GROUP INFORMATION 02 STATEMENT OF DIRECTORS

CHAIRMAN’S STATEMENT (CONTINUED)our core business activity, and first class risk management andselection practices.In 2011, Jubilee continued its phased expansion campaign,strengthening its operations in Burundi and Mauritius, as it gearsto expand into three additional countries by 2014 and at least 11countries in Africa by 2020.Jubilee’s strong performance marks the success of yourcompany’s initiative to increase market share in the region.We consider it very important that our core insurance businesscontributes effectively to our group results and to enhancethis, Jubilee is making significant investments in new operatingsystems and customer service capabilities. I am also pleased withan impressive increase in medical underwriting profits, a result offurther improvements in case management protocols and claimsservice efficiency.National economyThe global economy is stable, with the IMF projecting worldeconomic growth in the region of 3.6% The Central Bank ofKenya (CBK) estimates Kenyan GDP to have grown by 4% 4.5% in 2011, which is a slight reduction over the 2010 growthof 5.6%. Key drivers of the region’s economic growth includedimproved performance by the agricultural and industrial sectors.Inflationary pressures and exchange rate volatility escalated in2011 as a result of a combination of domestic and internationaleconomic developments. Inflationary pressures peaked inresponse to increasing food and fuel prices due to persistentlyhigh international oil prices while pressure on the exchange ratewas mainly attributed to uncertainty in the global financial marketthat was caused by the debt crisis in the eurozone. Averageannual inflation was at 14.2% in December 2011, compared to4% in 2010 while the Kenya shilling weakened to KShs 85.06compared to 80.8 in 2010.Short-term interest rates increased significantly in 2011 with thebenchmark 91 day Treasury bill closing at 18.9% against 2.3%recorded in 2010.In the capital markets, the NSE 20 Share performance declinedsignificantly by 28% to 3205 in December 2011 from 4432 inDecember 2010.An intensified tightening of monetary policy was adopted bythe CBK’s Monetary Policy Committee to tame inflationarypressures and stabilize the exchange rates. The MPC in itslatest meeting reviewed several market developments in orderto evaluate whether the desired outcomes of its policy stancehad been achieved. The Committee observed that its tightmonetary policy measures had yielded results with inflation ratesdeclining, interest rates on government securities falling further,the exchange rate stabilizing and private sector credit growthexperiencing a downward trend. However, the Committeeidentified certain potential risks in the economy driven by nonfood-non-fuel inflation, widening of the current account deficitand rising of crude oil prices as well as the high and volatileinterbank rates, among others.Financial PerformanceJubilee, East Africa’s oldest and largest insurance group, reporteda Group Profit Before Tax of 2.144 billion, an increase of 4.4%from 2.1 billion in 2010 and Gross Written Premiums increasedby 39% to Sh15.983 billion, (2010: 11.5 billion) and postedunderwriting profits significantly higher than key peers acrossour markets. These results underscore the importance Jubilee hasplaced on sound risk management and underwriting discipline,which has allowed Jubilee to post a record underwriting profit ofKShs 540 million.2.144bnGroup Profit Before TaxDespite the challenges faced in our regional markets, coupledwith the uncertainty in the global environment, the excellentperformance by the Jubilee Group underlines our capability todeliver superior value and returns for our shareholders and otherstakeholders.Based on Jubilee Group’s impressive performance in 2011, I ampleased to report that the Board has recommended a dividendof 110% for the year 2011 (same as 2010), on the increasedshare capital of Kshs 272.25 million. An interim dividend of20% (Kshs 1.0 per share) was paid on 07th October 2011.The Board is seeking your approval for a final dividend of 90%(KShs 4.5 per share) bringing the total dividend for 2011 to Kshs299.475m (2010: Kshs 272.25m). In addition, the Board hasrecommended a bonus share issue in the ratio of 1:10, subjectto the requisite regularoty approvals. This bonus share, will bethe third consecutive one, which upon approval, was planned aspart of the celebrations in a year in which Jubilee attains its 75thbirthday on the 3rd day of August 2012.General Insurance performanceJubilee’s general insurance gross written premium grew by 41%to reach Kshs 7.441 billion (2010: Shs 5.288 