http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/RSS.ashxAfrican Annual Reports PagesFri, 29 May 2009 18:21:00 +0200http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=1http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=1Annual Report for the year ended 31December 2008 always with you2009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=2http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=2TNM is a licensed mobile telecommunications operator in Malawi enjoying 62% and 33% market share in post-paid and pre-paid sector respectively. TNM’s “always with you” brand is clearly identified as Malawian and portrays best customer value and service availability. TNM’s principal colour green, is fresh and synonymous with Malawi’s prosperity derived from agriculture and the environment. TNM offers services and products designed to meet the needs and desires of its subscribers in Malawi which is primarily divided into priceconscious pre-paid and premium-paying postpaid subscribers2009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=3http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=3TNM’s growth strategy > Constantly improve and expand infrastructure and capacity; > Grow the depth and availability of telecommunications services; > Promote telecommunications accessibility to Malawians; and > Protect and promote customer loyalty Key achievements > Successful IPO on the Malawi Stock Exchange +88% growth in subscribers > Refurbishment and upgrade of key infrastructure > Renewal of MK150m TNM Super-league sponsorship > 105 new base stations constructed > Coverage extended to an additional 67 areas > New products and services were introduced > More focused corporate social responsibility2009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=4http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=4Financial highlights 88% growth in subscribers to 627,000 16% growth in revenues 5% growth in profit after tax 9% decline in EBITDA Revenues���� EBITDA����� Profit after tax���� ARPU����� ARPU ����� Shareholders’ funds��� Long-term debt���� Market capitalisation��� Shares in issue at 31 Dec 2008�� Earnings per share��� Market price per share��� Return on equity���� EBITDA margin���� 2 MK�� MK�� MK�� MK�� US$�� MK�� MK�� 6.7bn�� 2.7bn�� 1.5bn�� 1,032���� 7.37�� 6.2bn��� -����� MK�� 33.1bn�� 10,040,450,000�� MK�� MK�� %�� %�� 0.17�� 3.30�� 25�� 422009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=5http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=5Subsciber growth 700 000 650 000 600 000 550 000 3000 000 3500 000 Capital investment 700 000 600 000 500 000 400 000 3 000 2 000 Revenue growth 2500 Profit before tax 2000 MK ’000 MKm MKm MKm 500 000 450 000 400 000 350 000 300 000 250 000 200 000 150 000 100 000 50 000 2003 2004 2005 2006 2007 2008 2500 000 2000 000 1500 000 1000 000 500 000 1500 1000 500 1 000 2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008 TNM’s investment thesis Through continued improvement of service, growth in subscribers and network capacity from current core capacity of 1 million subscribers to 1.5 million subscribers by 31 December 2009,TNM offers investors potential for both capital and dividend growth. 3 expansion of its existing mobile2009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=6http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=6Financial highlights Our statement of vision Vision � Mission Always with you Our mission is to be "Malawi’s premier mobile company of choice, offering best in class mobile telecommunication services to people everywhere." Premier means best in terms of: > Customer value > Customer service > Employee talent > Consistent and predictable growth As Malawi’s Premier mobile company we will enable people and businesses to realise their full potential. In doing so, our mobile services will contribute to the growth and development of the Malawi economy. Values Customers We value all our customers and treat them with respect, providing friendly, courteous, knowledgeable and prompt service at all touch points.We never forget that they come to us by choice.We seek and are driven by our customers' feedback.We are committed to direct relationships and outperforming the competition with value and a superior customer experience. Integrity We operate with unyielding integrity, obeying all laws and adhering to a stringent code of business conduct.We will not tolerate unethical business conduct by our team members. sWe will act with integrity and respect towards all. Excellence We continually raise our performance to exceed customer and shareholder expectations.We strive to be the best in quality and in everything we do. People We are an equal opportunity employer and we value, respect and empower our people. Providing an environment where diverse individuals can develop and are expected to perform to their full potential.Teamwork is key; respecting new viewpoints, diversity, building trust, enhancing communications, and sharing best practices to deliver world-class products and services. Malawian Identity We are committed to our roots and our corporate social responsibility, Green or otherwise.We share an infectious sense of mission to make an impact on society and community at large.We reach out to and empower our customers in ways never before possible. Our goal is to develop mobile telecommunication services and offerings that are accessible and within reach of every Malawian. In so doing giving every Malawian the means and ability to reach their full potential and allow them to play a full role in the development of Malawi. The TNM Super League TNM is the proud sponsor of the biggest Football League in Malawi, since 2005, with an unprecedented MK150 million initial three year contract. Football is a game of passion, the most loved sport in the world and Malawi is no exception. It is a game for all.We believe that with carefully crafted sponsorship, we will make a difference to the standards of football in Malawi and touch the Malawians’ lives in ways that will make positive impact socially and economically. The TNM Mug TNM has been a friend to golf for many years. In 2007 TNM cemented this relationship by committing to the sponsorship of the most prestigious tournament in Malawi, the Malawi Open.This tournament, attracts the cream of Malawi golfers. TNM is proud to be associated with this tournament which is instrumental in developing talent in this sport. 42009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=7http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=7Historical highlights Our journey thus far:- 2008 In November 2008 TNM successfully raised over MK2.58bn in new capital and listed on the Malawi Stock Exchange and significantly expanded its service offerings In September 2008, The shareholders in MTL Mobile acquired direct shareholding in TNM 2008 In June 2007 TNM 2007 was re-branded to TNM with a brand promise,‘always with you’ In March 2007 2007 TMB’s stake was acquired by MTL Mobile In April 2005 TNM 2005 recorded 100,000 customers In 2002 TNM launched 2002 international roaming In June 2000 2000 TNM launched pre-paid services and in January 2001 TNM launched its SMS service TNM started 1996 commercial operations in TNM was launched 1995 on 15 December 1995 with 36 base transceiver stations covering Blantyre, Lilongwe, Mzuzu and Zomba, the third network in Southern Africa after South Africa’s MTN and Vodacom January 1996 offering post-paid services with a capacity of 7,000 subscribers. In the same year capacity was increased to 10,000 subscribers 52009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=8http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=8Stakeholder communications TNM has identified mechanisms and processes that promote enhanced levels of constructive stakeholder engagement Stakeholders are invited to register on TNM’s investor relations website and opt in to receive e-mail alerts on all corporate communications, regulatory announcements, annual reports, presentations, share prices and other investment related information. TNM encourages feedback from its community at all times. Online annual report����� Interactive online charting always with you Annual Report for the year ended 31December 2008 View our annual report online���� Our corporate website: www.tnm.com.mw�� View share charts online Our investor relations website: www.tnminvestor.com Our dividend policy “TNM expects to distribute between 40 and 60% of its annual profits after tax” TNM expects to distribute between 40 and 60% of its annual profits after tax by way of a first interim dividend declared in August, a second interim dividend declared in December and a final dividend declared at the AGM in May.TNM expects to pay three dividends annually:1st interim � 2nd interim � Final� � Dividend declared: � August �� Share register closed: � September�� Payment:�� September Dividend declared: � December �� Share register closed: � December�� Payment:�� January Dividend declared: � May �� Share register closed: � May�� June Payment date:� 62009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=9http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=9Contents Chairman’s statement��� Your directors��� Management discussion and analysis� Executive management�� Corporate governance��� Director’s annual report�� Annual financial statements�� Shareholder information�� Shareholders’ diary 2008/9�� Contact information��� Notice of annual general meeting�� Form of proxy��� 8 9 10 19 20 23 27 48 54 55 56 57 72009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=10http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=10Chairman’s statement Dear shareholders and partners, It gives me great pleasure to report on your company in its inaugural annual report as a listed company on the Malawi Stock Exchange. TNM’s strong Malawian identity was recognised by the record support our company received in its initial public offer for subscription. Over 33,000 stakeholders invested MK2.58bn which was immediately used to expand and improve access to, and the quality of, our services in Malawi. Our growth objectives are consistent with broader National policies and we have been fortunate to operate in a progressive environment within which telecommunications services can grow. Our total investment into capacity and infrastructure of MK3.3bn in 2008 has enabled TNM to catch up on previous years and lay a strong foundation for long-term growth. In the 12 months to 31 December 2008,TNM recorded a 88% increase in subscriber numbers to 627,000, a 16% increase in revenue to over MK6.7bn but a 9% decrease