National Investment Trust Limited                                           Annual Report 2010The National Investment Trus...
National Investment Trust LimitedAnnual Report 2010
National Investment Trust Limited                                                        Annual Report 2010ContentsInvestm...
National Investment Trust Limited     Annual Report 2010     Investment Policy     The principal objective of the Company ...
National Investment Trust Limited                                                                                         ...
National Investment Trust Limited     Annual Report 2010     Fund Manager’s Report (cont’d)     Review of the Year (cont’d...
National Investment Trust Limited                                                                                         ...
National Investment Trust Limited     Annual Report 2010     Director’s Report (cont’d)     In accordance with the Code of...
National Investment Trust Limited                                                                                         ...
National Investment Trust Limited     Annual Report 2010     Statement of Directors’ Responsibilities     For the year end...
National Investment Trust Limited                                                                                         ...
National Investment Trust Limited     Annual Report 2010     Statement of financial position     As at 30 September 2010  ...
National Investment Trust Limited                                                                                     Annu...
National Investment Trust Limited     Annual Report 2010     Statement of Changes in Equity     For the year ended 30 Sept...
National Investment Trust Limited                                                                 Annual Report 2010Statem...
National Investment Trust Limited     Annual Report 2010     Notes to the financial statements     For the year ended 30 S...
National Investment Trust Limited                                                                                         ...
National Investment Trust Limited     Annual Report 2010     Notes to the financial statements (cont’d)     For the year e...
National Investment Trust Limited                                                                                         ...
National Investment Trust Limited     Annual Report 2010     Notes to the financial statements (cont’d)     For the year e...
National Investment Trust Limited                                                                                         ...
National Investment Trust Limited     Annual Report 2010     Notes to the financial statements (cont’d)     For the year e...
National Investment Trust Limited                                                                                     Annu...
National Investment Trust Limited     Annual Report 2010     Notes to the financial statements (cont’d)     For the year e...
National Investment Trust Limited                                                                                         ...
National Investment Trust Limited     Annual Report 2010     Notes to the financial statements (cont’d)     For the year e...
National Investment Trust Limited                                                                                         ...
National Investment Trust Limited     Annual Report 2010     Notes to the financial statements (cont’d)     For the year e...
National Investment Trust Limited                                                                                         ...
National Investment Trust Limited     Annual Report 2010     Notes to the financial statements (cont’d)     For the year e...
National Investment Trust Limited                                                                                         ...
National Investment Trust Limited     Annual Report 2010     Notes to the financial statements (cont’d)     For the year e...
National Investment Trust Limited                                                                                       An...
National Investment Trust Limited     Annual Report 2010                           The National Investment Trust Limited  ...
National Investment Trust Limited                                                                                         ...
National Investment Trust Limited     Annual Report 2010     Notes     1.   A member entitled to attend and vote at the me...
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Nitl Malawi 2010 annual report
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The National Investment Trust Limited (Malawi) 2010 annual financial report

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Nitl Malawi 2010 annual report

  1. 1. National Investment Trust Limited Annual Report 2010The National Investment Trust Limited (Incorporated in Malawi on 20 September 2001 under registration number 6024) Annual Report 2010
  2. 2. National Investment Trust LimitedAnnual Report 2010
  3. 3. National Investment Trust Limited Annual Report 2010ContentsInvestment policy 2Fund Manager’s report 3Directors’ report 5Statement of Directors’ responsibilities 8Independent Auditor’s report 9Statement of financial position 10Statement of comprehensive income 11Statement of changes in equity 12Statement of cash flows 13Notes to the financial statements 14Details of shareholders 31Notice of Annual General Meeting 32Form of Proxy 33 01
  4. 4. National Investment Trust Limited Annual Report 2010 Investment Policy The principal objective of the Company is to provide a vehicle to facilitate broad public participation in a diverse portfolio of equity investments in Malawi. The Company’s investment portfolio is managed by an independent fund manager, First Merchant Bank Limited, whose management is subject to the overall direction of the Board of Directors of the Company. First Merchant Bank Limited has day-to-day control and discretion in the management of the investment portfolio in accordance with the investment policy. The investment portfolio is managed with a view to providing shareholders with a return by way of both annual income and capital growth. Subject to cash flow considerations, net after tax income, other than income from investment switches and unrealised net gains on the investment portfolio, is distributed to shareholders. The Board of Directors recognises there will always be risk present in any portfolio of investments but has adopted an investment policy which seeks to minimize that risk by defining permitted investments and placing limits on the extent of exposure to individual investments as follows:- Equities Up to 100% of the investment portfolio may be invested in equities provided that no more than 40% of the portfolio may be invested in any single listed company and no more than 10% of the portfolio may be invested in any single unlisted company. Further limitations on investment in equities of property companies are set out below. Bonds Up to 25% of the investment portfolio may be invested in public or private sector bonds provided that no more than 10% of the portfolio may be invested in any single bond issue or series of bonds of a single private sector issuer. It is a requirement that bonds must have a fixed redemption date and period to redemption of not more than ten years. Private sector bonds must be fully secured and public sector bonds must be guaranteed by the Government of Malawi. Property and Equity of Property Companies Up to 25% of the investment portfolio may be invested in properties or equity of property companies provided that no more than 10% of the investment portfolio may be invested in any single property investment. Cash Equivalents No restrictions are placed on short-term investments in the form of Treasury Bills, Reserve Bank Bills or deposits with licensed financial institutions. Restrictions The Fund Manager may not without the consent of the majority of the Board of Directors: acquire or dispose of any unlisted equities or bonds or enter into a contract on behalf of the Company to acquire or dispose of any unlisted equities or bonds, borrow money in the name of the Company, or pledge any property or assets belonging to the Company or create charges or mortgages thereon.02