billion) and eachof our insurance subsidiaries in Kenya, Uganda and Tanzaniacontributed to achieving a consolidated combined ratio of88.6%, which is an outstanding performance. This reflectsstrategies implemented to improve operating efficiency, ourrigorous focus on risk management, and an innovative productdevelopment drive that has seen Jubilee launch products inagricultural insurance, political violence, terrorism and sabotagecovers, and those targeted to Small and Medium Enterprises.Medical Insurance performanceThe Group’s medical business achieved a 49% growth toreach KShs 3.816 billion (2010: KShs 2.567 billion). Jubileeconsolidated and enlarged its market leadership in medicalinsurance business market leadership in Kenya while expansionof the successful franchise into Tanzania and Uganda generatedan exceptional 341% growth in Tanzania and made significantstrides in Uganda. Our retail medical product, J-Care, tailored toyoung families, was well received in the Kenyan market and in2012 we look forward to introducing it to more regional offices.Life Insurance PerformanceThe gross life insurance premium income and depositadministration inflows demonstrated strong growth of 30% toKshs 4.726 billion (Kshs 3.639 billion in 2010). This reflectsthe Group’s strategy to expand its life insurance portfolio withinthe region and the success of the group’s customer focusededucation and asset building products which are built aroundthe long term saving, education and protection needs of Jubilee’scustomers.Group OperationsJUBILEE HOLDINGS LIMITEDAnnual Report and Financial Statements 20117

CHAIRMAN’S STATEMENT (CONTINUED)Jubilee further strengthened its regional senior managementteam during 2011 to consolidate its position as the leadinginsurance franchise in Eastern Africa and provide the capacityand competence base to pursue further regional expansion.Significant investments have also been made in informationtechnology in order to support our growing portfolio, andensure service delivery is second to none. In 2011, Jubileeimplemented the sophisticated ISF Life insurance system inKenya to cater for the fast growing Individual Life and GroupLife portfolio, and which will also support bancassurance andunit linked products. This is in the process of being rolled outto all countries. Towards the end of 2011, Jubilee also signeda contract to implement a modern, state of the art Medicalinsurance system, and implementation of this system has alsocommenced.The subsidiary insurance companies in Kenya, Uganda andTanzania all performed well during the year with all companiescontributing positively to the Group’s growth whilst increasingunderwriting profitability and market share. Jubilee Tanzaniaparticularly rose to market leadership position, Ugandamaintained once again its number one position, whilst Kenyaincreased its market share and significantly enlarged the gapfrom the runner by over KShs 1.2 billion. The Subsidiaries inBurundi and Mauritius also recorded good growth.In 2011, Jubilee wrote KShs 15.983 billion in premium andrealized Kshs 2.14 billion in profit before tax. To ensurecontinuity as a market leader in the region, the company plansto open 14 agency offices in Kenya and continue its expansionplans in the region. Various strategic initiatives to grow theretail, bancassurance and micro insurance business and launchof online sales have been drawn up which will see Jubileecontinue to lead the market including in product innovation,distribution channels and customer service.Increased market confidence in Jubilee’s Balance Sheet strengthand financial stability as it attains 75 years, resulted in a27% growth in deposit administration inflows, indicating thecompany’s ability to safeguard funds and offer consistent returnsyear on year. The Group’s impressive end year results translateinto a 4% increase in profit attributable to shareholders, with theearning per share increasing to Kshs 33.10 from Kshs 32.25.Corporate Social ResponsibilitySupporting communities that it operates in is an importantcommitment for Jubilee, and in so doing it continues tocommit resources to key CSR initiatives that go towardssupporting crucial needs of the local communities, throughpartnerships with like-minded corporate organizations, as wellas implementing its trademark CSR projects. Among theseinclude The Jubilee Insurance Samaritan Award (JISA) which in2011 made a significant impact by awarding four remarkableindividuals for their extraordinary acts of charity, and tellingtheir stories through the media to inspire the general society.With overwhelming support of staff the Jubilee Children Fund(JCF) continues