in earnings before interest, tax, depreciation and amortisation (EBITDA) to nearly MK2.69bn. Much of TNM’s investment and subscriber growth occurred during the latter half of the year and revenue slippages occurred upon switch over to our New Generation platforms. In 2008 TNM proved its ability to innovate by introducing new relevant products based on existing and complementary technologies such as third-generation or 2.5G and GPRS.We plan to continue high levels of infrastructure investment to enhance quality and network coverage in 2009 in order to remain competitive in a rapidly growing and increasingly competitive industry. The extent of the financial meltdown across the globe and indeed the performance of the Malawi Stock Exchange has been significantly negative, more so than expected, but I believe that Malawi’s telecommunications sector still offers a strong investment opportunity. Our strong brand identity, robust financial performance underpinned by a strong balance sheet, shows that TNM is evolving into a leading provider of telecommunications services in Malawi. My appreciation is extended to the TNM Board, management and the nearly 350 people that constitute our TNM team. Thank you for your hard work, commitment and belief in the TNM brand. To our shareholders, thank you for faith in our commitment to provide our services and economic development across Malawi. TNM always with you Matthews Chikaonda 3 April 2009 82009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=11http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=11Your directors TNM has a Board comprising of six directors, all of whom are non-executive.The Chief Executive Officer of the Company attends Board meetings by invitation only. Dr. Mathews Aurelious Padzuwa Chikaonda, 54, Chairman and non-executive Director BA (Hons), Dip. Business, MBA, Ph. D. Dr Chikaonda served as Assistant and Associate Professor of Finance (1988-1991 and 1992-94, respectively) at Memorial University of Newfoundland in Canada. In addition to executive management and corporate restructuring experience, Dr. Chikaonda has over 14 years experience in economic management, policy formulation and implementation at national level. Dr Chikaonda served as Deputy Governor (19941995) and later as Governor (1995-2000) of the Reserve Bank of Malawi. In March 2000, he was appointed to the Cabinet and served in the Government of Malawi as Minister of Finance and Economic Planning until January 2002. Dr. Chikaonda has been Chairman of the TNM Board since his appointment thereto on 5th April 2007. In April 2002, Dr Chikaonda was appointed to his present position of Group Chief Executive of PCL. Mr. Hitesh Natwarlal Anadkat, 48,Vice Chairman and nonexecutive Director Masters of Business Administration, Bachelor of Science Economics (Hons). Prior to returning to Malawi to establish First Merchant Bank, Mr Anadkat worked in a corporate finance house in USA specialising in mergers, acquisitions and valuations. Mr.Anadkat holds chairmanships and Directorates and business interests in a number of other sectors of the Malawian economy, principally banking, manufacturing and property development. Mr. Kenneth Hudson Peter Mthuzi, 47, nonexecutive Director Bachelor of Commerce, Diploma Business Administration, Fellow Chartered Certified Accountant. Mr. Mthuzi currently serves as Chief Corporate Affairs Officer of MTL prior to which he served as MTL’s Interim Director of Finance. He has previously worked for Deloitte and Touche and Press Corporation as Head Group Internal Audit. Mr. Pius Percy Mulipa, 55, non-executive Director Bachelor of Arts, Diploma (Mgt.), MSc (Mgt.) Mr. Mulipa is Group Operations Executive in Press Corporation and is responsible for the operations of seven of the Press Group’s subsidiary and associate companies. He has held various senior management positions within the Press Corporation Group over the previous 17 years. Mr. James Adhemar Regout, 58 , non-executive Director Masters of Business Administration in Economics Mr. Regout is an experienced portfolio manager currently serves as External Investments Manager for Old Mutual Investment Group (SA) with executive responsibility for Old Mutual Malawi’s asset management operations, regional listed equity portfolios and a global private equity fund of funds. Mr. Regout also holds Directorates in a number of prominent companies in the Malawi economy. Mr. John M. O’Neill, 54, non-executive Director BSc in Mathematics and Management Sciences, FCA Mr. O’Neill is an Executive Director of First Merchant Bank and his previous experience includes a career of 17 years with international accountancy firm Deloitte, in the UK and Malawi, including six years as a partner in its Malawi practice. He holds numerous other Directorships in companies in various sectors of the economy. Mrs. Hilda Sheila Singo, 43, alternate nonexecutive Director to Kenneth Hudson Peter Mthuzi Masters in Business Administration, Bachelor of Commerce,Associate Chartered Management Accountant Mrs Hilda Sheila Singo is currently the Head of Finance at MTL where she previously served as Deputy Director of Finance. She worked with Grain and Milling Company as Management Accountant, with Malawi International Transport Company as Finance Manager and with Ministry of Finance and Agriculture as Principal Accountant. She has held several Directorates and trusteeships in several organizations. 92009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=12http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=12Management discussion and analysis The expansion of our core network, coverage roll-out and improvement of new products and services and a very successful IPO underpinned a year that will stand out in TNM’s history Dear stakeholders The expansion of our core network, coverage roll-out and improvement of new products and services and a very successful IPO underpinned a year that will stand out in TNM’s history.While profits and revenues were marginally below prospectus forecast, EBITDA was significantly below that of 2007 but the 42% EBITDA margin is an acceptable industry achievement. Taken within the context of our achievements, 2008 was a satisfying year from many perspectives and my key message to shareholders is that 2008 was a building year and our challenge now is to enhance revenues from our significantly expanded subscriber base. To all my staff and management team thank you for your dedication and diligence during 2008. Subscribers and summary financial results TNM implemented a wide range of initiatives in 2008 to stimulate subscriber growth and improve mobile phone penetration. > Subscriber numbers were marginally above prospectus forecasts > Profit after tax marginally below forecast > Lower cost airtime, increased access and affordability > 627,000 subscribers at 31 December 2008, 88% above the previous year > Market share remained static at 33% > ARPU at MK1,032 or US$7.37 102009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=13http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=13We implemented a wide range of initiatives in 2008 to stimulate subscriber growth and improve mobile phone penetration. Key in this strategy was the promotion and sale of low cost handsets (Nokia 1200,TNM T201 and TNM T202 handsets) which successfully offered the low end market increased access to our services. Our respective market shares were as follows at 31 December 2008:- Operators� Total� PSTN� TNM � 627,611� -� MTL (Note 1)� 102,000� 102,000� Zain (Note 2)�1,270,000� -� Total� 1,999,611� 102,000� Note 1 - Source: MTL. ���� Note 2 - Source: Zain Annual Report. PSTN means public switched telephone network Mobile Pre-paid� Mobile Post-paid 617,662� 9,949 -��� 1,264,000� 6,000 1,881,662� 15,949 In the absence of an industry standard definition for “subscriber” the figures above may not be strictly comparable but prima facie our share of Malawi’s total mobile market is 33% and 62% for pre-paid and postpaid subscribers respectively. Malawi’s mobile lines per 100 inhabitants have risen from 0.7 in 2002 to 14.7 as at 31 December 2008. From 1 January 2009 TNM will adopt a more internationally acceptable definition of subscriber being a customer that generates a mobile revenue earning event within three months. Currently the definition adopted uses 6 months. Revenue levels to the end of 2008 were unexpectedly lower resulting in overall performance which was marginally below prospectus forecast.Additional information is provided under “Revenue, EBITDA and ARPU” below but our summary financial performance appears below:- Revenues �� EBITDA�� EBITDA margin�� Profit after tax�� ARPU �� ARPU �� MK bn� MK bn� %� MK bn� MK� US$� Prospectus� ��� Forecast� 7.00� 2.94� 42� 1.60� 1,140� 8� Actual��� 31 December 2008 � % 6.70� (4.2)� 2.78� (5.4) 42� 1.53� (4.3) 1,032� (12.1) 7.37� (10.0) Malawi continued to enjoy a relatively stable economic climate to this annual report date with latest inflation registering 9.9% at 31 December 2008 and the US$ : MK exchange rate marginally up from 140.32 at 1 January 2008 to 140.60 at 31 December 2008. Prime overdraft interest rates ended the year at 19.5%. Revenue, EBITDA and ARPU > Revenue increased by 16% > Significant increase in prepaid customers + 88% offset by declines in average revenue per additional user and ARPU declined from US$10.3 in 2007 to US$7.37 in 2008 accordingly > EBITDA margin declined from 52% to 42% in 2007 and 2008 respectively 112009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=14http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=14TNM revenue increased by 16% from MK5.8bn in 2007 to MK6.7bn in 2008 77.0% Prepaid 11.9% Postpaid 9.5% Interconnect revenue 1.6% International roaming 2008 73.0% Prepaid 13.2% Postpaid 11.7% Interconnect revenue 2.1% International roaming TNM revenue increased by 16% from MK5.8billion in 2007 to MK6.7billion in 2008 and was primarily accounted for by our increased prepaid customer base which benefited from aggressive service expansion campaigns. The high growth in lower income subscribers accordingly reduced ARPU per month from US$10.3 in 2007 to US$7.37 in 2008. 2007 The decline in EBITDA margin of 10% from 52% to 42% is explained by the exceptional earnings in 2007 caused by Celtel’s outage, the negative effects of lower revenues toward the end of 2008, increases in direct operational and selling and administration expenses, for example, discounts on handsets and the positive growth in prepaid revenues over 2007’s performance. Direct operational and selling and administration expenses increased during 2008 by just over MK991 million.This was attributed to increased marketing development investments including discounts on handsets and increased staff investment and allowances as a result of an increased employee base and increments.A greater proportion of distribution was carried out through outsourced agents and this increased dealer commissions. In summary, our achieved EBITDA margin of 42% met our prospectus forecast but lower levels of revenues depressed overall EBITDA. 