 For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES in performing these tests. If a shortfall is identified an additional provision is established. The deficiency is is recognised intheprofitorlossfordeficiency theyear. The established. is provision additional an identified is shortfall a If tests. these performing in claims as such handling expenses, andinvestment incomefromassetsbacking theinsurancecontractprovisionsexpenses, areused related and flows cash contractual future all of estimates best Current provisions adequate. contract are insurance the if determine to performed are tests adequacy liability date, reporting each At Liability adequacytest a participationfeatureof contract withadiscretionary asaliability. element discretionary the recognises Group The contract. the issues that entity other or fund Company, realised contract, of and orunrealisedinvestment returnstype onaspecifiedpoolofassetsheldby theinsurerorprofitlossof specified a or contracts of pool specified the of performance the are on and of based insurer the contractually of discretion the at contractually is timing or amount whose and the benefits of portion contractual total significant a be to likely are that benefits additional payments, minimum guaranteed to supplement participationfeatureA contractwithadiscretionary isacontractual right heldby apolicyholderto receive asa I or lossintheperiodwhich they areincurred. Acquisition costsinrespectofinsurancecontractswithaDPFarenotdeferred andarerecognised intheprofit when notified. as anexpense whenduefor payment. Surrender claimsarerecognisedwhenpaid.Death recognised Claims includematurities, claimsarerecognised annuities,surrenders anddeathclaims.Maturity andannuity Claims Premiums exclude any taxesordutiesbasedonpremiums. policyholders. to allocated are units corresponding the when recognised are contracts assurance life ParticipationDiscretionary Features (DPF)contractsarerecognisedasrevenuewith whendue.Premiums inrespectofunit-linked insurance and contracts, assurance life non-linked and annuity of respect in Premiums Revenue (ii) brokers andre-insurancecontracts. Receivable andpayables arerecognisedwhendue. These includeamountsduefrompolicyholder’s agents, R pattern ofemergencesuch margins. out offuture marginsintherevenue fromtherelatedcontracts. recoverable be to The rateofamortisationisconsistentwiththe expected are costs the which in period the over amortised are costs acquisition Deferred margins. future of out recoverable are they andlifeCosts incurred inacquiringgeneralinsurance,annuity assurancecontractsaredeferred totheextent that Deferred acquisitioncosts insurance contracts (continued) (i) (c) 3. nsurance contracts with a Discretionary Participation Participation Discretionary a with contracts nsurance eceivable and payables related to insurance contracts contracts insurance to related payables and eceivable significant a Long-term assurance contracts General insurance contracts continued) ccounting policies(ontinued) NCI A L ST F eatures (DP eatures A TEMENTS ( TEMENTS F ) contin u ed ) For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES be measuredreliably. if itisprobablethatthefuture economic benefitsembodiedwithinthepartwillflow totheGroupandcostcan amountoftheitem The andequipment isrecognisedinthecarrying costofreplacingpartanitemproperty (iii) and value fair to classified asinvestment property. Anyremeasured gainorlossarisingonremeasurementisrecognisedinprofitloss. is it time which at complete, is development or construction until cost at property as stated and classified is property investment an as use future for developed or constructed being is that Property (ii) and equipment. property of item an amountofproperty and equipmentaredeterminedbyof comparingtheproceedsfromdisposalwithcarrying disposal on losses and Gains equipment. and property of items separate as for are they accounted lives, useful different having components major comprises equipment and property of item an Where which theassetswere locatedisalsoincludedinthecostofassets. normal of proportion production overheads. Where relevant, the costofdismantlingandremovingappropriate theitemsandrestoringsiteon an and labour direct materials, of cost the includes assets self-constructed of impairment losses.Costincludesexpenditures thataredirectlyattributable toacquisitionoftheasset. The cost andequipmentaremeasuredatcostlessaccumulateddepreciation accumulated Items ofproperty (i) (e) called translationreserve. arising onretranslationarerecogniseddirectlyasaseparatecomponentofequity differences exchange Foreign transactions. of dates the at ruling rates exchange foreign the to approximating reporting date. The incomeandexpenses offoreign operationsaretranslatedtoMalawi Kwacha atrates adjustments arisingonconsolidation,aretranslatedtoMalawi Kwacha atforeign exchange ratesruling at The assetsandliabilitiesofforeign operationswhich have different functionalcurrencies, includingfair value (ii) exchange ratesruling atthedatesfair value was determined. liabilities and denominated inforeign atfair currencies thatarestated value aretranslatedtoMalawi Kwachaassets atforeign Non-monetary transaction. the of date the at rate exchange the using translated are assetsandliabilitiesthataremeasuredintermsofhistoricalcostaforeigncomprehensive currency income. Non-monetary other in recognised are which instruments equity sale for available of retranslation the on arising differences for except loss, or profit the in recognised are translation on arising differences currency Foreign at thatdate. currencies atreportingdatearere-translatedtoMalawi Kwacha (functionalcurrency) attheexchange rateruling exchange assetsandliabilitiesdenominatedinforeign ratesruling atthedatesoftransactions.Monetary Transactions inforeign currencies aretranslatedtotherespective functionalcurrencies ofgroupentitiesatthe (i) (d) in included are insurance receivables andpayables,and andnotininsurancecontractprovisions. instruments financial are reinsurers and agents policyholders, from and to due Amounts Insurance receivables andpayables

Subsequent costs Reclassification to investment property Recognition andmeasurement equipment and Property Financial statements offoreign operations Foreign currency transactions F oreign currency currency oreign NCI A L ST A TEMENTS (CONTIN TEMENTS U ED) 45 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 46 For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES the lessorby way isrecognisedasanexpense ofpenalty intheperiodwhich terminationtakes place. When anoperatingleaseisterminatedbefore theleaseperiodhasexpired, any payment requiredtobemade basis over theperiodoflease. benefits ofownership. Payments made underoperatingleasesarerecognisedinprofitorlossonastraightline Leases ofassetsareclassifiedasoperatingleasesifthelessoreffectively alltherisksand substantially retains (iii) method (beforewhich tax), periodicrateofreturn. reflectsaconstant as unearnedfinanceincome.Lease incomeisrecognisedover thetermofleaseusingeffectiverecognised interest is receivable the of value present the and receivable gross the a as between difference The recognised receivable. is payments lease the of value present the lease, finance a to subject held are assets When lessor. the of liability the reduces which repayment capital the and period lease the over income against charged is which cost, finance the minimumleasepayments. Lease payments areseparatedusingtheeffective interestmethodtoidentifythe atthelowerleases. Financeleasesarecapitalised ofthefair value oftheleasedassetandpresentvalue of Leases allthebenefitsandrisksofownership, wheretheGroupassumessubstantially areclassifiedasfinance leases (i) (f) The residualvalue, usefullife andmethodofdepreciationarereviewed ateach reportingdate. Computerhardware Fixtures andfittings • Otherequipment • Motorvehicles • Leasehold landandbuildings • Freehold buildings • • The estimatedusefullives for current andcomparative periodsareasfollows: progress arenotdepreciated. andequipmentmajorcomponentsthatareaccountedforproperty separately. work-in- Landandcapital Depreciationisrecognisedinprofitorlossonastraight-linebasisover theestimatedusefullives ofitems (v) fromtherevaluationearnings. tax, toretained reserve amount equivalent totheadditional depreciationarisingfromrevaluations istransferred annually, netofdeferred except totheextent thatthey relatetorevaluation surplusespreviously transferred totherevaluation reserve. An istransferredportion ofthereserve earnings.Revaluation toretained decreasesarecharged totheprofitorloss Surpluses onrevaluations aretransferred torevaluation Onrealisationoftheasset,appropriate reserve. byeconomic conditionsdictate, independentvaluers. The basisofvaluation usediscurrent market value. does notdiffer materiallyfromthatwhich would bedeterminedusingfair values atthereportingdateas Revaluations andequipmentarecarried outwithsufficient ofproperty such regularity amount thatthecarrying (iv) (e) 3. significant a Operating lease Finance lease Depreciation recognised Revaluation Property andequipment(continued) ccounting policies(ontinued) NCI A L ST 3 years 10 years 3-10 years 5 years 40 years orover theleaseperiodiflessthan40years 40 years A TEMENTS ( TEMENTS contin u ed ) For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES less any impairmentlosses. to-maturity. Held-to-maturity investments aremeasuredatamortised costusingtheeffective interestmethod, If theGrouphaspositivetoholddebt securitiestomaturity, intentandability thenthey areclassifiedasheld- Held-to-maturity investments the Group’s obligations specifiedinthecontractexpire oraredischarged orcancelled. i.e., thedatethatGroupcommitsitselftopurchase orselltheasset.Financialliabilitiesarederecognisedif all substantially or risks andrewardscontrol oftheasset.Regular purchases andsalesoffinancialassetsareaccountedfor attradedate, retaining without party another to asset financial the transfers Group the if assets or expire financial the from flows cash the to rights contractual Group’s the if derecognised are assets Financial A financial instrument to the is contractualrecognised if the Group becomes a party provisions of the instrument. initial to recognition, non-derivative financialinstruments aremeasuredasdescribedbelow.Subsequent below. described as except costs, transaction attributable directly any loss, or profit through Non-derivative financialinstruments arerecognisedinitiallyatfair value plus,for instruments notatfair value receivables, cashandequivalents, loansandborrowings, andtradeotherpayables. Non-derivative financialinstruments compriseinvestments anddebtsecurities,tradeother inequity Non-derivative financialinstruments financial instruments (h) Computersoftware • The estimatedusefullives for current andcomparative periodsareasfollows: not yet available for usearetestedfor impairmentonanannualbasis. amountexceedsimpairment lossisrecognisedifthecarrying itsrecoverable assetsthatare amount.Intangible any is there indication ofimpairment.Ifany such indicationexistswhether thentheasset’s recoverable amountisestimated. determine An to date reporting each at reviewed is assets intangible of amount carrying The from thedateitisavailable for use. Amortisation isrecognisedinprofitorlossonastraightlinebasisover theestimatedusefullife ofthesoftware, the specificassettowhich itrelates. All other expenditure isexpensed asitisincurred. Subsequent expenditure onsoftware onlyifitincreasesthefuture iscapitalised economicbenefitsembodiedin amortisation andimpairmentlosses. the developing software,to andareamortisedover itsusefullife. Internallydeveloped softwareattributable atcostlessaccumulated isstated directly costs all includes software developed internally of cost capitalised The therearesufficient resourcestocompletedevelopment andtousetheasset. itistechnically andcommerciallyfeasible; and, • theGroupcanreliablymeasurecoststocompletedevelopment; • • • Expenditure oninternallydeveloped software isrecognisedasanassetwhen: Software intangibleassets acquiredbyatcostlessaccumulatedamortisationandimpairmentlosses. theGroupisstated (g) software inamannerthatwillgeneratefuture economic benefits; tocompletethedevelopmentthe Groupisabletodemonstrateitsintentionandability andusethe NCI A L ST 4-8 years A TEMENTS (CONTIN TEMENTS

U

ED) 47 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 48 For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES repurchase the asset (or a similar asset) at a fixed price on a future date, the arrangement is accounted for as a as for accounted deposit, andtheunderlyingasset continuestoberecognisedintheGroup’s is financialstatements. arrangement the date, future a on price fixed a at asset) similar a (or asset the repurchase entersintoa When theGroupsellsafinancial assetandsimultaneously “repo” or “stock lending”agreementto Customer depositsaccountsaretheGroup’s sourcesofdebtfunding. accounts. deposits Customer depositsaccountscomprisecurrent andsavings accounts,foreign currency denominated,andterm Customers depositsaccounts Financial guaranteesareincludedwithinotherliabilities. and thepresentvalue ofany expected payment (when payment undertheguarantee hasbecomeprobable). life oftheguarantee. The issubsequently measuredatthehigherofthisamortisedamount guaranteeliability Financial guaranteeliabilitiesareinitiallyrecognisedattheir fair value andtheinitialvalue isamortisedover the instrument. debt a lossitincursbecausespecifieddebtorfails tomake payment whendueinaccordancewiththetermsofa Financial guaranteesarecontractsthatrequiretheGrouptomake specificpayments toreimbursetheholderfor Financial guarantees method. attributabledirectly transactioncosts.Subsequent measurementisatamortisedcostusingtheeffective plus interestrate settlement on be to amount the being value fair at measured initially are payables other Tradeand T or loss,themovement inthefair value isaccountedfor inprofitorlossasinterestincome. Where theGrouphaselectedtoclassifyandaccountfor any loanasafinancialassetatfair value throughprofit origination fees receivedtothevalue arecapitalised oftheloanandamortisedthroughinterestincome. at amortisedcostusingtheeffective interestmethodlessimpairmentlosses.Origination transactioncostsand that arenotquotedinanactive market andincludepurchased loans.Loans andreceivables areaccountedfor Loans andadvances classifiedasloansandreceivables arefinancialassetswithfixed ordeterminablepayments value fair at assets through profitorloss. financial or receivables and loans as recognition initial on classified are advances and Loans Loans andadvances fair value throughprofitorlossaremeasuredatfair value, andchanges thereinarerecognisedinprofitorloss. recognition, attributable transactioncostsarerecognisedinprofitorlosswhenincurred. Financialinstruments at Group the if loss manages suchor investments andmakes purchaseprofit andsaledecisionsbasedontheirfair value. Uponinitial through value fair at designated are instruments Financial recognition. initial upon An instrument isclassifiedasatfair value throughprofitorlossifitisheldfor tradingorisdesignatedassuch Financial assetsatfair value through profit orloss comprehensive incomeistransferred toprofitorloss. are recogniseddirectlyinequity. items When aninvestment isderecognised,thecumulative gainorlossinother monetary available-for-sale on losses and gains exchange foreign and losses impairment than other financial assets.Subsequenttoinitialrecognition,they aremeasuredatfair value and changesavailable-for-sale therein, as classified are securities debt certain and securities equity in investments Group’s The A financialinstruments (continued) (h) 3. rade andotherpayables vailable-for-sale financialassets significant a ccounting policies(ontinued) NCI A L ST A TEMENTS ( TEMENTS contin u ed ) For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less less business, of course the estimatedcostofcompletion andsellingexpenses. ordinary the in price selling estimated the is value realisable Net condition. and location first outprincipleandinclude expenditure incurred inacquiringtheinventories andbringthemtotheirexisting inventories Consumable stock ismeasuredatthelower ofcostandnetrealisable value. Costsarebasedon thefirst-in- (j) uses fair value modelfor the assetrecognition. as for meetthedefinition ofinvestment andthelesseeinvestment would property accounted iftheproperty otherwise property and classified is lease operating an under lessee a by held is that interest property A Any lossisrecognisedinprofitorimmediately. is value if itisagain.Upondisposaloftheitem,gaintransferredrecognised directlyinequity fair earnings. toretained its and item the of amount carrying the between transfer of date the at arising differences any andequipmentbecomesaninvestmentWhen anitemofproperty following property achange initsuse, isaccountedforproperty asdescribedinaccountingpolicynote(o). Any gainorlossarisingfromachange infair value isrecognisedinprofitorloss.Rentalincomefrominvestment wherein thepartieshadeach actedknowledgeably, prudently andwithoutcompulsion. of valuation betweenawillingbuyer andawillingsellerinanarmslengthtransactionafter propermarketing is basedonmarket values, beingtheestimatedamountfor which couldbeexchanged aproperty onthedate investment property Investment ismeasuredatfair property value asdeterminedby anindependentregisteredvaluer. Fair value (i) less any impairmentlosses. Other non-derivative financialinstruments aremeasuredatamortisedcostusingtheeffective interestmethod, Other shareholdersontheregisterofdatepayment.by thenumberofordinary dividendsrecognisedduring theperioddivided The calculationofdividendpershareisbasedontheordinary (iii) shareholders. intheperiodwhich sharesarerecognisedinequity theyDividends onordinary areapproved by theCompany’s (ii) shares ordinary of are recognisedasadeductionfromequity,issue netofanyeffects. tax the to attributable directly costs Incremental equity. as classified are shares Ordinary (i) Share capitalanddividends in profitorloss. The Groupcarries customerdepositaccountsatfair value, withfair value changes recognisedimmediately carry the liabilitiesatfairto value throughprofitorloss. chooses Group the where except method, interest effective the using cost amortised their at subsequently measured and costs, transaction plus value fair at measured initially are liabilities deposits Customer instrument. the of terms contractual the of substance The instruments instruments Groupclassifiescapital asfinancialliabilitiesorequity inaccordancewiththe Dividend pershare Dividends onordinary shares Ordinary shares NCI A L ST A TEMENTS (CONTIN TEMENTS U ED)

