MPICO2009

Annual Report 2009
Contents
Chairmans Statement MPICO DEVELOPS Corporate Governance REPORT OF THE DIRECTORS STATEMENT OF DIRECTORS RESPONSIBILITIES REPORT OF THE INDEPENDENT AUDITOR STATEMENTS OF FINANCIAL POSITION STATEMENTS OF COMPREHENSIVE INCOME STATEMENTS OF CHANGES IN EQUITY STATEMENTS OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS DETAILED STATEMENT OF COMPREHENSIVE INCOME (COMPANY ONLY) APPENDIX 1 48 5 8 11 15 17 18 19 20 21 23 24
Annual Report 2009
Blantyre CBD seen from the low density Nyambadwe suburb. MPICO notes a 10 to 12% rise in property prices over the year
Annual Report 2009
Blantyre CBD seen in the background from the Civic Centre. The road linking Blantyre with its twin suburb Limbe has been upgraded to dual carriageway for most of its length. This infrastructural development has also helped boost property prices in the city
Annual Report 2009
Chairmans Statement
During 2009, management spent a considerable amount of time planning and mobilising resources for the shopping mall to be built in Lilongwe near the junction of Mchinji and Kaunda roads, adjacent to the ABC Clinic. This ultra modern shopping mall will be the largest mall in Malawi and will cater for Malawi, Mozambique and Zambia. On account of its international perspective, it has been christened The Gateway. Construction starts in 2010 and handover is planned for the latter half of 2011.
ECONOMY IN GENERAL
The economy did reasonably well and GDP grew by 7.7%. In 2008 and 2007, growth in GDP was 9.7% and 8.6% respectively. The Reserve Bank of Malawi bank rate remains at 15.0% as from 2007. In terms of food production, the country had a maize surplus which helped to keep inflation low at an annual average of 8.4% despite increases in fuel prices.
SHARE PRICE
The companys share price dropped sharply during the year from MK4.30 to MK2.60 at the close of the year. This is due to capital flight as a result of the global credit crunch. It affected several companies on the Malawi Stock Exchange and the rest of the world despite an appreciable increase in the dividend payout for a number of stocks quoted on the local exchange including Mpico Limited.
THE NATIONAL PROPERTY MARKET

The average growth in property prices in Blantyre during the year is estimated to be between 10-12% and 15 20% for Lilongwe. This is due to higher demand for properties of all categories in Lilongwe in general. In the long term, property investment in Malawi is likely to remain an attractive investment because demand continues to outstrip supply. This is because at the current level of cost of capital, it is expensive to finance new developments. Turnover remained almost at par with the previous year at MK1.95 billion in 2009 (MK1.97 billion in 2008). Total expenditure increased from MK385.1 million to MK427.7 million as the group continued to refurbish its properties. The number of shareholders has reduced from 6,500 at the close of last year to 6,152 at the end of December 2009.
GROUP PERFORMANCE
Annual Report 2009
OPERATIONS
The group profit before fair value adjustment and tax is MK572 million whilst in 2008 it was MK461 million. This represents an increase of 24% over the previous year. The overall group profit before tax but including fair value adjustment is MK1.52 billion and for 2008 it was MK1.58 billion. The company continued to refurbish its properties during the year and it will continue to do so up to next year. Demand for space continued to rise and as a result, the vacancy rate was at 0.07% at the close of the year.
Nyumba Yanu is an MPICO joint venture with Fargo Limited on the edge of Maone Park Limbe and provides the opportunity for city residents to own a quality affordable house
Annual Report 2009
HUMAN RESOURCES
The development of staff to match with the requirements of the company has continued and one of the accounts staff, Mr. Samuel Yakobe, has successfully completed his final year for ACCA. Another member of staff is also in the final year for the same course and two others are taking courses in Information Technology and Estate Management respectively at degree level.
PROSPECTS
It is anticipated that there will continue to be real growth in rental income as demand for commercial space continues to rise.
DYE MAWINDO CHAIRMAN
Annual Report 2009
MPICO DEVELOPS
F IRST RE G I O NA L SH O P P IN G MA L L IN MA L A W I Construction of a new regional shopping centre in the City of Lilongwe commences at the end of June this year. MPICO Limited, Malawis listed property investment company, is to develop a $40 million, 18 000m shopping centre development in the western suburbs of Lilongwe, the countrys capital. The development is financed by MPICO, the National Bank of Malawi and two major international financial institutions. An experienced South African development team of developers, financiers, professional designers, engineers and contractors will manage the development and construction of the project for MPICO.
Explaining the thinking behind this project, Dye Mawindo, the chairman of MPICO, said: Lilongwe, with a population of more than one million has overtaken Blantyre as the countrys largest city and fastest growing urban region and, being centrally situated, is perfectly positioned to serve as a gateway to the whole of Central Africa, including Zambia, Mozambique and Zimbabwe. The new complex, which will be called The Gateway (in recognition of this central position), is strategically located at the important intersection of the north south Kaunda Road western bypass and the main east west Mchinji highway leading from Lilongwe to Zambia. It is only a short distance from the congested Lilongwe Old Town. The Gateway is on a prime and highly visible site in an area which is experiencing rapid middle and upper income residential growth, says Mawindo. Having operated in Malawi since 1972, MPICO is committed to the sustainable, long-term growth of the economy. We continue to deliver value to our clients, shareholders and communities in this country and this property investment is a tangible example of this
policy, said Gray Nthinda, MPICOs Managing Director in reference to the project. MPICOs instruction to the development managers, following a detailed market research study, was to create a regional centre, the first in Malawi, with institutional investment grade finishes of a standard comparable with those used in similar centres in South Africa. The centre will have a 150m long, 12m wide retail mall into which most of the shops will face. They will have 3m high glazed shop fronts. In addition, there will be skylights which will emphasise the double volume spaces in which the delicately structured truss supports will form a frame for the floating roof which is one of the architectural features. The outward facing food court faces onto the landscaped car park which will cater for more than 1100 vehicles providing six 2 bays per 100m . In addition, plans make allowance for a stand-alone petrol station and drive-up food outlet on the south-western corner of the site. We are aware that Lilongwe is a garden city and we have therefore ensured that the surrounding area will be landscaped to complement this image, said Dye
Annual Report 2009
Mawindo. In addition, greening features are being employed throughout, from initial planning through construction and the eventual ongoing management of the completed mall. The centre will accommodate some 80 retail outlets anchored by a major South African national food retailer who will occupy 3500 m2 in a strategic position within the mall so as to ensure maximum exposure for each of the other tenants. Many other big brand SA chains will also be taking space, as well a number of banks, service providers and local retailers. The restaurants and fast food outlets comprising the food court will be enhanced by a cinema complex with three cinemas, each with approximately 100 seats. Earthworks for the new centre will commence at the beginning of May this year and the main construction will commence some three months later. As Malawi experiences heavy summer rainfall, the construction programme provides for the roof and outer walls to be in place by November this year, says Mawindo. The official opening is scheduled for September 2011. The design allows for a second phase which will increase the size to 24 000m.
The South African architects on the project are leading SA retail architects, Stauch Vorster Inc, who have in-depth experience in major retail centre design throughout Africa. They are partnered with local architects, Kanjere and Associates. Gray Nthinda, MPICO Managing Director, has emphasised the important role that a major retail development of this size will play in Malawis local economy, Apart from creating employment opportunities, both during construction as well as thereafter, the new Gateway Centre will reduce the cost of many items bought regularly by the local population. The local fresh fruit and vegetable, meat and dairy products industries all benefit over time from supply chain logistics advantages, being in close proximity to the centre and envisaged to replace higher cost imported content from South Africa and elsewhere.
Tony van Heerden, who is co-ordinating the letting of the space in the development, says that some 70% of the available space is under negotiation. Anton Bieber, of Broll Malawi, who is based in Blantyre, is assisting with the leasing of stores to local Malawian retailers. Those interested in exploring letting opportunities may contact Mr van Heerden on +27 83 325 3987 or email tonyvh@mweb.co.za. Mr Bieber may be contacted on +265 99 996 8855 or email abieber@broll.co.mw.
Annual Report 2009
Examples of significant MPICO property initiatives within the city of Lilongwe. MPICO has been and remains the largest single property developer in the city and has noted property price rises over the past year of up to 20%, suggesting investment in property in Lilongwe and in Blantyre will remain a wise choice for the foreseeable future
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Annual Report 2009
Corporate Governance
MPICO endorses the code of corporate practices and conduct recommended in the King report on Corporate Governance (King II Report), and the directors are committed to the implementation of the practices contained in this report.
BOARD OF DIRECTORS
The Board of directors is responsible for guiding and monitoring Malawi Property Investment Company Limited on behalf of the shareholders.
business and considered reports from auditors to the company. The auditors have unrestricted access to this committee. The members are:-
Stewart Malata Chairman Andrew Barron Member
In terms of the Memorandum and Articles of Association of the company, the Board consisted of six directors as at 31st December, 2009. No director has had any material interest, directly or indirectly, in any contract reviewed or approved by the Board in the year under review. The board is assisted in its duties by the following committees:-
Osman Karim Member
APPOINTMENTS AND REMUNERATION COMMITTEE

