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AnnualReport2010
MALAWI PROPERTY INVESTMENT COMPANY LIMITED2010ANNUAL REPORT  2
CONTENTSTHE CHairman’s sTaTEmEnT                   4                                                2010CorporaTE GovErnan...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED                                     THE CHAIRMAN’S STATEMENT                Dur...
MALAWI PROPERTY INVESTMENT COMPANY LIMITEDis notable construction activity where two new hotels and a convention centre ar...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED                The group profit before fair value adjustment and tax stands at ...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED                   CORPORATE GOVERNANCEMPICO endorses the code of corporate prac...
MALAWI PROPERTY    INVESTMENT COMPANY          LIMITED     Consolidated Financial Statements             for the year ende...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED                           REPORT OF THE DIRECTORS                              ...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED                                                                      REPORT OF ...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED     STATEMENT OF DIRECTORS’ RESPONSIBILITIES                               For ...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED                                                       INDEPENDENT AUDITOR’S REP...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED                     STATEMENTS OF FINANCIAL POSITION                           ...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED                                                                          STATEM...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED                    STATEMENTS OF CHANGES IN EQUITY                             ...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED                                                                          STATEM...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED                               STATEMENTS CASH FLOWS                            ...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED                                                                   NOTES TO THE ...
MALAWI PROPERTY INVESTMENT COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS (continued)                                   ...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED                                                       NOTES TO THE FINANCIAL ST...
MALAWI PROPERTY INVESTMENT COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS (continued)                                 Fo...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED                                                       NOTES TO THE FINANCIAL ST...
MALAWI PROPERTY INVESTMENT COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS (continued)                                 Fo...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED                                                       NOTES TO THE FINANCIAL ST...
MALAWI PROPERTY INVESTMENT COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS (continued)                                   ...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED                                                       NOTES TO THE FINANCIAL ST...
MALAWI PROPERTY INVESTMENT COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS (continued)                               For ...
MALAWI PROPERTY INVESTMENT COMPANY LIMITED                                                       NOTES TO THE FINANCIAL ST...
MALAWI PROPERTY INVESTMENT COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS (continued)                              For t...
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
Mpico 2010 annual report
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Transcript of "Mpico 2010 annual report"

  1. 1. AnnualReport2010
  2. 2. MALAWI PROPERTY INVESTMENT COMPANY LIMITED2010ANNUAL REPORT 2
  3. 3. CONTENTSTHE CHairman’s sTaTEmEnT 4 2010CorporaTE GovErnanCE 7rEporT oF THE DirECTors 9sTaTEmEnT oF DirECTors’ rEsponsiBiLiTiEs 11 ANNUAL REPORTinDEpEnDEnT auDiTor’s rEporT 12sTaTEmEnTs oF FinanCiaL posiTion 13sTaTEmEnTs oF ComprEHEnsivE inComE 14sTaTEmEnTs oF CHanGEs in EQuiTY 15sTaTEmEnTs oF CasH FLoWs 17noTEs To THE FinanCiaL sTaTEmEnTs 18An overview of the Blantyre CBD,seen from Mpingwe Hill in Limbe 3
  4. 4. MALAWI PROPERTY INVESTMENT COMPANY LIMITED THE CHAIRMAN’S STATEMENT During 2010, a considerable amount of time was spent on finalising plans and mobilising resources for the construction of “The Gateway Shopping Mall.” The earthworks contract was awarded in May 2010 and this phase of the works was completed in October 2010. The main contract was awarded in November 2010 and completion is expected in the second half of2010 next year (2012). ECONOMY IN GENERALANNUAL REPORT The economy performed relatively well in the year under review with GDP projected to grow by 6.7% which, although lower than the previous year (2009) when the economy grew by 7.7%, still represents robust growth. Annual inflation reduced from 8.4% in 2009 to 7.4%, following another bumper maize harvest. THE NATIONAL PROPERTY MARKET Demand for commercial property in Lilongwe continued to rise during the year under review. Comparatively, the demand in Blantyre was slightly lower, translating in rents rising at a faster pace in Lilongwe than in Blantyre. In response to the growing demand in Lilongwe, there MPICO’s Tikwere House(left) and Gemini House (right) flank landmark Kan’gombe House in Lilongwe’s CBD. MPICO initiated many of the developments in the new City Centre 4