49 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 50 For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES loss hadbeenrecognised. amount thatwould have beendetermined,netofaccumulated depreciationoramortisation,ifnoimpairment An impairmentlossisreversed onlytotheextent that theasset’s amountdoes notexceed carrying thecarrying loss a that has decreasedornolongerexists. indications any for date reporting each at assessed are periods prior in recognised losses Impairment loss isrecognisediftheestimatedrecoverable amount. amountislessthanthecarrying any is there indication ofimpairment.Ifindicationsarise,thentheasset recoverable amountisestimated. whether An impairment determine to date reporting each at reviewed are assets non-financial of amounts Carrying Non financialassets the reversalsecurities, isrecognisedinothercomprehensive income. equity are that assets financial available-for-sale For loss. and profit in recognised is reversal the For financialassetsmeasuredatamortisedcostandavailable for salefinancialassets thataredebtsecurities, impairment losswas recognised. An impairmentlossisreversed ifthereversal canberelatedobjectively toanevent occurring after the Reversal ofimpairment The amountsrequiredtofundtheassessedlevel ofprovision for creditlossesarecharged toprofitorloss. Loans and Advances arewritten off ofrecovering oncetheprobability becomesremote. exposure. advances and and takeaccountofpastlossexperience, economicconditionsandchangesloans of inthenature andlevel ofrisk evaluations specific on based are debts, doubtful identified covering provisions, Specific provisions for creditlosses. Loans and Advances offinancialpositionafter inthestatement andotherassetsarestated thedeductionof Loans andadvances financial assetrecognisedpreviouslyistransferred inequity toprofit or loss. All impairmentlossesarerecognisedinprofitorloss. Any cumulative lossinrespectofanavailable-for-sale assets areassessedcollectively ingroupsthatsharesimilarcreditriskcharacteristics. Individually significantfinancialassetsaretestedfor impairmentonanindividualbasis. The remainingfinancial by reference toitscurrent fair value. calculated is asset financial available-for-sale an of respect in loss impairment An original rate. the at interest effective discounted flows cash future estimated the of value present the and amount, carrying difference its the as between calculated is cost amortised at measured asset financial a of respect in loss impairment An more or one that events have hadanegative effectindicates ontheestimatedfuture cashflowsevidence ofthatasset. objective the if impaired be to considered is asset financial A impaired. is A financialassetisassessedatthereportingdatetodeterminewhetherthereany objective evidence thatit Financial assets impairment (l) flows, cashandequivalents arepresentednetofbankoverdrafts. Cash andcashequivalents comprise cashbalancesandcalldeposits.For ofcash thepurpose ofthestatement (k) 3. significant a Cash andcashequivalents ccounting policies(ontinued) NCI A L ST A TEMENTS ( TEMENTS contin u ed ) For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES income. Dividends received onpreference share investments formtrading. partoftheGroup’s for lending activitiesandareincludedininterest held instruments financial excluding value, fair at held instruments financial bearing based ontheoriginaleffective interest rate.Netincomeincludesfair value adjustments oninterest- Where financialassetshave beenimpaired,interestincomecontinuestoberecognisedontheimpairedvalue through value fair at profit orloss)andamortisedasinterestincomeover thelife oftheasset. instruments financial (excluding instruments financial of amount carrying the to capitalised origination fees receivedoffinancialposition,are as aresultofbringingmargin-yieldingassetsonthestatement transactioncostsincurred andfinancial Directincremental amountonthefinancialstatements. instrument tothecarrying the of life expected the through receipts or payments cash future estimated discounts exactly that using theeffective interestmethod.Intermsoftheeffective interest method,isrecognisedatarate Interest incomeisrecognisedintheprofitorlossfor allinterest-bearinginstruments onanaccrual basis (i) revenue recognition (o) and arereducedtotheextentbenefitswillberealised. thatitisnolongerprobabletherelatedtax available be will profits against which difference thetemporary canbeutilised.Deferredtaxable assetsarereviewed tax ateachfuture reportingdate that probable is it that extent the to only recognised is asset tax deferred A relates it that to itemspreviously chargedextent orcrediteddirectlytoequity.the to except loss, or profit the in recognised is rates tax in changes any of tax deferred on relates it that extent to atransactionthatisrecogniseddirectlyinequity, the orabusinesscombinationthatisanacquisition. to except The effectloss or profit the to recognised is tax Deferred date. reporting the at enacted realisation orsettlementratesenactedsubstantively amountofassetsandliabilitiesusingtax ofthecarrying reverse intheforeseeable future. The amountofdeferred provided tax isbasedontheexpected mannerof profit, anddifferences relatingtoinvestments insubsidiariestotheextent thatitisprobablethey willnot assets of or liabilitiesinatransactionthatisnotbusinesscombinationandaffectsrecognition neithertheaccountingortaxable initial the differences; temporary following the for recognised not is tax taxation Deferred for used purposes. amounts the and purposes reporting financial for liabilities and assets of amounts carrying Deferred method,providingdifferences isrecognisedusingthebalance sheetliability for tax temporary between Deferred tax substantively enactedatthereportingdate,andanypayable adjustmenttotax inrespectofprevious years. istheexpectedpayableCurrent tax incomefor onthetaxable year, ratesenactedor usingtax Current tax income. extent thatitrelatestoitems recogniseddirectlytoequity, inwhich caseitisrecognisedinothercomprehensive expenseIncome tax comprisescurrent anddeferred isrecognisedinprofitorlossexcept Incometax incometax tax. tothe (n) basis. redemption value beingrecognised inprofitorlossover theperiodofborrowings onaneffective interest initial to recognition, interestbearingborrowings atamortisedcostwithanySubsequent arestated difference betweencost andcosts. transaction attributable less value, fair at initially measured are and borrowings the Interest bearingborrowings tothecontractual arerecognisedwhentheGroupbecomesaparty provisions of interest bearing borrowings (m) Interest income NCI A L ST A TEMENTS (CONTIN TEMENTS U ED) 51 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 52 For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES the weighted averagesharesfor theeffects numberofordinary shares. ofalldilutive potentialordinary Diluted earningspershareis determinedby shareholders and adjustingthe profitorlossattributable toordinary accordingly. issue after orsubdivisionandthecorresponding figuresfor thecapitalisation allearlierperiodsareadjusted shares have beenissuedby way orsubdivision, theprofitisapportionedover ofcapitalisation equity thesharesin new year. the Where during outstanding shares ordinary of number average weighted the by Company earnings pershare Basic earningspershareiscalculatedby shareholders ofthe dividingtheprofitorlossattributable toordinary (r) the payroll andarecharged againstprofits asincurred. pension costisrecognisedintheperioditincurred. Contributionsto theFundsThe employees. of arebased onapercentage its of behalf on schemes pension contributions defined of number a to contributes Group The a into andwillhaveseparate entity nolegalorconstructive obligationtopaycontribution furtheramounts. fixed pays Group the which under plan benefit post-employment is plan contribution defined A Defined contribution plans employee benefits (q) the risksspecifictoliability. The unwinding ofthediscountisrecognisedasafinancecost. flows cash ratethatreflectscurrent marketat apre-tax assessmentsofthetimevaluefuture ofmoney and,whereappropriate, expected the discounting by determined are provisions material, is effect the If obligation. the obligation that canbeestimatedreliably,constructive anditisprobablethatanoutflow ofeconomicbenefitswillberequiredtosettleor legal present a has Group the event, past a of result a as if, recognised is provision A (p) The accountingpoliciesfor therecognitionofrevenue frominsurancecontractsaredisclosedinnote3I. (v) of thelease. of thelease.Leaseincomeover incentivesrental grantedarerecognisedasanintegralpartofthetotal term Rental incomefrominvestment isrecognisedintheprofitorlossonastraight-linebasisover property theterm (iv) receivables. on Treasury billistakentoincomeonanamortisedcost;ittreatedasaccrued interestincludedinother shares. The financialinstruments includelocalregisteredstocks, billsandfixed deposits. treasury The discount listed andunlistedcompaniesincreaseinfair value ofinvestment and investments property inlisted Investment incomecomprisesofinterestonmoney market financialinstruments anddividendsfrom (iii) significant act.Fees charged aloanarerecognisedasrevenueisprovided. for servicing astheservice commission areprovided oronexecutionare generallyrecognisedonanincurred basiswhentherelatedservices and ofa Fees entity. similar a in dividends cash to compare they that extent the to received recognised are dividends as dividends Scrip established. is receipt to right which in period the in ed recognis are Dividends revaluation ofinvestment bankingassets. and relatedtransactions,netrevenue fromexchange andsecurities tradingandnetgainsontherealisationor Non-interest revenue includesdividendsfrominvestments, fees insurance andcommissionfrombanking, (ii) revenue recognition (continued) (o) 3. significant a Provisions Insurance Premiums Rental income Investment income Non-interest revenue ccounting policies(ontinued) NCI A L ST A TEMENTS ( TEMENTS contin u ed ) For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES • • • • financial statements: the year andhave ended31December2009, for notbeenappliedinpreparingtheseconsolidatedandseparate effective yet not are interpretations and standards to amendments standards, newstandards andinterpretationsnew of notyet adopted number A (t) attributable totheacquisition,issueordisposalafinancialliability. premiums that areanintegralpartoftheeffectiveor interestrate. discounts and Transaction coststhataredirectlycosts, costsareincremental transaction fees, all includes rate interest effective the of calculation The revised subsequently. financial liability. The effective andisnot oninitialrecognitionofthefinancialliability interestrateisestablished the expected life (or, ofthefinancialliability amountofthe whereappropriate,ashorterperiod)tothecarrying method. The effective interestrateisthethatexactly discountstheestimatedfuture cashpayments through financecosts Finance expense comprising ofinterestexpense isrecognisedintheprofitorlossusingeffective interest (s) on orafter 2013. 1January hasnotyetimpact onthefinancialstatements beenestimated. Effective dateis, Annual periodsbeginning income. comprehensive The willbeappliedretrospectively standard (subjecttothestandard’sother transitionalprovisions).in The adjustments value fair of recognition the and derivatives embedded as such areas, The alsodiffers standard fromexisting requirementsfor accounting for financialassets in various other be measuredatamortisedcostifithasbasicloanfeatures andismanagedonacontractual yieldbasis. measurement categoriesfor financialassets:amortisedcostandfair value. A financialassetmay only ontherecognitionand measurementoffinancialinstruments.standard The definestwo standard IFRS 9FinancialInstruments; Thisforms standard partoftheIASB’s projecttoreplacetheexisting date Effective is, Annual periodsbeginningonorafter 2011.disclosures. 1January party related additional in result may and retrospectively applied be will standard related partiesandincludesdisclosurerequirementsfor commitmentsbetweenrelatedparties. The revised IAS 24(revised) Related Party Disclosures; anamendeddefinitionof therevisedcontains standard Annual periodsbeginningonorafter 1July 2009. be will applied prospectively2010. totransactionswithnon-controllinginterestsfrom1January Effective requirements loss. dateis,These or profit in recognised is loss or gain a and value, fair to re-measured is transactions. The amendmentsalsospecifythatwhencontrolislost,any remaininginterestintheentity be accounted forto withinequity. control of This isconsistentwiththegroup’sloss a currentin accountingpolicyfor such result not do that subsidiary a in interest ownership parent’s a in changes IAS 27(amendments)Consolidated andSeparate FinancialStatements;The amendmentsrequire date is, Annual periodsbeginningonorafter 1July 2009. be afunctionofthenumberandvalue ofany businesscombinationstransactedfromthisdate.Effective will statements 2010. financial the on January effect 1 The from combinations business all to prospectively acquisition-related costswillberecognisedinprofitorlossimmediately. The revised IFRS 3willbeapplied the at or non-controlling interest’svalue fair proportionateshareofthefair value oftheacquiree’sat either netidentifiableassets. All acquiree the in interest non-controlling any measure to basis acquisition as debtandsubsequentlyre-measuredthroughprofitorloss. There isachoice, onanacquisition-by- a businessaretoberecordedatfair value attheacquisitiondate,withcontingentpayments classified method tobusinesscombinations,withsomesignificantchanges. For example, allpayments topurchase IFRS 3(revised) Business Combinations;therevisedcontinuestoapplyacquisition standard NCI A L ST A TEMENTS (CONTIN TEMENTS

U

ED) 53 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 54 For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES • • • • • • newstandards andinterpretations notyet adopted (Continued) (t) 3. significant a -  -  Amended IAS 39FinancialInstruments: Recognition andMeasurement–The amendments: revision. if IFRSisadoptedearly. 3(2008) The Groupiscurrently inprocessofevaluating thepotentialeffect ofthis amendments applyprospectively for periodbeginningonorafter I July Earlyapplicationisrequired 2009. value assetsacquiredinabusinesscombination for ofintangible which noactive market exists. These amendments alsodescribevaluation techniques commonlyusedby entitieswhenmeasuringthefair assetswithsimilarusefullives intangible may berecognisedasasingleasset. complementary The is liability or asset recognised separatelyfromgoodwilltogetherwiththerelated item;and identifiable contract, related a with together only separable is that asset intangible an Amended IAS 38Intangible potential effect ofthisrevision. for periodsbeginningonorafter 2010. 1January Theapply Groupiscurrently intheprocessofevaluating the life. amendments The economic indefinite an has normally land that fact the of 17,account taking shoulddeterminetheclassificationofeachelements, anentity elementbasedonparagraphs7–13 ofIAS Amended IAS 17 Leases–The amendmentsclarifythatwhenaleaseincludesthelandandbuilding currently inthe processofevaluating thepotentialeffect ofthisrevision. is Group 2009. The July I after or on beginning period for effective 2. is IFRS This under for be accounted not will venture joint a of formation the upon business a of contribution the and control common that they maynotwithstanding beoutsidethescopeofIFRS 3. 2, IFRS of Therefore, businesscombinationsamongstentitiesunder scope the outside are (2008) 3 IFRS in defined as combinations business that Amended IFRS 2Share-based Payments clarify andRevisedIFRS 3BusinessCombinations(2008) potential effect ofthisrevision. requirements inparagraph45ofIAS 27(2008). The Groupiscurrently intheprocessofevaluating the The amendmentsapplyprospectivelyfirstappliedIFRS fromthedateentity 5,subjecttotransition July 1 before thenitalsoappliesamendedIAS atthesametime. 2009, 27(2008) beginning periods to amendments 5 IFRS the applies entity an If operation. discontinued a of disclosures formeetsthedefinition discontinuedoperationsarerequiredby theparentwhenasubsidiary this met; and are aninterest(otherthancontrol)inthesubsidiary; retaining 5 applies regardlessoftheentity IFRS of 8 to 6 paragraphs in criteria sale for held the when sale for held as assets liabilities and subsidiary’s that of all classify would it then subsidiary, a sell to plan a to committed is entity an if specify that: Amended IFRS 5Non-current IFRIC 17 Distributions ofNon-cash with prospective application. The Group is currently in the process of evaluating the potential effect of this revision this of effect potential the evaluating of process the in currently is Group The application. prospective with 2009 July I after or on beginning period for effective is owners. This to assets non-cash of distributions for thedividendpayable isrecognisedinprofitorloss. The scopeofIFRS 5was expanded toinclude are measuredatthefair value oftheassetstobedistributed. Any gainorlossonsettlement oftheliability non-cash assetstoownersasowners. acting intheircapacity DistributionswithinthescopeofIFRIC17 any requiredapprovals andtocompletethetransaction; and a in result toobtain business combinationatafuture acquisitiondatewithinareasonable periodnormallynecessary will that acquiree an sell or buy to shareholder selling a and acquirer an between options, clarify thatthescopeexemption inIAS contracts,i.e.,not 39paragraph2(g)isrestricted toforward derivative thatneedstobe separated; provide additionalguidanceondeterminingwhetherloan prepayment penaltiesresult inanembedded ccounting policies(Continued) Assets clarify that: The amendments Assets Heldfor SaleandDiscontinued Operations.amendments The NCI Assets toOwners provides guidanceinrespectofdistributions A L ST A TEMENTS ( TEMENTS contin u ed ) For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES • • • • • • • •

IFRIC 16Hedges ofaNetInvestment inaF The Groupiscurrently intheprocessofevaluating thepotentialeffect ofthisrevision. venture formations andcommoncontroltransactionsremainoutsidethescopeofIFRIC9. embedded derivatives incontractsacquiredbusinesscombinationsasdefinedIFRSjoint 3(2008), IFRIC 9ReassessmentofEmbeddedDerivatives incorporatesamendmenttothescopesothat financial statements. the on impact no have will 2009. This July I after or on beginning period for effective is This content. technical to changes no but structure improved an with standard this of version revised a issued IASB The Revised IFRS 1First-time process ofevaluating thepotentialeffect ofthisrevision. The amendmentsapplyfor periodsbeginningonorafter 2010. 1January The Groupiscurrently inthe -  These amendmentsapplyprospectively for periodbeginningonorafter IJuly 2009. that prevented ahedginginstrument frombeingheldby aforeign operationthatitselfisbeing hedged. Amended IAS 36Impairment of The Groupiscurrently intheprocessofevaluating thepotentialeffect of thisrevision. apply for periodsbeginningonorafter 2010. 1 January in therecognitionofanassetcanbeclassifiedasacash flow frominvesting activities. The amendments Amended IAS 7Statement ofCashFlows –The amendmentsclarifythatonlyexpenditures thatresult The Groupiscurrently intheprocessofevaluating thepotentialeffect ofthisrevision. instruments.equity The amendmentsapplyfor periodsbeginningonorafter 2010. 1January that could,attheoptionofholderinstrument, resultinsettlement by oftheliability issue of componentofa convertibleof theliability instrument ascurrent ornon-current isnotaffected by terms Amended IAS 1Presentation ofFinancialStatements –The amendmentsclarifythattheclassification The Groupiscurrently intheprocessofevaluating thepotentialeffect ofthisrevision. The amendmentsapplyfor periodsbeginningonorafter 2010. 1January assetsisrequiredonlyifsuchtotal information isregularlyreportedto thechief operatingdecisionmaker. Amended IFRS 8OperatingSegment –The amendmentsclarifythatsegmentinformation withrespectto The Groupiscurrently intheprocessofevaluating thepotentialeffect ofthisrevision. 2010.January 1 after or on beginning periods for prospectively apply 5. amendments IFRS The in specified are operations required disclosuresfor non-current assets (ordisposalgroups)classifiedasheldfor saleordiscontinued IFRS 5Non-current The Groupiscurrently intheprocessofevaluating thepotentialeffect ofthisrevision. criteria ofIFRS 8. The amendmentsapplyprospectively for periodsbeginning onorafter 2010. 1January should beallocatedistheoperating segmentlevel asdefinedinIFRS 8before applying theaggregation The Groupis currently inthe processofevaluating the potential effect ofthisrevision. amendments applyprospectively toallunexpired contractsfromthedateofadoption. income toprofitorlossduringtheperiodthathedgedforecast cashflows impactprofitorloss. The clarify thatthegainsorlossesonacashflow hedgeshouldbereclassifiedfromothercomprehensive Assets Heldfor SaleandDiscontinuedOperations- The amendmentsclarifythatthe A doption ofInternational FinancialReporting Standards (2008) –The amendments clarify that the largest unit to which goodwill goodwill which to unit largest the that clarify amendments –The Assets NCI A oreign Operation- The amendmentsremove therestriction L ST A TEMENTS (CONTIN TEMENTS U ED) 55 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 56 For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES notes specifictothatassetor liability. When applicable,furtherinformation abouttheassumption madeindeterminingfair values isdisclosedinthe disclosure purposesbasedonthefollowing methods. financial andnon-financialassetsliabilities.Fair values have beendeterminedfor measurementand/or A numberoftheGroup’s accountingpoliciesanddisclosuresrequirethedeterminationoffair value, for both (u) Determination offair values • • • • − − • newstandards andinterpretations notyet adopted (continued) (t) 3. significant a The Groupiscurrently intheprocessofevaluating thepotentialeffect ofthisrevision. expense. The amendmentsapplyfor periodsbeginningonorafter 1July 2011. beingrecognisedasanassetratherthan in prepaymentscircumstances ofcontributionsincertain the treatmentofprepayments wherethereisaminimumfundingrequirement. These amendmentsresult Requirements andtheirInteraction. These amendmentsremove unintendedconsequencesarisingfrom Funding Minimum Assets, Benefit Defined a Amendments toon IFRIC14IAS 19– Limit The The Groupiscurrently intheprocessofevaluating thepotentialeffect ofthisrevision. after 1July 2010. guidance ontheaccountingfor debtforswaps. equity The amendmentsapplyfor periodsbeginningonor IFRIprovides C 19interpretation ExtinguishingFinancialLiabilitieswithquityInstruments This The Groupiscurrently intheprocessofevaluating thepotentialeffect ofthisrevision. equity instruments. non-derivative own The amendmentsapplyforits periodsbeginningonorafter of 1February 2010.class same the of owners existing its of all to rata pro warrants or options a fixed amountofany instruments currency tobeclassifiedasequity providedoffers theentity therights, will allow rights,optionsorwarrants toacquireafixed numberoftheentity’s owninstruments equity for Amended IAS 32FinancialInstruments: Presentation –ClassificationofRightsIssues–The amendment Retrospective application issubjecttothetransitionalrequirementsinIFRS 2. payment. the settle to obligation no has entity receiving the and entity) (settling transaction individual financialstatements. This principleeven orshareholdersettles appliesifanothergroupentity the settled oracash-settled share-basedpayment transaction toaccountfor thetransaction initsseparateor ineitheranequity- (receivingentity) The receivinggoodsorservices amendmentwillrequireanentity Amended IFRS 2Share-based Payment –GroupCash-settled Share¬basedPayment Transactions. The Groupiscurrently intheprocessofevaluating thepotentialeffect ofthisrevision. The amendmentsapplyfor periodsbeginningonorafter 2010. 1January the dateoftransitionfor oil and gasassets. tousetheirprevious amountsasdeemedcost atallow GAAP entitiesintheoilandgas industry carrying assessment asthatrequiredby IFRIC4was madeunderprevious GAAP; and aleaseifthe samepermit entitiestonotreassessthedeterminationofwhetheranarrangement contains IFRSs that will: of adopters first-time for exemptions optional additional provide Adopters First-time for Exemptions Amended IFRS 1First-time ccounting policies(ontinued) A – Additional doption ofInternational FinancialReporting StandardsAdditional – NCI A L ST A TEMENTS ( TEMENTS contin u ed ) For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES e) d) c) b) a) Key assumptionsused: are flows reviewed regularlytoreduceanycash differencesfuture betweenlossestimatesandactualof lossexperience. timing and amount the both estimating for used assumptions and methodology The and objective evidence ofimpairmentsimilartothoseintheportfolio whenscheduling itsfuture cashflows. Management usesestimatesbasedonhistoricallossexperience for assetswithcreditriskcharacteristics borrowers inagroup,ornationallocaleconomicconditionsthatcorrelate withdefaults onassetsinthegroup. indicatingthattherehasbeenanadversemay data change includeobservable inthepayment status of portfolio ofloansbefore thedecreasecanbeidentifiedwithanindividualloaninthatportfolio. This evidence indicatingthatthereisameasurabledecreaseintheestimatedfutureany data cashflows observable froma an impairment lossshouldberecordedintheprofitorloss,Groupmakeswhether judgmentastowhetherthereis determining In basis. continuous on impairment assess to portfolio loan its reviews Group The (iv) principal andinterestcashflow based,discountedatthemarket ofinterestatthereportingdate. Fair value, which isdeterminedfor disclosurepurposes,iscalculatedbasedonthepresentvalue offuture (iii) without compulsion. arm’s an in length transactionafterseller propermarketing whereinthepartieshadeach actedknowledgeably,willing a prudently andand buyer willing a between valuation the of date the on exchanged be could property properties everyyear. The fair values arebasedonmarket values, beingtheestimatedamountfor which a beingvalued, ofproperty valuesrecent experiencetheGroup’s inthelocation andcategory investment An external, independentvaluation Company, having appropriaterecognisedprofessional qualificationsand (ii) of equipment,fixtures andfittings isbasedon thequotedmarket pricesfor similaritems. items of value market The compulsion. without and prudently knowledgeably, acted each had parties the wherein date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing values. The market valueistheestimatedamountfor ofproperty which couldbeexchanged aproperty onthe The fair valueandequipmentrecognisedasaresultofbusinesscombinationisbasedonmarket ofproperty (i)

which they areexpected. Cash flowsrealisationhave arisingfromsecurity beenassumedtoariseattheendofcalendaryear in repayments and areerratic orunpredictable; No cashflows areassumedtoarisewherethereisnorepaymentand agreementandnosecurity Unsupported guaranteesareassumedtoresultinnilcashflows; futuretotal estimatedcashflows areassumedtobenil; inplaceandcashflowsWhere thereisanagreementbutnosecurity inthesubsequentyears aredoubtful, assumed toariseattheendofperiod; Cash flows arisingfromrepayment agreementareaggregatedover yearlyof12 intervals monthsand Impairment lossesonloansandadvances liabilities financial Non-derivative Investment property Property andequipment NCI A L ST A TEMENTS (CONTIN TEMENTS U ED) 57 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 58 For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES In presenting information on the basis of geographical segments, segment revenue is based on the geographical geographical the location ofcustomers.Segmentassetsarebasedonthegeographicalassets. on based is revenue segment segments, geographical of basis the on information presenting In Geographical segments and Pension, Information Insurance Life Technology,Holding, Investment Asset ManagementandBanking segmentsareonlyoperatedinMalawi. Uganda. and Zambia, Tanzania Malawi, in operate segment Insurance General ------The Groupcomprisesthefollowing mainbusinesssegments: Business segments expected tobeusedfor morethanoneyear. expenditureSegment capital costincurred duringtheyear isthetotal toacquiresegmentassetsthatare interest-bearing loans,borrowings andexpenses, andcorporateassetsexpenses. be allocatedonareasonablebasis.Unallocateditemscomprisemainlyincome-earningassetsandrevenue, Segment results,assetsandliabilitiesincludeitemsdirectlyattributable toasegmentaswell asthosethatcan Inter-segment pricingisdeterminedonanarmslengthbasis. (geographical segment)which issubjecttorisksandrewards thataredifferent fromthoseofothersegments. products withinaparticulareconomicenvironment (businesssegment)orinproviding productsorservices, or services related providing in either engaged is that Group the of component distinguishable a is segment segmentalreporting A (v) 3. s Information Technology Asset Management Investment Holding Banking business General Insurancebusiness Life InsuranceandPension business i g nifi c ant a ant cc ountin NCI g

p A oli L ST c ies ( ies A TEMENTS ( TEMENTS c ontinue d ) contin u ed ) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES 3. significant accounting policies (Continued) (v) segmental reporting (continued)

Business segments

Life Insurance and General Banking Investment Asset Information Pension business Insurance business business Holding Management Technology business Eliminations Total 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008

Total revenue 4,777,531 3,632,301 7,008,127 3,819,467 5,178,865 3,937,318 826,344 1,063,289 63,971 - 142,771 122,759 (1,216,834) (1,338,869)16,780,775 11,236,265 Profit before tax 551,766 739,444 733,617 824,206 1,207,142 1,124,074 1,249,803 585,562 16,792 - 29,958 23,044 (551,554) (705,540) 3,237,525 2,590,790 Profit after tax 502,782 710,520 482,569 644,688 810,065 778,727 1,029,824 553,786 11,713 - 18,387 19,309 (551,554) (705,540) 2,306,787 2,001,490 NCI

Other information A Segment assets 19,590,413 16,701,999 8,111,465 7,412,223 29,202,313 20,420,122 2,576,905 1,788,160 54,840 - 110,811 91,343 (2,299,766) (2,152,122)57,763,668 44,314,417 L ST Segment liabilities 17,967,473 15,384,840 5,828,780 5,487,405 26,906,772 18,578,264 833,371 613,471 12,046 - 38,467 39,460 (500,196) (1,232,756)50,397,121 38,902.270 Capital expenditure 602,511 471,182 136,873 44,145 679,580 425,831 2,961 30,727 26,686 - 5,857 9,311 - - 1,454,468 981,196 A

Segment cash flows (CONTIN TEMENTS From operating activities 825,930 831,156 131,291 286,504 1,960,125 1,797,109 (103,008) 46,547 15,362 - 14,798 37,624 13,025 - 2,831,473 2,998,940 From investing activities (494,220) (511,433) (47,735) (93,895) (729,445) (433,221) 542,983 321,469 (23,542) - (2,835) (6,317) (551,094) (757,671) (1,305,888) (1,481,068) From financing activities (200,000) (457,000) (235,683) (78,539) (277,448) (278,675) (516,878) (336,334) 31,081 - - - (650,221) 970,073 (548,707) (180,475) U ED) 59 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 60 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES 3. Significant accounting policies (Continued) (v) segmental reporting (continued)

Geographical segments

Malawi Zambia Tanzania Uganda Eliminated Total 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008

Total Revenue 14,293,455 9,084,659 2,211,277 2,167,315 1,275,134 1,098,900 217,744 224,259 (1,216,834) (1,338,869) 16,780,775 11,236,265 Profit before tax 3,439,308 2,974,623 269,282 238,570 71,769 74,615 8,721 4,522 (551,554) (705,540) 3,237,525 2,590,790 Profit after tax 2,659,456 2,466,909 145,378 150,434 45,971 54,868 7,536 34,819 (551,554) (705,540) 2,306,787 2,001,490

Other information NCI Segment assets 56,940,229 43,564,428 1,613,195 1,661,574 1,232,713 1,008,102 277,297 232,434 (2,299,766) (2,152,121) 57,763,668 44,314,417

Segment liabilities 48,631,134 35,934,620 1,230,575 1,365,498 955,183 817,868 130,424 75,905 (550,196) 708,379 50,397,121 38,902,270 A

Capital expenditure 1,362,615 946,664 81,330 28,094 3,004 2,949 7,520 3,489 - - 1,454,468 981,196 L ST

Segment cash flows Cash flows from operating activities 2,451,661 2,919,989 351,211 132,156 38,199 (69,886) 3,427 16,681 13,025 - 2,831,473 2,998,940 A TEMENTS ( TEMENTS Cash flows from Investing Activities (559,316) (720,041) (173,389) (75,268) (78,229) 76,599 56,140 (4,687) (551,094) (757,671) (1,305,888) (1,481,068) Cash flows from financing activities (1,054,293) 781,633 (144,635) (30,339) - 2,268 - 36,036 (650,221) (970,073) (548,707 ) (180,475) contin u ed ) For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES which arereportedtotheFinanceand Audit Committee. Division undertakesbothregular andad-hocreviews ofriskmanagementcontrolsand procedures,theresultsof Division. by RiskManagementandComplianceServices The RiskManagementand ComplianceServices functions these in assisted is Committee Audit and Finance Group’s Group. The the by faced risks the to relation management policiesandprocedures,for reviewing theadequacyofriskmanagementframework in The Group’s Financeand Audit Committee isresponsiblefor monitoringcompliancewiththeGroup’s risk control environment, inwhich allemployees theirrolesand obligations. understand andprocedures,aimstodevelopthrough itstrainingandmanagementstandards adisciplined andconstructive and policies systemsmanagement arereviewed regularlytoreflectchangesRisk inmarket conditions,andtheGroup’slimits. activities. to The Group adherence and risks monitor to and controls and limits risk appropriate The Group’s toidentifyandanalyse riskmanagementpoliciesareestablished theriskfaced by theGroup, toset have bothexecutiveCommittees andnon-executiveBoard membersand reportregularlytotheBoard All ofDirectorsontheiractivities. areas. specified their in policies management risk Group’s monitoring and developing for Remuneration Committee, Investments Committee andCreditCommittee. These Committees areresponsible management framework.risk Group’s the of The BoardtheFinanceand hasestablished Audit Committee,oversight Appointments andand establishment the for responsibility overall has Directors of Board The riskManagement framework 4.2 Such risksmay relatetolife, financialorotherperilsthatmay arisefromaninsurableevent Long terminsurancerisk–theoflossfrompersonsororganisationsthataredirectlysubjecttorisk. event Such risksmay relatetoproperty, liability, accident,financialorotherperilsthatmay arisefromaninsurable Short termInsurancerisk–theoflossfrompersonsororganizationsthataredirectlysubjecttorisk. generally and ofcorporatebehaviouraccepted standards requirements regulatory and legal from arising those as such risks liquidity and market credit, than causes of variety wide associated withtheGroup’sa from processes,personnel,technology andinfrastructure andfromexternalarising factors other loss indirect or direct of risk the is risk Operational – Risk Operational the maturities ofliabilitiesandassets. commitments associatedwithfinancialinstruments. riskariseswhenthereismismatching Liquidity between riskisthethatGroupwillencounter difficulty risk–Liquidity inraisingcashtomeetLiquidity risk andotherpricerisk. fluctuate will due tochangesinstrument inmarket prices.Marketofrisknamelycurrency risk,interestrate riskcomprisesthreetypes financial a of flows cash future or value fair the that risk the is risk market – risk Market to instrument financial dischargea to itscontractual obligation. counterparty of willingness or inability the from arises risk Credit – risk Credit soundness. financial the in assumed that than worse is experience future actual that event the in obligations meet to adequacyriskisthethatGroup’s adequacyrisk–capital Capital shareholdersfundsareinsufficient ed asfollows:- The maincategoriesoffinancial risksassociatedwiththefinancialinstruments heldby theGrouparesummaris financialrisks overview 4.1 4. riskMana gement NCI A L ST A TEMENTS (CONTIN TEMENTS U ED) 61 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 62 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES Capital Management 1 tier 12%) (2008: 10% for and12% was for tier2ofallitsriskbearingassetsandcontingentliabilities. capital available group’s the 2009, December 31 At liabilities. contingent and assets bearing risk its of respectively, 8% and 6% of minimum a be to required is capital 2 and 1 Tier available Tier group’s The Capital (a) requirements throughouttheperiod. capital imposed externally all with complied have operations regulated individually its and Group The affordedbe possiblewithgreatergearingandtheadvantagessecurity byposition. asoundcapital is abalancebetweenthe higherreturnsalso recognisedandtheGrouprecognisesneedtomaintain thatmight return shareholders’ on capital of level the of impact The business. the of development future sustain to and The Group’s investor, basesoastomaintain astrongcapital policyistomaintain creditorandmarket confidence assets to attached and off-balancerisk sheetexposure.of levels varying the reflect to seek that requirements specified to according determined Banking operationsarecategorisedaseithertradingbookorbankingbook,andrisk-weighted assetsare items. consolidation,investments otherregulatory ofbanksandcertain included intheregulatory capital amountsofinvestments includethecarrying insubsidiariesthatarenot Otherdeductionsfromcapital capital. There arerestrictionsontheamountofcollective impairmentallowances thatmay beincludedaspartoftier2 instrumentsvalue relatingtounrealisedgainsonequity such reserve asavailable-for-sale. whichTier 2capital, includesqualifyingliabilities, collective impairment allowances andtheelementoffair differently foradequacypurposes. capital butaretreated adjustmentsrelatingtoitemsthatareincludedinequity assets,andotherregulatory intangible and earnings,translationreserve sharepremium,retained which sharecapital, Tier 1capital, includesordinary is analysedcapital intotwotiers: below. Bank’sregulatory The disclosed as assets risk-weighted total to capital total of ratio a prescribed maintain to Bank the requires Malawi of Bank Reserve requirements, capital current implementing In banking 4.3.1 confidence level. These ratiosaremonitoredregularly. levels that areusedtodeterminerequiredcapital solvency thatwillensuresustained withintheacceptable methods regulatory are There business. Group’s the affecting assumptions main the from deviations substantial The shareholders’ Groupmustmaintain fundsthatwillbesufficient tomeetobligationsintheevent of 4.3 4. Paid upsharecapital Share Premium Retained EarningsPrior Years Net Profit –Current period(60%) Core Capital( 1Capital) Tier Revaluation reserves Total 2Capital) capital(Tier riskMana The Bank’s regulatory was capitalpositionasat31December2009 follows:- Capital adequacyrisk A dequacy Requirement gement (continued) NCI A L ST 2,033,593 2,312,036 A 495,581 278,443 246,667 314,948 976,397 TEMENTS ( TEMENTS 2009 1,448,522 1,673,230 224,708 467,237 246,667 314,948 419,670 2008 contin u ed ) For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES -Liquidity Ratio 1 -Liquidity The ReserveBank ofMalawi issuedthefollowing guidelinesonthemanagementofliquidity: (b) complied withthisrequirementduringtheyear except for twonon-compliancesduringtheyear. weekly basis,ofnotlessthan15.5% oftheprecedingmonth’s average depositliabilities. total The Group amount with ReserveBank reserve ofMalawi,The aliquidity calculatedon groupisrequiredtomaintain (c) following requirementasatthereportingdate: In accordancewithSection27oftheBanking Act 1989, theReserveBank ofMalawithe hasestablished theBank’sAs at31December2009, Ratio 2was –30%). Liquidity 37% (2008 2 Ratio -Liquidity theBank’sAs at31December2009, Ratio 1was –31%) liquidity 37% (2008 tonetpremium. solvency andreserves marginiscalculatedastheratioofcapital Tanzania. There arenocontingenciesassociatedwiththeGroup’s compliancewiththeseregulations. The Group The Grouphascompliedwithallthesolvency regulationsinallthecountrieswhich itoperatesexcept for NIKO Solvency Margin insurance andothers 4.3.2 • risk, including: A Committee. Credit separate Creditdepartment,reportingtotheBoard CreditCommittee,its isresponsibleforto oversight ofthecredit risk credit of management the for responsibility delegated has Directors of Board The (a) banking 4.4.1 a as reported but component ofmarket riskexposure. independently managed is securities trading on arising risk credit purposes, management For sector risk). Group considersandconsolidatesallelementsofcreditriskexposure (such asindividualobligor default risk,and insurance premiumsandotherbanksinvestment securities.For riskmanagementreportingpurposes,the fails instrument financial a to meetitscontractual obligations,andarisesprincipallyfromtheGroup’sto loansandadvances tocustomers, counterparty or customer a if Group the to loss financial of risk the is risk Credit 4.4 assessment, risk grading and reporting, documentary and legal procedures and compliance with regulatory regulatory with requirements. and statutory compliance and procedures legal and documentary reporting, and grading risk assessment, Formulating withthebusinessunits,covering creditpoliciesinconsultation collateralrequirements,credit Prudential Aspects ofBankLiquidity Liquidity Reserve Requirement Management ofcredit risk Credit Risk