to grow in supporting health initiatives. Inaddition Jubilee continued its partnership in key impactingprojects that include the Standard Chartered Marathon andMater Heart Run, which target health-related afflictions ofcardiac illness and blindness.Board of DirectorsThe Directors who held office in 2011 are listed on page 4 and5 of this Report. There were no changes to the composition ofyour Board of Directors in the year under review. The Boardcontinues to reflect your Company’s regional outlook, while8JUBILEE HOLDINGS LIMITEDAnnual Report and Financial Statements 2011drawing from the key experience and skills that continue tosteer your Company to greater heights in achieving its strategicobjectives.2012 OutlookThe business and regulatory environment will remain challengingin 2012 and accurate forecasts of market trends remain difficult.However, inflation and increases in global fuel prices portendan erosion of the purchasing power of East African citizens.National elections and the establishment of a new system ofdevolved government will also make 2012 a challenging butpotentially prosperous year for Kenya and the region.Jubilee’s diversified business model proved robust in 2011, andour insurance companies will continue to focus on risk selectionand management, so as to balance our entrepreneurial approachto business opportunities whilst protecting profitability. Keystrategic initiatives for 2012 include the significant expansionof business through the bancassurance channel as well asgrowth of microinsurance business. New business systemshave already been launched to ensure that the Groupdelivers enhanced customer service to improve our customerexperience reputation and maintain our position as the leadingmulti-line insurance brand in East Africa. It is this quality andfinancial stability that will continue to strengthen our customerrelationships and grow business.Jubilee’s Africa-wide expansion resonates with our customerswho are themselves expanding business across the continent,and it will place Jubilee as an insurance company of choice, anda brand with the financial strength and muscle to deliver qualityand convenience.Your Company now provides insurance protection to morethan 300,000 clients across East Africa, and will continue toincrease our reach for the convenience of existing and potentialcustomers in the region.I am proud to advise that on 3rd August 2012 Jubilee willcelebrate its 75th anniversary and accordingly a number ofcelebratory events have been planned which will involve allthe stakeholders including customers, intermediaries andemployees.We continue to have ambitious goals and we do not rest on ourlaurels based on what we have achieved up to now. Jubilee willcontinue to perform strongly in 2012 and generate sustainableand stable returns for our shareholders.AppreciationJubilee’s continued strong performance is a culmination ofcontributions of our various stakeholders: our business partners,intermediaries and customers. I would like to thank you for yourcontinued support and loyalty, which have been instrumental inreinforcing Jubilee’s position as the invincible market leader inEast Africa.I also thank all our staff across the region who continues to showdedication and provide superior service to our customers. Iwould also like to acknowledge with appreciation my colleaguesin the Board and those on the Boards of the subsidiaries fortheir diligence, guidance and support.Nizar N. JumaChairman29th March 2012

REPORT OF THE DIRECTORSThe Directors submit their report together with the audited consolidated financial statements for the year ended31st December, 2011 which disclose the state of affairs of Jubilee Holdings Limited (the “Company”) and itssubsidiary companies (together the “Group”).Country of IncorporationThe Company is incorporated in the Republic of Kenya under the Companies Act and is domiciled in Kenya.The Company is also registered as a foreign company in the Republic of Uganda and in the United Republic ofTanzania.Principal activitiesThe Company is an investments holding company. The Company, through its subsidiaries The Jubilee InsuranceCompany of Kenya Limited, The Jubilee Insurance Company of Uganda Limited, The Jubilee Insurance Companyof Tanzania Limited, and The Jubilee Insurance Company Burundi (S.A.), transacts all classes of general and longterm insurance business as defined by the Kenyan Insurance Act while Jubilee Insurance (Mauritius) Limitedtransacts all classes of general insurance business. The Group does not engage in industrial life insurance. It alsoowns investment companies in Uganda, Burundi and Tanzania and a fund management