  5. 5. MALAWI PROPERTY INVESTMENT COMPANY LIMITEDis notable construction activity where two new hotels and a convention centre are underconstruction in the city centre area as well as the “The Gateway” Shopping Mall near thecorner of Mchinji / Kaunda Roads. 2010SHARE PRICEThe share price during the year rose from MK2.60 to MK3.10 by the end of the year. The marketis now settling down after the global credit crunch that negatively affected share prices in 2009. ANNUAL REPORTThe number of shareholders has further reduced from 6,152 in the previous year to 5,884 bythe end of the year under review.GROUP PERFORMANCETurnover increased significantly from MK1.95 billion to MK4.2 billion because of a major increasein the fair value of our properties. Total expenditure increased by 20.5% from MK427.7 million toMK515.4 million as management continued to rehabilitate some of the properties. 5
  6. 6. MALAWI PROPERTY INVESTMENT COMPANY LIMITED The group profit before fair value adjustment and tax stands at MK817 million. This is an increase of 43% over the previous year which was MK572 million. The overall group profit before tax including fair value adjustment is MK3.7 billion and for 2009 it was MK1.52 billion. This represents an increase of 141%. HUMAN RESOURCES2010 The development of staff remains a priority for the Company. Several staff members are engaged in various courses such as Business Administration, Human Resource Management, Information Technology and Estate Management. The Company will continue to support them.ANNUAL REPORT PROSPECTS It is expected that there will be continued real growth in rental income as demand for office space continues to grow. DYE MAWINDO CHAIRMAN Another view of MPICO’s Tikwere House in Lilongwe 6
  7. 7. MALAWI PROPERTY INVESTMENT COMPANY LIMITED CORPORATE GOVERNANCEMPICO endorses the code of corporate practices and conduct recommended in theKing report on Corporate Governance (‘King II Report’), and the directors are committedto the implementation of the practices contained in this report.BOARD OF DIRECTORS 2010The Board of directors is responsible for guiding and monitoring Malawi Property InvestmentCompany Limited on behalf of the shareholders.In terms of the Memorandum and Articles of Association of the company, the Board consisted of ANNUAL REPORTfive directors as at 31st December, 2010. No director has had any material interest, directly orindirectly, in any contract reviewed or approved by the Board in the year under review. The boardis assisted in its duties by the following committees:-• A udit Committee• A ppointments and Remuneration Committee AUDIT COMMITTEEThe committee has defined terms of reference and authority granted to it by the Board. Theymet four times in 2010 to review quarterly and annual financial statements including accountingpolicies as well as monitoring the effectiveness of internal controls. They also assessed the risksfacing the business and considered reports from auditors to the company. The auditors haveunrestricted access to this committee. The members are:-• Stewart Malata Chairman• Andrew Barron Member• Osman Karim MemberAPPOINTMENTS AND REMUNERATION COMMITTEEThis committee is responsible for making recommendations to the Board on the companyframework of remuneration for all staff. The committee also makes recommendations to theboard regarding the appointment of senior management. They met twice during the yearto consider the current conditions of service and to make appropriate recommendations forchange. The members are:-• A ndrew Barron Chairman• D ye Mawindo Member• O sman Karim Member 7
  8. 8. MALAWI PROPERTY INVESTMENT COMPANY LIMITED Consolidated Financial Statements for the year ended 31 December 20108
  9. 9. MALAWI PROPERTY INVESTMENT COMPANY LIMITED REPORT OF THE DIRECTORS For the year ended 31 December 2010 31 December 2010The directors have pleasure in presenting the consolidated Financial Statements of Malawi PropertyInvestment Company (MPICO) Limited and its subsidiary companies for the year ended 31 December 2010.INCORPORATION AND REGISTERED OFFICEMPICO Limited is a company incorporated in Malawi under the Malawi Companies Act, 1984.It is listed on the Malawi Stock Exchange. The address of its registered office is: Consolidated Financial Statements for the year endedOld Mutual HouseRobert Mugabe CrescentP.O. Box 30459Lilongwe 3AREAS OF OPERATIONThe company has 33 (2009: 35) investment properties in the country mainly in Lilongwe and Blantyre,which it rents out to the Government and the Private Sector.SHARE CAPITALThe authorised share capital of the company is MK60 million (2009: MK60 million) divided into 1,200,000 OrdinaryShares of 5 tambala each (2009: 1,200,000,000 ordinary shares of 5 tambala each). The issued capital is MK57.451million (2009: MK57.451 million) divided into 1,149,023,730 ordinary shares of 5 tambala each (2009: 1,149,023,730ordinary shares of 5 tambala each), fully paid.The shareholders and their respective shareholding as at year-end were: 2010 2009 % %Old Mutual Limited 55.0 55.0General Public 35.0 35.0Lincoln Investments Limited 10.0 10.0PROFITS AND DIVIDENDSThe directors report a net profit for the year of MK2.548 billion (2009 : MK1.086 billion). The annual general meetingheld on 24 June 2010 approved a dividend of MK183.8 million for the year 2009 of which an interim was alreadypaid in October 2009 and a final paid in July 2010. An interim dividend for the year 2010 of MK91.9 million waspaid in October 2010. 9