: : :

total depositsmustbeatleast30%. total liquidassetslesssuspenseaccountinforeign (total currency) dividedbyNet liquidity cheques inthecourseofcollection)dividedbydepositsmustbeatleast20%. total and currency foreign in account suspense less assets liquid (total liquidity Net NCI A L ST A TEMENTS (CONTIN TEMENTS U ED)

63 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 64 For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES Regular auditsofbusinessunitsandGroup’s Creditprocessesareundertakenby Internal • • • • • • • • (a) banking(continued) 4.4.1 4.4 4. riskmana

including thosesubjecttocentralapproval. and performance ofitscreditportfolio andfor monitoringandcontrollingallcreditrisksinitsportfolios, reports onallcreditrelatedmatters tomanagement.Each businessunitisresponsiblefor thequality authorities delegatedfromtheBoard CreditCommittee. Each businessunithasaCreditRiskOfficer who Each Group inthemanagementofcreditrisk. Providing advice,guidanceandspecialistskillstobusinessunitspromotebestpracticethroughoutthe quality of portfolios andappropriatecorrectivecredit actionistaken. the on Committee Credit Board to provided are reports Regular types. product and industries Reviewing complianceofbusinessunitswithagreedexposure limits,includingthosefor selected is usedindeterminingwhereimpairmentmay berequiredagainstspecificcreditexposures. degree ofriskfinanciallossfaced andtofocus managementontheattendant risks. The risk gradingsystem Developing theGroup’s andmaintaining riskgradinginordertocategoriseexposures accordingtothe advances), andby issuer, creditratingbandandmarket liquidity. Limiting concentrationsofexposure tocounterparties,geographicallocationandindustries(for loansand designated limits,priortofacilities beingcommitted tocustomersby thesamereview process. Reviewing andassessingcreditrisk.CreditCommittee assessesallcreditexposures inexcess of Committee, HeadofCredit,Board CreditCommittee ortheBoard ofDirectorsasappropriate. are allocatedtobusinessunitCreditOfficers. Largerfacilities requireapproval by ManagementCredit Establishing Management ofcredit risk (continued) (continued) risk Credit

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) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES

Carrying amount Carrying investment securities,andnosuch collateralwas heldattheyear end. securities are heldaspartofreversewhen purchaseexcept andsecuritiesborrowing activity.banks Collateralusuallyisnotheldagainst to advances and loans over held not is generally Collateral impaired. as individually is loan assessed a when except updated not are generally and borrowing, of time the at assessed collateral of property, otherregisteredsecuritiesover assets,andguarantees.Estimatesoffair value arebasedonthevalue The Groupholdscollateralagainstloansandadvances tocustomersintheform ofmortgageinterestsover collection ofamountsowed totheGroup. that impairmentisnotappropriateonthebasisoflevel available ofsecurity/collateral and/orthestage Loans andsecuritieswherecontractual interestorprincipalpayments arepastduebuttheGroupbelieves (d) loan/securities the of agreement. terms contractual the to according due interest and principal all collect to unable be will Impaired loansandsecuritiesarefor which theGroupdeterminesthatitisprobable thatit (c) credit riskatthereportingdatewas:- amountoffinancialassetsrepresentsthemaximumcreditexposure.The carrying The maximumexposure to (b) Individually impaired Allowance for impairment Carrying amount Carrying 1-6 month Individually impaired 7-12 months 13-24 months > 24months Total Allowance for impairment Carrying amount Carrying Past duenotimpaired Carrying amount Carrying Neither pastduenorimpaired Carrying amount Carrying Total amounts carrying Past duebutnotimpaired loans Impaired loansandsecurities Exposure to credit risk 14,768,494 14,768,494 17,945,806 17,945,806 2,732,640 2,732,640 (349,026) (349,026) 793,698 444,672 351,068 241,327 793,698 444,672 201,303 2009 Loans andadvances to customers NCI - 10,912,648 10,912,648 12,744,035 12,744,035 1,601,335 1,601,335 (329,452) (329,452) 230,052 300,037 559,504 230,052 559,504 184,787 A 74,680 2008 L ST - 1,350,568 A 1,350,568 1,350,568 1,350,568 TEMENTS (CONTIN TEMENTS Loans andadvances 2009 to otherbanks ------990,355 990,355 990,355 990,355 2008 ------4,566,826 4,566,826 4,566,826 4,566,826 2009 Investment securities ------2,501,188 2,501,188 2,501,188 2,501,188 U 2008 ED) ------65 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 66 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES

Carrying amount Carrying disclosed undernote27. asset which hasacorrelation withthelocationofborrower. Loans andadvances tocustomershave been Concentration by locationfor loansandadvances ismeasuredbasedonthelocationofbranch holdingthe (f) Against impaired individually (e) banking(continued) 4.4.1 4.4 4. Property Retail Concentration bysector: Equipment Against pastduebutnotimpaired Corporate Property Equipment Bank Property Against neitherpastduenorimpaired Equipment

Total Northern Region Concentration bylocation: Central Region Southern Region

riskmana

Analysis ofconcentrations ofcredit risk atthereporting date isshown below:- The Group monitors concentrations ofcredit risk by sector andby geographic location. assets isshown below: Estimated fair value ofcollateral andothersecurity enhancementheldagainst financial (continued) risk Credit gement (continued) 12,841,464 12,040,518 17,945,806 17,945,806 17,945,806 2,355,000 4,940,136 2,749,342 965,152 2009 Loans andadvances to customers NCI 10,668,998 12,744,035 12,744,035 12,744,035 8,603,153 1,675,037 3,485,192 400,000 655,690 A 2008 L ST 15,514,525 2,788,509 1,406,380 1,452,507 A 9,407,751 1,350,568 1,350,568 1,350,568 1,350,568 1,350,568 271,648 187,730 TEMENTS ( TEMENTS 2009 Loans andadvances Loans andadvances 2009 to otherbanks tocustomers

- - - - 14,450,241 8,909,328 1,599,750 3,199,669 990,355 990,355 990,355 990,355 990,355 132,503 511,252 97,739 2008 2008 - - - -

contin 4,566,826 4,566,826 4,566,826 4,566,826 4,566,826 2009 2009 Loans andadvances Investment securities tootherbanks ------

3,418,008 3,418,008 3,418,008 3,418,008 3,418,008 u 2008 ed 2008 ------) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES The maximumcreditexposure tocreditriskatthereportingdatewas asfollows: (b) amountofeachrisk isrepresentedby thecarrying offinancialposition. financialassetinthestatement At balancesheetdate,therewere nosignificantconcentrationsofcreditrisk. The maximumexposure tocredit Group. the than better Investments areallowed onlyinliquidsecuritiesandwithcounterpartiesthathave acreditratingequaltoor re-insurer. to finalisationofany contract. The Groupensuresthatthereisnosignificantconcentrationriskwithinasingle policyholder. The creditworthinessofre-insurersisconsideredannuallyby reviewing theirfinancialstrengthprior insurer. Ifare-insurerfails topay aclaimfor any reason,theGroupremainsliablefor thepayment to theprimary as liability Group’s the however, discharge not, does risk. This insurance manage to used is Reinsurance unpaid of policy benefitsintermsofthecontract. value An appropriatelevel ofallowances for creditlossesismaintained. underlying the by secured are business insurance short-term of terms in receivable Amounts customers andgeographicareas. a with deals variety ofmajorbanksanditsaccountsreceivables arespreadamonganumberofmajorreinsurancecompanies, Group the because risk, credit of concentration a represent not do instruments financial Group’s The payment ofpremiumscollectedby intermediaries. segments. The Groupisalsoprotectedby guaranteesprovidedguaranteefacilityfor bythenon- theintermediary concentration ofcreditrisktoGroupscounter-parties, andgeographical tobusinesssectors,producttypes, The Groupdeterminescounter-party internalanalysis, creditquality andseekstoavoid unacceptable (a) insurance andothers 4.4.2 specific approvals fromBank’scounterparty or CommitteeAsset Liability (ALCO). specific transaction required trades settlement free on risk settlement of Acceptance obligations. Settlement limitsform partofthecreditapproval/limit monitoringprocessdescribedearlier. clearing agenttoensurethattradeissettled onlywhenbothpartieshave fulfilledtheircontractual settlement For oftransactionstheGroupmitigatesthisriskby types conductingsettlements certain throughasettlement/ assets other or as contractually agreed. securities cash, deliver to obligations its honour to borrower a of failure the to due loss of risk the The Groupactivitiesmay give risetoriskthetimeofsettlement oftransactionsandtrades.Settlement riskis (g) Outstanding premiums(note25) Outstanding Reinsurance companies(note25) Others (note25) Total Exposure to credit risk Management ofcredit risk Settlement risk NCI A L ST A TEMENTS (CONTIN TEMENTS

2,375,655 2,284,899 4,848,907 175,366 2009 2,052,672 2,239,547 U 4,427,345 135,126 ED) 2008 67 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 68 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES fluctuations andlongertermfunding toaddressany structural requirements. liquidity Group asawhole. The requirementsofbusinessunitsaremetthrough liquidity Treasury tocover any short-term loans securities, and advancesinvestment tobanksandotherinter-bank liquid facilities, toensurethatsufficient withinthe ismaintained liquidity short-term of up made largely assets, liquid short-term of portfolio a maintains assets financial ofother projectedcashflows and liabilitiesdetails arising fromprojectedfuture business. their of Treasury thenprofile liquidity the regarding units business other from information receives Treasury lossesorrisking damagetotheGroup’sunacceptable reputation. tomeetitsliabilitieswhendue,underbothnormalandstressedconditions,without incurringliquidity The Group’s approach istoensure,asfar tomanagingliquidity aspossible,thatitwillalways have sufficient (a) banking 4.5.1 riskariseswhenthereismismatchingLiquidity betweenthematurities ofliabilitiesandassets. riskisthethatGroupwillencounterdifficultyLiquidity inmeetingobligationsfromitsfinancialliabilities. 4.5 The premiumsatthereportingdatewas: agingofoutstanding (c) insurance andothers(continued) 4.4.2 4.4 4.

Not pastdue Past due7–9months Past due10 –12 months More thanoneyear Total Not pastdue Past due7–9month Past due10 –12 months More thanoneyear

Net outstandingpremiums The movement intheallowance for impairmentinrespect ofinsurancereceivable during theyear was asfollows: Balance at1January Impairment lossrecognisedinprofit orloss Balance at31December riskmana l Management ofliquidityrisk Impairment losses (continued) risk Credit iquidity risk risk iquidity gement (continued) NCI A L ST A TEMENTS ( TEMENTS

contin 2,033,351 2,542,475 2,375,665 (150,255) (166,810) (166,810) 223,611 (68,392) (98,418) 172,969 112,544 (16,555) Gross 2009 2009 Impairment - - 1,621,295 2,202,927 2,052,672 u (150,255) (128,326) (150,255) 298,136 (61,200) (21,929) 146,325 (89,055) 137,171 ed Gross 2008 2008 - ) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES the variables. product andcustomerbehavioural assumptionswhenthereisindicationthata shift inoneormoreof guidelines andlimitsforgapsmonitorsthesedaily. anticipatedliquidity The committee reviews the behavioural assumptions. The bank’s committee assetliability (ALCO)managesthismismatch by setting The maturity gapanalysis shows the mismatch before any adjustmentsaremadefor productandcustomer Financial assets date. maturity contractual the to 2009 December 31 at The below table analyses assetsandliabilitiesintorelevant maturity groupingsbasedontheremainingperiod (c) measure theGroup’s by limitestablished theReserveBank compliancewiththeliquidity ofMalawi. borrowings andcommitmentsmaturing withinthenext month. A similar, butnotidentical,calculationisusedto equivalents and investment securitiesforcash which thereisanactiveand andliquidmarket lessany depositsfrombanks,other cash including as considered are assets liquid net purpose this For customers. deposits to from assets liquid net of ratio the is risk liquidity managing for Group the by used measure key The (b) report,includingany exceptionsA summary andremedialactiontaken,issubmitted regularlyto ALCO. units. operating subject toreview andapproval by CommitteeAsset Liability (ALCO).Dailyreportscover positionof theliquidity scenarios covering bothnormalandmoresevere market conditions. policiesandproceduresare All liquidity stresstestingisconductedunderavarietyof The positionismonitoredandregularliquidity dailyliquidity Cash andbalanceswithbanks Investment securities Loans andadvances Other assets Total financialassets Current andsavings accounts Financial liabilities Term depositaccounts Foreign Currency denominateddeposits Other borrowed funds Other liabilities Total financialliabilities Net LiquidityGap Cumulative LiquidityGap Cumulative Residual contractual financialliabilities Exposure to liquidityrisk

NCI Up to1month 22,062,631 (11,692,672) (11,692,672) 18,265,965 10,369,955 1,224,099 3,432,488 6,346,257 1,672,852 591,210 899,715 A L ST - - (11,839,215) 1-3 months 1,330,430 1,661,430 A 1,807,969 1,807,969 (146,539) 331,000 TEMENTS (CONTIN TEMENTS ------3-12 Months (7,404,684) 6,072,865 1,638,334 1,638,334 4,434,531 5,122,865 950,000 ------Over 1year 11,213,891 2,635,929 3,285,826 3,809,207 5,146,254 1,140,605 2,781,811 7,404,684 32,673 - - - - 18,265,965 29,318,141 29,318,141 3,373,021 17,945,806 3,860,028 3,432,488 4,566,826 5,151,828 1,140,605 U 899,715 ED) Total