company in Kenya (JubileeFinancial Services Limited).ResultsThe following is the summary of the results for the year ended 31st December, 2011:Profit analysisGroup profit before income taxIncome tax expenseGroup profit after income taxNon-controlling interestProfit attributable to equityholders of the 483,3631,755,761DividendAn interim dividend of Kshs 1.00 per share amounting to Kshs 54.45 million (2010: Kshs 49.5 million) waspaid on 7th October, 2011. The Directors recommend a final dividend of Kshs 4.50 per share amounting toKshs 245.025 million (2010: Kshs 222.75 million) for approval by Shareholders. The total dividend for the yearrepresents 110% of the issued share capital as at 31st December, 2011 (2010: 110%).DirectorsThe directors who held office during the year under review and up to the date of this report were:Nizar N. Juma (Chairman)Sultan A. Allana *Ramadhani K. Dau **Juma Kisaame ***Lutaf R. KassamSultan K. KhimjiJohn J. Metcalf ****Tom D. Owuor* Pakistani** Tanzanian*** Ugandan**** BritishAuditorThe Company’s independent auditor, KPMG Kenya, who was appointed during the year in place ofPricewaterhousecoopers, continues in office in accordance with Section 159(2) of the Kenyan Companies Act(Cap. 486).On behalf of the BoardNizar N. JumaChairman29th March, 2012JUBILEE HOLDINGS LIMITEDAnnual Report and Financial Statements 20119

STATEMENT OF DIRECTORS RESPONSIBILTIESThe Directors are responsible for the preparation and fair presentation of the group and company financialstatements of Jubilee Holdings Limited set out on page 17 to 68 which comprise consolidated and companystatements of financial position as at 31 December 2011, consolidated income statement, consolidatedstatement of comprehensive income, consolidated and company statements of changes in equity andconsolidated statement of cash flows for the year then ended, and a summary of significant accountingpolicies and other explanatory notes, in conformity with International Financial Reporting Standards andin the manner required by the Kenyan Companies Act. The Directors are of the opinion that the financialstatements give a true and fair view of the state of the financial affairs and the operating results of the groupand the company.The Directors’ responsibilities include: determining that the basis of accounting described in Note 2 is anacceptable basis for preparing and presenting the financial statements in the circumstances, preparation andpresentation of financial statements in accordance with International Financial Reporting Standards and inthe manner required by the Kenyan Companies Act and for such internal control as the directors determineis necessary to enable the preparation of financial statements that are free from material misstatements,whether due to fraud or error.Under the Kenyan Companies Act the Directors are required to prepare financial statements for eachfinancial year which give a true and fair view of the state of affairs of the group and the company as at theend of the financial year and of the operating results of the group for that year. It also requires the Directorsto ensure the group keeps proper accounting records which disclose with reasonable accuracy the financialposition of the group and the company.The Directors accept responsibility for the maintenance of accounting records which may be relied upon inthe preparation of financial statements, as well as adequate systems of internal financial control.The Directors have made an assessment of the group and the company’s ability to continue as a goingconcern and have no reason to believe the group and the company will not be a going concern for at leastthe next twelve months from the date of this statement.Approval of the financial statementsThe group and company financial statements, as indicated above, were approved by the Board of Directorson 29th March 2012 and were signed on its behalf by:Nizar N. JumaChairman29th March 201210JUBILEE HOLDINGS LIMITEDAnnual Report and Financial Statements 2011Sultan K. KhimjiDirector

CORPORATE GOVERNANCE STATEMENTThe Board of Directors, duly cognisant of its role in safeguarding shareholders’ assets and ensuring a decent return on investment,reaffirms its commitment to upholding policies and strategies that enhance transparency and accountability as part of the Company’scontinuing listing obligati

for the Aga Khan Fund for Economic Development (AKFED). Mr. Metcalf sits on the Company’s Board Audit and Compliance Committee, Board Finance Committee and Board Nominating and Human Resource Committee. Lutaf R. Kassam Mr. Kassam joined the Board in April 2006 and chairs its Finance Committee.