  5. 5. National Investment Trust Limited Annual Report 2010Fund Manager’s ReportReview of the YearInvestor appetite for Malawi equities remained subdued throughout the year and, unlike its African peers, themarket has yet to stage a recovery from the prolonged bear run of 2009. Even the impressive results publishedby a good number of listed companies received a muted or non existent response from the market.Foreign investment capital has yet to return to Malawi to any significant extent as concerns persist over thecountry’s foreign exchange position and a perceived concomitant risk of currency re-alignment to address thestructural imbalance. Domestic institutional investor interest has also remained lukewarm and, by and large,was confined to bargain hunting to remove historic market overhangs in a number of counters.Our overall fund value grew by a modest 2.5% over the year with fair value increases, particularly in PressCorporation and Standard Bank, being largely cancelled out as NBS Bank Limited, the contrarian star performerin the portfolio last year, gave up a considerable percentage of its exceptional 2009 gains. The performance ofthe fund does, however compare favourably with the Malawi domestic share index which declined by 1% overthe corresponding period.Almost all our investee companies matched or exceeded expectations both in terms of profits and dividends.In the financial sector, our three bank investments; National Bank of Malawi, NBS Bank Limited and StandardBank Limited posted good results. Composite insurer, Nico, recovered well from the adverse impact of the 2009downturn in the equity market buoyed also by good results from its majority holding in NBS Bank Limited.Strong regional sugar prices more than compensated for a weather related drop in Illovo’s sugar productionand record profits were once again achieved by this company.Diversified conglomerate Press Corporation Limited maintained profits at historic levels which wascommendable against a background of erratic fuel supplies and persistent foreign exchange shortages whichnegatively impacted its food and beverages, telecommunications and fuel distribution businesses.Property investments, MPICO and Kang’ombe Investments, continued to achieve capital growth through fairvalue gains on valuation of their respective property portfolios. Both also returned increased distributableprofits reflecting the buoyant property rental market, particularly in the capital city, Lilongwe.In the manufacturing sector, Packaging Industries Limited, despite facing serious constraints in importing rawmaterials for production, managed to achieve some growth in profits through productivity improvements andcost saving initiatives. Dairibord Malawi Limited, however, disappointed with a break even position as itcontinues to incur significant losses on its non core fruit canning operations.With a reduction in average selling prices of tobacco outweighing the benefit of an increase in national tobaccoproduction to record levels, commission earned by Auction Holdings Limited fell below that of the prior year.Increased rejection rates on the floors also led to increased overheads. Nevertheless, this group remains veryprofitable with an enviable asset base. The carrying value of our investment in Auction Holdings is derivedfrom a share transfer price fixed by its directors which is extremely conservative, translating to a dividend yieldof 36% and a price to book ratio of a mere 15%. It is hoped that the company’s board will consider addressingthis anomaly in the near future.A relatively modest shareholding was acquired in the 2008 IPO of mobile telephone operator TNM. Returns todate are low as the company invests heavily in network roll out and subsidization of handsets to increase marketpenetration. 03
  6. 6. National Investment Trust Limited Annual Report 2010 Fund Manager’s Report (cont’d) Review of the Year (cont’d) In line with the overall upward trend in profitability of the companies in our portfolio, total dividend income grew by 29% and, at K149million, equates to a dividend yield of 5.87% on the 30 September 2010 closing investment portfolio valuation. This is comfortably above the MSE domestic weighted average dividend yield of 4.58% at 30 September 2010. Interest earned exceeded the prior year level by K2.4million and, as a result of reduced management fees, the increase in overall expenditure was contained below inflation at 6.2%. Overall distributable profits continued, therefore, to trend upwards, increasing by 36% and permitting your board of directors to recommend a very healthy increase in the total dividend to be declared for the year. Outlook In the near term, despite the country’s very positive GDP growth story, for as long as other macro economic uncertainties persist, foreign investor interest in the Malawi equity market is likely to remain subdued. The market should, however, receive a major positive impetus when the proposed new pension legislation is enacted. The requirement that virtually all employed persons be members of pension schemes will greatly increase the domestic savings base and, almost inevitably, lead to greater domestic institutional investor demand for equity investments. Prices of Malawi listed equities have now become, in the main, undemanding relative to their emerging market peers. Furthermore, dividend yields thereon now compare very favourably with yields available from alternative domestic investment opportunities in the property and money markets. It might, therefore, be expected that, some time over the course of the coming year, the Malawi market could see some firming of equity prices. Irrespective of investor sentiment, our diversified portfolio of investments across a range of leading Malawi corporates should continue to generate strong dividend flows into the future. First Merchant Bank Limited 11 November 201004
  7. 7. National Investment Trust Limited Annual Report 2010Director’s ReportNature of BusinessThe Company is a closed end collective investment scheme established with the objective of providing investorswith the opportunity to invest in a diversified portfolio of equity investments in Malawi. The Company’sinvestment policy, which has been fully complied with during the year, appears on page 2.Share capitalDetails of the current authorised and issued share capital are set out in note 14. An analysis of shareholders bytype and holding is set out on page 31.DividendsAn interim dividend of 25 tambala per share (2009: 22 tambala) was paid on 18 June 2010 to shareholdersregistered in the Company’s share register on 11 June 2010. The directors recommend a final dividend of 45tambala per share (2009: 27 tambala) for declaration at the forthcoming annual general meeting.DirectorsThe following directors served in office during the year under review and four Board meetings were held. Attendance Attendance Record %D. J. Kamwaza (Chairman) 3/4 75A. T. Konyani 3/4 75R. E. Mdeza 4/4 100V. H. Masikini 2/4 50W. G. Nyengo 4/4 100M. Sosola 3/4 75B. Movete 4/4 100All directors are non-executive.The regulations governing collective investment schemes stipulate that the majority of directors of the Companymust not be affiliated persons. None of the directors are affiliated persons.In terms of the Company’s articles of association Mr. R. Mdeza, Mr M. Sosola and Mr W. Nyengo retire at theforthcoming annual general meeting and being eligible offer themselves for re-election. The Nomination andRemuneration Committee of the Board recommends the re-election of the retiring directors.Other than as disclosed in note 18 to the financial statements, none of the directors held a direct or indirectinterest in the shares of the Company as at the reporting date.Statement on corporate governanceThe Company has a unitary board of directors comprising seven non-executive directors. There are no executivedirectors.The board complies with the major principles of modern corporate governance as contained in the Code of BestPractice for Corporate Governance in Malawi (The Malawi Code II) and the Cadbury and King II report.The board meets at least four times a year. Adequate and efficient communication and monitoring systems arein place to ensure that the directors receive all relevant information to guide them in making necessary strategicdecisions, and providing effective leadership, control and strategic direction over the Company’s operations,and in ensuring that the Company fully complies with relevant legal, ethical and regulatory requirements. 05