122009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=15http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=15Our people > Staff complement grew by 35% from 260 in 2007 to 350 in 2008 > Staff development and training initiatives continue > Foreign consultants used as an opportunity to transfer skills Without our dedicated and hard-working team TNM could not have achieved what we did in 2008. Extensive training programs for staff were provided both locally and abroad for the new technologies and equipment installed during 2008. In addition to Malawi based training initiatives, staff attended training programs in France and China and interacted closely with visiting specialist consultants in key areas to maximise knowledge transfer. TNM provided loans to staff to enable them to participate in TNM’s IPO and at 31 December 2008 employees owned 97,390.000 TNM shares under the IPO scheme representing 0.99% of TNM’s issued share capital. Products and services > New SMS platform integrated > Missed Call Notification successfully launched > Mobile Internet, Multimedia Messaging Service (MMS) and Voice Mail to be launched in early 2009 > Pilot for data, MMS and voicemail commenced Our focus on the distribution of low cost handsets to capture the lower bracket segment was complemented by the introduction of lower and easy value airtime cards of 25 units and 40 units voucher to improve airtime access and affordability. Preparations started for the implementation of Mobile Internet, MMS and Voice Mail, expected to be launched early 2009.TNM upgraded and also introduced a range of VAS platforms, namely:> Missed Call Notification Service > Multi-Media Service > Personalized Ring Back Tones > Short Message Service Centre (SMSC) > Over-The-Air (OTA) Device and Sim Management System > Voice Mail Service > Wireless Access Protocol (WAP) Network > Successfully completed major upgrades during 2008 > Constructed 105 new base stations in 2008 > New international satellite gateway installed > Successful migration to New Generation Network (NGN) During 2008 we successfully completed major upgrades and capacity expansions, the highlight being the migration of the Legacy Network to the NGN and the deployment of this cutting edge technology resulted in the integration of the above mentioned new services in our portfoli 13 152009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=16http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=16A total of 105 new base stations were constructed during 2008, the majority (67) of which covered areas in which TNM services were not previously available listed in the table below.The remainder were used to add capacity in the high-density urban areas. No.� 1� 2� 3� 4� 5� 6� 7� 8� 9� 10� 11� 12� 13� 14� 15� 16� 17� 18� 19� 20� 21� 22� 23� 24� 25� 26� 27� Southern Region� No.� Bangwe Police�� 1� Bvumbwe�� 2� Cape Maclear�� 3� Chiradzulu Hospital� 4� Chiringa��� 5� Fatima��� 6� Lirangwe�� 7� Malekano�� 8� Marka��� 9� Mayaka��� 10� Milepa��� 11� Mpemba��� 12� Mvuu Camp�� 13� Nambande�� 14� Nasawa��� 15� Nayuchi��� 16� Ngapani��� 17� Nkando��� 18� Nselema�� 19� Phalula��� 20� Phwazi (Chapananga)� 21� Sun and Sand�� Tea Research (Mimosa)�� Thekerani Tsangano Turn-off� Zaone���� Zoa Central Region�� Chamama��� Chipoka���� Chitedze��� Chulu ���� Dangaliro��� Dwambazi��� Dwangwa��� Kapili ���� Kapirinthema��� Kasitu ���� Livingstonia Beach�� Liwaladzi��� Lobi���� Malilana���� Muwa���� Nathenje��� Ngala���� Nkhako miseza ��� Nsalu (Kasiya) ��� Santhe���� State House��� No.� 1� 2� 3� 4� 5� 6� 7� 8� 9� 10� 11� 12� 13� 14� 15� 16� 17� 18� 19� 20� 21� Northern Region Bolero Elephant Tree Embangweni Kayerekera mine Lusangazi Lwanjati Manyamula Mbalachanda Mchenga Coal Mine Mchengautuba Misuku Mpamba Mpata Mpherembe Mtakisi (Kapolo) Mzuzu Forestry Phwezi Undaninge Usisya Uzumala Yesaya Nkosi We also installed a new international satellite gateway in early 2008 which provided access to all major international carriers resulting in an improvement with the quality and availability.The installation of a redundant transmission network connecting Blantyre to Lilongwe and Mzuzu improved the availability, quality and capacity of our voice circuits. Corporate sales/ services > Increase in corporate account subscribers > Corporate account service levels remain high > Strong loyalty from the corporate sector By paying close personal attention to clients,TNM remains strong in its corporate account management and managed to retain its corporate customer base and gained numbers from the competition during 2008. TNM has been a friend to golf for many years and in 2007 we began sponsoring the most prestigious tournaments in Malawi, the men’s Malawi Open and ladies tournament. These tournaments attract the cream of Malawi golfers and TNM is proud to be associated with developing talent in this sport. 14 172009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=17http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=17At the end of the year our coverage of Malawi was as follows:- Chitipa Karonga Lake Malawi Rumphi Bolero Northern Ekwendeni Mzuzu Euthini Nkhata Bay Mzimba Chintheche Edingeni Likoma Lake Kasungu Nkhotakota Central Ntchisi Mchinji Mponela Dowa High network area Medium network area Low network area Lake Namitete Lilongwe Chipoka Monkey Nathenje Dedza Bay Mangochi Southern Ntcheu Balaka Ntaja Machinga Chikwawa Thyolo N’gabu Malawi Salima Domasi Zomba Mwanza Lilangwe Namadzi Lunzu Chiradzulu Phalombe Blantyre Mulanje Nsanje 152009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=18http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=18Promotions & marketing > Exciting promotions launched & well supported > Call-for-free, Zeni Zeni, Shop-A-Dream > SMS Bonus promotions A number of promotions were successfully planned and executed during the year to stimulate airtime buying. Call-for-Free, Zeni-Zeni, Shop-aDream and SMS bonus promotions all excited the market. TNM launched a shop in Karonga and extended opening hours of key shops for customers’ convenience. Distribution A number of promotions were successfully planned and executed during the year to stimulate airtime buying. Call-for-Free, Zeni-Zeni, Shop-aDream and SMS bonus promotions all excited the market. TNM launched a shop in Karonga and extended opening hours of key shops for customers’ convenience. > Distributors doubled from 11 to 22 > Outlets doubled from 5,000 to 10,000 > Flexible distribution and credit facilities to outlet To strengthen market position and service new coverage areas we doubled our distributorships from 11 to 22 country-wide.We increased number of TNM sales outlets from 5,000 to 10,000 and improved responsiveness and product availability by paying closer attention to dealers.We also introduced a flexible distribution & credit facility to chain outlets. Research & Development > Enhanced independent research into customer needs and trends > Expansion into Greenfield areas continues TNM has embraced dependence on independent research to uncover customer needs or wants, market insights and competitiveness through customer and market surveys.Alongside these surveys TNM also carried out demand surveys in green markets and the results demonstrate greater potential for growth. > Support for YONECO implemented in 2008 > TNM renewed support for the TNM Superleague > CSR policies are evolving as we grow Corporate social responsibility (CSR) & the environment We recognise that we must integrate social, economic and environmental responsibilities with our business values and operations to meet the expectations of our stakeholders comprising customers, employees, regulators, investors, suppliers, the community and the environment. Our focus in the future is to concentrate on supporting vulnerable groups in Malawi particularly the youth, young mothers, the disabled and the elderly. We continue to implement more environmentally responsible practices which include alternative energy sources, low power consumption equipment and sharing telecommunications infrastructure. In future we intend to promote responsible disposal of obsolete phones and recharge cards and promoting reforestation. 162009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=19http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=19From 2005 we have been the proud sponsor of the biggest football league in Malawi amounting to MK50 million annually.This was by far the biggest sponsorship in the history of Malawian football.At a time when football sponsorship experienced apathy due to hooliganism and poor administration, TNM’s sponsorship has transformed the landscape of football in Malawi evidenced by improvements by the Malawi National team. Football is a game of passion, the most loved sport in the world and Malawi is no exception.We believe that with carefully crafted sponsorship, we will make a difference to the standards of football in Malawi and touch the Malawians’ lives in ways that will impact positively both socially and economically. Competition > Aggressive competition continues > Price wars were avoided, where possible, through product positioning > TNM’s strong Malawian brand continues to be a strategic asset By introducing wireless phones in 2008 MTL entered the fixed mobile market.TNM also experienced aggressive competition from Zain particularly on pricing of both handsets and local and international calling rates. In its interest,TNM avoided the price war tactfully by positioning itself differently In July 2008 MACRA awarded Global Advanced Integrated Networks (GAIN – trading as G Mobile) a third mobile licence. Access Communications Limited, the second national fixed network operator in Malawi, was awarded an operating license by MACRA in July 2008, the same month that MACRA advertised its intention to award a fourth mobile licence and accordingly, invited bidders. Management expects G Mobile to launch their network and Access Communications to commence operations in fourth quarter of 2009. During the year MACRA confirmed its intention to migrate to a 10 digit numbering format by March 2009 which will increase the current 1 million available numbers per mobile operator to 10 million numbers. The new numbering plan is expected to be effective 1 April 2009.The new numbering format for TNM subscribers is 088 x xxx xxx, replacing 08 xxx xxx and 04 xxx xxx. For example 08 123 456 becomes 088 8 123 456 and 04 123 456 becomes 088 4 123 456.The international calling format to Malawi will now be +265 88 8 123 456 /+265 88 4 123 456; alternatively 00 265 88 8 123 456 / 00 265 88 4 123 456. MACRA is currently reviewing all operators’ licences to ensure they are appropriate to the operating environment. 