This committee is responsible for making recommendations to the Board on the company framework of remuneration for all staff. The
Audit Committee Appointments and Remuneration Committee
committee also makes recommendations to the board regarding the appointment of senior management. They met twice during the year
AUDIT COMMITTEE
The committee has defined terms of reference and authority granted to it by the Board. They met four times in 2009 to review quarterly and annual financial statements including accounting policies as well as monitoring the effectiveness of internal controls. They also assessed the risks facing the
to consider the current conditions of service and to make appropriate recommendations for change. The members are:-
Andrew Barron Dye Mawindo Osman Karim
Chairman Member Member
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Annual Report 2009
The city of Blantyre stretches around Ndirande mountain with its CBD in the distance. As in Lilongwe MPICO initiated many of the most significant commercial and residential developments there
Chairmans Statement
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Annual Report 2009
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Annual Report 2009
MALAWI PROPERTY INVESTMENT COMPANY LIMITED
Consolidated Financial Statements for the year ended 31 December 2009
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MALAWI PROPERTY INVESTMENT COMPANY LIMITED Consolidated Financial Statements for the year ended 31 December 2009
REPORT OF THE DIRECTORS

The directors have pleasure in presenting the consolidated Financial Statements of Malawi Property Investment Company (MPICO) Limited and its subsidiary companies for the year ended 31 December 2009.
INCORPORATION AND REGISTERED OFFICE

MPICO Limited is a company incorporated in Malawi under the Malawi Companies Act, 1984. It was listed on the Malawi Stock Exchange in November 2007. The address of its registered office is: Old Mutual House Robert Mugabe Crescent P.O. Box 30459 Lilongwe 3
AREAS OF OPERATION
The company has 35 investment properties in the country mainly in Lilongwe and Blantyre, which it rents out to the Government and the Private Sector.
SHARE CAPITAL
The authorised share capital of the company is MK60 million (2008: MK60 million) divided into 1,200,000,000 Ordinary Shares of 5 tambala each (2008: 1,200,000,000 ordinary shares of 5 tambala each). The issued capital is MK57.451 million (2008: MK57.451 million) divided into 1,149,023,730 ordinary shares of 5 tambala each (2008: 1,149,023,730 ordinary shares of 5 tambala each), fully paid. The shareholders and their respective shareholding as at year-end were: Old Mutual Limited General Public Lincoln Investments Limited 2009 % 55.0 35.0 10.0 2008 % 55.0 35.0 10.0
PROFITS AND DIVIDENDS

The directors report a net profit for the year of MK1,086 million (2008 : MK1,006 million). Final Dividend for 2008 of MK160.8 million (2008: MK149.4 million), representing 14 tambala per share was declared and paid during the year. An interim dividend of MK80.4 million representing 7 tambala per share (2008: MK80.4 million) was declared and paid on 16 October 2009.
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REPORT OF THE DIRECTORS (continued)

DIRECTORS
The following directors, appointed in terms of the companys Articles of Association, served office during the year: Mr S. Malata Mr O. Karim Mr J.A. Regout Mr A. Barron Mr. D. Mawindo Mr G. A. Nthinda All year All year All year All year All year All Year
DIRECTORS INTERESTS
The directors noted below hold the following ordinary shares in the company at the year-end. Mr. D. Mawindo Mr. S. Malata Mr. G. Nthinda Mr. O. Karim : : : : 43,471 shares 85,689 shares 6,426,221 shares 38,193 shares
ACTIVITIES
MPICO is in the business of development, rental and management of property. It has subsidiary companies as follows: Subsidiaries of MPICO Limited Percentage of Control 100% 100% 50.75% 69.5% Nature of operations
Capital Developments Limited New Capital Properties Limited Capital Investments Limited Frontline Investments Limited
Development and rental of property Development and rental of property Development and rental of property Development and rental of property
AUDITORS
The company auditors, Deloitte, have indicated their willingness to continue in office and a resolution is to be proposed at the forthcoming Annual General Meeting to re-appoint them as auditors in respect of the companys 31 December 2010 financial statements.
BY ORDER OF THE BOARD
COSMAS KATULUKIRA COMPANY SECRETARY
16
STATEMENT OF DIRECTORS RESPONSIBILITIES

The Malawi Companies Act, 1984, requires the directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the company and the group as at the end of the financial year and of the operating results for that year. The Act also requires the directors to ensure that the company and the group keep proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the financial statements comply with the Malawi Companies Act, 1984. In preparing the financial statements the directors accept responsibility for the following: Maintenance of proper accounting records; Selection of suitable accounting policies and applying them consistently; Making judgements and estimates that are reasonable and prudent; Compliance with applicable accounting standards, when preparing financial statements; and Preparation of financial statements on a going concern basis unless it is inappropriate to presume that the company and the group will continue in business.
The directors also accept responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and the group and to maintain adequate systems of internal controls to prevent and detect fraud and other irregularities. The directors are of the opinion that the consolidated financial statements give a true and fair view of the state of the financial affairs of the company and of its operating results.
Director
Director
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REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF MALAWI PROPERTY INVESTMENT COMPANY LIMITED
P.O Box 30364 Capital City Lilongwe 3 Malawi Public Accountants Deloitte Second Floor Old Mutual House Robert Mugabe Crescent Tel : +265 (0)1 773 699 Fax : +265 (0)1 772 276 Email : lldeloitte@deloitte.co.mw www.deloitte.com
We have audited the financial statements and the consolidated financial statements of Malawi Property Investment Company Limited as set out on pages 19 - 47 which comprise the consolidated statement of financial position as at 31 December 2009, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Managements Responsibility for the Financial Statements