- - 69 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 70 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES detailed risk management policies (subject to review and approval by Finance and Audit Committee) and for the the for day-to-dayand review oftheirimplementation. Committee) Audit and Finance by approval and review to (subject policies management risk detailed Overall for authority market riskisvested in ALCO. The Bank’s ALCO isresponsiblefor thedevelopment of togetherwithfinancialassetsandliabilitiesthataremanagedonafair valueposition taking, basis. mainly areheldby the Treasuryportfolios Trading portfolios. Department,andincludepositions arisingfrommarket making andproprietary non-trading and trading between risk market to exposure its separates Group The (a) banking 4.6.1 control market riskexposuresparameters,whileoptimisingthereturn withinacceptable onrisk. or thevalue ofitsholdingsfinancialinstruments. The objective ofmarket riskmanagementistomanageand and creditspreads(notrelatingtochanges intheobligor’s/issuer’s willaffect creditstanding) theGroup’s income Market riskisthethatchanges inmarket prices,such prices,foreign asinterestrate,equity exchange rates 4.6 Financial assets Financial assets 31 at tothecontractualDecember 2009 maturity date,whichperiod may affect oftheGroup. theliquidity remaining the on based maturities and obligations contractual the are following The obligations. its proportion ofmaturing fundsavailable tomeetsuch calls. The Group hassignificantliquidresourcestocover cash that risk the is may notbeavailablerisk atareasonablecosttopay obligationswhendue. Liquidity The Board setslimitsontheminimum claims. from resources cash available its on calls daily to exposed is Group The insurance andothers 4.5.2 4.5 4. Cash andbalanceswithbanks Investment securities Loans andadvances Other assets Total financialassets Current andsavings accounts Financial liabilities Term depositaccounts Foreign Currency denominateddeposits Other borrowed funds Other liabilities Total financialliabilities Net LiquidityGap Cumulative LiquidityGap Cumulative riskmana l Management ofmarket risks Market risk iquidity risk (continued) (continued) risk iquidity gement (continued) NCI Up to1month 568,033 355,357 201,292 314,318 355,211 212,676 212,676 41,334 11,089 A 146 L ST - - - 1-3 months A 263,028 951,818 739,143 476,947 746,025 TEMENTS ( TEMENTS 6,883 6,883 5,610 - - - - - 3-12 Months 1,072,047 1,725,001 1,476,370 383,096 703,187 773,183 611,031 21,227 92,156 - - - - contin Over 1year (1,725,001) 5,338,599 5,180,970 2,371,815 3,613,598 1,217,490 157,629 24,293 - - - - - 2,594,339 6,404,025 6,404,025 3,433,150 u 6,147,211 256,814 314,318 62,219 ed Total - - - - - ) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES Treasury is subject to regular monitoring by ALCO, but it is not currently significant in relation to the overall overall the results andfinancialpositionoftheGroup. to relation in significant currently not is it but by ALCO, monitoring regular to subject is Treasury Credit spreadrisk(notrelatingtochanges intheobligor/issuer’s ondebtsecuritiesheldby creditstanding) (c) asymmetrical no movement balancesheetposition)was and aconstant asprovided inyieldcurves (d)below.(assuming rates interest market in decrease or increase an to sensitivity Group’s the of analysis pararell (bp) fall anda50bpriseor orriseinallyieldcurves inthegreaterthan12-monthpoint portionofallyieldcurves. An basis 100 a include basis monthly a on considered are that scenarios Standard scenarios. oftheGroup’ssensitivity interestrate financialassetsandliabilities tovariousandnon-standard standard The managementofinterest rateriskagainstinterestgaplimitsissupplementedby monitoringthe portfolios isgiven below. basis by monitoringactivities onthemarket. oftheGroup’s day-to-day A summary on interestrategappositiononnon-trading risks the manages and limits these with compliance for body monitoring the is re-pricing for bands. ALCO The limits pre-approved having by and gaps rate interest monitoring through principally risk rate managed is Interest rates. interest market in change a of because instrument financial of values fair future or the flows in cash fluctuations from loss of risk the is exposed are portfolios non-trading which to risk principal The (b) Exposure to othermarket risks –nontrading portfolios Exposure to interest rate risk –nontrading portfolios NCI A L ST A TEMENTS (CONTIN TEMENTS U ED) 71 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 72 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES interest rateadjustment Assets subjectto dates. The Groupdoesnothave aninterestrateexposure onoff balancesheetitems. amountscategorisedby theearlierofcontractualliabilities inthebankingsectoratcarrying pricingormaturity The below table summarises theexposureareGroup’s tointerestraterisk.Includedinthetable assets and (d) banking(continued) 4.6.1 4.6 4. Loans andadvances: Securities: Other Total assets(RSA) ratesensitive Liabilities subjecttointerestrateadjustment: Demand accounts Savings deposits Time deposits Other borrowings Other Total liabilities(RSL) ratesensitive Asset /LiabilityGap Cumulative Gap Cumulative Net position as a percent of total assets Net positionasapercentoftotal RSA as apercentofRSL riskmana Interest rate gap analysis Market risk (continued) gement (continued) 3,373,021 6,805,509 3,432,488 3,860,030 3,880,040 2,925,469 2,925,469 20,010 176% Zero 10% rate NCI - - - - 15,796,779 20,213,728 17,945,806 17,945,806 (2,267,922) 1,048,048 2,469,186 657,547 899,715 Floating A rate 89% (8%) L ST - - -

2,570,727 (2,239,727) (1,582,180) 2,432,773 331,000 331,000 months 137,954 A (8%) 13% TEMENTS ( TEMENTS 0-3 - - - - -

1,359,570 (2,291,750) 1,359,570 (709,570) 650,000 650,000 months 3—6 48% (2%) Fixed Rate Instruments ------

(2,270,514) 278,764 300,000 300,000 278,764 months 21,236 108% 6-12 contin ------3,285,826 3,285,826 2,270,514 1,015,312 Over 12 982,641 months 32,671 324% 8% ------u 15,796,779 29,318,141 29,318,141 17,945,806 3,860,030 3,373,021 2,040,320 2,469,186 5,151,826 7,999,341 ed 100% Total - - - ) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES Forward contracts Cash invaults Balances withcorrespondent banks Assets At 31December2009 of Malawi Kwacha):millions in expressed amounts (all positions currency foreign significant following the had Bank The (e) interest rateadjustment Assets subjectto Net balancesheetposition Total liabilities Forward contracts Customer deposits Liabilities Total assets Loans andadvances tocustomers Loans andadvances: Securities: Other Total assets(RSA) ratesensitive Demand accounts Liabilities subjecttointerestrateadjustment: Savings deposits Time deposits Other borrowings Other Total liabilities(RSL) ratesensitive Asset /LiabilityGap Cumulative Gap Cumulative RSA as apercentofRSL assets Net positionasapercentoftotal Currency risk (2,938,898) (2,918,888) 1,026,848 1,026,848 1,816,566 2,149,180 3,965,746 (20,010) 135% Zero 5% rate NCI - - - - (11,997,865) 13,036,370 13,036,370 1,480,362 (1,972,996) 1,004,155 (2,307,620) 1,038,505 2,065,353 (7,717,249) 549,764 930,598 313,389 549,764 Floating 147,548 15,270 A 109% USD rate L ST 5% - - - - -

(2,070,784) (4,486,137) (4,486,137) (4,136,137) 350,000 350,000 months A (20)% 35,224 37,816 (2,592) 34,519 TEMENTS (CONTIN TEMENTS 37,816 0-3 8% GBP - - 179 - - - - 526 - -

(1,711,808) (141,024) (141,024) 500,000 500,000 358,976 months 355% 3—6 Fixed Rate Instruments 299,793 2% 309,627 309,627 298,763 - - (9,834) - - - - 1,024 Euro 2,282,472 2,282,472 6 2,277,103 - 42,512% - 565,295 months

(5,369) (5,369) 11% 6-12 ------46,251 43,743 43,909 2,508 2,258 2,508 ZAR Over 12 (850,831) (850,831) (565,295) 285,536 285,536 84 months - - 34% (3)% ------

(20,420,124) (2,918,888) 1,004,424 1,861,630 U (1,972,996) (4,632,530) 13,036,370 20,420,124 (3,178,461) 2,149,180 (7,717,249) 961,915 899,715 5,234,574 648,929 899,715 147,548 60,729 ED) 100% Total Total - - - - 73 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 74 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES Cash invaults Balances withcorrespondent banks Board ofDirectors. policies andproceduresinplace. The Group’s overall market positionsaremonitoredonaquarterlybasisby the investments. The Group’s market riskismanagedonadailybasis by the Asset Managerinaccordancewith Company thebestvalue andtoobtain intermsofadministrative investment costsassociatedwiththeGroup’s which areto achieve superior riskadjustedandinflationbeatingreturns, tomeetcash-flow needsofthe objectives investment Group’s the by driven is risk investment of management the on strategies Group’s The Long term insurance contracts: undiscounted andcontractually non-interest-bearing. Short-term insuranceliabilitiesarenotdirectlysensitive tothelevel ofmarket interestrates,asthey are the of Group ischaracterised by interestraterisk. portfolio this in assets financial the of portion non-equity The instruments. market money and equivalents For short-terminsurancecontracts,theGrouphasmatched theinsuranceliabilitieswithcashand Short-term insurance contracts: any requirements. arelimitedby by parametersestablished managementand statutory in one organisationorindustry concentrations and industries, across diversified are holdings Group’s The methods. modelling through of managed variety a actively is risk price equity and regularly analysed are characteristics Portfolio securities. liquid The Group’s objective istoearncompetitive relative returns by investing inadiverse portfolio ofhighquality, value andaretherefore susceptibletomarket fluctuations. brought aboutby changes investments prices.Certain ininterestratesandequity equitiesarevalued atfair The Groupoperationsareexposed tomarket risk. The riskarisesfromachange infair value oftheinvestments (a) insurance andothers 4.6.2 Total assets Loans andadvances tocustomers Assets At 31December2008 banking(continued) 4.6.1 4.6 4. Forward contracts Customer deposits Liabilities Total liabilities Net balancesheetposition riskmana Interest andequities Market risk (continued) gement (continued) NCI (1,008,917) (1,089,130) 1,315,718 559,536 226,588 685,865 (80,213) 70,317 A USD L ST

A (23,006) (23,006) 30,613 29,876 TEMENTS ( TEMENTS 7,607 GBP 737 - -

(52,785) (52,785) 5,978 51,348 58,763 1,283 6,132 Euro - contin 20,927 12,228 12,175 (8,699) (8,699) 8,103 649 ZAR - (1,093,407) (1,173,620) 1,426,021 u 566,317 252,401 (80,213) 775,192 84,512 ed Total ) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES currencies at year endwas inZambia, foreign different Tanzaniato andUganda. Exposure growth. regional and investments of diversification international seeking exchange rates. The Group’s exposure tocurrency riskisinrespecttoforeign investments for thepurposeof Currency riskisthethatvalue ofafinancialinstrument willfluctuate owing tochanges inforeign (c) value oftheassetsandliabilities. carrying liabilities sensitive tointerest ratesatfair values, categorisedby theearlierofmaturity datemeasuredby The followingthe Group’s details table exposure tointerestraterisks.ItincludestheGroup’s assetsandtrading guidelines or of theGroup, Asset Managerwillrebalancetheportfolio. policy investment the with accordance in not are risks rate interest the Where Directors. of Board and procedures setupby theBoard. policies with The Group’s overallaccordance interestraterisksaremonitoredonaquarterlybasisby thein Manager Asset the by basis daily on managed is risk rate interest Group’s The to month. up of one maturity with agreements repurchase short-term in invested are Group the of cash equivalents excess cash Any and rates. interest market of levels prevailing the in fluctuations to due risk rate interest value fair to The Groupholdssignificant interest-bearing financialassetsandtherefore subjectedtosignificantexposure (b)

Government Securities Financial assets 2009 Loans anddebentures Term deposits Total Assets Bank overdraft Financial liabilities Total Liabilities Government Securities Financial assets 2008 Loans anddebentures Term deposits Total Assets

Bank overdraft Financial liabilities Total Liabilities Currency risk Interest rate risk NCI A L ST 11,714,322 3,336,947 1,565,967 4,852,434 1,208,369 1,553,544 6,811,400 Less than A 7,614,347 (154,054) (154,054) (203,213) (203,213) TEMENTS (CONTIN TEMENTS 1 year

1 year and 1,609,985 1,179,951 1,357,741 430,034 373,808 983,933 above ------

13,324,307 3,336,947 5,226,242 1,553,544 8,972,088 2,192,302 2,745,918 7,241,442 (154,054) (154,054) (203,213) (203,213) Total U ED)

75 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 76 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES any riskoflossresultingfromaconcentrationinvestments inoneasset,assetclassorsector. traded onvarious markets. instruments of The Groupwilltherefore ensurethatitsportfolio iswell diversified soastominimise portfolio diversified a constructing by Manager Investment Group’s the by managed is risk Price individual an to investment,specific itsissuerorallfactors affectingfactors allinstruments by traded inthemarket. caused whether risk), currency or rate interest from arising those prices than market (other in changes of result a as fluctuate will instrument the of value that risk the is risk price Other (d) wasDecember 2009 asfollows; toaddressshorttermimbalances.Exposurecurrency riskasat31 currencies atspotrateswherenecessary foreign selling or buying by level, minimal a to kept is exposure net the that ensures Group Kwacha,the Malawi assetsandliabilitiesheldincurrencies otherthantheSouth African Rands (ZAR).Inrespectofothermonetary British Pound (GBP),USDollars(USD),UgandaShillings(USH), primarily Tanzaniaare Shillings(TZS),ZambiaKwacharisk this (ZK)andto rise giving currencies The subsidiaries. foreign its through Kwacha and Malawi the The Groupincursforeign currency riskonreinsurancebalancesthataredenominatedinacurrency otherthan (c) insurance andothers(continued) 4.6.2 4.6 4. Outstanding premiums Outstanding Due fromreinsurancecompanies Other Total assets Outstanding claims Outstanding Due toReinsurance companies Other Total liabilities Net balancesheetexposure Outstanding premiums Outstanding As at31December2008 Due fromreinsurancecompanies Other Total assets Outstanding claims Outstanding Due toReinsurance companies Other Total liabilities Net balancesheetexposure riskmana Other price risk Currency risk (continued) Market risk (Continued) gement (Continued) NCI 60,365 60,365 60,365 60,365 60,365 60,365 A L ST ZK ------A 284,030 412,292 313,946 (176,252) 308,226 206,921 199,441 128,261 (81,760) 104,066 137,694 (94,492) 107,025 12,836 71,753 TEMENTS ( TEMENTS TZS - - - 399,024 356,427 (105,684) (78,656) 226,999 226,999 226,999 462,111 (12,876) 58,516 4,571 USH ------contin (102,099) (125,730) (125,730) 129,273 166,777 166,462 191,750 25,288 (16,736) (14,152) (74,689) 66,019 (10,674) 33,465 64,679 4,039 USD - - u 1,028,172 424,895 564,657 (280,743) (112,771) (407,667) 866,433 480,304 620,506 386,129 274,130 437,499 377,954 29,572 (14,152) 82,427 58,516 ed 4,039 Total ) For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES risks insured and overall risks. These methods include internal risk measurement models, sensitivity analyses analyses and scenarioanalyses. sensitivity models, measurement risk internal include methods risks. These overall and insured risks The Groupusesseveral methods toassessandmonitorinsuranceriskexposures bothforof individualtypes and monitoring ofemergingissues. reinsurance of management centralised guidelines, pricing limits, set exceed that or products new involve limits;approvalThe proceduresfor Groupmanagesitsinsuranceriskthroughunderwriting transactionsthat and investment activities. insurance its through risk market to exposure has also Group The contract. the under claims of timing severity the and surrounding uncertainty the to exposed is Group the such As event. insurable an from perils arise other may or that financial accident, liability, property, to relate may risks Such risk. the to subject directly organisations or are that persons from loss of risk the assumes Group the by out carried activity insurance primary The riskmanagement objectives andmitigating insurance risk 4.8.1 short term insurance risks 4.8 • of overall Group’s for standards themanagementofoperationalriskinfollowing areas: is risk operational assigned toseniormanagementwithineach businessunit. address to This issupportedby responsibility thedevelopment controls of implementation and development the for responsibility primary The and creativity. initiative damage totheGroup’s withoverall reputation costeffectiveness andtoavoid controlproceduresthatrestrict The Group’s objective istomanageoperationalrisksoasbalancetheavoidance offinanciallossesand all by faced business entities. are and operations Group’s the of all from arise risks Operational behaviour. corporate of standards market riskssuch requirementsandgenerallyaccepted andliquidity asthosearisingfromlegalandregulatory the Group’s processes,personnel,technology andinfrastructure andfromexternal factors otherthancredit, Operational riskistheofdirectorindirectlossarisingfromawidevarietycausesassociatedwith operational risks 4.7 fair values. amountsoffinancialassetsandliabilitiesapproximated their thecarrying and2008, As at31December2009 (e) Requirements ofcontrols andprocedures; Documentation • andotherlegalrequirements; Compliancewithregulatory • Requirements for thereconciliationandmonitoringoftransactions; • • Riskmitigation,includinginsurancewherethisiseffective. and Ethicalandbusinessstandards; • Training andprofessional development • Development ofcontingencyplans • Requirements for thereportingofoperationallossesandproposedremedialaction; • • Requirement designed toensurethecorrectness, completenessandvalidityofalltransactions; and procedurestoaddresstherisksidentified; Fair values versus carrying amounts