172009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=20http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=20Prospects & revised forecast for 2009 > Subscribers planned to double > Revenue base expansion from new subscribers is a key objective In 2009 TNM plans a 100% expansion of its customer base through services improvement and low cost handsets.The majority of our planned network expansion initiatives are to focus on expanding network coverage in new markets. Data services and other revenue enhancing initiatives will be launched in 2009 to open up new revenue streams particularly internet service and data products. In December 2008 shortages of foreign currency began to inhibit capital investment and operational initiatives, particularly our ability to import handsets. Furthermore in the last quarter of 2008 telecommunications operators experienced a marked slow down in revenues as a result of cautious consumer spending patterns. Our competitors also implemented vigorous price reductions on handsets. Market commentators have expressed concern over the possibility of exchange rate devaluation in 2009.These issues and the prospect of the third licensed operator commencing operations in 2009 remain a cause of concern as we intend to continue our successful 2008 strategies in 2009. The Board has taken a prudent view of these latest developments and accordingly the forecast issued at our IPO is replaced by earnings guidance based on earnings per share within a range of between MK0.16 and MK0.18 per share for the year ending 31 December 2009. TNM Always with you Werner Schrijver Chief Executive Officer 182009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=21http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=21Executive management Our management team implements the long term strategy and vision of the company to generate relations with stakeholders Mr. Werner Schrijver, 57, Chief Executive Officer The CEO, Mr.Werner Schrijver, is assisted by five senior management employees. Mr.Werner Schrijver holds a Bachelor of Arts in Business Administration and has been commercially responsible for three international mobile telecommunications start-ups having worked for such companies as TMobile International,Tele Denmark International and KPN Telecom International. In both the B2B and B2C markets, Mr. Schrijver has had more than 20 years experience managing large units (1,000 employees plus) at board level. shareholder value and positive Mr. David Chetty, 44, Chief Technical Officer Mr. David Chetty holds a National Telecommunications Diploma and a National Higher Diploma in PostSchool Education and since 1984 has experience in start up telecommunications companies and has worked in senior management positions with MTN, Celtel, Swedtel and Nokia in Africa and the Middle East Mr. Macleod Duncan Matandika, 39, Chief Financial Officer Mr. Macleod Matandika holds a Masters in Business Administration and is a an accountant from the polytechnic. He joined the company at its commencement as the Operations Accountant up to 1998. He has wide experience in the mobile industry and has been part of the growth of the company. Prior to his appointment as Chief Financial Officer in April 2008 he worked as a Management Accountant Mr. Charles Kamoto, 34, Head Commercial Mr. Charles Kamoto holds a Bachelor of Business Administration. He joined the Company as Branch Executive in 2000 and has subsequently held the posts of Sales and Marketing Manager and Head of Marketing/Acting Chief Commercial Officer during his 8 years’ experience in the mobile phone industry. Mrs. Christina Mwansa, 35, HeadLegal & Corporate Affairs Mrs. Christina Mwansa holds a Bachelor of Laws Honours Degree from Chancellor College, University of Malawi. She joined the Company in 2000 as Legal Officer and later the same year was appointed Company Secretary. She has been a licensed legal practitioner for over 10 years. Obituary:TNM’s Head of Human Resources Bester Kumbani passed away on 9 November 2008. Condolences are extended to his family and colleagues. 192009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=22http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=22Corporate governance > “TNM’s Board of Directors is responsible to shareholders for creating and delivering sustainable shareholder value” > “Good corporate governance practice is an important ingredient in creating and sustaining shareholder value and ensuring that behaviour is ethical, legal and transparent.” Board structure and policies TNM’s Board is responsible to shareholders for creating and delivering sustainable shareholder value through management of the Company’s business.TNM’s Board therefore determines TNM’s strategic objectives and policies to deliver long-term value and provide overall strategic direction within a framework of rewards, incentives and controls. The Board is committed to ensuring that TNM conforms with the major principles of modern corporate governance namely, accountability, integrity, and transparency as contained in the King’s Report on Corporate Governance 2002 and the Code of Best Practice for Corporate Governance in Malawi. TNM’s unitary Board structure comprises 6 non-executive Directors whose responsibilities are set out in a formal charter. Dr. Mathews Chikaonda is TNM’s non-executive Chairman. Internal control The Board of Directors is responsible for TNM’s systems of internal control.These systems are designed to provide reasonable, but not absolute, assurance as to the integrity and reliability of the financial statements and to safeguard, verify and maintain accountability of its assets and to detect and minimise significant fraud, potential liability, loss and material misstatement while complying with applicable laws and regulations. In carrying out these responsibilities, the Board considers what is appropriate for the Company’s business and reputation, the materiality of financial and other risks inherent in the business and the relative costs and benefits of implementing specific controls. The Board also seeks to ensure that management strikes an appropriate balance between promoting long-term growth and delivering short-term objectives within its system of internal controls to provide assurance of effective and efficient operations, internal financial controls and compliance with law and regulation. Board meetings The Board holds formal meetings and periodic strategic sessions at least four times a year and reviews its governance practices continually and which may from time to time be amended to ensure that TNM adopts and successfully implements sustainable business practices. Special board meetings may be convened on an ad hoc basis, when necessary, to consider issues requiring urgent attention or decision. During the year under review, 8 Board meetings were held. Dr. Matthews Chikaonda��� Mr. Hitesh Anadkat���� Mr. Kenneth Mthuzi���� Mr. Pius Mulipa����� Mr. John O’Neill����� Mr. James Regout���� 20 Attendance� ����� � Attendance Record % 7 / 8 ��� � 88 8 / 8 ���� 100 8 / 8 ���� 100 7 / 8���� 88 8 / 8 ���� 100 4 / 8 ���� 502009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=23http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=23Committees The Board is authorised to form committees to assist in the execution of its duties, powers and authorities.The Board has 2 standing committees, namely, the Audit Committee and the Appointments and Remuneration Committee.The Terms of Reference and composition of the committees are determined and approved by the Board. The Board of TNM has established an Audit Committee and an Appointments and Remuneration Committee whose Chairmen, Mr. Kenneth Mthuzi and Mr. Hitesh Anadkat respectively, report formally to the Board. The Audit Committee’s role is ensuring proper management of the business operations in compliance with statutory obligations, policies, procedures, regulations and prudent business practices.The committee also reviews and evaluates the Company’s financial and accounting policies, evaluates the work and findings of internal audit, evaluates the external auditors and reviews the financial statements of the Company for recommendations to the Board for approval. Members of the Audit Committee and their respective attendance records are as follows: Attendance ����� ����� Record % 100 100 Mr. Kenneth Hudson Peter Mthuzi (Chairman)�� Mr. John Michael O’Neill��� The Appointments and Remuneration Committee determines and agrees with the Board the framework or broad policy for the remuneration of staff.The remuneration packages of Mr Schrijver and Mr Chetty are incorporated within a management contract between TNM and Greenhurst Inc. No Director or manager is involved in any decisions regarding his or her own remuneration. Members of the Appointments and Remuneration Committee and their respective attendance records are as follows: Attendance ����� ����� Record %� 100 100 Mr. Hitesh Natwarlal Anadkat (Chairman)�� Mr. Pius Percy Mulipa���� Directors interests As provided by the Companies Act 1984 and the Company’s Articles of Association, the Directors are bound to declare any time during the year, in writing whether they have any material interest in any contract of significance with the Company, which could have given rise to a related conflict of interest. No such conflicts were reported for this year. TNM has adopted detailed policies and procedures covering the regulation and reporting of transactions in securities of TNM by Directors and officers. 