Management is responsible for preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of Malawi Property Investment Company Limited and of the group as of 31 December 2009, and of their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards and the Malawi Companies Act, 1984, so far as concerns the members of the company.
Deloitte Public Accountants Lilongwe, Malawi 21 January 2010
Audit Tax Consulting Financial Advisory

Resident Partners: N.T Uka J.S. Melrose L.L. Katandula V.W. Beza
A member firm of Deloitte Touche Tohmatsu
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STATEMENTS OF FINANCIAL POSITION

Notes ASSETS NON-CURRENT ASSETS Investment properties 5 & 6 Property, plant and equipment 7 Capital work in progress Subsidiary companies 8 Secured staff loans Total non-current assets CURRENT ASSETS Nyumba Yanu receivable 9 Receivables 10 Tax recoverable Amounts due from subsidiaries 11 Dividends receivable from subsidiaries Funds at call and on deposit Bank balances and cash Total current assets TOTAL ASSETS EQUITY AND LIABILITIES SHAREHOLDERS EQUITY Share capital Distributable reserves Non-distributable reserves Equity attributable to equity holders of the parent Minority interests Total equity NON-CURRENT LIABILITIES Severance pay provision Deferred taxation Group 2009 MK000 2008 MK000 2009 MK000 Company 2008 MK000
7,379,204 122,882 59,456 - 29,505 7,591,047
6,336,287 127,839 11,419 - 26,925 6,502,470
3,977,727 58,678 58,900 72,810 29,505 4,197,620
3,428,395 60,991 3,899 72,810 26,925 3,593,020
25,220 98,379 93,935 - - 396,308 7,072 620,914 8,211,961
48,393 179,509 11,292 - - 104,673 44,048 387,915 6,890,385
- 88,307 93,935 9,274 - 75,892 4,009 271,417 4,469,037
83,477 38,261 5,000 23,483 24,480 174,701 3,767,721
57,451 835,534 4,140,223 5,033,208 714,009 5,747,217
57,451 652,456 3,550,387 4,260,294 603,319 4,863,613
57,451 535,986 2,600,485 3,193,922 - 3,193,922
57,451 347,108 2,262,217 2,666,776 2,666,776
12 13
153,425 1,985,053 2,138,478
114,684 1,722,652 1,837,336
153,425 1,001,747 1,155,172
114,684 858,102 972,786
Total non-current liabilities CURRENT LIABILITIES Payables 14 Tax payable Bank overdraft Total current liabilities TOTAL EQUITY AND LIABILITIES
245,891 74,624 5,751 326,266 8,211,961
112,794 76,642 - 189,436 6,890,385
114,442 - 5,501 119,943 4,469,037
54,414 73,745 128,159 3,767,721
The financial statements were approved and authorised for issue by the Board of Directors on 21 January 2010 and were signed on its behalf by:
Director 19
Director
STATEMENTS OF COMPREHENSIVE INCOME

Notes INCOME Rental income 5 Increase in fair value of investment properties 16 Profit on disposal of assets Interest receivable Dividends receivable from subsidiaries Other income Total income EXPENDITURE Property and administration expenses Provision for doubtful receivables 10 Interest payable Total expenditure PROFIT BEFORE TAXATION TAXATION 17 18 Group 2009 2008 MK000 MK000 874,882 953,632 - 75,916 - 48,815 1,953,245 747,385 1,120,635 1,288 65,110 - 32,124 1,966,542 Company 2009 2008 MK000 MK000 402,307 487,818 - 24,989 161,510 213,892 1,290,516 347,546 772,161 1,288 27,335 79,350 119,674 1,347,354
405,445 19,219 2,990 427,654 1,525,591 439,633 1,085,958
360,947 17,324 6,832 385,103 1,581,439 575,002 1,006,437
350,872 14,166 2,832 367,870 922,646 234,636 688,010
293,358 15,033 6,497 314,888 1,032,466 357,229 675,237
PROFIT FOR THE YEAR APPROPRIATION OF PROFIT FOR THE YEAR Distributable reserves Non-distributable reserves 16 Amounts attributable to members of the company Amounts attributable to minority interest Basic earnings per share (MK) 19 Analysed as: - Distributable (MK) - Non-distributable (MK)
343,942 589,836 933,778 152,180 1,085,958 0.81 0.30 0.51
222,184 679,209 901,393 105,044 1,006,437 0.78 0.19 0.59
349,742 338,268 668,010 - 688,010
135,555 539,682 675,237 675,237
The Group and Company had no other comprehensive income in the current or prior period.
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STATEMENTS OF CHANGES IN EQUITY

Attributable Non- to equity Share Distributable distributable capital reserve reserve MK000 MK000 MK000 Group For the year ended 31 December 2008 At the beginning of the year Distributable profit for the year Non-distributable profit for the year Dividends declared Final 2007 Dividends declared Interim 2008 At the end of the year For the year ended 31 December 2009 At the beginning of the year Distributable profit for the year Non-distributable profit for the year Dividends declared Final 2008 Dividends declared Interim 2009 At the end of the year
holders of the parent MK000
Minority interest MK000
Total MK000
57,451 - - - - 57,451
660,078 222,183 - (149,373) (80,432) 652,456
2,871,178 - 679,209 - - 3,550,387
3,588,707 222,183 679,209 (149,373) (80,432) 4,260,294
533,925 48,755 56,289 (17,825) (17,825) 603,319
4,122,632 270,938 735,498 (167,198) (98,257) 4,863,613
57,451 - - - - 57,451
652,456 343,942 - (80,432) (80,432) 835,534
3,550,387 - 589,836 - - 4,140,223
4,260,294 343,942 589,836 (80,432) (80,432) 5,033,208
603,319 49,788 102,392 (17,215) (24,275) 714,009
4,863,613 393,730 692,228 (97,647) (104,707) 5,747,217
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STATEMENTS OF CHANGES IN EQUITY (continued)

Share Distributable capital reserve MK000 MK000 Company For the year ended 31 December 2008 At the beginning of the year Distributable profit for the year Non-distributable profit for the year Dividends declared Final 2007 Dividends declared Interim 2008 At the end of the year For the year ended 31 December 2009 At the beginning of the year Distributable profit for the year Non-distributable profit for the year Dividends declared Final 2008 Dividends declared Interim 2009 At the end of the year Nondistributable reserve MK000
Total MK000
57,451 - - - - 57,451
441,358 135,555 - (149,373) (80,432) 347,108
1,722,535 - 539,682 - - 2,262,217
2,221,344 135,555 539,682 (149,373) (80,432) 2,666,776
57,451 - - - - 57,451
347,108 349,742 - (80,432) (80,432) 535,986
2,262,217 - 338,268 - - 2,600,485
2,666,776 349,742 338,268 (80,432) (80,432) 3,193,922
The distributable reserve is available for distribution to shareholders as dividends. The non-distributable reserve relates to unrealised capital profits (net of related deferred tax) on valuation of investment properties and is not available for distribution in terms of the Malawi Companies Act, 1984. SHARE CAPITAL Authorised: 1,200,000,000 Ordinary shares of 5t each (2008: 1,200,000,000 Ordinary Shares of 5t each) Issued and fully paid: 1,149,023,730 Ordinary shares of 5t each (2008: 1,149,023,730 Ordinary Shares of 5t each) Total issued and fully paid share capital Group 2009 MK000 2008 MK000 2009 MK000 Company 2008 MK000
60,000
60,000
60,000
60,000
57,451 57,451
57,451 57,451
57,451 57,451
57,451 57,451
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STATEMENTS OF CASH FLOWS