  8. 8. National Investment Trust Limited Annual Report 2010 Director’s Report (cont’d) In accordance with the Code of Best Practice for Corporate Governance in Malawi, the Board regularly assesses its performance and effectiveness as a whole and that of individual Directors. Board Committees a) Audit Committee The Audit Committee comprises Mr. R. Mdeza, B. Comm, FCCA, CPA(Mw), Mrs. V. Masikini, CIMA and Mr. W. Nyengo, B. Comm, M. Acc. The Committee, which conducts its business in accordance with detailed terms of reference does the following: n monitors the integrity of the financial statements of the Company and any formal announcements relating to the Company’s financial performance, including reviewing significant financial reporting judgements contained in them; n reviews the Company’s internal financial controls to ensure the operation of adequate systems and control processes to safeguard the Company’s assets; n reviews the Company’s policies and procedures to ensure they adequately address compliance and regulatory issues; n oversees the company’s relationship with its external auditor and reviews and monitors the external auditor’s independence and objectivity and the effectiveness of the audit process; n makes recommendations to the Board, for it to put to shareholders for their approval in general meeting, in relation to the appointment and remuneration of external auditors. During the year under review the Audit Committee held four meetings. There were no disagreements between the Audit Committee and the Board of Directors. Attendance Attendance Record % R. E. Mdeza 4/4 100 W. G. Nyengo 4/4 100 V. H. Masikini 0/4 0 b) Investment Committee The Board has appointed an Investment Committee whose role is to supervise and assist the managers of the Company in their investment decisions. Messrs Nyengo and Sosola and Ms Konyani serve on the Investment Committee. The managers report to the Investment Committee on all investment purchases and disposals and they also have to seek prior authorisation from the Committee before undertaking transactions with a value in excess of K20 million. Transactions with a value in excess of K40 million require approval of the Board of Directors. During the year under review, four Investment Committee meetings were held. Attendance Attendance Record % M. Sosola 3/4 75 A. T. Konyani 3/4 75 W. G. Nyengo 4/4 100 c) Nomination and Remuneration Committee This Committee comprises three non-executive directors namely: Mrs B. Movete, Ms A. Konyani and Mrs V. Masikini. The Committee reviews on a regular basis the composition, size and balance of the full Board to ensure that the Board is not lacking in skills or experience and adequately represents the interests of the shareholders as a whole. Additionally, the Committee deliberates on the appropriate level of remuneration of directors to be recommended for approval by the shareholders in general meeting. This Committee also makes06
  9. 9. National Investment Trust Limited Annual Report 2010Director’s Report (cont’d)recommendations to the Board on the appointment and contractual terms of appointment of the Fund Manager.The committee held one meeting during the year which was attended by all 3 committee members.Ethical StandardsThe Board is fully committed to ensuring the Company’s affairs are conducted with integrity and that thehighest ethical standards are maintained.Director’s feesCurrently, the chairman receives an annual fee of K575,000 and directors receive an annual fee of K525,000 each,together with sitting allowances at the rate of K27,500 per meeting for the chairman and K22,500 per meetingfor other directors.At the forthcoming annual general meeting, it will be proposed that fees and sitting allowances be increasedbased on recommendations from the Nomination and Remuneration Committee of the Board.ManagementThe Company has an agreement for a period of two years commencing from 1 January 2009 with First MerchantBank Limited (FMB) under the terms of which FMB is contracted as sole manager of the Company.Subject to the overall policy and direction of the Board, FMB has day-to-day administrative and general controland discretion in the management, in accordance with the investment policy, of the funds and investments ofthe Company throughout the term of the agreement.Specific duties of FMB include: n to ensure adequate administrative, secretarial, accounting, financial and internal control systems are maintained. n to ensure the establishment of acceptable custodial arrangements to ensure the safe custody of the Company’s assets.FMB Limited is a commercial bank, licensed in Malawi under the Banking Act, and also licensed as aninvestment/portfolio manager by Reserve Bank of Malawi under the authority vested in it by the SecuritiesAct.Independent auditorsThe auditors, KPMG, have signified their willingness to continue in office and a resolution to confirm their re-appointment as auditors in respect of the year ending 30 September 2011, is to be proposed at the forthcomingannual general meeting.D. J. Kamwaza R. E. MdezaChairman Director11 November 2010 07
  10. 10. National Investment Trust Limited Annual Report 2010 Statement of Directors’ Responsibilities For the year ended 30 September 2010 The Malawi Companies Act, 1984, Cap. 46:03, requires the directors to prepare financial statements for each financial year, which give a true and fair view of affairs of the company as at the end of the financial year and of the operating results and cash flows for that year. The directors are responsible for preparing the company’s financial statements in accordance with Malawi Companies Act, 1984, Cap: 46:03, and International Financial Reporting Standards (IFRS). In preparing those financial statements, the directors are required to: n select suitable accounting policies and then apply them consistently; n make judgments and estimates that are reasonable and prudent; n comply with IFRS when preparing financial statements subject to any material departures disclosed and explained in the financial statements n prepare the company’s financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors confirm that they have complied with the above requirements in preparing the financial statements. The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company. They are also responsible for safeguarding the assets of the company and taking reasonable steps for the prevention and detection of fraud and other irregularities. Nothing has come to the attention of the directors to indicate that the company will not remain a going concern for at least the next twelve months from the date of this statement. The directors are of the opinion that the financial statements give a true and fair view of the financial affairs of the company and of their operating results and cash flows. Approval of the financial statements The financial statements of the company as indicated above, were approved by the board of directors on 11 November 2010 and are signed on its behalf by: D.J. Kamwaza R.E. Mdeza Chairman Director08
  11. 11. National Investment Trust Limited Annual Report 2010 KPMG Telephone : (265) 01 820 744/01 820 391 Public Accountants and Business Advisors Fax: (265) 01 820 575 MASM House, Lower Sclater Road E-mail: kpmg@kpmgmw.com P. O. Box 508, Blantyre, MalawiIndependent Auditor’s Report to the members ofThe National Investment Trust LimitedWe have audited the accompanying financial statements of The National Investment Trust Limited, whichcomprise the statement of financial position as at 30 September 2010, and the statement of comprehensiveincome, statement of changes in equity and statement of cash flows for the year then ended, and a summary ofsignificant accounting policies and other explanatory notes as set out on pages 10 to 30.Directors’ responsibility for the financial statementsThe Company’s directors are responsible for the preparation and fair presentation of these financial statementsin accordance with International Financial Reporting Standards and in compliance with the provisions of theMalawi Companies Act, 1984. This responsibility includes: designing, implementing and maintaining internalcontrol system relevant to the preparation and fair presentation of the financial statements that are free frommaterial misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies;and making accounting estimates that are reasonable in the circumstances.Auditor’s responsibilitiesOur responsibility is to express an opinion on these financial statements based on our audit. We conducted ouraudit in accordance with International Standards on Auditing. Those standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance whether the financialstatements are free of material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on our judgement, including the assessment of the risksof material misstatement of the financial statements, whether due to fraud or error. In making those riskassessments, we consider internal control system relevant to the entity’s preparation of the financial statementsin order to design audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity’s internal control system. An audit also includesevaluating the appropriateness of accounting policies used and reasonableness of accounting estimates madeby management, as well as evaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient to provide a basis for our audit opinion.OpinionIn our opinion, the financial statements, give a true and fair view in all material respects of the financial positionof The National Investment Trust Limited as at 30 September 2010, and its financial performance and its cashflows for the year then ended in accordance with International Financial Reporting Standards and in compliancewith the provisions of the Malawi Companies Act 1984.Certified Public Accountants and Business AdvisorsBlantyre11 November 2010 09