212009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=24http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=24Directors interests As provided by the Companies Act 1984 and the Company’s Articles of Association, the Directors are bound to declare any time during the year, in writing whether they have any material interest in any contract of significance with the Company, which could have given rise to a related conflict of interest. No such conflicts were reported for this year. TNM has adopted detailed policies and procedures covering the regulation and reporting of transactions in securities of TNM by Directors and officers. Sustainability practices During 2008 we expanded into communities that previously had no telecommunications access.With this growth comes responsible management of social, economic and environmental aspects of our operations. During 2009 we will be defining and formulating policies with respect to our commitment to this socio-economic growth of communities in which we operate. Our goal is to enhance universal access for customers and improve the general quality of life of Malawian communities and partner individuals, communities and businesses to achieve this. Communication Our Annual General Meeting (AGM) will provide a useful interface with individual shareholders, many of whom are also TNM customers.The Chairman of the Board and the Chief Executive Officer are available at the AGM to answer questions and receive feedback. Information about TNM is maintained and available to shareholders on and investors are able to receive notification of the AGM by way of opt-in email in addition to postal notification. We also report formally to shareholders twice a year when our halfyear and full-year results are announced. Presentations on results and strategic progress to institutional investors, analysts and the media are presented by the CEO and his management team.Typically these presentations and, where applicable, summary transcripts of any material issues discussed at these meetings, are made available on as soon as possible thereafter. Regulation We enjoy a constructive relationship with MACRA, Ministry of Finance and MRA and have worked closely with Government and other �� stakeholders on telecommunications related matters during 2008. 222009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=25http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=25Director’s annual report The Directors have pleasure in submitting their report together with the audited financial statements for the year ended 31 December 2008. Incorporation and registered office Telekom Networks Malawi Limited is a company incorporated in Malawi under the Malawi Companies Act, 1984 company number 4029.The address of its registered office is:Fifth Floor, Livingstone Towers. Glyn Jones Road. P.O. Box 3039 Blantyre Malawi Nature of the business The company is engaged in providing telecommunication services in accordance with its licence issued by Malawi Communications Regulatory Authority (MACRA). The results and state of affairs of the company are set out in the accompanying income statement, balance sheet, statement of changes in equity, cash flow statements and notes to the financial statements which include a summary of significant accounting policies. Directors and Company Secretary who served during the year are listed below: Dr. Matthews Chikaonda� Mr. Hitesh Anadkat�� Mr. Kandi Padambo �� Mr. Pius P. Mulipa �� Mr. James Regout�� Mr. Steve Minaar �� Mrs Ruth Audrey Lemani� Mr. John M. O’Neill �� Mr. Ken Mthuzi �� Mrs. Hilda Singo �� Mrs. Christina Mwansa�� Corporate Governance Chairman� Vice Chairman Director (up to 30 April 2008) Director Director Alternate to Mr. James Regout Director (Resigned 17 July 2008) Director Director Alternate to Mr. Ken Mthuzi Company Secretary Financial performance Directorate and Secretariat The company continues to embrace and abide by the main principles of modern corporate governance as contained in the Cadbury Report and the King Report. In this regard, the company has at Board level, a Board Audit Committee and a Board Appointments and Renumeration Committee.The committees comprise non-executive directors. During the year total dividend of MK881 million was declared. MK360 million was paid in May 2008 and MK320 million was paid in October 2008 and the balance of MK201 million which was decalred in December 2008 was payable in January 2009. At the forthcoming Annual General Meeting the directors will make an appropriate recommendation to the members with regard to the appointment of auditors for the year ending 31 December 2009. BY ORDER OF THE BOARD Dividend Auditors DIRECTOR�� 3 April 2009 DIRECTOR 232009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=26http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=26Controlling shareholder By virtue of its shareholding and a mutual voting agreement with other non-public shareholders Press Corporation Limited (PCL) is the ultimate holding company of TNM comprising a total beneficial direct and indirect interest in TNM, of 32.72% comprising a direct shareholding of 10.46% and an effective interest of 22.26% held through subsidiary,Telecom Holdings Limited. PCL is a Malawi Stock Exchange-primary listed and London Stock Exchange-secondary listed diversified holding company. MTL, a public limited company, is currently the sole provider of domestic and international fixed telecommunications services in Malawi providing telephone, data, leased line and internet access services to an estimated 110,000 customers. MTL is owned 20% by the Government of Malawi and 80% by Telecom Holdings Limited, a company in which PCL holds 62.6% equity interest. Material resolutions The authorised share capital of TNM was restructured on 4 September 2008 by increasing the share capital by MK51.618m from MK350m to a total of MK401.618m comprising 10,040,450,000 ordinary shares of 4 tambala each. On 4 September 2008 the following special resolutions were passed by TNM’s shareholders:> TNM’s authorised share capital of MK350,000,000 comprising 35,000,000 ordinary shares of nominal value MK 10.00 each were sub-divided into 8,750,000,000 ordinary shares of 4 tambala each. > The authorised share capital of the Company was increased to MK 401,618,000 comprising 10,040,450,000 ordinary shares of 4 tambala each by the creation of an additional 1,290,450,000 ordinary shares of 4 tambala each ranking pari-passu with the existing shares in the capital of the company. Review of results Review of financial results and the activities of TNM are contained in the reports of the Chairman, the CEO and the annual financial statements. Directors' emoluments and related payments for the year ended 31 December 2008 Directors’ emoluments and related payments Name��� Dr. Matthews Chikaonda*� Mr. Hitesh Anadkat �� Mr. Ken Mthuzi*�� Mr. James Regout*�� Mr. Pius P. Mulipa* �� Mr. John M. O’Neill�� Mr. Steve Minaar *�� Mrs. Hilda Singo*�� Mrs. Ruth Audrey Lemani� Mr. Kandi Padambo�� TOTAL��� Position� Amount ���� (MK million) Chairman� 1.030 Vice Chairman 1.030 Director� 0.958 Director� 0.780 Director� 1.030 Director� 1.030 Alternate to��� Mr. James Regout 0.035 Alternate to ��� Mr. Ken Mthuzi 0.071 Director� 0.526 Director� 0.390 � 6.880 Note: * These fees were not paid direct to the individuals but to the respective shareholders they represent 242009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=27http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=27Distributions to shareholders Prior to the intended declaration of a final dividend of 2t per share at the AGM total dividends of MK 521 million 5t per share (MK 0.05) were declared and paid during the year as follows:MK 320 million �� MK 201 million �� 2008 was ���� 3.17t per share paid in October 2008 2t per share declared in December paid in January 2009 TNM will have distributed a total of MK722m dividends following the declaration and payment of the final dividend of 2t per share for the year ended 31 December 2008. Control of un-issued share capital Interests of Directors TNM’s ordinary share capital is fully issued and paid. The Directors are in aggregate non-beneficially interested in ordinary shares of the Company by virtue of their positions as Directors of shareholders of TNM. Directors’ shares in TNM held directly and indirectly are as follows:Name��� Dr. Matthews Chikaonda� Mr. Hitesh Anadkat�� Mr. Ken Mthuzi �� Mr. Pius P. Mulipa �� Mr. John M. O’Neill �� Mr. James Regout�� Mrs. Hilda Singo�� Number of shares� indirectly held � 448,700��� Note 1��� 75,200��� 30,000��� Note 1 ��� -��� 85,000��� Number ��� directly held Note 1 78,800 287,990 Note 1 228,300 Note 1: Both Mr. John Michael O’Neill and Mr. Hitesh Natwarlal Anadkat are beneficially interested through indirectly held part shareholdings of themselves or of their immediate family members in Livingstone Telecommunication Holdings Limited’s holding of 1.296bn TNM shares. Statement of Directors’ responsibilities The Malawi Companies Act, 1984, requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company as at the end of the financial year and of the operating results for that year. The Malawi Companies Act, 1984, requires the Directors to ensure the company keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and to ensure the financial statements comply with International Financial Reporting Standard (IFRSs) and the provisions of Malawi Companies Act, 1984. In preparing the financial statements, the Directors accept responsibility for the following:- 252009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=28http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=28> Maintenance of proper accounting records; > Selection of suitable accounting policies and applying them consistently; > Making judgments and estimates that are reasonable and prudent; > Compliance with applicable accounting standards, when preparing financial statements, subject to any material departures being disclosed and explained in the financial statements; and > Preparation of financial statements on a going concern basis unless it is inappropriate to presume the company will continue in business. The Directors’ responsibilities includes, designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of these financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. The Directors have made an assessment of the company’s ability to Approval of Financial Statements The financial statements of the company, were approved by the Board of Directors on 3 April 2009 and are signed on its behalf by: BY ORDER OF THE BOARD DIRECTOR���� 3 April 2009 DIRECTOR 262009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=29http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=29Independant Auditors Report 272009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=30http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=30Balance sheet as at 31 December 2008 In thousands of Malawi Kwacha Assets Property, plant & equipment Intangible assets Total non-current assets Inventories Trade and other receivables Amount due from related companies Cash and cash equivalents Total current assets Total assets Equity Share capital Share premium Retained earnings Total equity Liabilities Deferred tax liabilities Employee benefit liabilities Total non current liabilities Trade and other payables Deferred income Dividend payable Income tax liabilities Total current liabilities Total liabilities Total equity and liabilities 20 20 Note 14 15 16 17 18 19 2008 2007 5,798,154 35,756 5,833,910 179,218 1,073,998 7,112 1,534,366 2,794,694 8,628,604 401,618 2,346,921 3,457,314 6,205,853 284,892 70,118 355,010 1,337,362 213,436 200,809 316,134 2,067,741 2,422,751 8,628,604 3,092,949 40,583 3,133,532 108,562 344,698 221 832,138 1,285,619 4,419,151 350,000 2,808,158 3,158,158 193,415 40,903 234,318 543,975 149,002 333,698 1,026,675 1,260,993 4,419,151 21 22 23 30 29 The note on pages 31 to 52 are an integral part of the financial statements. Auditors report is on page 27. 