This Document Is Important and Requires Your Immediate Attention. Please Read It Carefully

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. PLEASE READ IT CAREFULLY

Action Required:

·  If you are in any doubt as to the course of action to be taken, you should consult your stockbroker, banker, lawyer, accountant or other professional adviser immediately.

·  If you have sold or transferred all your shares in Botswana Insurance Holdings Limited (“BIHL” or “the Company”), you should at once hand this Circular together with the Notice of the Extraordinary General Meeting (“EGM”) and the Form of Proxy to the agent through whom you effected the sale and transfer for onward transmission to the purchaser or transferee.

·  This Circular incorporates listing particulars and is issued in compliance with the Listing Requirements of the Botswana Stock Exchange for the purpose of giving information to the public with regard to the Shareholders of BIHL. The Botswana Stock Exchange assumes no responsibility for the accuracy of any of the statements made or opinions expressed in this Circular.

Registration number CO 90/1818

Share code: BIHL ISIN: BW 000 000 0033

Incorporated in the Republic of Botswana

(“BIHL” or “the Company”)

CIRCULAR TO SHAREHOLDERS

IN RELATION TO THE RELATED PARTY TRANSACTION AND INCORPORATING A NOTICE OF THE EGM AND A FORM OF PROXY

A notice convening an EGM of BIHL is to be held at Avani Gaborone Hotel & Casino (Gaborone Sun) on the 17th November 2015 at 1600hrs or any adjournments thereof, together with the Form of Proxy enclosed in the notice of the EGM. The Form of Proxy must be lodged at the Registered Office of the Company Secretary at c/o Plot 50371, Fairground Office Park not later than forty-eight (48) hours before the time set for holding the meeting. The lodging of the Form of Proxy will not preclude you from attending and voting in person at the meeting should you subsequently wish to do so.

Important Dates
Date of Circular / 26th October 2015
Last day and time for lodgement of Form of Proxy / 13th November 2015
Date and time of EGM / 17th November 2015
Press Announcement on results of EGM / 20th November 2015

The dates and times are subject to change. Any such change will be published in the press.

Stockbrokers Legal Advisor

TABLE OF CONTENTS

CLAUSE PAGE

1.  DEFINITIONS AND INTERPRETATION 4

2.  INTRODUCTION 5

3.  NATURE OF BIHL BUSINESS 5

4.  NATURE OF THE RELATED PARTY INTEREST 6

5.  DETAILS OF THE ACQUISITION 6

6.  FINANCIAL INFORMATION 9

7.  MAJOR SHAREHOLDERS 12

8.  INFORMATION ON DIRECTORS 12

9.  RELATED PARTIES 13

10.  DIRECTORS’ OPINIONS AND RECOMMENDATIONS 13

11.  INDEPENDENT EXPERT OPINION 13

12.  DIRECTORS’ RESPONSIBILITY 13

13.  OTHER INFORMATION 13

14.  NOTICE OF AN EXTRAORDINARY GENERAL MEETING 22

15.  FORM OF PROXY 23

CORPORATE INFORMATION
Head Office
Botswana Insurance Holdings Limited
(Registration Number CO 90/1818)
Plot 50374, Fairgrounds Financial Centre
Gaborone, Botswana
P. O. Box 336, Gaborone
Botswana / Directors
Mrs. Batsho Dambe-Groth
Mr. Gaffar Hassam
Mr. Chandra Chauhan
Mr. Andre Roux
Mr. John Hinchliffe
Mr. Mahube Chilisana Mpugwa
Mr. Heinie Werth
Mr. Gerrit van Heerde
Lieutenant General Tebogo Masire
Registered Office
Pricewaterhouse Coopers
Plot 50371 Fairground Office Park
Gaborone, Botswana
P. O. Box 294 Gaborone
Botswana / Sponsoring Broker
Motswedi Securities
Registration Number CO 97/2262
Plot 113, Unit 30, Kgale Mews
Private Bag 00223,
Gaborone, Botswana
Legal Advisors
Armstrongs Attorneys
2nd Floor, Acacia House,
Plot 54358
Cnr Khama Crescent Ext
PG Matante Road, New CBD
P O Box 1368
Gaborone, Botswana / Independent Expert
Imara Botswana Ltd
2nd Floor, Morojwa Mews
Unit 6, Plot 74770
Western Commercial Road, CBD
Gaborone