Notes Cash flows from operating activities Net cash generated from operations Group 2009 MK000 2008 MK000 Company 2009 2008 MK000 MK000
21
774,435
321,650
389,135
154,943
Returns on investments and servicing of finance Dividends received Interest received Interest paid Dividends paid to outside shareholders Dividends paid to shareholders, including tax Net cash flow from returns on investments and servicing of finance Taxation paid Net cash flow from operating activities Cash flow from investing activities Purchase of property, plant and equipment and additions to investment properties (including capital work in progress) Proceeds on disposal of property, plant and equipment and investment properties Movement in Nyumba Yanu receivable Staff long-term loans movement Net cash flow from investing activities Net cash flow before financing Cash flow from financing activities Intercompany loan NET CASH FLOW FOR THE YEAR CASH AND CASH EQUIVALENTS at the beginning of the year CASH AND CASH EQUIVALENTS at the end of the year
- 75,916 (2,990) (41,490) (160,864)
- 65,110 (6,832) (35,650) (229,805)
166,510 24,989 (2,832) - (160,864)
124,350 27,335 (6,497) (229,805)
(129,428) (261,893) 383,114
(207,177) (60,270) 54,203
27,803 (258,671) 158,267
(84,617) (56,149) 14,177
(154,799) - 23,173 (2,580) (134,206) 248,908
(49,496) 1,359 69,052 (945) 19,970 74,173
(129,250) - - (2,580) (131,830) 26,437
(24,492) 1,359 (945) (24,078) (9,901)
- 248,908
- 74,173
- 26,437
34,860 24,959
148,721
74,548
47,963
23,004
15
397,629
148,721
74,400
47,963
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NOTES TO THE FINANCIAL STATEMENTS

1. General information
The main business of the Group, which is incorporated in Malawi, comprises the development, rental and management of property. The Groups administrative office and registered office is in Old Mutual House, City Centre, Lilongwe.
2. Adoption of new and revised International Financial Reporting Standards

In the current period, the Group has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (the IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for accounting periods beginning on 1 January 2009. Except for IAS 1 Presentation of Financial Statements and IFRS 8 Operating Segments, the adoption of these new and revised Standards and Interpretations did not have a material impact on the financial statements for the group and company. The adoption of IAS 1 has introduced terminology changes (including revised titles for the financial statements) and changes in format and content of the financial statements. The adoption of IFRS 8, on the other hand, has resulted into a change in the way operating segments are identified. The effect of this change is reflected in note 5. IAS 23 Borrowing Costs (as revised in 2007) has had minimal impact with the principal change being to eliminate the option to expense all borrowing costs when incurred. At the date of authorisation of these financial statements, the following relevant standards and Interpretations were in issue but not yet effective: IFRS 2 Group Cash-settled Share-based Payments, the amendments to IFRS 2: Share-based Payment to provide additional guidance on the accounting for share-based payment transactions among group entities and is effective for periods beginning on or after January 2010 or June 2009; IFRS 9 Financial Instruments: Classification and Measurement. This Standard introduces new requirements for the classification and measurement of financial assets and is effective for periods beginning on or after 1 January 2013; IAS 24 Related Party Disclosures, the amendments to IAS 24 simplify the disclosure requirements for entities that are controlled, jointly controlled or significantly influenced by a government (referred to as governmentrelated entities) and clarify the definition of a related party and is effective for periods beginning on or after 1 January 2011; IFRS 3 Business Combinations and IAS 27 Consolidated and Separate Financial Statements (as revised in 2008). These two standards were published as a package in January 2008, together with consequential amendments to IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures. The revisions principally affect the accounting for transactions or events that result in a change in the Groups interests in its subsidiaries. The revised standards are effective for periods beginning on or after 1 July 2009; IAS 32 Classification of Rights Issues. This relates to amendments to IAS 32 rights, options and warrants which otherwise meet the definition of equity instruments in IAS 32.11. It is effective for periods beginning on or 1 February 2010;
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NOTES TO THE FINANCIAL STATEMENTS (continued)

FRIC 17 Distributions of Non-cash Assets to Owners There have been new interpretations to this standard I which will become effective for periods beginning on or after 1 July 2009; IFRIC 18 Transfers of Assets from Customers addresses the accounting by recipients for transfers of property, plant and equipment from customers. The recipient should recognise the asset at its fair value on the date of the transfer, with the credit recognised as revenue in accordance with IAS 18 Revenue and is effective for transfers of assets from customers received on or after 1 July 2009; and IFRIC 19 Extinguishing financial liability with equity instruments; the interpretation addresses divergent accounting by entities issuing equity instruments in order to extinguish all or part of a financial liability (often referred to as debt for equity swap). It is effective for the periods beginning on or after 1 July 2010.
The directors anticipate that, other than IFRS 9, these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group. IFRS 9 will impact the presentation and measurement of financial assets.
3. Significant accounting policies

The principal accounting policies are set out below.
3.1 Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards.
3.2 Basis of preparation

The consolidated financial statements are prepared in terms of the historical cost convention with the exception of investment properties, which are included at valuation. No other procedures have been adopted to reflect the impact on the financial statements of specific price changes or changes in the general level of prices.
3.3 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Malawi Property Investment Company Limited (MPICO) and entities controlled by MPICO. Control is achieved where the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective dated of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Minority interests in the net assets (excluding goodwill) of consolidated subsidiaries are identified separately from the Groups equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minoritys share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minoritys interest in the subsidiarys equity are allocated against the interest of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.
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3. Significant accounting policies (Continued) 3.4 Property, plant and equipment
Property, plant and equipment are shown at cost, less related depreciation. Property, plant and equipment are depreciated on the straight line basis at rates that will reduce book amounts to estimated residual values over the anticipated useful lives of the assets as follows: Fixtures, equipment and computers Motor vehicles 5 years 4 years
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at every year-end.
3.5 Investment properties

Investment property, which is property held to earn rentals and/or for capital appreciation, is measured initially at its cost, including transaction costs. Subsequent to initial recognition, investment property is measured at fair value. Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the year in which they arise. The increase in the fair value of investment properties, net of the related deferred tax, is appropriated to a nondistributable reserve in compliance with profit distribution restrictions included in the Malawi Companies Act, 1984. In the event of disposal of the property held at fair value, the related portion of the reserve is transferred to the distributable reserve. The statement of comprehensive income will then report a profit or loss on disposal based on the difference between proceeds and the carrying value. A property is deemed to have been sold when formal Government consent to the sale is received.
3.6 Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
3.7 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax. Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Groups liability for current tax is calculated using tax rates that have been enacted by the end of the reporting period. Deferred tax Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of the taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
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Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax for the year Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items that are recognised outside profit or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in the accounting for the business combination.
3.8 Foreign currencies