  12. 12. National Investment Trust Limited Annual Report 2010 Statement of financial position As at 30 September 2010 In thousands of Malawi Kwacha Notes 2010 2009 Assets Equity investments 11 2,540,628 2,510,911 Income notes 12 1 1 Dividends receivable 6,814 3,229 Prepaid expenses 766 833 Cash and cash equivalents 13 76,443 51,723 Total assets 2,624,652 2,566,697 Equity and liabilities Shareholders’ equity Share capital 14 2,700 2,700 Share premium 14 169,550 169,550 Retained earnings 14 2,417,190 2,353,420 Total shareholders’ equity 2,589,440 2,525,670 Liabilities Non-current Deferred tax liability 15 4,856 17,378 Current liabilities Accrual for withholding tax on dividends 496 323 Current income tax liability 4,351 3,961 Trade and other payables 16 25,509 19,365 Total current liabilities 30,356 23,649 Total liabilities 35,212 41,027 Total equity and liabilities 2,624,652 2,566,697 The financial statements of the Company were approved by the Board of Directors on 11 November 2010 and were signed on its behalf by: D. J. Kamwaza R.E. Mdeza Chairman Director10
  13. 13. National Investment Trust Limited Annual Report 2010Statement of Comprehensive IncomeFor the year ended 30 September 2010In thousands of Malawi Kwacha Notes 2010 2009IncomeDividend income 5 149,168 115,842Interest income 6 3,827 1,425Fair value gain / (loss) on equity investments 7 15,603 (319,810)Total net income / (loss) 168,598 (202,543)ExpenditureAuditor’s remuneration - fee 1,320 1,200 - other expenses 218 198Directors’ remuneration - fees 3,725 2,730 - allowances 1,072 914Management fees 8 15,718 18,308Listing expenses 3,132 3,293Transfer secretarial fees 3,611 1,021Communication costs 3,426 2,544Consultancy fees - 178Other 291 223Total expenditure 32,513 30,609Profit /(loss) before taxation 136,085 (233,152)Income tax expense 9 (2,115) (157)Profit/(loss) and total comprehensive income/ (loss) for the year 133,970 (233,309)Attributable to:Equity holders of the Company 133,970 (233,309)Earnings/(loss) per share (tambala)Basic and diluted 10 99 (173) 11
  14. 14. National Investment Trust Limited Annual Report 2010 Statement of Changes in Equity For the year ended 30 September 2010 In thousands of Malawi Kwacha Share Share Retained capital premium earnings Total At 1 October 2008 2,700 169,550 2,639,379 2,811,629 Dividends paid to Shareholders - - (52,650) (52,650) Loss and total comprehensive loss for the year - - (233,309) (233,309) At 30 September 2009 2,700 169,550 2,353,420 2,525,670 At 1 October 2009 2,700 169,550 2,353,420 2,525,670 Dividends paid to Shareholders - - (70,200) (70,200) Profit and total comprehensive income for the year - - 133,970 133,970 At 30 September 2010 2,700- 169,550- 2,417,190- 2,589,440-12
  15. 15. National Investment Trust Limited Annual Report 2010Statement of cash flowsFor the year ended 30 September 2010In thousands of Malawi Kwacha Note 2010 2009Cash flows from operating activitiesDividends received 145,583 120,985Interest received 6 3,827 1,425 149,410 122,410Operating expenditure (31,209) (32,880) 118,201 89,530Taxes paid (14,074) (8,688)Net cash from operating activities 104,127 80,842Cash flows from investing activitiesPurchase of shares 11 (14,114) (5,527)Net cash utilised in investing activities (14,114) (5,527)Cash flows from financing activitiesDividends paid (65,293) (50,403)Net increase in cash and cash equivalents 24,720 24,912Cash and cash equivalents at beginning of year 51,723 26,811Cash and cash equivalents at end of year 13 76,443 51,723 13
  16. 16. National Investment Trust Limited Annual Report 2010 Notes to the financial statements For the year ended 30 September 2010 1. Reporting entity National Investment Trust Limited is a limited liability company domiciled and incorporated in Malawi under the Malawi Companies Act, 1984. The business objective of the Company is to provide investors with an opportunity to invest in a diversified portfolio of equity investment in Malawi. The Company’s registered office is; C/o First Merchant Bank Limited, Private Bag 122, Livingstone Towers, Blantyre, Malawi. 2. Basis of preparation (a) Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and provisions of the Malawi Companies Act; 1984. (b) Nature of business To provide a vehicle to facilitate broad public participation in a diverse portfolio of equity investments in Malawi. (c) Basis of measurement The financial statements are prepared on the historical cost basis except for financial instruments at fair value through profit or loss, which are measured at fair value and financial instruments measured at amortised cost. The methods used to measure fair values are discussed further in note 3. (d) Functional and presentation currency These financial statements are presented in Malawi Kwacha, which is the Company’s functional currency. Except as indicated, financial information presented in Malawi Kwacha has been rounded to the nearest thousand. (e) Use of estimates and judgements The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in note 19.14
  17. 17. National Investment Trust Limited Annual Report 2010Notes to the financial statements (cont’d)For the year ended 30 September 20103. Significant accounting policies The accounting policies set out below have been consistently applied by the Company and are consistent with those used in the previous year.(a) Financial instruments Financial assets and financial liabilities are recognised on the Company’s statement of financial position when the Company becomes a party to the contractual provisions of the instrument. Financial instruments are subsequently measured as described below: (i) Fair value measurement The determination of fair values of financial assets and financial liabilities is based on quoted market prices or dealer price quotations for financial instruments traded in active markets. For all other financial instruments fair value is determined by using valuation techniques. The Company uses widely recognised valuation models for determining the fair value of common and more simple financial instruments. For these financial instruments, inputs into models are market observable. The value produced by a technique is adjusted to allow for a number of factors as appropriate, because valuation techniques cannot appropriately reflect all factors market participants take into account when entering into a transaction. Management believes that these valuation adjustments are necessary and appropriate to fairly state financial instruments carried at fair value on the statement of financial position. (ii) Identification and measurement of impairment At each reporting date the Company assesses whether there is objective evidence that financial assets not carried at fair value through profit or loss are impaired. Financial assets are impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset, and that the loss event has an impact on the future cash flows from the asset that can be estimated reliably. The Company considers evidence of impairment of financial instruments at amortised cost at both a specific asset and collective level. All individually significant financial assets and those known to be impaired are assessed for specific impairment. All assets assessed but found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified together with all other assets not individually assessed by grouping together financial assets with similar risk characteristics. Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a borrower, restructuring of a loan or advance by the Company on terms that the Company would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, or other observable data relating to a group of assets such as adverse changes in the payment status of borrowers or issuers in the group, or economic conditions that correlate with defaults in the group. Impairment losses on assets carried at amortised cost are measured as the difference between the carrying amount of the financial assets and the present value of estimated cash flows discounted at the assets’ original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against the related financial asset. Interest on the impaired asset continues to be recognised through the unwinding of the discount. 15