  10. 10. MALAWI PROPERTY INVESTMENT COMPANY LIMITED REPORT OF THE DIRECTORS (continued) For the year ended 31 December 201031 December 2010 DIRECTORS The following directors, appointed in terms of the company’s Articles of Association, served office during the year: Mr S. Malata All year Mr O. Karim From 1 January 2010 to 1 December 2010 Mr J.A. Regout All year Mr A. Barron All yearConsolidated Financial Statements for the year ended Mr D. Mawindo All year Mr G. A. Nthinda All Year DIRECTORS’ INTERESTS The directors noted below hold the following ordinary shares in the company at the year-end. Mr. D. Mawindo : 43,471 shares Mr. S. Malata : 85,689 shares Mr. G. Nthinda : 503,300 shares Mr. O. Karim : 38,193 shares ACTIVITIES MPICO is in the business of development, rental and management of property. It has subsidiary companies as follows: Subsidiaries of Percentage of Nature of operations MPICO Limited Control Capital Developments Limited 100% Development and rental of property New Capital Properties Limited 100% Development and rental of property Capital Investments Limited 50.75% Development and rental of property Frontline Investments Limited 69.5% Development and rental of property Mpico Malls Limited 100% 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 company’s 31 December 2010 financial statements. BY ORDER OF THE BOARD COSMAS KATULUKIRA COMPANY SECRETARY10
  11. 11. MALAWI PROPERTY INVESTMENT COMPANY LIMITED STATEMENT OF DIRECTORS’ RESPONSIBILITIES For the year ended 31 December 2010 31 December 2010The Malawi Companies Act, 1984, requires the directors to prepare financial statements for each financial year, whichgive 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 ofthe operating results for that year.The Act also requires the directors to ensure that the company and the group keep proper accounting records whichdisclose with reasonable accuracy at any time the financial position of the company and the group and enable themto ensure that the financial statements comply with the Malawi Companies Act, 1984. Consolidated Financial Statements for the year endedIn 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• P reparation 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 assetsof the company and the group and to maintain adequate systems of internal controls to prevent and detect fraud andother irregularities.The directors are of the opinion that the consolidated financial statements give a true and fair view of the stateof the financial affairs of the company and of its operating results.Director Director 11
  12. 12. MALAWI PROPERTY INVESTMENT COMPANY LIMITED INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MALAWI PROPERTY INVESTMENT COMPANY LIMITED P.O Box 30364 Public Accountants31 December 2010 Capital City Deloitte Lilongwe 3 Second Floor Malawi Old Mutual House Robert Mugabe Crescent Tel : +265 (0)1 773 699 +265 (0)1 773 069 Fax : +265 (0)1 772 276 Email : lldeloitte@deloitte.co.mw www.deloitte.comConsolidated Financial Statements for the year ended We have audited the consolidated financial statements of Malawi Property Investment Company Limited and its subsidiaries as set out on pages 13 to 47, which comprise the consolidated statement of financial position as at 31 December 2010, 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 information. MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. AUDITOR’S RESPONSIBILITY Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated 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 entity’s 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 consolidated 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 consolidated financial statements give a true and fair view of the financial position of Malawi Property Investment Company Limited and its subsidiaries as at 31 December 2010, and of their financial performance and 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 25 January 2011 Audit • Tax • Consulting • Financial Advisory • A member firm of Deloitte Touche Tohmatsu Resident Partners: N.T Uka J.S. Melrose L.L. Katandula V.W. Beza C.A. Kapenda12