(a) Functional and presentation currency Items included in the financial statements of each of the Groups companies are measured using Malawi Kwacha, the functional currency of the primary economic environment in which the entire Group operates. The consolidated financial statements are presented in Malawi Kwacha, which is the Groups functional and presentation currency. (b) Transactions and balances Transactions in currencies other than Malawi Kwacha are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognised in profit or loss in the period in which they arise except for exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
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3. Significant accounting policies (Continued) 3.9 Pension fund
MPICO contributes to a defined contribution pension scheme administered by Old Mutual Malawi who are also a shareholder of the company. All payments made to the scheme are charged as an expense as they fall due.
3.10 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
3.11 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated rebates and other similar allowances. Rental income from investment properties is recognised on a straight-line basis over the term of the relevant lease. Such rental income recognition commences when an occupancy agreement with a tenant is formalised. Dividend revenue from investments is recognised when the shareholders right to receive payment has been established. Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that assets net carrying amount.
3.12 Financial assets

Investments are recognised and derecognised on a trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial assets are classified into the following specified categories: financial assets as at fair value through profit or loss (FVTPL), held-to-maturity investments, available-for-sale (AFS) financial assets and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest basis for debt instruments other than those financial assets designated as at FVTPL.
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Financial assets at FVTPL Financial assets are classified as at FVTPL where the financial asset is either held for trading or it is designated as at FVTPL. A financial asset is classified as held for trading if: it has been acquired principally for the purpose of selling in the near future; or it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or it is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if: such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or the financial asset forms part of a Group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Groups documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract (asset or liability) to be designated as at FVTPL.
Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. AFS financial assets Listed shares and listed redeemable notes held by the Group that are traded in an active market are classified as being AFS and are stated at fair value. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the investments revaluation reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss for the year. Dividends on AFS equity instruments are recognised in profit or loss when the Groups right to receive payments is established. The fair value of AFS monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. The change in fair value attributable to translation differences that result from a change in amortised cost of the asset is recognised in profit or loss, and other changes are recognised in other comprehensive income.
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3. Significant accounting policies (Continued) 3.12 Financial assets (continued)
Loans and receivables Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial. Impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the assets carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period. With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income.
3.13 Financial liabilities and equity instruments issued by the Group

Classification as debt or equity Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs. Dividends on ordinary shares Dividends on ordinary shares are recognised in equity in the period in which they are approved by the company.
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Financial liabilities Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities. Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL. A financial liability is classified as held for trading if: it has been incurred principally for the purpose of repurchasing in the near future; or it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if: uch designation eliminates or significantly reduces a measurement or recognition inconsistency that would s otherwise arise; or the financial liability forms part of a Group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Groups documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract (asset or liability) to be designated as at FVTPL.
Financial liabilities at FVTPL Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. Other financial liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Groups obligations are discharged, cancelled or they expire.
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3. Significant accounting policies (Continued) 3.14 Impairment of non-financial assets
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risk specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately. If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.
3.15 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
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4. Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements, in conformity with IFRS, requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the principal accounting policies of the company. Estimates and judgements are evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
4.1 Critical judgements in applying the Groups accounting policies

No critical judgements were made by the directors during the current period which would have a material impact on the financial statements.
4.2 Key sources of estimation uncertainty

Valuation of investment properties Investment properties are carried at fair value in accordance with IAS 40 Investment Property. Fair values have been determined through valuations carried out by Knight Frank, qualified and registered valuers. Provision for doubtful debts Provision for doubtful debts is based upon a policy which takes into account past transaction history with debtors and projected collections. Actual collection experience may differ from the current projections. Provision for severance pay An estimate of MK153 million (2008: MK115 million) has been made in respect of severance pay based on the current provisions of the Employment Law and based on the assumption that employee terminations will be evenly spread between the immediate future and anticipated retirement dates. Some of these current provisions of the law are the subject of legal challenges and reviews. As such the actual amounts to be paid in future may be different.
5.
Operating segments
5.1 Adoption of IFRS 8 Operating Segments

The Group has adopted IFRS 8 Operating Segments with effect from 1 January 2009. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance. In contrast, the predecessor Standard (IAS 14 Segment Reporting) required an entity to identify two sets of segments (business and geographical), using a risks and returns approach, with the entitys system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments. As a result, following the adoption of IFRS 8, the identification of the Groups reportable segments has changed.
5.2 Products and services from which reportable segments derive their revenues
The Group has one principal line of business rental and management of investment property. In prior years, segment information reported externally was analysed on the basis of geographical markets. However, information reported to and used by the Managing Director for decision making for the purposes of resource allocation and assessment of segment performance is more specifically focussed on each of the Groups current 35 investment properties. Though one of the properties contributed 14% (MK120 million) of the total rental revenue in the current year and its value at MK972 million was 13% of the total investment property value, no single investment property contributes close to 75% of the total revenue from external customers.
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5. Operating segments (continued)
5.3 Geographical information