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77 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 78 For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES • • • its policyholders withrespecttocededinsuranceifany re-insurerfailsto tomeettheobligationsitassumes. liable remains Group However, the paid. is claim the event the in proportion ceded the agrees reimburse to re-insurer the agreements, reinsurance the of terms the Under coverage. of characteristics on limits based maximum to circumstances certain in subject risk, specified the of evaluation Group’s the on depends retained risk each of amount losses. The of effect the minimise and risk the spread agreements These reinsurance agreements. various under losses underwriting to exposure limit to risk insurance cedes Group The reinsurance risk 4.8.4 • The corecomponentsofthereinsuranceprogrammecomprise: Group. the of exposure lossesinordertomeasuretheeffectivenesssimulate catastrophe ofthereinsuranceprogrammeandnet and international reinsurancemarket. local Thethe Groupusesanumberofmodellingtoolstomonitoraggregationand on placed is cover This capital. Group’s the or earnings year current the on impact have could significant that a risk of accumulation or events single from risks reduce to cover reinsurance obtains Group The 4.8.3 methods,theGroupendeavoursreserving tominimiserisks. produce can risk adequatepricesandconditions. information clientfocused claims handlingandgoodthis Through selectiveon underwriting, based underwriting selective and resources, data maintained extensive well Only expertise, claims. fraudulent reject and deductibles impose to ability the has also It renewal. on risks the change and re-price to right the has Group renewal. The at contract the of conditions and terms the change to haveMost generalinsurancecontractsareannualinnature therighttorefuserenewal andtheunderwriters or similar risksover anumberofyears and,assuch, itisbelieved thatthisreducesthevariabilityofoutcome. strategyseeksdiversitytoensureabalancedportfolio andisbasedonalargeportfolioThe of underwriting underwriting strategy 4.8.2 techniques. statistical using established nature, random,andtheactual numberandsize ofevents duringany oneyear mayfromthoseestimated vary principal riskisthatthefrequencyandseverity ofclaimsisgreaterthanexpected. Insuranceevents are,by their isappliedtothepricingandprovisioning ofprobability forThe aportfolio theory ofinsurancecontracts. The riskmanagement objectives andmitigating insurance risk (Continued) 4.8.1 short term insurance risks (Continued) 4.8 4. riskmana liquidators bonds. covering, sharetreaty performance,A bondsandguaranteesquota maintenance,supply, customsand public liability, guarantees. personalaccident,fidelity A motor, losses oroccurrence ofoneevent whichcatastrophe, provides protectiontolimitlossesoneach andeverylossriskorseriesof An Excess oflossCover for fireandContractors policies. from MaterialDamageandLoss ofprofitsfollowing explosion, fire,lightning, riot,strike includingallrisks A r

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For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES specified circumstances. reduce to areallowedtreaties the netexposure tobuy totheGroup.Inaddition,underwriters facultative reinsuranceincertain reinsurance non-proportionate and proportionate of combination a buys It resources. capital inorderto control itsexposures tolosses andprotectThe Groupreinsuresaportionoftherisksitunderwrites reinsurance strategy 4.9.2 similar risksover anumberofyears and,assuch, itisbelieved thatthisreducesthevariabilityofoutcome. strategyseeksdiversitytoensureabalancedportfolio andisbasedonalarge portfolioThe of underwriting underwriting strategy 4.9.1 techniques. statistical using established nature, random,andtheactual numberandsize ofevents duringany oneyear mayfromthoseestimated vary principal riskisthatthefrequencyandseverity ofclaimsisgreaterthanexpected. Insuranceevents are,by their isappliedtothepricingandprovisioning ofprobability forThe aportfolio theory ofinsurancecontracts. The analyses and scenarioanalyses. sensitivity models, measurement risk internal include methods risks. These overall and insured risks The Groupusesseveral methodstoassessandmonitorinsuranceriskexposures bothforof individualtypes and monitoring ofemergingissues. reinsurance of management centralised guidelines, pricing limits, set exceed that or products new involve limits;approvalThe proceduresfor Groupmanagesitsinsuranceriskthroughunderwriting transactionsthat claims of under thecontract. severity Theand Groupalsohasexposure tomarket riskthroughitsinsuranceandinvestment activities. timing the surrounding uncertainty the to exposed is Group the such As event. insurable organisations or that aredirectlysubjecttotherisk.Suchpersons risksmay relatetolife,from financialorotherperilsthatmay arisefroman loss of risk the assumes Group the by out carried activity insurance primary The l ong term insurance risks 4.9 In thousandsofMalawi Kwacha Notes totheconsolidatedandseparatefinancialstatements any oneclassofbusiness. of insurance. This exposure isconsistentwiththemarket andtheGroup’s reinsurancepolicylimitsthelossesin The Grouphasexposure limitedexposure toallmajorlinesofinsurancebusinesswithvery specialisedareas and classofbusiness. impact heavily upontheGroup’s resources. The Groupmonitors the concentrationriskby geographicalsegment theinsuranceprocess,concentrationsofriskmayWithin arisewhereaparticularevent orseriesofevents could 4.8.6 proved tobesufficient tofundtheactual claimspaid. Consequently, ofpositive claimsdevelopment, theGrouphasahistory createdover i.e.thereserves time has appropriateinformationpractices. regardingitsclaimsexposures andadoptssoundreserving to fundhistoricclaims(run-off risk). To managerun-off risktheGrouptakesallreasonablestepstoensurethatit nature the on of theinsurancecontract. The Groupisthereforedependent exposedwillnotbeadequate totheriskthatclaimsreserves scales time pre-determined to subject term, contract the of end the is after loss the discovered if even contract, the of term the during occurred that events insured all for liable is Group The 4.8.5 Concentration ofinsurance risks and policies mitigating theconcentrations Claims development NCI A L ST A TEMENTS (CONTIN TEMENTS U ED) 79 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 80 For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES Group ensuresthatthey move inlinewitheach other. same the stay not overmay time.Long-termwhich bonds aremoresensitive tochanges ininterestratethanshort-termbonds,andthusthe rate, discount risk a using priced is policy the of outset the at risk rate Interest covered underthecreditrisksection. ofdefault modellingisusedtomonitorthispositiononaregularbasis.Details riskhaveAsset orliability been mismatch. the throughoutthetermofpolicyto minimisetheriskof Group willneedtobuy andsellassetsasnecessary therefore expected as die not will annuitants cases most However, in matching). (perfect dies annuitant last dieasexpected dates, inordertobalancethefund.Ifannuitants thenfundwilldeclinezero justasthe redemption the (match) with coincide should which disinvested, be will sum lump the of part year each so The incomeearnedontheinvestment willnotusuallybesufficient tocover andtheexpense theannuity outgo, ofthecontract. the start The redemptiondates. assetmixwillconsist of corporatebondsandgiltswithvarying investment risk: ofproductthelumpsumpremiumisavailable thistype With for theGrouptoinvest at (b) mortality future improvements.for allowance willdifferThe mortality andjointlife betweentheretirement,voluntary annuitant. including policyholders of population the for experience mortality on information (a) used not is for thisproduct. underwriting Reinsurance design. product and pricing sensible through managed are risks key The matched byassets. suitable annuity. Investment riskdependsontheextent towhich payments theannuity undercontractshave been annuities arepaidfor thelifetime ofthepolicyholder, andthisriskismanagedthroughtheinitialpricingof The mainrisksassociatedwiththisproductarelongevityandinvestment risks.Longevity risksariseasthe Management ofRisk ofproductaccrueassociated withthistype toshareholders. andinvestmentProfit ariseswhenmortality experience arebetter thanexpected. All risksandrewards Payments areoften 5or10 guaranteedtobepaidfor(e.g. aminimumtermregardlessofsurvival years). index. the for remainder ofhis/herlifetime. Annuities maypolicyholder belevel, orescalateatafixedpricethe rate,orbeinlinewithasuitable to paid is and outset, at premium single a with purchased is annuity of type This long-term insurance contracts –Immediate annuities 4.9.4 any re-insurerfails tomeettheobligationsitassumes. the in proportion event theclaimispaid.However,ceded the theGroupremainsliabletoitspolicyholderswithrespectcededinsuranceif reimburse to agrees re-insurer the agreements, reinsurance the of terms the Under reinsurance risk 4.9.3 longterm insurance risks (Continued) 4.9 4. riskmana Mortality risk: availableThe pricingassumptionisbasedonbothhistoricin-houseandindustry gement (Continued) NCI A L ST A TEMENTS ( TEMENTS contin u ed ) For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES respect ofmoney available tofundbonusesdepositadministrationpoliciesandimmediateannuities. Assumed 20%ofsurplusfromwhich bonusesaredeclaredonindividuallife policies(with profit)plus10% in F Deposit Admin Individual Life Group Life Immediate Annuity Business Class The Group’s riskanalysis islargelydriven by theclassesofbusinesswritten; 4.9.8 market. Reinsurance arrangements arealsoinplacetoprotecttheGroup onlargeclaims. experienceThe oftheGroupaswell Groupusesratesthattakecognisanceofthemortality/claims as Management ofRisk of death. The Groupwritesshort-termlife business. The policiesaredesignedtoindemnifytheinsuredinevent short-termInsurance –Group Life4.9.7 place toprotecttheGroup. The Groupusesproperlydeveloped rates,andintheevent ofdeathcovers, reinsurance arrangements arein Management ofRisk policyholder. The Groupwritesindividual life business. The policies aredesignedsoastodistributebenefitsthe long-T 4.9.6 policyholders’ reasonableexpectationswhensetting bonuslevels. The Grouphascompletecontractual discretiononthebonusesdeclared.InpracticeGroupconsiders Management ofrisk long a on based term rateofreturn. funds The tothepolicyholderthanaunit-linkedassets contractsprovidesecurity contract. morecapital the on income the policyholders to distribute to designed are payments bonus The participationfeatures.The Groupwritespolicyholder benefitsbusinesswithdiscretionary 4.9.5 uture Shareholder entitlements l Concentration ofrisk ong-term insurance contracts – with discretionary participation features participation discretionary with – contracts insurance ong-term High erm Insurance Contracts –IndividualL ife NCI A L ST Low Medium High Risk Rating A TEMENTS (CONTIN TEMENTS U ED) 81 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 82 For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES andanexpense reserve madeupofmortality Contingencyreserve • • Investment calculatedas10% reserves oftheactuarial liability • • • Additional were reserves heldasfollows: billion MK19.2 i.e. MK16.4(2008: billion). position financial of statement the in presented per as taken been has assets net of Valuation related investment returns, bonusestobegrantedpolicyholders’ andcurrent reinsurancearrangements. the liabilitieshasbeenbasedonprojectedcashflowsintoaccountexpected taking mortality, expenses, market MK79 million)andIncurred ButNotReportedMK25.1million). (IBNR)ofMK65million(2008: The balanceof constitutes asmallportionofbusinesscarries anUnearnedPremium Reserve(UPR)ofMK22.5million(2008: Administration businesshave beensetequaltothevalue oftheInvestment Account. GroupLife businesswhich Soundness Valuation hasbeenused;thisisagrosspremiummethodofvaluation. Reservesfor theDeposit The Fund hasbeenvaluedby asat31December2009 anindependentconsultingactuary. The Financial f 4.9.10 forThe claimsoutstanding aperiodofover Groupdoesnotmaintain 12 months. Claims Build-up diversity oftheGroup’s investment portfolio. Henceitdoesnotposeasignificantrisk. The Groupishighlyvulnerabletointerestratesfluctuations. However, theriskisheavily mitigatedby the Interest rates andamountavailablewill increaseprofitability for distributiontoshareholdersandpolicyholders. profits, butinview ofcurrent market trends,cannotbepassedontothe market. Any reductionintheoverruns The Groupiscurrently experiencing expense overruns inallitsproductlines. Any slightincreasewillreduce Expenses significant change intheresults. at least5%islikely toimpactnegatively onthebusiness.Declinein isunlikelyAIDS statistics tocause closely monitored theGrouphasbeenabletooperateprofitably. However,limits cover free amajorincreaseinthe by AIDS statistics AIDS. With of impact the by affected significantly been not has industry the Currently AIDS the presenttime,andstiff competitionprevailing inthemarket. (even aslow as5%),mightaffect thedemandfor theseproductsinview ofthelow ofthemarket elasticity at business. This would give risetotheneedadjustratesaccordingly, which intheevent ofanegative increase Any shift rateswould affect inthemortality theGroupinitsbusinessespeciallyonLife, andindividuallife Mortality Rates The Groupissensitive tothefollowing factors: sensitivityanalysis 4.9.9 longterm insurance risks (Continued) 4.9 4. riskmana 31 December 2009 plus investment returns of 12.25% for the year less the amount utilised to fund the increased bonus rates the fund to utilised amount the less year the for 12.25% of returns investment plus 2009 December 31 administration contractandis calculatedastheopeningbalanceofBonus Reserveasat Stabilisation Bonus Reserve. Stabilisation action intermsofreducingbonuses. wasA resiliencereserve calculated as85%ofvaluation interest andignoringany possible management witha5yearhigh risk additiontothecalendaryear.AIDS mortality The

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) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES been retained intheLifebeen retained Fund. billion (2008:MK1.17 billion)aspartofLife Fund. MK3.4billion)has Unallocated surplusofMK3.1billion(2008: whereby abalanceofMK285millionwillbepaidintheyear 2010 leaving balanceofMK1.34 acarried forward of which MK50million (2008:MK150 million)hasbeenpaidintheyear leavingMK1.62 abalanceof billion year Shareholders’ toshareholders,total fundsintheLife fundwere MK1.67 billion (2008:MK1.55 billion)out of MK150 million paidin2009. After MK710.5 theallocationofMK505.8million(2008: million)surplusfor the The openingshareholder’s ofMK1,167millionexcludes 2009 shareofsurplusasat1January finaldividend Ontheadviceofconsultingactuaries, theCompany hasallocated thesurplus asfollows: c) The Fund hasdisclosedasurplus ofMK5.7billion(2008: MK6.3billion). Balance at1January b) Movements during theyear a) The positionoftheFund asat31December(after allocationofsurplus) isasfollows: Surplus before allocations(grosspremiumbasis) Individual Life Revaluation surplusnetofdeferred tax Bonus-Deposit Administration (vested) Group Life Long termpolicyholders’ benefits (Page 36) Bonus-Deposit Administration (non-vested) Deposit Administration Balance at31December(Page 35) Shareholder’s shareofsurplusasat1January Surplus after allocationtopolicyholdersbutbefore allocationtoshareholders Annuities Surplus for theyear toshareholders Reserves Data AIDS Reserves Unallocated policyholdersreserves Investment Reserves Less: Dividendpaidduringtheyear Surplus after allocationtopolicyholdersbutbefore allocationtoshareholders Resilience Reserves Surplus peractuarial report Contingencies Reserves(mortality, expenses) Unallocated policyholders reserves Unallocated policyholdersreserves

NCI A L ST A TEMENTS (CONTIN TEMENTS

11,160,488 1,968,493 17,628,997 3,095,252 17,628,997 15,087,183 1,549,282 3,095,252 (1,167,158) 4,718,192 4,768,192 4,768,192 5,707,020 (352,060) (505,782) (586,768) 573,321 862,391 383,632 265,594 50,000 197,430 89,330 17,851 2009 2009 7,747 11,836,606 1,663,527 3,424,061 15,087,183 15,087,183 (1,087,516) 6,341,240 1,083,245 3,424,061 4,891,219 9,325,212 4,891,219 U 4,741,219 1,587,050 (710,520) (362,505) (756,638) (150,000) 255,433 105,482 109,481 577,953 142,116 ED) 47,086 17,114

2008 2008 83 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 84 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES the fair value. All otherreceivables orpayables arediscounted todeterminethefair value. For receivables orpayables witharemaininglife oflessthanoneyear, thenotionalamountisdeemed toreflect The amortisedcostisestimatedasthepresentvalue offuture cashflows, discountedateffective interestrates. Loans andreceivables The amortisedcostisestimatedasthepresentvalue offuture cashflows, discountedateffective interestrates. Malawi Government LocalRegistered Stocks principal andinterestcashflows. The fair value isbasedonquotedmarket prices,ifavailable, oriscalculatedbasedondiscountedexpected future Malawi Government financial instrumentsof reflectedinthetable. values fair the estimating in used assumptions and methods major the summarises following The Estimation offair values Cash andcashequivalents a 4.10 4. Trading assets Loans andadvances tocustomers Investment securities Investment securities Loans andadvances tocustomers Trading assets Cash andcashequivalents 31 December2009 Total Total Deposits fromcustomers Trading liabilities Trading liabilities Long termloan Deposits fromcustomers Total Long termloan Total 31 December2008 riskmana ccounting classificationsandfair values

T reasury Bills gement (Continued) 990,355 990,355 Trading ------

NCI Designated 3,418,008 4,104,875 686,867 A at fair value L ST

------

receivables 12,747,296 12,747,296 A TEMENTS ( TEMENTS Loans and ------

(16,504,940) (17,555,708) (1,050,768) amortised 18,665 18,665 Other cost ------

contin (16,504,940) (17,555,708) 17,861,191 (1,050,768) 12,747,296 3,436,673 686,867 990,355 carrying amount Total - - - -