  13. 13. MALAWI PROPERTY INVESTMENT COMPANY LIMITED STATEMENTS OF FINANCIAL POSITION 31 December 2010 Group Company 31 December 2010 notes 2010 2009 2010 2009 mK’000 mK’000 mK’000 mK’000ASSETSNON-CURRENT ASSETSInvestment properties 5&6 8,664,683 7,379,204 4,869,895 3,977,727Plant and equipment 7 132,869 122,882 66,486 58,678Capital work in progress 8 1,172,842 59,456 - 58,900Subsidiary companies 9 - - 73,810 72,810Secured staff loans 29,657 29,505 29,657 29,505 Consolidated Financial Statements for the year endedTotal non-current assets 10,000,051 7,591,047 5,039,848 4,197,620CURRENT ASSETSNyumba Yanu receivable 10 7,001 25,220 - -Receivables 11 953,183 98,379 364,873 88,307Tax recoverable 11,562 93,935 11,562 93,935Amounts due from subsidiaries 12 - - 1,044,852 9,274Dividends receivable from subsidiaries - - 42,645 -Funds at call and on deposit 31,910 396,308 5,296 75,892Bank balances and cash 15,745 7,072 15,187 4,009 1,019,401 620,914 1,484,415 271,417Investment properties classified as held for sale 13 1,234,080 - 107,580 -Total current assets 2,253,481 620,914 1,591,995 271,417TOTAL ASSETS 12,253,532 8,211,961 6,631,843 4,469,037EQUITY AND LIABILITIESSHAREHOLDERS’ EQUITYShare capital 57,451 57,451 57,451 57,451Distributable reserves 1,323,040 835,534 912,705 535,986Non-distributable reserves 5,723,617 4,140,223 3,338,414 2,600,485Equity attributable to equity holders of the parent 7,104,108 5,033,208 4,308,570 3,193,922Minority interests 953,582 714,009 - -Total equity 8,057,690 5,747,217 4,308,570 3,193,922NON-CURRENT LIABILITIESBorrowings 14 700,000 - 700,000 -Severance pay provision 15 160,484 153,425 160,484 153,425Deferred taxation 16 2,808,152 1,985,053 1,374,425 1,001,747Total non-current liabilities 3,668,636 2,138,478 2,234,909 1,155,172CURRENT LIABILITIESPayables 17 349,591 245,891 70,733 114,442Dividend due to Minority Interest 1,755 - - -Tax payable 144,636 74,624 - -Bank overdraft 31,224 5,751 17,631 5,501Total current liabilities 527,206 326,266 88,364 119,943TOTAL EQUITY AND LIABILITIES 12,253,532 8,211,961 6,631,843 4,469,037The financial statements were approved and authorised for issue by the Board of Directors on 25 January 2011and were signed on its behalf by:Director Director 13
  14. 14. MALAWI PROPERTY INVESTMENT COMPANY LIMITED STATEMENTS OF COMPREHENSIVE INCOME For the year ended 31 December 201031 December 2010 Group Company notes 2010 2009 2010 2009 mK’000 mK’000 mK’000 mK’000 INCOME Rental income 5 1,016,236 874,882 464,443 402,307 Increase in fair value of investment properties 19 2,863,462 953,632 1,379,765 487,818 Profit on disposal of non-current assets 133,387 - 133,387 -Consolidated Financial Statements for the year ended Interest receivable 118,830 75,916 114,030 24,989 Dividends receivable from subsidiaries - - 157,900 161,510 Other income 64,034 48,815 74,204 213,892 Total income 4,195,949 1,953,245 2,323,729 1,290,516 EXPENDITURE Property and administration expenses 497,865 405,445 421,641 350,872 Provision for doubtful receivables 11 7,924 19,219 5,616 14,166 Interest payable 9,613 2,990 60,430 2,832 Total expenditure 515,402 427,654 487,687 367,870 PROFIT BEFORE TAXATION 20 3,680,547 1,525,591 1,836,042 922,646 TAXATION 21 1,132,640 439,633 526,060 234,636 PROFIT FOR THE YEAR 2,547,907 1,085,958 1,309,982 688,010 APPROPRIATION OF PROFIT FOR THE YEAR Distributable reserves 415,801 343,942 305,014 349,742 Non-distributable reserves 19 1,850,433 589,836 1,004,968 338,268 Amounts attributable to members of the parent 2,266,234 933,778 1,309,982 688,010 Amounts attributable to minority interest 281,673 152,180 - - 2,547,907 1,085,958 1,309,982 688,010 Basic earnings per share (K) 22 1.97 0.81 Analysed as: - Distributable (K) 0.36 0.30 - Non-distributable (K) 1.61 0.51 The group and company had no other comprehensive income in the current or prior period.14
  15. 15. MALAWI PROPERTY INVESTMENT COMPANY LIMITED STATEMENTS OF CHANGES IN EQUITY For the year ended 31 December 2010 31 December 2010 attributable non- to equity share Distributable distributable holders of minority capital reserve reserve the parent interest Total mK’000 mK’000 mK’000 mK’000 mK’000 mK’000Group Consolidated Financial Statements for the year endedFor the year ended 31 December 2009At the beginning of the year 57,451 652,456 3,550,387 4,260,294 603,319 4,863,613Distributable profit for the year - 343,942 - 343,942 49,788 393,730Non-distributable profit for the year - - 589,836 589,836 102,392 692,228Dividends declared – Final 2008 - (80,432) - (80,432) (17,215) (97,647)Dividends declared – Interim 2009 - (80,432) - (80,432) (24,275) (104,707)At the end of the year 57,451 835,534 4,140,223 5,033,208 714,009 5,747,217For the year ended 31 December 2010At the beginning of the year 57,451 835,534 4,140,223 5,033,208 714,009 5,747,217Transfer to distributable reserveson disposal of properties - 267,039 (267,039) - - -Distributable profit for the year - 415,801 - 415,801 87,900 503,701Non-distributable profit for the year - - 1,850,433 1,850,433 193,773 2,044,206Dividends declared – Final 2009 - (103,412) - (103,412) (17,825) (121,237)Dividends declared – Interim 2010 - (91,922) - (91,922) (24,275) (116,197)At the end of the year 57,451 1,323,040 5,723,617 7,104,108 953,582 8,057,690 15
  16. 16. MALAWI PROPERTY INVESTMENT COMPANY LIMITED STATEMENTS OF CHANGES IN EQUITY For the year ended 31 December 2010 (continued)31 December 2010 non- share Distributable distributable capital reserve reserve Total mK’000 mK’000 mK’000 mK’000 Company For the year ended 31 December 2008Consolidated Financial Statements for the year ended At the beginning of the year 57,451 347,108 2,262,217 2,666,776 Distributable profit for the year - 349,742 - 349,742 Non-distributable profit for the year - - 338,268 338,268 Dividends declared – Final 2008 - (80,432) - (80,432) Dividends declared – Interim 2009 - (80,432) - (80,432) At the end of the year 57,451 535,986 2,600,485 3,193,922 For the year ended 31 December 2010 At the beginning of the year 57,451 535,986 2,600,485 3,193,922 Transfer to distributable profit on disposal of properties - 267,039 (267,039) - Distributable profit for the year - 305,014 - 305,014 Non-distributable profit for the year - - 1,004,968 1,004,968 Dividends declared – Final 2009 - (103,412) - (103,412) Dividends declared – Interim 2010 - (91,922) - (91,922) At the end of the year 57,451 912,705 3,338,414 4,308,570 The distributable reserve is available for distribution to shareholders as dividends subject to a 10% withholding tax. 