The Groups investment property is situated principally in the two major cities in Malawi. The following analysis shows the rental income, investment property values and property fair value movements by geographical market. GROUP Rental income Property values 2009 2008 MK000 MK000 Blantyre Lilongwe Other markets Total 148,837 700,565 25,480 874,882 202,336 522,941 22,108 747,385
Fair value increase 2009 MK000 1,317,787 5,803,217 258,200 7,379,204
2008 MK000 1,190,056 4,919,231 227,000 6,336,287
2009 MK000 133,131 795,981 24,521 953,633
2008 MK000 223,381 869,854 27,400 1,120,635
COMPANY Rental income Property values 2009 2008 MK000 MK000 Blantyre Lilongwe Other markets Total 110,072 268,083 24,152 402,307 94,538 232,082 20,926 347,546
Fair value increase 2009 MK000 1,087,188 2,644,339 246,200 3,977,727
2008 MK000 979,856 2,232,039 216,500 3,428,395
2009 MK000 114,206 349,768 23,844 487,818
2008 MK000 141,281 603,480 27,400 772,161
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5.4 Information about major customers
Included in total rentals income are rentals amounting MK572 million (2008: MK494 million) in respect of property rented by the Government of Malawi. At rental value of 67% (2008: 66%), the Government is the single largest tenant with the other rental revenues being evenly spread over several tenants. Group 2009 MK000 2008 MK000 Company 2009 2008 MK000 MK000
6. Investment properties
VALUATION Freehold Leasehold Total investment properties 6,016,985 1,362,219 7,379,204 5,201,062 1,135,225 6,336,287 3,530,307 447,420 3,977,727 3,071,735 356,660 3,428,395
Movements in the valuation of investment properties are set out below. VALUATION Freehold At the beginning of the year Additions Fair value adjustment Realignment At the end of the year Leasehold At the beginning of the year Additions Fair value adjustment Realignment At the end of the year Total valuation
5,201,062 73,232 727,985 14,706 6,016,985
4,204,062 7,316 989,684 - 5,201,062
3,071,735 54,777 441,035 (37,240) 3,530,307
2,331,634 740,101 3,071,735
1,135,225 16,053 225,647 (14,706) 1,362,219 7,379,204
1,004,274 - 130,951 - 1,135,225 6,336,287
356,660 6,737 46,783 37,240 447,420 3,977,727
324,600 32,060 356,660 3,428,395
The registers of land and buildings are open for inspection at the registered offices of the company. Investment properties were revalued to fair value as at 31 December 2009 on the basis set out in Note 3.5 to the financial statements. The valuations were carried out by Mr. Don Whayo B.Sc., Dip. (Urb. Man.) B.A, MSIM, MRICS, Chartered Valuation Surveyor, in accordance with the Appraisal and Valuation Standards laid down by the Royal Institution of Chartered Surveyors and the International Valuation Standards. Included in the investment properties balance as at 31 December 2009 were properties encumbered as follows: 1. Lingadzi House valued at MK451 million (2008: MK391 million) The property is the subject of a charge in favour of First Merchant Bank to secure a sum of MK70 million and a further charge to secure a sum of MK30 million registered on 16 May 2003 and 29 June 2006 respectively.
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7. Plant and equipment
Fixture & Fittings Generators MK000 MK000 16,522 - 34,407 50,929 50,929 8,276 59,205 20,794 - - 20,794 20,794 - 20,794 Motor vehicles MK000 4,621 (4,621) 18,770 18,770 18,770 - 18,770 Furniture & equipment MK000 54,846 (1,270) 31,115 84,691 84,691 9,201 93,892
GROUP COST At 1 January 2008 Disposals Additions At 31 December 2008 At 1 January 2009 Additions At 31 December 2009 ACCUMULATED DEPRECIATION At 1 January 2008 Disposals Charge for the year At 31 December 2008 At 1 January 2009 Charge for the year At 31 December 2009 CARRYING AMOUNT Carrying amount 31 December 2009 Carrying amount 31 December 2008
Total MK000 96,783 (5,891) 84,292 175,184 175,184 17,477 192,661
8,576 - 2,734 11,310 11,310 5,785 17,095
9,631 - 2,079 11,710 11,710 1,723 13,433
4,621 (4,621) 4,693 4,693 4,693 4,693 9,386
13,991 (1,199) 6,840 19,632 19,632 10,233 29,865
36,819 (5,820) 16,346 47,345 47,345 22,434 69,779
42,110 39,619
7,361 9,084
9,384 14,077
64,027 65,059
122,882 127,839
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COMPANY COST At 1 January 2008 Disposals Additions At 31 December 2008 At 1 January 2009 Additions At 31 December 2009 ACCUMULATED DEPRECIATION At 1 January 2008 Disposals Charge for the year At 31 December 2008 At 1 January 2009 Charge for the year At 31 December 2009 CARRYING AMOUNT Carrying amount 31 December 2009 Carrying amount 31 December 2008 Fixture & Fittings Generators MK000 MK000 Motor vehicles MK000 Furniture & equipment MK000
Total MK000
11,673 - 157 11,830 11,830 3,523 15,353
18,123 - - 18,123 18,123 - 18,123
4,621 (4,621) 18,770 18,770 18,770 - 18,770
54,846 (1,270) 1,667 55,243 55,243 9,212 64,455
89,263 (5,891) 20,594 103,966 103,966 12,735 116,701
6,318 - 1,731 8,049 8,049 1,705 9,754
9,126 - 1,811 10,937 10,937 1,455 12,392
4,621 (4,621) 4,693 4,693 4,693 4,693 9,386
13,991 (1,198) 6,503 19,296 19,296 7,195 26,491
34,056 (5,819) 14,738 42,975 42,975 15,048 58,023
5,599 3,781
5,731 7,186
9,384 14,077
37,964 35,947
58,678 60,991
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8. Subsidiary companies
Wholly owned subsidiaries New Capital Properties Limited Capital Developments Limited Other subsidiaries Frontline Investments Limited Capital Investments Limited Total investment in subsidiary companies 2009 % 100.00 100.00 2008 % 100.00 100.00 2009 MK000 570 68,969 2008 MK000 570 68,969
69.50 50.75
69.50 50.75
1,870 1,401 72,810
1,870 1,401 72,810
The investments in subsidiary companies comprise ordinary shares and are stated at cost. The subsidiaries have no other forms of shares in issue.
9. Nyumba Yanu receivable

This relates to advances made and direct costs incurred on the houses being constructed under the Nyumba Yanu Project. Nyumba Yanu, a subsidiary of Fargo Ltd, was the proprietor of the absolute title in 34 plots of land comprised in title number NK 309 comprising 1.97 hectares of land situated at Maone in Blantyre. Nyumba Yanu obtained planning approval in accordance with the Local Government Act and the Town & Country Planning Act for the construction of 34 houses on the land. The Group, through New Capital Properties Ltd, financed the construction of the houses by Fargo Ltd. No interest is charged by the Group on the amounts advanced but the Group is selling the houses whose construction was completed in 2007. MPICO has a caution on the land. During the year 7 houses (2008: 15 houses) were sold and deposits amounting to MK15.98 million (2008: MK18 million were received towards the purchase of the remaining 12 houses (2008: 19 houses). The houses are let to third parties at commercial rates. This receivable amount was less than the estimated net realisable value on the sale of houses as at year-end taking into account the rent being received on these houses. The movement on the account in the year is detailed below: Opening balance Advances made in the year Recovery on sale of houses Closing balance GROUP 2009 2008 MK000 MK000 48,393 - (23,173) 25,220 117,445 3,778 (72,830) 48,393
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Group 2009 MK000 2008 MK000 Company 2009 2008 MK000 MK000
10. Receivables
Rental and service charges Prepaid property expenses Valuation and consultancy receivables Staff receivables Other receivables Provision for doubtful receivables Total receivables 65,985 21,202 28,047 32,673 3,077 (52,605) 98,379 185,665 12,196 2,415 23,011 7,985 (51,763) 179,509 41,838 19,773 28,047 32,673 2,746 (36,770) 88,307 77,007 10,484 2,415 23,011 6,443 (35,883) 83,477
Interest is charged on receivables in respect of outstanding rentals at the prevailing commercial bank lending rate. As at year end the amount outstanding from Government was nil (2008: MK112 million) for the Group {Company nil (2008: MK35 million)}. The total interest charged on overdue Government rentals and other tenants amounted to MK75 million (2008: MK73 million) {Company MK16.3 million (2008: MK23 million)} for the year. During the year under review, the Government has cleared all its outstanding rentals and made an advance payment covering a period to February 2010. The prepaid rentals have been disclosed under payables in note 14. The rest of the Groups receivables are spread on a large number of counterparties and tenants. The Group has provided fully for all receivables over 90 days except for rentals receivable from Government because historical experience is such that receivables that are past due beyond 90 days are generally not recoverable. Movement in provision for doubtful receivables Balance at beginning of the year Amounts written off during the year Amounts recovered during the year Increase in provision recognised in the statement of comprehensive income Balance at end of the year 51,763 - (18,377) 19,219 52,605 56,721 (8,680) (13,602) 17,324 51,763 35,883 - (13,279) 14,166 36,770 36,616 (8,682) (7,084) 15,033 35,883
In determining the recoverability of a rentals receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. Except for the Government which accounts for approximately 67% (2008: 66%) rental income, the concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the provision already made for doubtful receivables.
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11. Related party transactions
At the year-end, the company had the following balances with subsidiary companies. The company also had staff loans and advances as disclosed in the statement of financial position and in note 10 to the financial statements. Amounts owed by related parties New Capital Properties Limited Capital Developments Limited Frontline Investments Limited Capital Investments Limited Total balances with subsidiaries
2009 MK000 - - 269 9,005 9,274
2008 MK000 9,854 11,558 5,581 11,268 38,261
MPICO Group had the following transactions and balances with Old Mutual, the parent company: Pension contribution costs for the year Rental income and service charges for the year Amount receivable from Old Mutual SA Old Mutual Group internal auditors remuneration (excluding expenses) 2009 MK000 16,623 2,368 - 3,529 2008 MK000 9,287 3,261 293 2,199
Rental income and service charges for the year relates to the rentals charged by MPICO for the office space that Old Mutual occupies in Old Mutual Building in Lilongwe. The service charges relate to Old Mutuals share of utilities paid by MPICO that are then recovered from the tenants and the service charges are charged based on office space occupied. These transactions are at arms-length. The balances due to MPICO relate to unsettled management fees, net of payments made on behalf of the company.
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During the year, the company entered into the following transactions with its subsidiary companies. Management fees charged to subsidiaries Compensation of key management personnel During the year loans totalling MK16.4 million (2008: MK4.0 million) were advanced to employees in key positions. At 31 December 2009 the total loans balance outstanding from employees in key positions was MK36.3 million (2008: MK17.0 million). These loans were granted on the same interest and repayment terms as loans to other staff members. Furthermore, emoluments paid to the employees in key positions during the year were as follows: Salary, housing allowance, pension and other benefits 72,201 51,070 Company 2009 2008 MK000 MK000 172,366 94,476
Loans and advances to directors as at 31 December 2009 amounted to MK1.7 million (2008: MK10.6 million). These were granted on the same interest and repayment terms as loans to staff members. Group 2009 MK000 2008 MK000 Company 2009 2008 MK000 MK000
12. Provisions
Severance pay 153,425 114,684 153,425 114,684
The provisions for severance pay relate to severance pay allowance provided for in accordance with the Employment Act and the Groups conditions of service. The amount has been determined as detailed in note 4.2 to the consolidated financial statements.
13. Deferred taxation