  18. 18. National Investment Trust Limited Annual Report 2010 Notes to the financial statements (cont’d) For the year ended 30 September 2010 3. Significant accounting policies (cont’d) (a) Financial instruments (Continued) When a subsequent event causes the amount of impairment loss to decrease, the impairment loss is reversed through profit or loss. (iii) Derecognition Financial assets are derecognised when the Company has substantially transferred all the risks and rewards of ownership of the asset. Financial liabilities are derecognised when the obligation is extinguished. (iv) Cash and cash equivalents Balances with banks comprise demand deposits and other short term highly liquid instruments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Treasury bills (including repos) are classified as held for trading and are initially and at subsequent reporting dates measured at fair value. Gains or losses arising from changes in fair value are included in profit or loss. (v) Other financial assets Other financial assets which include dividends receivable are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest method. (vi) Trade and other payables Creditors are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. (vii) Equity investments Equity investments are recognised and derecognised on a trade date basis where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the time frame established by the market, and are initially measured at fair value. The Company’s equity investments are classified as investments held for trading, and are measured at subsequent reporting dates at fair value. Gains or losses arising from changes in fair value are included in profit or loss. (b) Revenue recognition Interest income is recognised in profit or loss for all interest bearing instruments on an accrual basis using the effective interest basis. Dividend income is recognised when the Company has an unconditional right to receive the income (usually the date on which trading in the underlying investment becomes “ex- dividend”). (c) Expenses All expenses, including management fees are recognised in profit or loss on an accrual basis. (d) Taxation Taxation on the profit or loss for the year comprises current tax (including taxation withheld on dividend income) and deferred taxation.16
  19. 19. National Investment Trust Limited Annual Report 2010Notes to the financial statements (cont’d)For the year ended 30 September 20103. Significant accounting policies (cont’d)(d) Taxation (Continued) Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the full liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the reporting date. Current tax and deferred liabilities and assets are offset in the statement of financial position only if the Company has a legal right to settle on a net basis and they relate to the same tax authority. Deferred tax assets are recognised only to the extent that it is probable that taxable profits will be available against which the asset will be utilised.(e) Earnings per share The Company presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of shares outstanding during the year. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of shares outstanding for the effects of all dilutive potential ordinary shares.(f) New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 30 September 2010, and have not been applied in preparing these financial statements: n IAS 7 Statement of cash flows.The IAS 7 amendments specify that only expenditures that result in a recognised asset can be classified as investing activities in the statement of cash flows. This amendment is effective for the period beginning on or after 1 January 2010 and is not expected to have a significant impact on the financial statements. n IAS 17 Leases. The amendment clarifies the classification of leases of land and building. The amendment is applicable for the period beginning on or after 1 January 2010 and is not expected to have any impact on the financial statements. n IAS 24 Related party disclosures. The IAS 24 amendment is applicable for reporting periods commencing on or after 1 January 2011. The amendment is not expected to have a significant impact on the company’s financial statements. n IAS 39 Financial Intruments: Recognition and measurement. The IAS 39 amendment is applicable for reporting periods commencing on or after 1 January 2010 and is not expected to have a significant impact on the financial statements. 17
  20. 20. National Investment Trust Limited Annual Report 2010 Notes to the financial statements (cont’d) For the year ended 30 September 2010 3. Significant accounting policies (cont’d) (f) New standards and interpretations not yet adopted (continued) n IFRS 2 Share – based payment. The IFRS 2 amendment is applicable for the period beginning on or after 1 January 2010 and is not expected to have any impact on the financial statements. n IFRS 5 Non Current Assets Held for Sale and Discontinued Operations. The IFRS 5 amendment is applicable for reporting periods commencing on or after 1 January 2010 and is not expected to have a significant impact on the company’s financial statements. n IFRS 9 Financial Instruments. IFRS 9 requires two primary measurement categories for financial assets and liabilities: amortised cost and fair value. The basis of classification depends on the entities business model and contractual cashflows of the financial asset. The standard is applicable for reporting periods commencing on or after 1 January 2013 and will have an impact on disclosures in the financial statements. n IAS 32 Financial Instruments: Presentation-Classification of Rights Issues. The amendment is applicable to periods beginning on or after 1 February 2010 and is not expected to have any impact on the Company’s financial statements. n IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments. IFRIC 19 is applicable for periods beginning on or after 1 July 2010 and is not expected to have any impact on the Company’s financial statements. 4. Determination of fair values A number of the Company’s accounting policies and disclosures require determination of fair value for both financial assets and liabilities. Fair values have been determined for measurement and for disclosure purposes as described in note 19. When applicable, further information about the assumptions made in determining fair value is disclosed in the notes specific to that asset or liability. n Trade and other receivables The fair value of trade and other receivables and cash and cash equivalents is estimated as the present value of the future cash flows discounted at market rate of interest at the reporting date. This fair value is determined for disclosure purposes.18
  21. 21. National Investment Trust Limited Annual Report 2010Notes to the financial statements (cont’d)For the year ended 30 September 2010In thousands of Malawi Kwacha5. Dividend income 2010 2009 Auction Holdings Limited 10,500 8,983 Illovo Sugar (Malawi) Limited 56,753 50,673 Kang’ombe Investment Limited 11,250 7,500 Malawi Property Investment Company Limited 352 229 National Bank of Malawi Limited 23,788 20,432 NBS Bank Limited 18,013 9,825 NICO Holdings Limited 5,132 2,272 Packaging Industries Malawi Limited 358 72 Press Corporation Limited 9,380 4,966 Standard Bank Malawi Limited 13,477 10,779 Telekom Networks Malawi Limited 165 111 Total dividend income 149,168 115,8426. Interest income Funds at call and on deposit 3,827 1,4257. Fair value gain / (loss) on equity investments Net decrease in fair value of unlisted equity investments (5,874) (37,717) Net increase / (decrease) in fair value of listed equity investments 21,477 (282,093) Net increase / (decrease) in fair value of equity investments 15,603 (319,810) Represented by: Decrease in fair value of unlisted equity investments (5,874) (37,717) Increase in fair value of listed equity investments 124,099 131,000 Decrease in fair value of listed equity investments (102,622) (413,093) Net increase / (decrease) in fair value of listed equity investments 21,477 (282,093) Net increase /(decrease) in fair value of equity investments 15,603 (319,810) Of which realized through disposal - - Unrealized net increase/(decrease) in fair value 15,603 (319,810)8. Management fees Fee payable 13,492 15,904 Value added tax 2,226 2,404 15,718 18,308