282009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=31http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=31Income Statement for the year ended 31 December 2008 In thousands of Malawi Kwacha Revenue Direct operational costs Gross profit Other income Selling and administrative expenses Results from operating activities Finance income Finance expenses Net finance income Profit before income tax Income tax expense Profit for the period Earnings per share Basic earnings per share (MK) Note 7 8 9 10 11 11 2008 6,701,931 (2,788,062) 3,913,869 92,615 (1,822,951) 2,183,533 42,201 (3,473) 38,728 2,222,261 (692,296) 1,529,965 0.17 2007 5,771,254 (2,421,309) 3,349,945 19,439 (1,198,037) 2,171,347 43,494 (13,505) 29,989 2,201,336 (748,827) 1,452,509 0.17 12 13 Statement of Changes in Equity for the year ended 31 December 2008 In thousands of Malawi Kwacha 2007 Balance at 1 January 2007 Profit for the year Dividend declared Balance at 31 December 2007 2008 Balance at 1 January 2008 Profit for the year Issue of share capital Dividend declared Balance at 31 December 2008 Share capital Share premium Retained earnings Total 350,000 350,000 - 2,175,649 1,452,509 (820,000) 2,808,158 2,525,649 1,452,509 (820,000) 3,158,158 350,000 51,618 401,618 2,346,921 2,346,921 2,808,158 1,529,965 (880,809) 3,457,314 3,158,158 1,529,965 2,398,539 (880,809) 6,205,853 The note on pages 31 to 52 are an integral part of the financial statements. Auditors report is on page 27. 292009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=32http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=32Cash flows statement for the year ended 31 December 2008 In thousands of Malawi Kwacha Cash flows from operating activities Cash receipts from customers Cash payments to suppliers and employees Interest paid Income tax paid Net cash from operating activities Cash flows to investing activities Interest received Acquisition of property, plant and equipment Purchase of software Proceeds from sale of property, plant and equipment Net cash used in investing activities Cash flows from / (to) financing activities Proceeds from issue of share capital Dividends paid Repayment of loans Net cash from (used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December Additional statutory requirement Increase (decrease) in net working capital Note 2008 2007 11 6,541,323 (3,684,702) 2,856,621 (884) (618,383) 2,237,354 6,350,365 (2,624,872) 3,725,493 (12,146) (722,733) 2,990,614 11 14 15 42,201 (3,300,033) (5,396) 9,563 (3,253,665) 43,494 (1,367,556) (46,858) 8,177 (1,362,743) 20.3 29 2,398,539 (680,000) 1,718,539 702,228 832,138 1,534,366 (820,000) (178,380) (998,380) 629,491 202,647 832,138 19 468,009 (113,634) The note on pages 31 to 52 are an integral part of the financial statements. Auditors report is on page 27. 302009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=33http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=33Notes to the financial statements 1. Reporting entity Telekom Networks Malawi(TNM) is a company domiciled in Malawi and incorporated under the Malawi Companies Act, 1984 Cap.46:03. The address of the company’s registered office is Livingstone Towers, Fifth Floor, Glyn Jones Road, P.O. Box 3039, Blantyre. The company was listed on the Malawi Stock Exchange on 3 November 2008. The company primarily is involved in the provision of telecommunication services in accordance with its licence issued by Malawi Communications Regulatory Authority (MACRA). 2. Basis of preparation 2.1 Statement of compliance These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the provisions of the Malawi Companies Act 1984. The financial statements were authorised for issue by the Board of Directors on 3 April 2009. 2.2 Basis of measurement The financial statements have been prepared on the historical cost basis, except for financial instruments at fair value through income statement which are measured at fair value. The methods used to measure fair values are discussed further in Note 4.1. 2.3 Functional and presentation currency These financial statements are presented in Malawi Kwacha, which is the company’s functional currency. All financial information presented in Malawi Kwacha has been rounded to the nearest thousand. 2.4 Use of estimates and judgements The preparation of financial statements in conformity with IFRSs requires management to make judgments, 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. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. Judgments made by management in the application of IFRS’s that have significant effect on the amounts recognized in the financial statements are discussed in note 4.2 to the financial statements. 3. Significant accounting policies The principal accounting policies adopted in the preparation of these financial statements as set out below, have been consistently applied to all periods presented. 312009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=34http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=343.1Foreign currency Transactions in foreign currencies are converted to Malawi Kwacha at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are converted to Malawi Kwacha at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognized in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are converted using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are converted to Malawi Kwacha at foreign exchange rates ruling at the dates the fair value was determined. 3.2 Property, plant and equipment (i) Recognition and measurements Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The cost of self-constructed assets includes the cost of material and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. (ii) Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefit embodied within the part will flow to the company and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognized in income statement as incurred. (iii) Depreciation No depreciation is provided on land. Depreciation is recognised in the income statement on a straight line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives of assets for current and comparative periods are as follows:Buildings 20 years Equipment and machinery 8-15 years Furniture & fittings 5 years Other equipment 5 years Motor vehicles 5 years (iv) Determination of residual values and useful lives The assets’ residual values and useful lives and depreciation methods are reviewed and adjusted, if appropriate, at each balance sheet date. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. (v) Gains and losses on disposal Gains and losses on disposals of an item of property, plant and equipment are determined by comparing the proceeds with the carrying amount of the item and are recognised net within “other income” in the income statement. (vi) Interest and exchange losses on loans Interest and exchange losses on loans which are utilized for the purchase of property, plant and equipment are capitalized until the commissioning of the related asset after which they are dealt with in the income statement. 322009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=35http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=35(vii) Capital work in progress Capital work in progress is an integral part of property, plant and equipment and measured at cost. Cost includes all expenditures related directly attributable to the asset under construction. Capital work in progress is not depreciated until it is available for use upon which it is capitalised to its relevant class of property, plant and equipment. 3.3 Intangible assets Computer software acquired by the company is recognised initially at cost. Cost includes all directly attributable costs in order to bring the asset into a state for its intended use. Computer software is measured at cost less accumulated amortization and accumulated impairment losses. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. Amortisation is recognised in the income statement on a straight line basis over the estimated useful lives of intangible assets from the date they are available for use. The estimated useful life for current and comparative periods for acquired computer software is 5 years. 3.4 Impairment of assets (i) Financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its current fair value. Financial assets are tested for impairment on an individual basis. All impairment losses are recognized in profit or loss. (ii) Non-Financial assets The carrying amounts of the company's non-financial assets, inventories and deferred tax asset are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset's recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, recoverable amount is estimated at each reporting date. An impairment loss is recognised if the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. A cash generating unit is the smallest identifiable asset that generates cash flows that largely are independent from other assets. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less costs to sell. 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 risks specific to the asset. 332009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=36http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=36An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. 3.5 Inventories Inventories are stated at the lower of cost and net realizable value. The cost of inventories is based on the first in first out principle and includes expenditure incurred in acquiring the inventories, conversion costs and other costs incurred in bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business less estimated costs of completion and selling expenses. 3.6 Trade receivables Receivables are measured at amortized cost using the effective interest method less any allowance made for impairment of these receivables. Allowance for impairment of trade receivables is established when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of contracts. 