Registration number CO 90/1818

Share code: BIHL ISIN: BW 000 000 0033

Incorporated in the Republic of Botswana

(“BIHL” or “the Company”)

1.  DEFINITIONS AND INTERPRETATION

In this section unless otherwise stated or the context otherwise requires, the words in the first column have the meanings stated opposite them in the second column, words in the singular include the plural and vice versa, and words importing natural persons shall include juristic persons, whether corporate or incorporate, and vice versa:

“Act” the Companies Act, 2003, Act No 32 of 2004 as amended;

“Acquisition” the acquisition of 261,760,272 shares representing 25.1% issued share capital in NICO Holdings Limited;

“Acquisition Agreement” the Sale of Shares Agreement between BIHL as the purchaser and SEM as the seller to the Transaction;

“BIHL” or “the Company” Botswana Insurance Holdings Limited (registration number CO 90/1818) incorporated in the Republic of Botswana, regulated in terms of the Non-Bank Financial Regulatory Authority Act Cap 46;08 and listed on the BSE;

“Botswana” the Republic of Botswana;

“BSE” the Botswana Stock Exchange;

“BWP” the legal tender of the Republic of Botswana in which all monetary amounts in this Circular are expressed;

“Directors” the Board of Directors of BIHL;

“EGM” Extraordinary General Meeting of the Company to be held on 17th of November 2015;

“Listings Requirements” the listings requirements of the BSE;

“Independent Expert” Imara Holdings Limited, a company incorporated in accordance with the laws of Botswana;

“MK” the legal tender of Malawi in which all monetary amounts in this Circular are expressed;

“NICO” Nico Holdings Limited a financial services holding company incorporated in accordance with the laws of Malawi which is listed on the Malawian Stock Exchange which is the subject of the Transaction;

“Ordinary Resolution” a resolution passed by 50% of the votes of all Shareholders present or represented by proxy at the general meeting and eligible to vote on the matter.

“Related Party Transaction” in terms of the Listing Requirements, it means a transaction, or any variation or novation of an existing agreement between a listed company or any of its subsidiaries or associates of the subsidiaries;

“SEM” Sanlam Emerging Markets (Proprietary) Limited, a South African financial services company which is a 100% subsidiary of Sanlam Limited a listed company on the Johannesburg Stock Exchange;

“Shareholders” holders of Ordinary Shares of the Company;

“Transaction” the acquisition of 261,760,272 shares representing 25.1% issued share capital in NICO by BIHL from SEM.

“VWAP” the volume weighted average price over 60 days prior to the 23rd of September 2015.

2.  INTRODUCTION

2.1  BIHL proposes to enter into the Acquisition Agreement with SEM for the acquisition of 261,760,272 shares representing 25.1% issued share capital in NICO.

2.2  The Acquisition constitutes a Related Party Transaction in terms of the Listings Requirements of the BSE and is accordingly subject to approval by the Shareholders.

2.3  The purpose of this Circular is to provide Shareholders with initial information regarding the Acquisition and the Shareholders will be asked to approve the Ordinary Resolution necessary to implement the Acquisition at the forthcoming EGM.

3.  NATURE OF BIHL BUSINESS

3.1  BIHL is a company listed on the BSE and was incorporated in Botswana on the 21st of November 1990. The Company is regulated by the Non- Bank Financial Regulatory Authority Act Cap 46;08.

3.2  BIHL’s core business is in life assurance, general insurance and asset management while it has strategic investments in a number of companies that are enabling achievement of business objectives.