  22. 22. National Investment Trust Limited Annual Report 2010 Notes to the financial statements (cont’d) For the year ended 30 September 2010 In thousands of Malawi Kwacha Management fees (cont’d) Management fees are computed in accordance with the Fund Manager’s agreement. The fees are computed as a percentag of the net assets of NITL and the total dividends declared by NITL to its shareholders in each financial year. 75% of the annual fees determined on the basis of quarterly management accounts is payable within one month of each quarter, and the balance is payable upon certification by the Independent auditors of NITL. 9. Income tax expense 2010 2009 Current income tax 898 316 Deferred income tax (12,522) (8,357) Dividend tax 13,739 8,198 2,115 157 Income tax using company income tax rate of 30% (2009: 30%) 40,825 (69,946) Non deductible expenditure 9,504 9,071 Non taxable element of fair value (increase)/decrease in investments (17,203) 87,586 Dividends received (44,750) (34,752) (11,624) (8,041) Tax withheld on dividends 13,739 8,198 Income tax in profit or loss 2,115 157 The Company is currently appealing against a ruling by the Malawi Revenue Authority (MRA) to not allow a deduction for tax purposes of certain expenditure incurred for the purposes of its trade. The income tax and deferred tax provisions in these accounts have been calculated on the basis of the Malawi Revenue Authority ruling and if the appeal is successful income tax and deferred tax provisions of K9,330,000 and K4,856,000 will not be required. 10. Earnings per share Basic earnings per share The calculation of basic earnings per share at 30 September 2010 was based on the profit attributable to ordinary shareholders of K133,970,000 (2009: loss of K233,309,000) and the number of ordinary shares in issue at 30 September 2010 of 135,000,000 (2009: 135,000,000). 2010 2009 Profit / (Loss) attributable to ordinary shareholders 133,970 (233,309) Number of ordinary shares in issue (‘000) 135,000 135,000 Earnings per share (tambala) 99 (173) Diluted earnings per share The diluted earnings per share are equal to the basic earnings per share.20
  23. 23. National Investment Trust Limited Annual Report 2010Notes to the financial statements (cont’d)For the year ended 30 September 2010In thousands of Malawi Kwacha 2010 200911. Equity investments Cost 342,433 328,319 Adjustment to fair value 2,198,195 2,182,592 Fair value 2,540,628 2,510,911 Fair value of equity investments is analysed as: Listed: Illovo Sugar (Malawi) Limited 891,837 891,837 Malawi Property Investment Company Limited 19,057 4,335 National Bank of Malawi 333,769 335,761 NBS Bank Limited 360,250 458,500 Nico Holdings Limited 73,621 75,724 Packaging Industries Malawi Limited 8,964 8,964 Press Corporation Limited 316,008 261,663 Standard Bank Limited 271,157 202,012 Telekom Networks Malawi Limited 5,251 5,527 2,279,914 2,244,323 Unlisted: Auction Holdings Limited 27,430 27,430 Dairibord Malawi Limited 8,284 14,158 Kang’ombe Investment Limited 225,000 225,000 260,714 266,588 Total 2,540,628 2,510,911 Adjustment to fair value: At beginning of year 2,182,592 2,502,402 Fair value gains/(losses) during year 15,603 (319,810) At end of year 2,198,195 2,182,592 There has been no movement in the fair value of Auction Holdings Limited and Kang’ombe Investments Limited as the valuation has been based on the most recent transactions regarding the shares of the respective companies. 21
  24. 24. National Investment Trust Limited Annual Report 2010 Notes to the financial statements (cont’d) For the year ended 30 September 2010 In thousands of Malawi Kwacha 11. Equity investments (cont’d) At the reporting date the equity investment portfolio comprised: Percentage shareholding Number of shares 2010 2009 2010 2009 African Lotteries Limited 0.8 0.8 300,000 300,000 Auction Holdings Limited 5.0 5.0 45,716,970 45,716,970 Dairibord Malawi Limited 20.0 20.0 200,000 200,000 Illovo Sugar (Malawi) Limited 1.1 1.1 8,107,611 8,107,611 Kang’ombe Investment Limited 25.0 25.0 500,000,000 500,000,000 Malawi Property Investment Company Limited 0.6 0.1 7,329,719 1,635,960 National Bank of Malawi Limited 1.2 1.2 5,690,853 5,690,853 NBS Bank Limited 6.6 6.6 32,750,000 32,750,000 Nico Holdings Limited 0.8 0.8 8,413,800 8,413,800 Packaging Industries Malawi Limited 2.1 2.1 1,434,205 1,434,205 Press Corporation Limited 1.7 1.7 2,012,791 2,012,791 Standard Bank Malawi Limited 1.3 1.3 2,711,574 2,711,574 Telekom Networks Malawi Limited <0.1 <0.1 2,763,500 2,763,500 12. Income notes African Lotteries Limited – at cost 2,850 2,850 Impairment allowance (2,849) (2,849) 1 1 The company holds 22,800 income notes of nominal value US$1 each in African Lotteries Limited which bear interest at a variable rate ranging from 12% to 20% per annum. There is no specific repayment date. The impairment is necessitated as explained under note 17. 13. Cash and cash equivalents Funds at call and on deposit 61,698 36,076 Balances with banks 14,745 15,647 Total cash and cash equivalents 76,443 51,72322
  25. 25. National Investment Trust Limited Annual Report 2010Notes to the financial statements (cont’d)For the year ended 30 September 2010In thousands of Malawi Kwacha14. Capital and reserves The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets. Share capital 2010 2009 K K Authorised share capital 150,000,000 ordinary shares of 2 tambala each 3,000 3,000 Issued and fully paid 135,000,000 ordinary shares of 2 tambala each 2,700 2,700 Retained earnings Included in the reported retained earnings are unrealised gains on the changes in fair value of equity investments held at fair value through profit or loss net of related deferred taxation totalling K2,197,556,000 (2009: K2,167,315,000), which are not distributable in terms of the Companies Act and profits on investments switches totaling K138,950,796 (2009: 138,950,796) which are not distributable in terms of the company’s investment policy.15. Deferred tax Deferred tax is calculated, in full, on all temporary differences under the liability method using the enacted tax rate of 30% (2009: 30%). The movement on the deferred tax account is as follows: 2010 2009 Balance at 1 October 17,378 25,735 Recognised in profit or loss (note 9) (12,522) (8,357) Balance at 30 September 4,856 17,37816. Trade and other payables Accrued operating expenses 13,009 9,258 Value added tax 800 3,314 Unclaimed dividends payable to shareholders 11,700 6,793 Total creditors payable within one year 25,509 19,365 23
  26. 26. National Investment Trust Limited Annual Report 2010 Notes to the financial statements (cont’d) For the year ended 30 September 2010 In thousands of Malawi Kwacha 17. Financial risk management Overview The Company has exposure to the following risks from its use of financial instruments: n Credit risk; n Liquidity risk; and n Market risk. This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies, and processes for measuring and managing risk, and the Company’s management of capital. Further quantitative disclosures are included throughout these financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board has developed risk management policies principal among which is the Investment Policy outlined on page 2 of this Annual Report. The Investment Committee and the Fund Manager are expected to adhere at all times to the Investment Policy. The Investment Committee reports regularly to the Board of Directors on its activities. The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company’s Audit Committee oversees how management monitors compliance with the Company risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Company Audit Committee is assisted in its oversight role by the Fund Managers’ internal audit department which undertakes reviews of risk management controls and procedures, the results of which are reported to the Audit Committee. Credit risk Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s dividend receivable and cash and cash equivalents. Money market investments are limited to government paper and to deposits with licensed financial institutions. The table below shows the maximum credit exposure as at the reporting date: Note 2010 2009 Dividends receivable 6,814 3,229 Funds on call 13 61,698 36,076 Cash and bank balances 13 14,745 15,647 83,257 54,95224
  27. 27. National Investment Trust Limited Annual Report 2010Notes to the financial statements (cont’d)For the year ended 30 September 201017. Financial risk management (cont’d) Impairment losses The Company’s policy for recognition of impairment losses is described in note 3a(ii). An impairment loss allowance of K2,899,000 (2009:K2,899,000) is being carried in respect of an investment in African Lotteries Limited, an unlisted company which has incurred significant losses since it commenced its operations. This company was restructured during 2008 but the asset remains fully impaired until such time as a period of sustained profitability demonstrates that this company will be able to service its income note obligations and provide a return to its shareholders. Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity risk is to ensure, as far as possible, that it has sufficient liquidity to meet liabilities when they fall due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. The Company maintains sufficient funds in liquid money market investments to meet foreseeable operating expenses. The Company’s financial instruments include investments in unlisted equity investments, which are not traded in an organised public market and which generally may be illiquid. As a result, the Company may not be able to liquidate quickly some of its investments in these instruments at an amount close to fair value in order to meet its liquidity requirements, or to respond to specific events such as a deterioration in the financial position of any particular issuer. 25