3.7 Cash and cash equivalents Cash and cash equivalents includes cash on hand, call deposits with the banks, other shortterm highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are disclosed as current liabilities on the balance sheet. 3.8 Income tax Income tax comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. (i) Current tax Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences the initial recognition of assets or liabilities that is not a business combination affect neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that the related tax benefit will be realized. 3.9 Provisions A provision is recognized in the balance sheet when the company has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. 342009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=37http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=37(i) Restructuring A provision for restructuring is recognized when the company has approved a detailed and formal restructuring plan, and the restructuring has either commenced or has been announced publicly. Costs relating to the on going activities of the company are not provided for. (ii) Onerous contracts A provision for onerous contracts is recognized when the expected benefits to be derived by the company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the company recognises any impairment loss on the assets associated with the contract. (iii) Warranties A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities 3.10 Share Capital (i) Share issue costs Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (ii) Dividends on ordinary shares Dividends on ordinary shares are recognised in equity in the period in which they are declared. (iii) Dividend per share The calculation of dividend per share is based on the ordinary dividends recognized during the period divided by the number of ordinary shareholders on the register of shareholders on the date of payment. 3.11 Earnings per share The calculation of basic earnings per share is based on the profit for the period attributed to ordinary shareholders and the weighted average number of shares in the period. Where new equity shares have been issued by way of capitalization or subdivision, the profit is apportioned over the shares in issue after the capitalization or subdivision and the corresponding figures for all earlier periods are adjusted accordingly. 3.12 Revenue recognition Revenue, which excludes value added tax, represents the fair value of the consideration received or receivable for services provided and accessories sold. The main categories of revenue and basis of recognition are: (i) Air time usage Revenue from prepaid, postpaid and international roaming telephone service is recognised when airtime is used by the customer. (ii) Starter packs, sim cards and other Revenue on starter packs, sim cards and other sales is recognised on the date all risks and rewards associated with the sale are transferred to the purchaser. Revenue on other services is recognised upon the performance of the contractual obligation. 352009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=38http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=38(iii) Deferred income Deferred income consists of the value of unused airtime on prepaid service recharge vouchers sold to customers. 3.13 Employee benefits (i) Pension obligations - Defined Contribution Plan The company contributes to an independently managed defined contribution pension plan. Obligations for contributions to defined contribution plans are recognized as an expense in the income statement as incurred. Once the contributions have been made, the company has no further payment obligations. (ii) Short-term benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. 3.14 Financial instruments The company classifies its financial assets in the following categories: financial assets at fair value through profit or loss; loans and receivables; held-to-maturity investments; and available-for-sale financial assets. Management determines the classification of its investments at initial recognition. Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the company has transferred substantially all risks and rewards of ownership. (i) Financial assets at fair value through profit or loss The company designates trade receivables at fair value with fair value changes recognised immediately in income statement. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the company provides money, goods or services directly to a debtor with no intention of trading the receivable. Loans and receivables are measured at amortised cost using the effective interest method less any impairment losses. 3.15 Trade and other receivables Trade and other receivables are measured upon initial recognition at fair value including transaction cost, and are subsequently measured at amortised cost using the effective interest method. Appropriate allowances for estimated irrecoverable amounts (i.e. impairment losses) are recognised in the income statement when there is objective evidence that the asset is impaired. The allowance recognized is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. 3.16 Segment reporting A segment is a distinguishable component of the company that is engaged either in providing products or service (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The company does not, at present, have distinguishable business segments. 362009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=39http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=393.17 Leased assets - Lessee Rentals payable under operating leases are charged to income statement on a straightline basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. 3.18 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 31 December 2008, and have not been applied in preparing these financial statements: •IFRS 8 Operating Segments introduces the “management approach” to segment reporting. IFRS 8, which becomes mandatory for the company’s 2009 financial statements, will require the disclosure of segment information based on the internal reports regularly reviewed by the company’s Chief Operating Decision Maker in order to assess each segment’s performance and to allocate resources to them. It is not expected to have any impact on the financial statements. •IFRIC 13 Customer Loyalty Programmes addresses the accounting by entities that operate, or otherwise participate in customer loyalty programmes under which the customer can redeem credits for awards such as free or discounted goods or services. IFRIC 13, which becomes mandatory for the company’s 2009 financial statements, is not expected to have any impact on the financial statements. •Revised IAS 1 Presentation of Financial Statements introduces the term total comprehensive income, which represents changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income may be presented in either a single statement of comprehensive income (effectively combining both the income statement and all non owner changes in equity in a single statement), or in an income statement and a separate statement of comprehensive income. Revised IAS 1, which becomes mandatory for the company’s 2009 financial statements, is expected to have a significant impact on the presentation of the financial statements. The company plans to provide total comprehensive income in a single statement of comprehensive income for its 2009 financial statements. •Amendments to IAS 32 Financial instruments: Presentation and IAS 1 Presentation of Financial Statements- Puttable Financial Instruments and Obligations Arising on Liquidation requires puttable instruments, and instruments that impose on the entity an obligation to deliver to another party a pro rata share of the of the net assets of the entity only on liquidation, to be classified as equity if certain conditions are met. The amendments, which become mandatory the company’s 2009 financial statements, with retrospective application required, are not expected to have any impact on the financial statements. •IFRIC11 IFRS 2 Company and Treasury Share Transactions requires a share based payment arrangement in which an entity receives goods or services as consideration for its own equity instruments to be accounted for as an equity-settled share based payment regardless of how the equity instruments are obtained. IFRIC 11 will become mandatory for the company’s 2009 financial statements, with retrospective application required. It is not expected to have any impact on the financial statements. •Amendments to IAS 39 Financial instruments: Recognition and Measurement- Eligible Hedged Items clarifies the application of existing principles that determine whether specific risks or portions of cash flows are eligible for designation in a hedging relationship. The amendment will become mandatory for the company’s 2010 financial statements, with retrospective application required. The amendments are not expected to have any impact on the financial statements. 372009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=40http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=404.Critical accounting estimate and judgements 4.1 A number of the company’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the methods disclosed below. When applicable further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. (i) Trade and other receivables The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. (ii) Intangible assets The fair value of other intangible assets is based on the discounted cash flows expected to be derived from use and eventual sale of the assets. (iii) Non-derivative financial liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows based, discounted at the market rate of interest at the reporting date. 4.2 Other areas where management judgement is used to derive information presented in the financial statements include: (i) Identification of impairment As in note 3.4 (ii) Determination of residual value and useful lives As in note 3.2 property, plant and equipment (iii) Income taxes Current tax as in note 3.8 is expected tax payable based on determination by management. Actual tax is only determined after an agreed tax assessment is issued by the Malawi Revenue Authority, usually nine months after the balance sheet date. 5. Comparatives Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current period. 