At the beginning of the year Charged to statement of comprehensive income At the end of the year 1,722,652 262,401 1,985,053 1,294,578 428,074 1,722,652 858,102 143,645 1,001,747 601,703 256,399 858,102
41

Group 2008 MK000 Company 2009 2008 MK000 MK000
2009 MK000
14. Payables
Accruals Prepaid rentals Other payables Litigation provisions Property expenses payables Total payables 46,509 147,416 39,803 - 12,163 245,891 8,595 42,225 25,526 13,103 23,345 112,794 41,816 49,401 20,368 - 2,857 114,442 4,973 10,717 25,621 13,103 54,414
Accruals are in respect of various expenses incurred but whose invoices had not yet been received or received but not booked as at year-end. Prepaid rentals comprise of rentals paid in advance by tenants as at year-end. MK123.6 million (2008: nil) [MK35.1 million (2008: nil) for company] of total prepaid rentals figure relates to amounts prepaid by the Malawi Government. The rest of the prepaid rentals are spread over several other tenants. The prepaid amounts do not attract any interest charges. The provision in respect of litigation and other claims relates to an estimate of the claims and related legal costs likely to be settled by the Group with regard to various legal claims against the Group. The estimate is based on advice from legal counsel. Property expenses payables relate to unpaid but booked invoices for property maintenance and other directly attributable property management costs. No interest is chargeable on these payables and there is no specific allowed credit period from the date of the invoice but the Groups financial risk management policies include ensuring that invoices are paid within 30 days.
42

2009 MK000
15. Cash and cash equivalents as stated in the statement of financial position
Funds at call and on deposit Bank balances and cash Bank overdraft Total cash and cash equivalents 396,308 7,072 (5,751) 397,629 104,673 44,048 - 148,721 75,892 4,009 (5,501) 74,400 23,483 24,480 47,963
16. Increase in fair value of investment properties

During the year, a fair value adjustment to investment properties has been credited and the associated tax has been charged to the statement of comprehensive income. To ensure compliance with profit distribution rules under company law in Malawi, the net of tax balance has been transferred to a non-distributable reserve. This is analysed as follows: Fair value adjustment credited to statement of comprehensive income Related deferred tax Minority interest Amount transferred to non-distributable reserves
953,632 (261,404) (102,392) 589,836
1,120,635 (385,137) (56,289) 679,209
487,818 (149,550) - 338,268
772,161 (232,479) 539,682
43

2009 MK000
17. Profit before taxation

Profit before taxation is arrived at after charging/(crediting): Auditors remuneration Group internal auditors - remuneration - expenses Depreciation of property, plant and equipment Profit on disposal of property, plant and equipment Directors remuneration - fees for services as directors - for managerial services Bad debts Pension costs Staff costs 24 staff in 2009 (22 in 2008) 7,399 3,529 3,040 22,434 - 9,165 26,276 19,219 7,425 137,160 6,974 2,199 3,248 16,346 (1,288) 9,015 32,808 17,324 3,715 91,338 4,236 3,529 3,040 15,048 - 3,459 26,276 14,166 7,425 137,160 4,054 2,199 3,248 14,738 (1,288) 3,799 32,808 15,033 3,715 91,338
18. Taxation
Income tax Deferred tax Divided tax Total taxation charge Reconciliation of effective tax rates to standard tax rate: Effective taxation rates Impact of dividend income not taxed Other permanent differences Standard tax rate 28.8% - 1.2% 30.0% 36.4% - (6.4%) 30.0% 25.4% 5.3% (0.7%) 30.0% 34.6% 2.3% (6.9%) 30.0% 160,581 262,401 16,651 439,633 125,814 428,074 21,114 575,002 74,340 143,645 16,651 234,636 79,716 256,399 21,114 357,229
44

2009 MK000
19. Earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: Distributable profit Non-distributable profit Profit for the year attributable to equity holders of the parent Weighted average number of ordinary shares for the purposes of basic earnings per share 2009 MK 343,942,000 589,836,000 933,778,000 2008 MK 222,184,000 679,209,000 901,393,000
1,149,023,730 1,149,023,730
20. Dividends declared

The annual general meeting held on 13 May 2009 approved a dividend of MK160.8 million for the year 2008 profits and the dividend was paid in October 2008 as interim and final in June 2009. An interim dividend for the year 2009 of MK80.4 million was paid in October 2009.
21. Reconciliation of profit before taxation to net cash inflow from operating activities
Profit before taxation Increase in fair value of investment properties Interest receivable Dividends receivable Interest payable Depreciation Decrease/(increase) in receivables Increase/(decrease) in payables Increase in severance pay provision Profit on disposal of assets Movement on group company balances Net cash inflow from operating activities 1,525,591 (953,632) (75,916) - 2,990 22,434 81,130 133,097 38,741 - - 774,435 1,581,439 (1,120,635) (65,110) - 6,832 16,346 (97,003) (10,338) 11,407 (1,288) - 321,650 922,646 (487,818) (24,989) (161,510) 2,832 15,048 (4,830) 60,028 38,741 - 28,987 389,135 1,032,466 (772,161) (27,335) (79,350) 6,497 14,738 (10,971) (13,981) 11,407 (1,288) (5,079) 154,943
45