  28. 28. National Investment Trust Limited Annual Report 2010 Notes to the financial statements (cont’d) For the year ended 30 September 2010 In thousands of Malawi Kwacha 17. Financial risk management (cont’d) Liquidity risk (cont’d) The Company’s Investment Policy sets maximum permitted limits for investments in unlisted equities. Compliance position as at 30 September 2010 Permitted Current limit position 1. Equities % of portfolio invested in equities 100% 97% % of portfolio in individual listed company 40% 34% % of portfolio in individual unlisted company 10% 9% 2. Bonds % of portfolio invested in bonds 25% Nil % of portfolio in bonds of single private sector issues 10% Nil 3. Property % of portfolio invested in property companies/equities 25% 10% % of portfolio in a single property investment 10% 9% 4. Cash equivalents 100% 3% 5. Speculative investments Nil Nil Due Within Fair 30 September 2010 1 month Total Value Financial liabilities Payables 25,509 25,509 25,509 30 September 2009 Financial liabilities Payables 19,365 19,365 19,365 Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity and commodity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk. The Company’s market risk is managed on a daily basis by the Fund Manager in accordance with policies and procedures in place. The Company’s overall market positions are monitored by the Audit Committee and reported on a quarterly basis to the Board of Directors. (a) Currency risk As the Company has no significant foreign denominated financial assets, save for a full impaired US dollar denominated income note, and has no foreign denominated financial liabilities, the Company’s income and operating cash flows are substantially independent of changes in foreign exchange rates.26
  29. 29. National Investment Trust Limited Annual Report 2010Notes to the financial statements (cont’d)For the year ended 30 September 201017. Financial risk management (cont’d) Market risk (cont’d)(b) Interest rate risk The Fund Manager is not permitted to borrow funds without the sanction of the Board of Directors who, in turn, may not, unless sanctioned by an ordinary resolution of shareholders, borrow in excess of the aggregate of the Company’s share capital and reserves. However, since incorporation, the Directors have not exercised their borrowing powers and, accordingly, the Company is not exposed to interest risk on borrowings. At the reporting date, the Company has only invested in fixed rate financial instruments. The company does not account for any fixed rate financial instruments at fair value as the debt securities market is fairly illiquid. Therefore, a change in interest rates at the reporting date would not affect profit and loss or equity.(c) Equity price risk Equity price risk arises from the Company’s held for trading equity securities. The Company seeks to manage individual equity risk through diversification of its investments within its Investment Policy guidelines on individual investments and/or broad classes of investments. The Fund Manager and the Investment Committee manage risk on an ongoing basis. Due to the nature of its business, the Company is always exposed to overall market price risk. Sensitivity analysis – equity price risk The carrying value, at latest trading price, of shares listed on the Malawi Stock Exchange (MSE) represents 87% (2009: 87%) of the Company’s total asset value. Although not directly correlated, it could be expected that the overall value of this portfolio would move broadly in line with movements in the MSE Domestic Share Index. The domestic share index on 30 September 2010 was 3904.68 (2009: 3941.27). An overall increase of 0.5% in share prices would have resulted in a capital gain of K12.7m (2009: K12.6m) recognised in profit or loss and an identical change in equity. An overall decrease of 0.5% in share prices would have resulted in a capital loss of identical magnitude. The small percentage has been used because the market has been relatively illiquid over the past twelve months. Capital management The Board’s policy is to maintain its capital base in real terms by not distributing unrealised fair value gains on revaluation of equities or realised profit on sale of equity investments.18. Related parties Fund Manager The Company entered into a management agreement with First Merchant Bank Limited, a licenced commercial bank and licenced investment/portfolio manager. Management fees for the year amounted to K13.5 million (2009:K15.9 million). Refer to note 8. Included in trade and other payables at 30 September 2010, is management fees payable of K3.7 million (2009: K6.6million). The fund manager provides banking services to the Company. Balances amounting to K9.02 million (2009: K15.6 million) were held at First Merchant Bank Limited. Interest earned on these balances during the year was K0.07 million (2009:K0.05 million). The transactions are done at arm’s length. 27
  30. 30. National Investment Trust Limited Annual Report 2010 Notes to the financial statements (cont’d) For the year ended 30 September 2010 18. Related parties (cont’d) Fund Manager (cont’d) At various times during the year, funds have been placed on short-term deposit at normal commercial rates of interest with The Leasing and Finance Company of Malawi Limited, a subsidiary of First Merchant Bank Limited. Interest earned on these balances during the year was K2.5 million (2009: K1.1 million). At the reporting date the Company had no investments (2009: nil) with The Leasing and Finance Company of Malawi Limited. As required by the Malawi Stock Exchange listing rules, First Merchant Bank Limited as fund manager are required to hold a minimum of 5% of the issued share capital of the Company. At 30 September 2010, 11,767,447 (2009: 11,767,447) issued shares of the Company were held by First Merchant Bank Limited which represented 8.72% (2009: 8.72%). At 30 September 2010, FMB Pension Fund whose assets are managed by First Merchant Bank Limited held 9,277,814 (2009: 6,012,314) shares in the Company. In addition at 30 September 2010, directors of First Merchant Bank Limited and related parties thereto had beneficial interests in a further 4,369,690 (2009: 879,690) issued shares of the Company. Directors’ fees Total directors’ fees are disclosed in the statement of comprehensive income. Directors’ interests As at 30 September 2010, the total direct and indirect interests of the directors and related parties thereto in the issued share capital of the Company were as follows: 2010 2009 D.J. Kamwaza 110,000 110,000 R.E. Mdeza 32,700 32,700 19. Critical accounting estimates and judgements 19.1 Fair values of financial instruments Many of the Company’s financial instruments are measured at fair value on the statement of financial position and it is usually possible to determine their fair values within a reasonable range of estimates. For the majority of the Company’s financial instruments, quoted market prices are readily available. However, certain financial instruments for example, unlisted equity investments are fair valued using valuation techniques, including reference to the current fair values of other instruments that are substantially the same (subject to the appropriate adjustments).28
  31. 31. National Investment Trust Limited Annual Report 2010Notes to the financial statements (cont’d)For the year ended 30 September 201019. Critical accounting estimates and judgements (cont’d)19.1 Fair values of financial instruments (cont’d) Fair value estimates are made at a specific point in time, based on market conditions and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and, therefore, cannot be determined with precision. Fair value hierarchy n The table below analyses financial instruments carried at fair value by valuation. The different levels have been defined as follows:- n Level 1: quoted prices (unadjusted) in active markets. n Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly (i.e. derived from prices). n Level 3: Inputs for the asset or liability that are not based on observable data. Level 1 Level 2 Total 30 September 2010 Listed equity investments 2,279,914 - 2,279,914 Unlisted equity investments - 260,714 260,714 2,279,914 260,714 2,540,628 30 September 2009 Listed equity investments 2,244,323 - 2,244,323 Unlisted equity investments - 266,588 266,588 2,244,323 266,588 2,510,911 For certain other financial instruments, including other receivables and other payables, the carrying amounts approximate fair value due to the immediate or short–term nature of these financial instruments. The carrying amounts of all the Company’s financial assets and financial liabilities at the reporting date approximated their fair values.19.2 Impairment of financial assets The company follows the guidance of IAS 39 to determine when a financial asset is impaired. This determination requires significant judgement. In making this judgement, the company evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost; and the financial health of and short-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cashflow.19.3 Income taxes The company is subject to income taxes. Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The company recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Whether the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. 29