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. Group Company 2010 2009 2010 2009 mK’000 mK’000 mK’000 mK’000 SHARE CAPITAL Authorised: 1,200,000 Ordinary shares of 5t each (2009: 1,200,000,000 Ordinary Shares of 5t each) 60,000 60,000 60,000 60,000 Issued and fully paid: 1,149,023,730 Ordinary shares of 5t each (2009: Ordinary Shares of 5t each) 57,451 57,451 57,451 57,451 Total issued and fully paid share capital 57,451 57,451 57,451 57,45116
  17. 17. MALAWI PROPERTY INVESTMENT COMPANY LIMITED STATEMENTS CASH FLOWS For the year ended 31 December 2010 31 December 2010 Group Company notes 2010 2009 2010 2009 mK’000 mK’000 mK’000 mK’000Cash flows from operating activitiesNet cash (used in)/generated by operations 24 (144,993) 774,435 (1,221,282) 389,135Returns on investments and Consolidated Financial Statements for the year endedservicing of financeDividends received - 115,255 166,510Interest received 118,830 75,916 114,030 24,989Interest paid (9,613) (2,990) (60,430) (2,832)Dividends paid to outside shareholders (40,345) (41,490) - -Dividends paid to shareholders, including tax (195,334) (160,864) (195,334) (160,864)Net cash flow from returns on investmentsand servicing of finance (126,462) (129,428) (26,479) 27,803Taxation paid (157,156) (261,893) (71,009) (258,671)Net cash (used in)/generated by operating activities (428,611) 383,114 (1,318,770) 158,267Cash flows from investing activitiesPurchase of plant and equipment and additionsto investment properties (including property held for sale) (118,413) (154,799) (71,671) (129,250)(Increase)/decrease in capital work in progress (1,113,386) - 58,900 -Proceeds on disposal of non-current assets 561,145 - 561,145 -Investments in subsidiaries - - (1,000) -Movement in Nyumba Yanu receivable 18,219 23,173 - -Staff long-term loans movement (152) (2,580) (152) (2,580)Net cash (used in)/generated by investing activities (652,587) (134,206) 547,222 (131,830)Cash flows from financing activitiesBorrowings 700,000 - 700,000 -NET (DECREASE)/INCREASE IN CASHAND CASH EQUIVALENTS (381,198) 248,908 (71,548) 26,437CASH AND CASH EQUIVALENTSat the beginning of the year 397,629 148,721 74,400 47,963CASH AND CASH EQUIVALENTSat the end of the year 18 16,431 397,629 2,852 74,400 17
  18. 18. MALAWI PROPERTY INVESTMENT COMPANY LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 201031 December 2010 1. GENERAL INFORMATION The main business of the Group, which is incorporated in Malawi, comprises the development, rental and management of property. The Group’s administrative office and registered office is in Old Mutual House, City Centre, Lilongwe. 2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDSConsolidated Financial Statements for the year ended 2.1 Standards and Interpretations affecting amounts reported and/or disclosed in the financial statements In the current year, the Group has adopted those new and revised Standards and Interpretations issued by the International Accounting Standards Board and the International Financial Reporting Interpretations Committee of the International Accounting Standards Board that are relevant to its operations and are effective for annual reporting periods beginning on 1 January 2010. The adoption of these new and revised Standards and Interpretations did not have a significant impact on the consolidated financial statements. 2.2 Standards and Interpretations in issue, not yet effective At the date of authorisation of these consolidated financial statements, the following Standards and Interpretations were in issue but not yet effective: 2.2.1 IFRS 3 Business Combinations - Amendments resulting from May 2010 Annual Improvements to IFRSs (effective for annual periods beginning on or after 1 July 2010). 2.2.2 IFRS 7 Financial Instruments: Disclosures - Amendments resulting from May 2010 Annual Improvements to IFRSs (effective for annual periods beginning on or after 1 January 2011). 2.2.3 IFRS 7 Financial Instruments: Disclosures - Amendments enhancing disclosures about transfers of financial assets (effective for annual periods beginning on or after 1 July 2011). 2.2.4 IFRS 9 Financial Instruments - Classification and Measurement (effective for annual periods beginning on or after 1 January 2013). 2.2.5 IAS 1 Presentation of Financial Statements - Amendments resulting from May 2010 Annual Improvements to IFRSs (effective for annual periods beginning on or after 1 January 2011). 2.2.6 IAS 12 Income Taxes – Limited scope amendment (recovery of underlying assets). Effective for annual periods beginning on or after 1 January 2012. 2.2.7 IAS 24 Related Party Disclosures - Revised definition of related parties (effective for annual periods beginning on or after 1 January 2011). 2.2.8 IAS 27 Consolidated and Separate Financial Statements - Amendments resulting from May 2010 Annual Improvements to IFRSs (effective for annual periods beginning on or after 1 July 2010).18