22. Financial instruments
Below is an analysis of how the Group manages the risk associated with the following relevant financial instruments. (a) Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of mainly equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in the statement of changes in equity. The Board reviews the capital situation on an annual basis and based on each review, the Group will balance its overall capital structure through the payment of dividends and raising finance through borrowings or repaying any existing borrowings. The Groups overall strategy remains unchanged from 2008. (b) Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3 to the consolidated financial statements. (c) Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and ensuring that tenants pay rentals in advance, as a means of mitigating the risk of financial loss from defaults. The Groups exposure and the credit worthiness of its tenants is continuously monitored. Excluding Government, rentals receivable are from a large number of tenants, spread across diverse sectors and geographical areas. Apart from the exposure to Government, the Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk exposure is managed by proactively engaging Government in good time on amounts due from it. The credit risk on liquid funds is limited because the counterparties are financial institutions in a highly regulated industry. The carrying amount of receivables (notes 9 and 10) and cash and cash equivalents (note 15) recorded in the financial statements, grossed up for any allowances for losses, represents the Groups maximum exposure to credit risk.
23. Operating lease arrangements

The Group as lessor Leasing arrangements Operating leases relate to the investment property owned by the Group with lease terms of between 1 and 10 years, with an option to extend the lease term. All operating lease contracts contain market based rental review clauses in the event that the lessee exercises its option to renew. The lessees do not have options to purchase the property at the expiry of the lease period. The property rental income earned by the Group from its investment property, all of which is leased out under operating leases, amounts to MK874 million (financial year 2008: MK747 million).
46

24. Contingent liabilities
2009 MK000
The Group is currently contesting various civil cases filed by various plaintiffs. On advice from legal counsel, MK4.3 million (2008: MK19 million) has been provided for in respect of these claims.
25. Capital commitments

Authorised but not contracted 797,110 181,012 769,500 124,912
There were no contracted commitments (2008: nil) as at 31 December 2009. Included in the commitments above, is budgeted expenditure relating to a shopping mall construction project. Expected to commence after year-end, the construction is estimated to take at least 14 months. The project is to be implemented in a joint arrangement with other financing partners through an entity, Mpico Malls Limited, to be created specifically for that purpose. Capital expenditure commitments are to be financed from internal resources, existing facilities as well as external sources.
26. Economic factors

Economic factors relevant to the companys performance are set out below. Year-end exchange rate MK/US$ Inflation rate Bank base rate At the time of approval of these consolidated financial statements, there had been no significant changes to these statistics. 2009 146.0 7.6% 19.5% 2008 140.6 9.9% 19.5%
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DETAILED STATEMENT OF COMPREHENSIVE INCOME (COMPANY ONL Y) APPENDIX 1

INCOME Rental income Increase in fair value of investment properties Profit on disposal of property, plant and equipment Interest receivable from subsidiaries Interest receivable from others Dividends receivable from subsidiaries Management fees from subsidiaries Management fees from others Consultancy fees Bad and doubtful debts recovered Other income Total income EXPENDITURE Salaries and benefits Maintenance of properties Administration costs Severance pay Security Rates Electricity and water Depreciation of property, plant and equipment Bad and doubtful debts charged Legal and professional fees Entertainment Listing, transfer secretaries costs Travelling Insurance Auditors remuneration Fringe benefits tax Directors fees Interest on overdrafts Bank charges General expenses Rent payable Costs recovered from tenants Total expenditure PROFIT before taxation Company 2009 2008 MK000 MK000
402,307 487,818 - - 24,989 161,510 172,366 10,358 16,295 13,279 1,594 1,290,516
347,546 772,161 1,288 1,900 25,435 79,350 94,476 8,893 7,814 7,084 1,407 1,347,354
137,160 65,226 48,090 38,742 18,461 18,290 15,486 15,048 14,166 14,396 7,714 4,970 4,659 4,483 4,236 4,085 3,459 2,832 385 348 339 (54,705) 367,870 922,646
91,380 86,656 39,294 11,407 18,502 17,891 14,758 14,738 15,033 8,837 7,863 15,516 5,038 3,655 4,054 6,112 3,799 6,497 477 919 339 (57,877) 314,888 1,032,466
48

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Annual Report 2009

Annual Report 2009

Annual Report 2009

Annual Report 2009

THE NATIONAL PROPERTY MARKET

Annual Report 2009

Annual Report 2009

DYE MAWINDO CHAIRMAN

Annual Report 2009

Annual Report 2009

Annual Report 2009

Annual Report 2009

Stewart Malata Chairman Andrew Barron Member

Osman Karim Member

APPOINTMENTS AND REMUNERATION COMMITTEE

 Audit Committee  Appointments and Remuneration Committee

 Andrew Barron  Dye Mawindo  Osman Karim

Chairman Member Member

Annual Report 2009

Annual Report 2009

Annual Report 2009

MALAWI PROPERTY INVESTMENT COMPANY LIMITED

Consolidated Financial Statements for the year ended 31 December 2009

REPORT OF THE DIRECTORS

INCORPORATION AND REGISTERED OFFICE

PROFITS AND DIVIDENDS

REPORT OF THE DIRECTORS (continued)

BY ORDER OF THE BOARD

COSMAS KATULUKIRA COMPANY SECRETARY

STATEMENT OF DIRECTORS RESPONSIBILITIES

Managements Responsibility for the Financial Statements

Deloitte Public Accountants Lilongwe, Malawi 21 January 2010

Audit Tax Consulting Financial Advisory

A member firm of Deloitte Touche Tohmatsu

STATEMENTS OF FINANCIAL POSITION

7,379,204 122,882 59,456 - 29,505 7,591,047

6,336,287 127,839 11,419 - 26,925 6,502,470

3,977,727 58,678 58,900 72,810 29,505 4,197,620

3,428,395 60,991 3,899 72,810 26,925 3,593,020

25,220 98,379 93,935 - - 396,308 7,072 620,914 8,211,961

48,393 179,509 11,292 - - 104,673 44,048 387,915 6,890,385

- 88,307 93,935 9,274 - 75,892 4,009 271,417 4,469,037

83,477 38,261 5,000 23,483 24,480 174,701 3,767,721

57,451 835,534 4,140,223 5,033,208 714,009 5,747,217

57,451 652,456 3,550,387 4,260,294 603,319 4,863,613

57,451 535,986 2,600,485 3,193,922 - 3,193,922

57,451 347,108 2,262,217 2,666,776 2,666,776

153,425 1,985,053 2,138,478

114,684 1,722,652 1,837,336

153,425 1,001,747 1,155,172

114,684 858,102 972,786

245,891 74,624 5,751 326,266 8,211,961

112,794 76,642 - 189,436 6,890,385

114,442 - 5,501 119,943 4,469,037

54,414 73,745 128,159 3,767,721

STATEMENTS OF COMPREHENSIVE INCOME

405,445 19,219 2,990 427,654 1,525,591 439,633 1,085,958

360,947 17,324 6,832 385,103 1,581,439 575,002 1,006,437

350,872 14,166 2,832 367,870 922,646 234,636 688,010

293,358 15,033 6,497 314,888 1,032,466 357,229 675,237

343,942 589,836 933,778 152,180 1,085,958 0.81 0.30 0.51

222,184 679,209 901,393 105,044 1,006,437 0.78 0.19 0.59

349,742 338,268 668,010 - 688,010

135,555 539,682 675,237 675,237

Audit Committee Appointments and Remuneration Committee

Andrew Barron Dye Mawindo Osman Karim

2. Adoption of new and revised International Financial Reporting Standards