(16,504,940) (17,555,708) 17,861,191 (1,050,768) 12,747,296 3,436,673 u 686,867 990,355 ed value Fair - - - - ) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES Profit andequipment onsales ofproperty 10. Interest incomefrombankdeposits 9. Interest incomeonLoans 8. Premium basedfees 7. Gross written premium–shortterminsurance 6. Holdings LimitedinZimbabwe inlinewithZimbabwean law for foreign investors. There were nodiscontinuingoperationsanddisposalsduringtheyear, thegroupacquired49%ofSFGInsurance 5. - Treasury bills Investment incomefrom:- Exchange gains/(loss) Interest fromGovernment stocks Fund Managementbasedfees Gross life insurancepremium - Local registeredstocks Other sundry income Other sundry Gross interestfromBanking Information Technology fees Consultancy Gross pensionpremium - Loans anddebentures Commission andBank charges Other fee income - Dividends Unearned premiumadjustment Rental income Reinsurance premium Other interestincome Net earnedinsurancepremium

fees and Commissionincome investment incoe incomefrom bankingoperations insurancePremiu o Discontinuing operations, disposals and a ther income/(expenses) NCI A L ST (2,474,148) 3,450,296 3,603,949 9,793,626 2,140,700 6,506,128 1,146,798 1,482,815 4,741,485 A 1,040,119 7,042,208 1,137,536 444,406 153,653 163,510 (277,270) 448,043 458,030 230,725 465,433 155,196 (65,582) 20,306 75,503 50,413 TEMENTS (CONTIN TEMENTS 28,747 97,257 (8,196) 2009 (245) GROUP (2,187,888) 2,244,530 1,593,330 2,423,306 8,098,224 3,402,439 1,029,686 5,529,417 1,136,146 5,667,994 544,626 (242,342) 979,133 178,776 369,579 975,477 125,721 447,206 377,382 65,512 93,003 75,347 50,309 46,887 13,583 65,172 77,420 (3,982) 4,073 2008 cquisitions 246,534 246,534 551,554 579,810 24,497 28,836 5,916 9,000 8,426 4,914 4,168 2009 171 ------COMPANY U 339,936 705,539 339,936 723,353 (1,015) ED) 6,890 1,335 6,891 2,698 1,776 2,711 2008 80 ------85 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 86 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES Interest onloans 15. Auditors remuneration 14. Fixed deposits 13. Commission expenses paid 12. Insurance claimsandlossadjustmentexpenses 11. Directors remuneration

Communication andaccommodationexpenses Staff costs Finance leasecharges Investment deposits Changes indeferred acquisitioncosts Recoveries fromreinsurers businesschargesSundry Depreciation Other investment expenses Savings deposits

Impairment (losses)/gain

Repairs andmaintenance

netpolic financeCosts aDMinistrative expenses bankinterest expense insuranceontra y holders claims and benefits - Audit fees -Executive - Nonexecutive

cts a NCI cquisition osts A L ST (4,816,479) (2,401,470) (4,766,724) (3,707,257) 1,109,222 A (325,091) (233,866) (404,059) (753,673) (881,030) (702,404) (545,161) (120,231) (213,644) (145,750) (913,896) (274,430) (184,746) (48,865) (81,923) (23,427) 51,269 (24,212) TEMENTS ( TEMENTS (1,307) 2009

GROUP (2,619,533) (2,770,527) (3,922,820) (2,067,598) (284,689) Restated (586,641) (245,863) (552,545) (713,669) 150,994 (231,819) (173,034) (104,982) (501,946) (364,474) (112,275) (91,448) (92,522) (40,071) (72,559) 34,096 (13,733) (1,074) 2008 - contin (362,553) (134,416) (81,923) (46,496) (54,779) (65,094) (46,532) (8,620) (3,400) (8,989) (4,919) 2009 (413) (36) ------COMPANY

u Restated (435,544) (247,045) (17,047) (72,559) (63,985) (66,524) (64,969) (18,623) ed (3,662) (2,526) (7,558) 2008 (984) ------

) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES 1,043,041thousand),calculatedasfollows:- of1,043,041thousand(2008: outstanding shares ordinary of number average weighted a and MK1,768,509) ordinary to (2008: shareholders ofMK1,946,470 attributable profit on based was 2009 December 31 at share per earnings basic of calculation The basic earningspershare 17. Under theMalawi Taxation Act toanother. itisnot possible totransfer losses from onesubsidiary tax Recognised intheprofit orloss 16. Profit for the year MK’000 30%and21%respectively)(2008: Current yearat30%andLife tax businessat21% Current taxexpense interestMK’000 Minority Total onthegroupandsubsidiaries incometax shareholders (MK’000s) Profit attributable totheordinary Origination andreversaldifferences oftemporary Deferred taxexpense in issuethroughouttheyear (‘000s) Weighted averageshares numberofordinary Total incometaxexpense/(credit) Earnings pershare(MK) Profit for the year Reconciliation charge oftax Diluted earningspershare Income tax expenseIncome tax Profit beforetax Tax 30%) at30%(2008: Effect oflower rate tax Effect income ofnontaxable Effect ofpermanentdifferences gaintax Capital Dividend tax Under provision fromlastyear

income taxpense ex NCI A L ST 1,043,041 2,306,787 1,946,470 2,306,787 A 3,237,525 238,071 930,738 (140,533) 360,317 692,667 692,667 930,738 971,257 234,590 930,738 (52,094) (13,583) (74,248) TEMENTS (CONTIN TEMENTS 5,349 2009 2009 1.87 1.87 GROUP GROUP 1,043,041 2,001,490 2,652,417 1,768,509 2,063,117 589,300 232,981 (139,628) 589,300 (30,872) 589,300 795,726 574,363 574,363 (88,548) 14,937 (12,997) 65,619 2008 2008 1.70 1.70 - 1,029,824 1,249,803 196,259 219,979 219,979 219,979 374,941 23,720 (94,306) (23,720) (47,440) 23,720 10,504 2009 - - COMPANY U (146,202) 553,786 585,562 175,669 (43,640) (39,029) 31,776 84,978 31,416 31,416 31,776 31,776 ED) 2008 360 - - 87 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 88 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES 18.

GROUP Balance 2009 asat1January Cost orvaluation Effects ofchanges inexchange rates Additions Revaluation surplus Transfers fromassetsheldfor sale(note26) Transfers assets(note19) tointangible Disposals Balance asat31December2009 Balance 2008 asat1January Cost Effects ofchanges inexchange rates Additions Revaluation surplus Transfers withinclasses Transfers toassetsheldfor sale(note26) Transfers toinvestment properties(note20) Disposals Balance asat31December2008 Balance 2009 asat1January Accumulated depreciationandimpairmentloss Effects ofchanges inexchange rates Transfers assets(note19) tointangible Depreciation for theyear Released onrevaluation Eliminated ondisposals Balance asat31December2009 Balance 2008 asat1January Accumulated depreciationandimpairmentloss Effects ofchanges inexchange rates Transfer asset tointangible Depreciation for theyear Released onrevaluation Eliminated ondisposals Balance asat31December2008 At 31December2009 Carrying amounts At 31December2008

Property and equipment NCI A L ST 1,354,567 2,020,644 1,354,567 2,020,644 1,354,567 1,415,517 A Land and buildings (573,617) 436,478 153,242 573,617 (49,280) (11,459) (17,837) 96,149 TEMENTS ( TEMENTS 11,459 (9,936) (7,327) (7,827) 3,638 7,627 200 ------

Vehicles 208,881 146,006 154,320 154,320 100,064 108,817 (10,721) (10,721) 71,231 81,888 34,029 24,087 81,888 72,432 15,051 67,930 (5,949) (1,559) (4,951) (5,132) Motor (5,178) (5,178) ------

contin Equipment 2,073,470 1,035,855 1,324,801 2,982,103 1,811,269 1,811,269 1,477,285 Furniture 908,633 202,345 (33,175) 775,414 775,414 213,165 301,153 587,425 (92,956) (30,605) (36,143) (13,198) (27,836) 49,280 (8,169) (7,132) (9,317) (6,115) and ------

1,399,670 1,008,697 3,038,808 4,202,931 2,462,854 3,320,156 3,320,156 u 5,211,628 (106,232) (573,617) (43,896) (41,326) 752,682 258,653 655,555 234,059 153,242 573,617 (12,310) 857,302 857,302 (41,275) (20,812) (13,347) (13,198) (11,459) (11,066) (27,836) (17,837) 96,149 ed (7,827) Total - ) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES

is recognised directly in equity and is not distributable, untilrealised. andisnotdistributable, is recogniseddirectlyinequity surplus revaluation market. The property the in prices observable to reference by determined were Values MSIM, aChartered Valuation Surveyor withKnightFrank onbehalfoftheDirectors. Land andbuildingswere revalued onopenmarketby basis on31December2009 Don Whayo BSC,MRCIS, by inspection for shareholders ortheirdulyauthorisedagents. open are and subsidiaries its and Group the of office registered the at maintained are Companies 1984 Act the 16of Section 3, Schedule under required as details giving registers, equipment and Property 18. COMPANY Balance 2009 asat1January Cost orvaluation Additions Transfers assets(note19) tointangible Disposals Balance asat31December2009 Balance 2008 asat1January Cost orvaluation Adjustments Additions Disposals 8 Balance asat31December200 Balance 2009 asat1January Accumulated depreciationandimpairmentloss Depreciation for theyear Transfer asset(note19) tointangible Eliminated ondisposals Balance asat31December2009 Balance 2008 asat1January Accumulated depreciationandimpairmentloss Adjustments Depreciation for theyear Eliminated ondisposals Balance asat31December2008 Carrying amounts At 31December2009 At 31December2008

Property and equipment(Continue) NCI A L ST A Vehicles TEMENTS (CONTIN TEMENTS (2,692) (2,692) Motor 6,037 5,787 8,729 6,037 3,721 4,628 5,256 3,721 1,157 1,157 1,159 2,316 (250) (250) - - - -

Equipment Furniture (13,198) (14,763) 66,995 42,892 30,727 66,795 28,825 28,449 28,825 30,073 50,817 20,744 37,970 (3,653) (3,550) (2,716) (3,171) (4,176) (2,474) 6,400 2,961 7,833 and

(13,198) (14,763) 72,832 56,604 51,621 30,727 72,832 32,546 25,372 33,705 32,547 31,232 40,286 (4,426) (6,345) (2,966) (6,242) (3,171) (2,474) 2,961 8,990 7,557 Total U

ED) 89 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 90 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES 19. Group Balance asat1January Cost Transfers andequipment(note18) fromproperty Additions Balance at31December Balance asat1January Amortisation Transfers Charge for theyear Balance at31December Carrying amountat31December Cost Company Balance at1January Additions Transfers andequipment(note18) fromproperty Balance at31December Balance asat1January Amortisation Transfers andequipment(note18) fromproperty Charge for theyear Balance at31December Carrying amountat31December

intangible assets NCI A L ST A Goodwill (58,000) (58,000) 58,000 TEMENTS ( TEMENTS ------

Software 135,692 240,611 104,919 95,213 117,562 17,825 73,896 13,830 13,198 13,198 14,763 14,763 27,836 2009 632 933 - - - - contin Software 78,791 62,022 73,896 16,422 95,213 21,317 11,874 2008 ------u ed ) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES a Chartered Valuation Surveyor withKnightFrank onbehalfoftheDirectors31December2009. Investment propertieswere revalued ontheopenmarket value basisby Don Whayo Bsc,MRICS, MSIM, 20. At valuation GROUP Balance 2009 at1January 2009 Acquisitions Fair value adjustment Balance asat31December2009 Balance 2008 at1January 2008 Acquisitions Transfers Transfers andequipment(note18) fromproperty Fair value adjustment Balance asat31December2008

Balance asat1January At valuation C Additions Balance asat31December ompany: I n v est m ent ent p ro p erties erties NCI A L ST investment properties 1,249,297 1,396,837 1,249,297 A Freehold 239,169 136,172 309,000 647,199 36,092 TEMENTS (CONTIN TEMENTS 11,368 17,837 - - -

investment Leasehold properties (309,000) 862,679 682,993 226,804 776,797 776,797 176,000 176,000 176,000 85,882 2009 - - - 2,026,092 2,026,094 2,259,516 1,330,192 222,054 465,973 212,092 176,000 176,000 11,368 17,837 2008 Total - - U

ED) 91 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 92 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES doubtful ofrecoveryhave beenfullyimpaired. are companies expected torealiseatleastamountswhich theyinthefinancialstatements. All loansconsidered arestated registered Malawi to relate which of all debentures, and loans the Directors, the of opinion the In It istheintentionofDirectorstoholdallGovernment securitiestomaturity. Public Accountants (Malawi) onbehalf oftheDirectors. Unlisted shareswere revalued usingtheearningsvaluationby basison31December2009 Deloitte, Certified MK2.2billion)unlisted. (2008: Shares compriseMK7.1 MK7.4 billion(2008: billion)listedontheMalawi Stock Exchange andMK4.2billion Group 21. O Company Balance at1January 2009 2009 Additions Movement duringtheyear: Balance 2009 at1January At costorvaluation Effects ofchanges inexchange rates Fair value adjustment Additions Balance asat31December Fair value adjustment Balance at1January 2008

Additions Disposals Fair value adjustment Balance at31December2009 Balance asat31December Balance 2008 at1January At costorvaluation 2008 Additions Fair value adjustment

Reclassification Disposals Balance at31December2008

ther investments and loansceiv re - shareholder - policyholder - shareholder - policyholder NCI Long term receivable 169,955 162,865 (16,611) A 2,099 lease 7,422 7,422 7,422 L ST ------

Government 1,085,343 1,085,343 Securities 1,471,918 1,181,909 A (324,984) 436,957 216,118 (99,322) 48,940 19,450 TEMENTS ( TEMENTS (7,150) able - - -

11,339,443 9,612,493 2,353,199 9,612,493 5,637,096 1,457,872 842, 741 504,432 390,378 (15,997) 164,432 38,045 98,600 98,600 98,600 98,600 Shares 60,555 Loans 5,396 (656) - - - -

contin debentures 1,182,323 1,016,895 1,274,925 1,016,895 (171,365) Loans & 803,708 344,440 320,288 265,340 (157,153) 401,682 401,682 932,310 69,535 (21,141) Shares 21,010 (9,390) 384 (718) - - -

14,156,549 11,722,153 11,722,153 1,455,784 1,373,525 u 4,474,840 6,118,554 1,457,872 (497,005) (289,083) 500,282 500,282 803,708 893,062 440,843 390,378 148,442 69,535 38,429 21,010 (15,745) 19,450 ed Total Total

) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES Outstanding premiums Outstanding 25. period andarerecoverable outoffuture marginsintherevenue fromtherelatedcontracts. Deferred acquisitioncostscompriseexpenses for theacquisitionofinsurancecontractsrecognisedduring Balance asat1January 24. Consumables 23. 22. Reinsurance companies–Commission,UPR,IBNR Movement duringtheyear Company

Reinsurance losses companies-Outstanding Balance asat31December NICO GeneralInsuranceCompany Ltd Fees, rentandotherreceivables NICO Life InsuranceCompany Ltd

NIKO Insurance(Uganda)Ltd NIKO Insurance(Tanzania) Ltd NICO Insurance(Zambia)Ltd NICO Technologies Ltd NICO Asset ManagersLtd NBS Bank Ltd

inventories investment insubsidiaries at cost lessimp Trade receiv Deferred a cquisition osts ables incorporation of Country

Malawi Malawi Uganda Tanzania Zambia Malawi Malawi Malawi

NCI A L ST Shareholding 2,375,665 1,883,893 4,835,930 A 175,366 281,965 213,651 401,006 68,314 TEMENTS (CONTIN TEMENTS 47,113 66.67 2009 2009 100 100 100 100 100 100 60 %

GROUP 2,052,672 1,319,612 4,427,345 135,126 226,999 882,732 120,000 185,220 919,935 213,651 Amount 104,066 25,875 187,776 90,000 65,000 41,838 60,366 31,081 2009 2008 airment

Shareholding 66.67 2008 2009 100 100 100 100 100 60 % ------COMPANY

U 226,999 851,651 120,000 185,220 Amount 104,066 90,000 65,000 60,366 ED) 2008 2008 ------93 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 94 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES Loans anddebentures short term investments 28. Loans andoverdrafts 27. Accrued investment income 26. Shares Lease contracts Staff loansandadvances Term deposits Mortgage advances Assets heldfor sale Government securities Total loansandadvances Assets transferred andequipment(note18) property Impairment ofloansandadvances Other non-tradereceivables

• Net loansandadvances areduetomature asfollows: •

oneyear Within After oneyear l o oans and dva ther re ther c ei v ables ables ances to customers NCI A L ST 10,526,504 18,291,901 11,670,399 17,942,875 17,942,875 4,816,081 1,805,421 4,991,488 5,469,617 A , 1,7 5,515,177 7,416,371 (349,026) (573,617) 288,794 791,975 189,335 216,204 573,617 507,900 TEMENTS ( TEMENTS 67,871 2009 - GROUP 13,073,487 12,744,035 12,744,035 3,406,912 7,228,858 2,944,207 1,192,165 2,501,188 1,745,496 7,921,079 (329,452) 521,936 204,033 233,595 573,617 52,140 44,472 5,391 2008 - contin 11,727 9,467 2,260 2009 ------COMPANY u 58,041 58,041 16,608 22,499 ed 5,891 2008 ------) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES revaluation. The revaluationandcomprisesthecumulative relatestoproperty increaseinthefair reserve value atthedateof Authorised (‘000) sharecapital Authorised Share capital 30. 29. Cash and cash equiv Bank balances Nominal value pershare(MK) Short termdeposits Authorised (MK’000) sharecapital Cash andcashequivalents (‘000) Issued andfullypaidsharecapital Issued andfullypaid Bank overdrafts Nominal value pershare(MK) statement ofcashflows asshownintheCash andcashequivalents (MK’000) Issued sharecapital Share premium Revaluation reserve