  19. 19. MALAWI PROPERTY INVESTMENT COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 December 2010 31 December 20102.2.9 IAS 32 Financial Instruments: Presentation - Amendments relating to classification of rights issues (effective for annual periods beginning on or after 1 February 2010).2.2.10 IFRIC 13 Customer Loyalty Programmes - Amendments resulting from May 2010 Annual Improvements to IFRSs (effective for annual periods beginning on or after 1 January 2011).2.2.11 IFRIC 14 IAS19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction Consolidated Financial Statements for the year ended - November 2009 Amendments with respect to voluntary prepaid contributions (effective for annual periods beginning on or after 1 January 2011).2.2.12 IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective for annual periods beginning on or after 1 July 2010).The directors anticipate that these Standards and Interpretations in future periods will have no significant impacton the financial statements of the Group.3. SIGNIFICANT ACCOUNTING POLICIESThe principal accounting policies are set out below.3.1 Statement of complianceThe consolidated financial statements have been prepared in accordance with International Financial Reporting Standards.3.2 Basis of preparationThe consolidated financial statements are prepared in terms of the historical cost basis with the exception of investmentproperties, which are included at valuation. Historical cost is generally based on the fair value of the consideration givenin exchange for assets as explained in the accounting policies below.3.3 Basis of consolidationThe consolidated financial statements incorporate the financial statements of the Malawi Property Investment CompanyLimited (MPICO) and entities controlled by MPICO. Control is achieved where the Company has the power to govern thefinancial and operating policies of an entity so as to obtain benefits from its activities.Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statementof comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate.Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interestseven if this results in the non-controlling interests having a deficit balance.When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies intoline with those used by other members of the Group.All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. 19
  20. 20. MALAWI PROPERTY INVESTMENT COMPANY LIMITED NOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 December 201031 December 2010 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.4 Plant and equipment Plant and equipment are shown at cost, less related depreciation. 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:Consolidated Financial Statements for the year ended Fixtures, equipment and computers 5 years Motor vehicles 4 years The assets residual values and useful lives are reviewed, and adjusted if appropriate, at every year-end. An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. 3.5 Investment properties Investment property, which is property held to earn rentals and/or for capital appreciation (including property under construction for such purposes), 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 non-distributable 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 and that investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Properties in the course of construction for supply or administrative purposes are carried at cost, less any recognised impairment loss. Cost includes professional fees and borrowing costs capitalised in accordance with the Group’s accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and are ready for intended use. 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. Non-current assets classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell except where the measurement is specifically covered by another standard.20
  21. 21. MALAWI PROPERTY INVESTMENT COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 December 2010 31 December 20103.7 TaxationIncome tax expense represents the sum of the tax currently payable and deferred tax.Current taxThe tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in thestatement of comprehensive income because it excludes items of income or expense that are taxable or deductible inother years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is Consolidated Financial Statements for the year endedcalculated using tax rates that have been enacted by the end of the reporting period.Deferred taxDeferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statementsand the corresponding tax bases used in the computation of the taxable profit. Deferred tax liabilities are generallyrecognised for all taxable temporary differences and deferred tax assets are generally recognised for all deductibletemporary differences to the extent that it is probable that taxable profits will be available against which deductibletemporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary differencearises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in atransaction that affects neither the taxable profit nor the accounting profit.Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries andassociates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary differenceand it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising fromdeductible temporary differences associated with such investments and interests are only recognised to the extent that itis probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences andthey 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 thatit 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 liabilityis settled or the asset realised, based on tax rates (and tax laws) that have been substantively enacted by the end of thereporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would followfrom the manner in which the company expects, at the reporting date, to recover or settle the carrying amount of its assetsand liabilities.Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets againstcurrent tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intendsto settle its current tax assets and liabilities on a net basis.Current and deferred tax for the yearCurrent and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items that arerecognised outside profit or loss (whether in other comprehensive income or directly in equity), in which case the tax is alsorecognised outside profit or loss, or where they arise from the initial accounting for a business combination. In the case ofa business combination, the tax effect is taken into account in the accounting for the business combination. 21
  22. 22. MALAWI PROPERTY INVESTMENT COMPANY LIMITED NOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 December 201031 December 2010 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.8 Foreign currencies (a) Functional and presentation currency Items included in the financial statements of each of the Group’s companies are measured using Malawi Kwacha, the functional currency of the primary economic environment in which the entire Group operates. The consolidated financialConsolidated Financial Statements for the year ended statements are presented in Malawi Kwacha, which is the Group’s 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. Non-monetary 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. 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 shareholder’s 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 asset’s net carrying amount.22
  23. 23. MALAWI PROPERTY INVESTMENT COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 December 2010 31 December 20103.12 Financial assetsInvestments are recognised and derecognised on a trade date where the purchase or sale of an investment is under acontract whose terms require delivery of the investment within the timeframe established by the market concerned, andare initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value throughprofit 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’ Consolidated Financial Statements for the year ended(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 initialrecognition.Effective interest methodThe effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interestincome over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receiptsthrough the expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effectiveinterest basis for debt instruments other than those financial assets designated as at FVTPL.Financial assets at FVTPLFinancial 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• i t 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:• s uch designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or• t he 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 Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or• i t 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 gainor loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. 23
  24. 24. MALAWI PROPERTY INVESTMENT COMPANY LIMITED NOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 December 201031 December 2010 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.12 Financial assets (Continued) Financial assets at FVTPL (Continued) AFS financial assets AFS financial assets are non-derivatives that are either designated as AFC or are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss.Consolidated Financial Statements for the year ended 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 asset’s 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. Derecognition of financial assets The group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.24
  25. 25. MALAWI PROPERTY INVESTMENT COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 December 2010 31 December 20103.13 Financial liabilities and equity instruments issued by the GroupClassification as debt or equityDebt and equity instruments are classified as either financial liabilities or as equity in accordance with the substanceof the contractual arrangement.Equity instruments Consolidated Financial Statements for the year endedAn equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting allof its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.Dividends on ordinary sharesDividends on ordinary shares are recognised in equity in the period in which they are approved by the company.Financial liabilitiesFinancial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities.Financial liabilities at FVTPLFinancial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designatedas 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• i t 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:• s uch designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or• t he 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 Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or• i t 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 FVTPLFinancial 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. 25