4.  NATURE OF THE RELATED PARTY INTEREST

4.1  BIHL intend to acquire 25.1% of the issued ordinary shares in NICO. SEM currently holds an equity stake of 25.1% in NICO and indicated that it will be agreeable to dispose of the investment to BIHL on an arms-length commercial terms.

4.2  The Transaction involves parties that are related through the beneficial material shareholding that SEM has in both BIHL and NICO, consequently the transaction is subject to section 10 of the BSE Listing Requirements.

5.  DETAILS OF THE ACQUISITION

5.1  Background Information of NICO

5.1.1  NICO Holdings is listed on the Malawian Stock Exchange and its VWAP as of the 23 September 2015 was MK30.00 (which is approximately BWP 0.50), which converts to a market capitalization of MK31.2billion (which is approximately BWP 600 000 000).

5.1.2  NICO was founded in 1970 and started trading in January 1971, and is headquartered in Blantyre, Malawi. The group operates in five countries including Malawi, Tanzania, Uganda, Zambia and Mozambique and approximately 70% of NICO operations remain in Malawi.

5.1.3  NICO operates its business through six segments which are, general insurance business, life insurance & pensions business, banking business, asset management, information technology and investment holding.

5.1.4  It is also involved in the hospitality industry and real estate industry as portfolio investments through some of its subsidiaries and associate companies.

5.1.5  NICO is the Malawian market leader in terms of diversification into financial services businesses outside Malawi which was implemented to mitigate the country’s risks. NICO in Malawi is comfortably maintaining the number one position in general lines insurance followed closely by its competitor, Old Mutual, the life insurance company.

5.1.6  The NICO Group has well established insurance and banking operations throughout Malawi. A common theme that seems to emerge from all the Malawian companies is retention of key staff, an issue that is at the core of the NICO Group’s endeavors to remain the top broad based financial services company in Malawi.

5.2  Organogram Structure of NICO

5.3  Details of the Acquisition Agreement

5.3.1  Details of SEM

5.3.1.1  The seller to the Transaction is SEM, a company incorporated in South Africa whose registered address is 2 Strand Road, Belleville, South Africa.

5.3.1.2  SEM is Sanlam Limited’s subsidiary responsible for investments in life assurance, short term insurance and asset management business in emerging markets outside South Africa. Sanlam Limited is listed on the on the Johannesburg Stock Exchange. SEM’s footprint currently extends to the following countries Botswana, Burundi, Ghana, Kenya, Malawi, Mozambique, Namibia, Nigeria, Rwanda, Tanzania, Gambia, Uganda, Zambia, India and Malaysia.

5.3.2  Consideration

The aggregate purchase price payable for the Transaction is approximately BWP 145 million. The market value of NICO is MK 31.3 billion (which is approximately BWP 600 000 000). This is based on a BWP/MK exchange rate of BWP1 = MK54. The purchase price is to be discharged by way of cash settlement through an authorized broker of the Malawian Stock Exchange.

5.3.3  Effective Date

Subject to Shareholders approval and the fulfillment of the conditions set out in clause 5.3.4 ,BIHL shall be a shareholder to NICO and be entitled to every benefit arising from being a shareholder in NICO.

5.3.4  Conditions

The Acquisition is subject to the fulfillment of the following conditions:

5.3.4.1  the shareholders in BIHL approving the acquisition of 261,760,272 shares representing 25.1% issued share capital in NICO at a duly convened EGM;

5.3.4.2  the approval of the BSE;

5.3.4.3  the regulatory approval of the Malawian Stock Exchange of the Transaction; and

5.3.4.4  the approval of the South African Reserve Bank of the Transaction.

5.3.5  Rationale for the Transaction

5.3.5.1  BIHL has historically found itself in a position of accumulating excess capital primarily through its mature subsidiary Botswana Life Insurance Limited, the leading life assurance company in Botswana with an estimated market share of 70%-75%. BIHL is continuously exploring investment opportunities in financial services in Botswana but this has become challenging due to the extent of BIHL’s existing investments in the local market.