Capital and reser ves alents NCI A L ST 1,043,041 1,300,000 1,300,000 A 1,113,344 7,371,154 7,152,725 6,257,810 (218,429) 428,859 995,150 65,000 52,152 TEMENTS (CONTIN TEMENTS 2009 0.05 0.05 GROUP 1,300,000 5,436,846 6,379,060 1,043,041 6,175,847 (203,213) 428,859 956,983 942,214 65,000 52,152 2008 0.05 0.05 1,043,041 1,300,000 1,300,000 428,859 65,000 52,152 18,354 18,354 18,354 2009 0.05 0.05 - - - COMPANY 1,300,000 1,043,041 U 428,859 30,000 65,000 95,257 65,257 95,257 52,152 ED) 2008 0.05 0.05 - - 95 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 96 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES branchthe Blantyre renovating property.in ed utilis The loanisguaranteed bymillion. was NICOHoldingsLimited inthesumofMK200 and +2% interest prime at 2006 June effective term year 5 a for is loan funds Pension Government underthevaried termsofthecontract. TheMalawi loanisguaranteedby theMalawito Government. Corporation Housing Malawi by receipts offsetting through loan the repays bank The suspended. Corporation for theconstruction oflowInterest on theloanoriginallyat7%perannumwas costhousing. The Malawi Government loanofMK20millionrepresents anIDA creditwhich was loanedtoMalawi Housing years. The loanisguaranteedby NICOHoldingsLimitedinthesumofUSD3 million. Small MediumEnterprisesinMalawi thatareenvironmentallyfriendly.viable to Thislending loanhasarepayment periodof5 onward for used be to is loan drawn. This be to yet is million 2 USD which of annum per 6.5% atanagreed fixedNORSAD toNBSBank2007 rateof Limitedon23January approved aloanofUSD5,000,000 and hasarepayment periodof5years commencingon15 July 2009. Enterprises TheMedium loanisnotsecured. Small to lending onward for used be to is loan annum. This per 8.6% of rate fixed agreed toNBSBank Limited in International FinanceCorporationapprovedAugust atan 2007 aloanofUSD3,000,000 Included intheGrouploanofMK1billionarefollowing loans:- Loans 33. Interest bearingloans and borro MK0.27pershare) (2008: share MK0.42 perqualifyingordinary The following dividendswere declaredandpaidby theCompany:- 32. at thereportingdate. investments foreign of retranslation on arising difference retranslation represents reserve Translation Fair valuerepresents fair reserve value adjustmentonavailable for salefinancialassets. representstransfersGeneral reserve earnings,requiredby fromretained statute andotherregulators. 31. Due between2and5years Terms anddebtrepaymentschedule (i) Generalreserve Due within1year (ii) Fair value reserve (iii) Translation reserve Total otherreserves o

Dividens ther reser ves NCI A L ST 1,155,501 1,155,501 1,065,674 A 438,077 428,708 569,097 143,099 89,827 (2,704) TEMENTS ( TEMENTS wings 2009 GROUP 1,003,403 1,003,401 925,208 285,000 105,445 (21,090) 78,195 84,355 2008 - contin 577,303 248,993 438,077 248,993 577,303 157,629 91,364 2009 - - COMPANY u 285,000 327,794 327,794 80,597 247,197 14,707 14,707 ed 2008 - - ) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES GROUP Deferred (assets)andliabilitiesareattributable tax tothefollowing: Recognised deferred tax 34. Limited, respectively. These loansareatmarket rateofinterest. Holdings CompanyationofNIKO Limited and capitalis Insurance Tanzania LimitedandNIKO InsuranceUganda from NICOLife Bank InsuranceLimitedandStandard Pension Fund ofMK83.9millionfor investment in Telecom At Company level, theloanbalanceofMK249millionincludesunsecuredloansMK163.6 millionborrowed

Property andequipment Investment propertiesandshares Accrued interest Exchange gains/losses Other assets Deferred (assets)/liabilities tax Deferred taxassetsandliabilitiesmovement intheyear

GROUP Property andequipment Investment propertiesandshares Accrued interest Exchange gains/losses Other assets Deferred tax(assets)/liabilities

Deferred tax assets and liabilities (268,351 (268,351) 2009 - - - - NCI Assets (139,700) (29,204) (89,098) (21,072) A 2008 (326) L ST - 01-Jan-2009 A 428,553 715,248 131,288 131,376 Balance 158,311 (45,471) (21,072) 49,595 91,176 25,337 12,166 TEMENTS (CONTIN TEMENTS 17,036 2009 as at

Liabilities Recognised statement 114,739 131,288 271,076 (226767) 297,265 income 43,627 78,799 33,238 17,362 8,301 2008 - - Recognised in equity 428,553 449,897 203,782 203,782 (177,172) 158,311 25,337 12,166 2009 - - - -

31-Dec-2009 Net U 449,897 428,553 (177,172) 131,288 131,376 Balance 158,311 (45,471) (21,072) 49,595 25,337 12,166 ED) 17,036 2008 as at

97 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 98 In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES unearnedpremiuro 36. riskexposuresliquidity oftheGroup. liabilities andinsuranceprovisions.analysis Innote4,adetailed isgiven oftheinsurancerisk,interestrateand informationNotes 3,4,25,26and27contain abouttheimpairmentofloansadvances, policyholders’ Key sources ofestimationuncertainty critical accounting policiesandestimatestheapplicationoftheseestimates. the of disclosure and selection development, the committee audit the with discussed Management 35. Accrued interestandotherallowance COMPANY 34. Deferred tax(asset)/liability General insurancefundatthebeginningofyear Property andequipment Deferred taxassetsandliabilitiesmovement intheyear Increase inprovision inUPR Shares

General insurancefundatendoftheyear COMPANY

Property andequipment Investment propertiesandshares Other assets Tax (assets)/liabilities aCCounting estimates d judgements an Deferred tax liabilities and assets (Continued) s (64,202) (64,202) 2009 - - NCI Assets vision (UPR) (24,479) (24,479) A 2008 L ST - - 01-Jan-2009 1,834,753 A 2,257,267 422,514 249,885 Balance 251,747 (24,479) (8,714) 13,205 TEMENTS ( TEMENTS 1,862 2,560 2009 2009 as at - Liabilities GROUP Recognised 1,839,906 1,834,753 236,680 196,259 in profit (39,723) (5,153) 13,205 or loss 15,765 2,560 2008 2008 (698) - contin 31-Dec-2009 (64,202) (64,202) 249,885 249,885 Balance 187,545 187,545 1,862 1,862 2009 2009 as at - - - COMPANY Net u (24,479) 13,205 ed (8,714) 2,560 2008 2008 - - - ) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES The investment in investments inassociateshave beenmeasuredatfair value andchanges infair value recognisedinprofitor lossintheperiod. InaccordancewithIASConsolidated andSeparateFinancialStatements). 39FinancialInstruments: Recognition andMeasurement,the in Associates”, theGroup’s recognisedgainsandlossesoftheseassociateshave shareofthetotal notbeenincludedinthese The investment intheseassociates issignificantlythroughtheLife andPensions business.(InlinewithIAS 28, “Investments NICO Properties Limited:-(throughNBSBank Limited): NICO Properties Limited:-(throughNICOHoldingsLimited): SFG InsuranceHoldingsLtd:-(throughNICOLimited): NICO Properties Limited:-(throughNICOLife InsuranceCompany Limited): Chichiri Shopping CentreLimited-(throughNICOLife InsuranceCompany Limited): its various subsidiaries; The Grouphasinvestments inthefollowing associatedcompanieseitherdirectlyorthrough 41. Tanzania at33.33%. inNBSBank positionofthesharesand reserves Limitedat40%andNIKO interestrepresentsminority Minority 40. Other non-tradepayables 39. Repayable ondemand 38. Balance atbeginningoftheyear Movement ofallowances for claimsincurred butnotreported(IBNR): claims Gross outstanding tradep 37. outstanding. the Groupwhether paidoraccrued. The sumsodeterminedisthe interestandtherateisdeterminedby reference totheprincipal andinvestmentrate thatisdeterminedusingtherental incomecollected, lesstaxesandothercostsincurred inthemanagementof unsecured non-convertible debenture redeemableon31December2016. Interestonthedebenture accrues quarterlyinarrears ata Repayable withinthreemonthsorless Additional allowance madeduringtheyear reported (IBNR) Allowances for claimsincurred butnot Balance atendoftheyear Due tore-insurancecompanies Other tradepayables

investments in nonCONTROLLING interest o Deposits and customer a ther p NICO ayables ayables Properties Limitedisintheform oflinked sharesanddebentures intheratioof1:99. The debenture is an A ssociates NCI A ccounts L ST 23,164,428 18,012,602 5,151,826 1,328,025 1,209,079 3,403,940 1,129,633 1,159,937 A 427,250 353,360 439,585 439,585 86,225 TEMENTS (CONTIN TEMENTS 2009 GROUP 15,354,556 10,667,553 1,148,906 4,687,003 1,641,483 3,292,175 1,076,704 148,426 344,086 353,360 353,360 763,133 9,274 2008

161,715 49.00% 49.00% 54.25% 13.00% 2.50% 2009 ------COMPANY U 117,964 ED) 2008 ------99 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 100 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES Total remunerationisincludedinDirectors’ Remuneration under thehead‘Administrative Expenses’ (note14). numberofshares oftheGroupowned thetotal by2009, ExecutiveDecember Directorswas 741,86431 741,864) (2008: at As 42). note (refer programme option share Group’s the in participate also Directors Executive past andpresentseniormanagers oftheGroup. comprise Limited Investments Millennium and Limited Holdings Millennium both of shareholders Investments The Limited. Millennium and Limited Holdings Millennium through Group the in shares own Directors Executive Group the also provides non-cashbenefitsandgratuities toExecutivesalaries, Directors. their to addition In Directors. executive non and executive comprise Group the of Directors The mortgagestotheDirectorsatyear total endamountedtoMK27.9 MK52.9million). million(2008: T The relationshipwithitsDirectors, Executive Grouphasarelatedparty officers anditssubsidiaries. Group 43. their options. exercised 102)have (2008: 102 employees 2009 December 31 at As value. market to equal price a at employees of exercisable positions and service of length on based Group the of employees all to granted been have Options held by be thetrust. However,may Group arrangements were uponlisting, the made for the in Trustequity the of toacquire2%oftheequity. 4% to up of maximum a rules, Exchange Stock Malawi of terms In scheme. On 16 August 1996, theshareholdersapproved ofatrust establishment for anemployee shareownership Employee Share OwnershipScheme Movement onSeverance allowance The severance allowancewas asatDecember31,2009 actuarially liability determined. employment by retirement,retrenchment mutual agreement,death,retirement,voluntary andredundancy. In termsofMalawi employment Act, severance pay allowance ispayable toemployees onterminationof Severance pay allowance pension contributions. The Fund isadefinedcontributionarrangement. Underthisarrangement, employer’s islimitedtothe liability eMPloyee benefits 42. Balance at1January Severance pay Expense recognisedintheprofit orloss Underprovisions inprioryears Pension costs Amount paid

Charge for theyear Reversal ofactuarial valuation Balance at31December ransactions withDirectors andExecutive Directors related p arties NCI A L ST A 779,204 134,607 693,374 (85,830) (59,604) (59,420) 33,194 48,777 TEMENTS ( TEMENTS 2009 2009 - GROUP GROUP 685,880 779,204 210,245 116,921 (59,919) 93,324 65,314 97,344 (9,415) 2008 2008 contin 151,947 148,014 (3,933) (3,933) (2,820) 1,113 2009 2009 - - - COMPANY COMPANY u 151,947 54,604 ed 97,343

2008 2008 975 975 - - - - )

In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES The following transactionstookplaceduringtheyear. relatedparty innote14.is contained Directors oftheGroupcompriseexecutive andnonexecutive Directors.Director’s remunerationduringtheyear T The relationshipwithitsDirectorsandExecutive Grouphasarelatedparty Officers. Company (Tanzania) Ltd Related Party NICO Asset

Managers Limited NICO Technologies Company Limited

NICO Life Insurance Company Limited

NBS Bank Limited NICO General Insurance Company Limited

NIKO Insurance (Uganda) Limited NICO Insurance (Zambia) Limited NIKO Insurance ransactions withDirectors andExecutive Directors Subsidiary

Relationship Subsidiary

Subsidiary

Subsidiary

Subsidiary

Subsidiary

Subsidiary Subsidiary

Intergroup expenses Type of Management fees transaction Management fees

Others Technical Support Internal Audit Management fees Impairment Group Life Management fees Internal Audit fees Loan Investment fees Rent Management fees Banking services Insurance premium Insurance claim Management fees Internal Audit fees Investment Management fees Internal Audit Intergroup expenses Management fees Internal auditfees NCI A L ST transactions A TEMENTS (CONTIN TEMENTS Value of (43,358) (18,846) 24,000 68,000 53,084 24,148 67,500 (9,970) (4,881) 2009 3,900 1,200 1,050 3,968 3,035 5,295 1,042 1,603 4,512 (420) ------Balance at year end (164,999) (1,052) 6,438 3,154 2009 (480) 792 234 ------transactions Value of (173,355) (14,123) 23,000 22,000 70,000 71,000 73,000 28,546 25,505 (6,220) (3,812) (3,612) 1,997 3,836 2,380 5,836 4,309 2,918 2,173 2008 ------Balance at year end (198,641) U (2,053) 10,113 1,960 4,570 2,746 ED) 2008 657 ------101 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 102 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES United States Dollar(MK) United States exchange rateswere asfollows; At thetimeofapproving thesefinancialstatements, Exchange Rates asat31December 45. 44. United States Dollar(ZK) United States Dollar(MK) United States Letters ofCredit United States Dollar(Ush) United States Dollar(ZK) United States Insurance contracts United States Dollar(Tsh) United States Dollar(Ush) United States Total South Africa Rand (MK) Dollar(Tsh) United States British Pound (MK) South Africa Rand (MK) Inflation ratesasat31December(%) BritishPound (MK) the inflation rate was: At thetimeofapproving thefinancialstatements, ex Contingent liabilities change and inflation rates NCI A L ST A 203,099 197,490 4,750.0 2,025.0 4,645.0 1,359.5 2,025.0 1,330.5 TEMENTS ( TEMENTS 5,609 150.8 237.0 2009 226.7 146.0 8.2% 2009 20.8 7.8% 20.1 GROUP 240,011 267,020 5,660.0 4,890.0 1,345.0 1,708.0 2,195.0 1,377.8 27,009 10.1% 2008 240.0 142.0 219.6 9.9% 141.9 2008 18.2 16.5 contin 2009 - - - COMPANY u ed 2008 - - - ) In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES Assets severance pay allowance. The prioryear adjustmentrelatestodeferred onfair tax value increaseonNICOProperties Limitedandadditional 46.3 individuals benefits insteadof4/52theannualsalary. were wronglycomputedas4/52ofmonthlysalary The prioryear adjustmentrelatestoseverance pay allowance thatwaslastyear understated becausesometwo severance pay allowance 46.2 byunderstated thevaluers. The prioryear adjustmentrelatestofair value adjustmentofNICOProperties Limitedthathadbeen otherinvestment andloanreceivables 46.1 46. As previously stated Balance asat31December2008 As previously stated Balance asat31December2008 As previously stated Balance asat31December2008 Fair value ofNICOProperties Limited Reclassified from/(to)deferredtax liabilities Correction oferror As restated Severance pay provision As restated As restated Liabilities As previously stated Balance asat31December2008 Reclassified to/(from)deferredtax asset Fair value ofNICOProperties Limited As restated Net deferred asset/(liability) tax

Prior year adj ustments Deferred tax NCI A L ST 11,722,153 11,701,143 A (131,376) 6,303 29,204 681,860 779,204 139,700 210,906 271,076 97,344 56,629 53,867 53,867 TEMENTS (CONTIN TEMENTS 21,010 Group Group Group Group Company Company Company Company 500,282 479,272 151,948 21,010 97,344 6,303 54,604 29,204 24,479 14,187 15,765 (4,725) (4,725) 8,714 -

U ED) 103 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES 104 Annual Report 2009 NICO HOLDINGS LIMITED AND ITS SUBSIDIARIES In thousandsofMalawiKwacha For theyearended31December2009 Consolidated andSeparate FinancialStatements A FIN THE TO NOTES disclosure inthesefinancialstatements. Subsequent tothereportingdate,nosignificantevents have adjustments or occurred necessitating 48. and banking. As aGroup,itisengagedingeneralinsurance,life assuranceandpensions,information technology services, Formerlyin 2002. itwas called The NationalInsuranceGroup.ItislistedontheMalawi Stock Exchange. NICO HoldingsLimitedisapublicCompany incorporatedinMalawi undertheCompanies Act, 1984 formed 47. net ofdeferred tax. The prioryear adjustmentsrelatetoseverance pay allowance andfair value ofNICOProperties Limited, retainedearnings 46.4 46. As previously stated Balance asat31December2008 Severance pay allowance netofdeferred tax Fair value ofNICOProperties Limitednetofdeferred tax As restated incorporation subsequentevents Prior year adj ustments (Continue d) NCI A L ST 14,708 3,180,098 3,126,665 A (68,141) TEMENTS ( TEMENTS Group Company 693,678 14,708 (68,141) 747,111 contin

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