  32. 32. National Investment Trust Limited Annual Report 2010 Notes to the financial statements (cont’d) For the year ended 30 September 2010 20. Contingencies At the reporting date there were no contingent assets or contingent liabilities. 21. Capital commitments At the reporting date there were no capital commitments which were authorized or contracted. 22. Exchange rates and inflation rates 2010 2009 2008 K K K United States Dollars (USD) 151 141 141 South African Rand (ZAR) 22 19 21 Inflation rates as at 30 September 7.0% 7.5% 9.3% At the time of signing these financial statements the exchange rates had not significantly moved from the above. 23. Subsequent events There have been no events subsequent to the reporting date requiring disclosure in the financial statements.30
  33. 33. National Investment Trust Limited Annual Report 2010Details of ShareholdersThe number of shareholders in NITL was 1,723 as at 30 September 2010 compared to 1,857 as at 30 September2009.Analysis by number of shares held:Number of shares held Number of shareholders Total holding0 – 1000 149 109,9321000 – 5000 429 1,416,2355001 – 10000 292 2,615,41910001 – 20000 217 3,566,29820001 – 50000 265 9,660,31450001 – 100000 188 16,171,956100001 - 500000 146 32,775,318500001 - 1000000 18 12,504,2661000001 - 10000000 18 44,412,81510000001 - 20000000 1 11,767,447Grand total 1,723 135,000,000Analysis by shareholder type:Type Number of Number of % of total holders shares held sharesResident Individual 1,622 73,421,123 54.39Pension / provident 20 23,520,898 17.42Banks / Nominees 24 18,394,839 13.63Invest / Trust etc 18 8,512,017 6.30Other Corporations 11 1,311,245 0.97Local Company 15 6,535,482 4.84Insurance / Assurance 7 3,252,836 2.41Non resident 5 49,560 0.04Foreign Company 1 2,000 0.00Total 1,723 135,000,000 100.00Shareholders holding in excess of 2% of the Company’s equity:Shareholders name Number of shares % of total number of sharesFirst Merchant Bank Limited 11,767,447 8.72FMB Pension Fund 9,277,814 6.87Press Trust 4,795,000 3.55National Bank of Malawi 3,946,371 2.92SUCOMA Non-contributory Fund 3,740,000 2.77NBM Pension Fund 3,037,826 2.25Livingstone Exports Limited 2,890,000 2.14 31
  34. 34. National Investment Trust Limited Annual Report 2010 The National Investment Trust Limited Notice is hereby given that the 9th annual general meeting of members of The National Investment Trust Limited will be held at Ryalls Hotel, Blantyre, Malawi on Thursday 16 December 2010 at 2.30 pm to transact the following business: 1. Minutes of previous annual general meeting To approve the minutes of the 8th annual general meeting held on 10 December 2009. 2. Financial Statements To receive and adopt the audited financial statements for the year ended 30 September 2010. 3. Election of directors To consider re-electing Mr. R.E. Mdeza, Mr. M. Sosola and Mr W. Nyengo who retire in terms of the articles of association, and who, being eligible, offer themselves for re-election. Persons other than the retiring and/or nominated directors will also be eligible for election to the office of director. Nominations in writing will be accepted from members of the company until 2.30 pm on 15 December 2010. Nominations should be delivered to The Company Secretary, The National Investment Trust Limited, First House, Glyn Jones Road, Private Bag 122, Blantyre and must be accompanied by the written consent of the nominee to be elected director and a signed copy of the nominee’s curriculum vitae. The election of any person as director is conditional upon the approval of The Reserve Bank of Malawi under the authority vested in it by The Securities Act. 4. Ordinary business To consider and, if deemed fit, to pass with or without modification the following ordinary resolutions: 4.1 That unless otherwise determined by the company in general meeting, the chairman shall be entitled to remuneration for his services at the rate of K635,000 (2009: K575,000) and each director shall be entitled to remuneration for his/her services at the rate of K580,000 (2009:K525,000) per annum payable quarterly in arrears with effect from 1 October 2010 and that the directors shall also be entitled to receive a sitting allowance for each board meeting attended at the rate of K30,250 (2009: K27,500) per meeting for the chairman and K24,750 (2009: K22,500) per meeting for other directors. 4.2 That audit fees of K1,320,000 (2009:K1,200,000) payable to KPMG in respect of the audit of the financial statements for the year ended 30 September 2010 be approved. 4.3 That KPMG be re-appointed as auditors for the 2010/2011 financial year. 4.4 That a final dividend of 45 tambala (2009: 27 tambala) per share for the year ended 30 September 2010 recommended by the directors be declared and paid on 31 December 2010 to all shareholders registered in the books of the company at close of business on 17 December 2010. 5. Other business To transact such other business as may be transacted at an annual general meeting of members. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend, speak and vote in his/her/its stead. The proxy need not be a member of the company. Proxy forms should be forwarded to reach the company’s registered office or the transfer secretaries not later than 2.30 pm on 15 December 2010 By order of the Board First Merchant Bank Limited Secretaries Blantyre, Malawi, 11 November 2010.32
  35. 35. National Investment Trust Limited Annual Report 2010 The National Investment Trust LimitedForm of Proxy for the 9th Annual General Meeting of The National Investment Trust LimitedI/We(Name/s in block letters)of (address) Number of votesBeing a shareholder/ member of the above named company and entitled to (1 share =1 Vote)do hereby appoint1 ofor failing him/her2 ofor failing him/her3. the chairman of the meetingas my/our proxy to attend, speak and vote for me/us or on my/our behalf at the annual general meeting ofthe company to be held at Ryalls Hotel, Blantyre, Malawi on 16 December 2010 at 2.30pm and at anyadjournment thereof as follows:Agenda Itemwhere applicable Mark with X In Favour Against Abstain1. Approval of minutes of previous annual general meeting2. Adoption of 2010 annual financial statements3. Election of directors including retiring directors4.1 Determination of directors’ remuneration4.2 Approval of audit fees4.3 Re-appointment of auditors.4.4 Declaration of final dividendSigned at on this dayof 2010Signature______________________________________________________________Assisted by me (where applicable) (see note 3)Full name/s of signatory/ies if signing in a representative capacity (see Note 4) 33
  36. 36. National Investment Trust Limited Annual Report 2010 Notes 1. A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend, speak and vote in his/her/its stead. A proxy need not be a member of the company. 2. If this proxy form is returned without any indication as to how the proxy should vote, the proxy will be entitled to vote or abstain from voting as he/she thinks fit. 3. A minor must be assisted by his/her guardian. 4. The authority of a person signing a proxy in a representative capacity must be attached to the proxy unless the company has already recorded that authority. 5. In order to be effective, proxy forms must reach the registered office of the company (c/o First Merchant Bank, First House, Glyn Jones Road, Blantyre, Malawi) or the transfer secretaries (National Bank of Malawi, Financial Management Services Department, P. O. Box 143, Blantyre) by no later than 2:30 pm. on 15 December 2010 6. The delivery of a duly completed proxy form shall not preclude any member or his/ her/its duly authorized representative from attending the meeting, speaking and voting instead of such duly appointed proxy. 7. If two or more proxies attend the meeting, then that person attending the meeting whose name appears first on the proxy form, and whose name is not deleted, shall be regarded as the validly appointed proxy.34
  37. 37. Designed & Printed by Kris Offset - 01 870 467/647

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