  26. 26. MALAWI PROPERTY INVESTMENT COMPANY LIMITED NOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 December 201031 December 2010 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.13 Financial liabilities and equity instruments issued by the Group (Continued) 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.Consolidated Financial Statements for the year ended 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 Group’s obligations are discharged, cancelled or they expire. 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.26
  27. 27. MALAWI PROPERTY INVESTMENT COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 December 2010 31 December 20103.15 ProvisionsProvisions 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 theamount of the obligation.The amount recognised as a provision is the best estimate of the consideration required to settle the present obligationat the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a Consolidated Financial Statements for the year endedprovision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the presentvalue 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 thereceivable can be measured reliably.4. CRITICAL ACCOUNTING jUDGEMENTS AND kEY SOURCES OF ESTIMATION UNCERTAINTYThe 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 ofthe company. Estimates and judgements are evaluated and based on historical experience and other factors, includingexpectations of future events that are believed to be reasonable under the circumstances.4.1 Critical judgements in applying the Group’s accounting policiesNo critical judgements were made by the directors during the current period which would have a material impacton the financial statements.4.2 Key sources of estimation uncertaintyValuation of investment propertiesInvestment properties are carried at fair value in accordance with IAS 40 Investment Property. Fair values have beendetermined through valuations carried out by Knight Frank, qualified and registered valuers.Provision for doubtful debtsProvision for doubtful debts is based upon a policy which takes into account past transaction history with debtors andprojected collections. Actual collection experience may differ from the current projections.Provision for severance payAn estimate of MK160 million (2009: MK153 million) has been made in respect of severance pay based on the currentprovisions of the Employment Law and based on the assumption that employee terminations will be evenly spread betweenthe immediate future and anticipated retirement dates. Some of these current provisions are being reviewed and amendedas detailed in note 15. As such the actual amounts to be paid in future may be different. 27
  28. 28. MALAWI PROPERTY INVESTMENT COMPANY LIMITED NOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 December 201031 December 2010 5. OPERATING SEGMENTS 5.1 Operating Segments Operating segments have been 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.Consolidated Financial Statements for the year ended 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. 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 Group’s current 33 (2009: 35) investment properties. Though one of the properties contributed MK140 million (2009: MK120 million) representing 15% (2009: 14%) of the total rental revenue in the current year and its value at MK1,256 million (2009: MK947 million) was 15% (2009: 13%) of the total investment property value, no single investment property contributes close to 75% of the total revenue from external customers. 5.3 Geographical information The Group’s 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 Fair value rental income property values increase 2010 2009 2010 2009 2010 2009 mK’000 mK’000 mK’000 mK’000 mK’000 mK’000 Blantyre 167,400 148,837 1,214,786 1,317,787 305,924 133,131 Lilongwe 718,558 700,565 7,137,497 5,803,217 1,897,031 795,981 Other markets 29,717 25,480 312,400 258,200 53,242 24,520 Total 915,675 874,882 8,664,683 7,379,204 2,256,197 953,632 Investment property held for sale 100,561 - 1,234,080 - 607,265 - 1,016,236 874,882 9,898,763 7,379,204 2,863,462 953,63228
  29. 29. MALAWI PROPERTY INVESTMENT COMPANY LIMITEDNOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 December 2010 31 December 2010CompanY Fair value rental income property values increase 2010 2009 2010 2009 2010 2009 mK’000 mK’000 mK’000 mK’000 mK’000 mK’000Blantyre 122,044 110,072 917,186 1,087,188 242,749 114,206 Consolidated Financial Statements for the year endedLilongwe 314,191 268,083 3,655,509 2,644,339 1,076,165 349,768Other markets 28,208 24,152 297,200 246,200 50,895 23,844Total 464,443 402,307 4,869,895 3,977,727 1,369,809 487,818Investment propertyheld for sale - - 107,580 - 9,956 - 464,443 402,307 4,997,475 3,977,727 1,379,765 487,8185.4 Information about major customersIncluded in total rentals income are rentals amounting to MK698 million (2009: MK572 million) in respect of propertyrented by the Government of Malawi. At rental value of 69% (2009: 67%), the Government is the single largest tenantwith the other rental revenues being evenly spread over several tenants. 29

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