5.3.5.2  BIHL realized a number of years ago that expansion into the Southern African region was the most viable option to utilize excess capital, however, this route has proven to be difficult as it inherently presented conflict of interest situations with its majority shareholder, SEM.

5.3.5.3  This situation is quite common where subsidiaries are producing profits significantly in excess of future capital required for organic growth, an example being the local commercial banks where excess capital have been returned to parent companies on a consistent basis since the 1990’s. In BIHL’s case it was decided that capital will rather be retained for business expansion.

5.3.5.4  The opportunity presented to buy 261,760,272 shares representing 25.1% issued share capital in NICO is attractive for the following reasons:

5.3.5.4.1  the business is well diversified into a number of financial services company spanning over 5 countries in Southern Africa;

5.3.5.4.2  the relatively new business in Uganda, Tanzania and Mozambique offers significant growth prospects and are closely monitored by experienced professionals in SEM.

5.3.5.4.3  the Malawian general lines and life assurance companies are well established business occupying the number one and two positions in terms of market share respectively in Malawi.

5.3.5.4.4  it offers BIHL an opportunity to expand into Southern Africa at a market related price with attractive growth opportunities and enhanced return on group equity value.

5.3.5.5  SEM owns 25.1% and 58.3% of the share capital of NICO and BIHL respectively. BIHL owns 100% of its operating subsidiaries in Botswana which differs significantly with the NICO structure where it has joint shareholding interest with SEM in various life and general lines subsidiaries in the Southern African region.

5.3.5.6  SEM considers the Acquisition as a good opportunity to assist BIHL in its regional diversification drive within acceptable risk parameters.

6.  FINANCIAL INFORMATION

6.1  Pro forma Balance Sheet

The pro forma balance sheet set out below is presented for illustrative purposes only, to provide information about how the Acquisition may affect the balance sheet of BIHL as at the 30 June 2015 should the Transaction been implemented on the date of the notice to the EGM. Due to the nature of a pro forma balance sheet, it may not accurately reflect the financial position of BIHL after the Acquisition.

Group Consolidated Statement of Financial Position as at 30 June 2015 / Pre Transaction / Post Transaction
P'000 / P'000
ASSETS
Property and equipment / 18 437 / 18 437
Intangible assets / 123 755 / 123 755
Long term reinsurance assets / 1 728 / 1 728
Investment property / 238 939 / 238 939
Investments in associates and joint venture / 1 594 330 / 1 739 330
Financial assets at fair value through profit or loss / 10 471 161 / 10 471 161
- Bonds (Government, public authority, listed and unlisted corporates) / 5 837 292 / 5 837 292
- Equity investments (Local and foreign) / 4 088 907 / 4 088 907
- Policy loan and other loan advances / 407 746 / 407 746
- Money market instruments / 137 216 / 137 216
Deferred tax asset / 495 / 495
Insurance and other receivables / 236 071 / 236 071
Tax refund due / 2 705 / 2 705
Cash, deposits and similar securities / 803 116 / 658 116
Total assets / 13 490 737 / 13 490 737
EQUITY AND LIABILITIES
Equity attributable to equity holders of parent
Stated capital / 130 821 / 130 821
Non distributable reserves / 585 408 / 585 408
Retained earnings / 2 126 393 / 2 126 393
Total equity attributable to equity holders of parent / 2 842 622 / 2 842 622
Non-controlling interests / 17 448 / 17 448
Total equity / 2 860 070 / 2 860 070
Liabilities
Policyholder liabilities under: / 10 194 238 / 10 194 238
- Insurance contracts / 7 950 007 / 7 950 007
- Investment contracts / 2 244 231 / 2 244 231
Deferred tax liability / 22 721 / 22 721
Insurance and other payables / 390 106 / 390 106
Short-term insurance contract liabilities / 8 587 / 8 587
Tax payable / 10 273 / 10 273
Related party balances / 4 742 / 4 742
Total equity and liabilities / 13 490 737 / 13 490 737

6.2  Working capital statement