6. Financial risk management Overview The Company has exposure to the following risks from its use of financial instruments: • credit risk • liquidity risk • 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 is responsible for developing and monitoring the company’s risk management policies. 382009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=41http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=41The 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, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Audit Committee of the Board of Directors oversees how management monitors compliance with the company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee is assisted in its oversight role by the Press Corporation Group Internal Audit department which undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee. 6.1 Credit risk Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the company’s receivables from customers, bank balances and other cash and cash equivalents. Telekom Networks Malawi Limited deposits cash with major banks with high quality credit standing and limits exposure to any one counter - party. (a) Trade and other receivables The company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the company’s customer base, including the default risk of the industry in which customers operate, has less of an influence on credit risk. Over 80% of the company’s revenue arises from cash sales. The company has established a credit policy under which the credit quality of each new customer is assessed and appropriate individual credit limits are sets. The company establishes specific allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. (b) Cash and cash equivalents The company limits its exposure to credit risk by depositing its cash and cash equivalents with reputable financial institutions. 6.2 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 is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the company’s reputation. 6.3 Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, 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. 392009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=42http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=42Currency risk The company transacts the majority of its sales, non-capital expenditure purchases and borrowings in its functional currency, the Malawi Kwacha. The company is exposed to currency risk where these transactions are denominated in currencies other than the functional currency. Purchases in currencies other than the functional currency are carried out by opening letters of credit. The company’s capital expenditure requirements are in currencies other than functional currency whilst these liabilities are settled by way of short term letters of credit, the company is exposed to currency risk. The company mitigates currency risk by utilizing borrowing facilities from local banks and minimizing foreign supplier credit. Purchases in currencies other than the functional currency are carried out by opening letters of credit. 6.4 Capital management The company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The company’s objectives when managing capital are to safeguard the company’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure. 402009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=43http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=437. Revenue Revenue is derived from the following revenue streams:In thousands of Malawi Kwacha 2008 796,609 5,157,251 109,068 639,003 6,701,931 2007 763,957 4,213,413 119,167 674,717 5,771,254 Postpaid Prepaid International roaming Interconnect revenue 8. Direct operational costs IDD call charges Lease circuit charges Power and electricity Frequency channels licence Site and space rental MACRA annual levy Interconnect charges Data network leased lines International roaming charges Network repairs and maintenance Cost of sim cards sold Cost of recharge vouchers Cost of starter – packs Dealers Commission Marketing development expenses Depreciation Impairment loss 150,072 104,217 44,164 33,600 55,404 259,393 344,938 9,640 108,657 215,871 942 118,210 19,497 475,458 382,724 465,275 2,788,062 172,898 102,991 14,363 33,600 55,035 234,974 243,652 6,338 46,000 191,884 4,272 108,928 22,502 385,656 1,015 391,313 405,888 2,421,309 9. Other income Insurance claims Profit on disposal of property, plant and equipment Sundry income 4,855 87,760 92,615 2,718 6,725 9,996 19,439 412009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=44http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=4410. Selling and administrative expenses In thousands of Malawi Kwacha Audit fees Directors’ fees and expenses Depreciation and amortization Management fees Motor vehicle running expenses Staff costs and allowances Impairment losses on receivables Insurance Office rentals and security expenses Licences, marketing and other expenses 2008 4,500 6,880 135,068 72,960 71,295 549,356 17,146 34,453 98,336 832,957 1,822,951 2007 3,788 5,791 76,242 12,039 37,868 294,405 11,203 27,133 68,515 661,053 1,198,037 11. Finance income and expense Recognized in the income statement: Interest on bank deposits Interest on staff loan and other receivables Total finance income Interest expenses Net foreign exchange loss Total finance expense Net finance income 12. Income tax expense Current tax expense Current year tax Adjustment for prior periods Deferred tax expense Origination and reversal of temporary differences Adjustment for prior periods Total income tax expense Reconciliation of effective tax rate Profit for the year Total income tax expense Profit excluding income tax 39,292 2,909 42,201 (884) (2,589) (3,473) 38,728 35,276 8,218 43,494 (12,146) (1,359) (13,505) 29,989 588,548 12,271 600,819 103,748 (12,271) 91,477 692,296 1,529,965 692,296 2,222,261 741,321 76,653 817,974 (76,563) 7,416 (69,147) 748,827 1,452,509 748,827 2,201,336 2008 Income tax using domestic rate Non- deductible expenses Taxation incentives Under provided in prior periods 42 2008 666,678 15,892 (2,545) 12,271 692,296 2007 30% 0.50% 0% 3.50% 34% 2007 660,401 11,864 (91) 76,653 748,827 30% 0.72% (0.11%) 0.55% 31.16%2009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=45http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=4513. Earnings per share The calculation of basic earnings per share at 31 December 2008 was based on the profit attributable to ordinary shareholders of K1,530 million (2007: K1, 453 million) and the weighted average number of ordinary shares in issue during the year ended 31 December 2008. 2008 Profit attributable to ordinary shareholdersfor the year (MK’000) Weighted average number of shares Basic earnings per share (MK) 1,529,965 8,958,023,361 0.17 2007 1,452,509 8,750,000,000 0.17 Weighted average number of shares: Issued ordinary shares at 1 January Effect of shares issued on 3 November 2008 Weighted average number of ordinary shares at 31 December 8,750,000,000 208,023,361 8,958,023,361 8,750,000,000 8,750,000,000 The weighted average number of ordinary shares in issue in the prior period has been adjusted retrospectively to reflect the effects of share split on 4 September 2008.The weighted average number of ordinary shares in issue in the current period includes the time weighted effect of the issue of 1,290,450,000 new ordinary shares on 3 November 2008. There are no dilutive potential ordinary shares. 432009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=46http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=4614. Property, plant and equipment In thousands of Malawi Kwacha Land & buildings Cost At 1 January 2007 Additions Transfers Disposals At 31 December 2007 At 1 January 2008 Additions Transfers Disposals At 31 December 2008 Equipment & machinery Motor vehicles Office equipment Capital Work in progress Total 334,002 146 168,783 502,931 502,931 7,249 114,129 624,309 2,814,713 94,735 913,444 110,004 1,218 (156,330) (9,413) 3,573,045 195,326 3,573,045 195,326 - 192,572 1,611,602 - (12,526) 5,184,647 375,372 211,528 62,050 (1,218) (20,480) 251,880 105,536 281,912 (168,783) 218,665 3,560,514 1,367,556 (186,223) 4,741,847 4,741,847 3,300,033 (12,526) 8,029,354 At 1 January 966,501 461,280 405,888 (184,771) 1,648,898 1,648,898 590,120 (7,818) 2,231,200 251,880 218,665 249,197 2,851,015 - (1,725,731) 501,077 1,343,949 Depreciation and impairment losses 2007 35,923 Charge for year 18,550 Impairment loss Disposals At 31 December 2007 54,473 At 1 January 2008 Charge for year Disposals At 31 December 2008 Carrying amount At 31 December 2008 At 1 January 2008 At 31 December 2007 At 1 January 2007 54,473 26,364 80,837 804,177 372,762 405,888 (156,330) 1,426,497 44,375 27,451 (8,456) 63,370 82,026 42,517 (19,985) 104,558 104,558 73,219 177,777 - 1,426,497 63,370 441,313 49,224 - (7,818) 1,867,810 104,776 543,472 448,458 448,458 298,079 3,316,837 270,596 2,146,548 131,956 2,146,548 131,956 2,010,536 50,360 323,300 147,322 147,322 129,502 1,343,949 218,665 218,665 105,536 5,798,154 3,092,949 3,092,949 2,594,013 A register of land and buildings giving details required under the Malawi Companies Act 1984, Schedule 3, Section 16 is maintained at the registered office of the company and is open for inspection by members or their duly authorized agents. Property, plant and equipment were free of any charge and were not pledged as security for any borrowings during the year. A total of MK79, 104,307 in interest expense was capitalised in the year under review in line with IAS 23 Borrowing Costs. Capital work in progress represents land and buildings, equipment and machinery still under construction and installation. Impairment loss for the year 2008 is MK nil (2007: MK 406 million) 442009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=47http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=4715. Intangible assets In thousands of Malawi Kwacha Cost At 1 January Additions during the year Balance at 31 December Amortisation At 1 January Amortisation for the year Balance at 31 December Carrying amounts At 31 December 2008 46,858 5,396 52,254 6,275 10,223 16,498 35,756 2007 46,858 46,858 6,275 6,275 40,583 16. Inventories Goods held for resale 17. Trade and other receivables 179,218 108,562 Trade receivables Allowance for impairment losses Other receivables Staff advances Deposits and prepayments Other receivables Total trade and other receivables 430,037 (35,596) 394,441 225,931 448,857 4,769 679,557 1,073,998 241,941 (88,977) 152,964 33,774 155,418 2,542 191,734 344,698 Movement in the allowance for impairment in respect of trade receivables during the year was as follows:Balance at 1 January Provision previously recognized in income statement written off Impairment loss recognized Balance at 31 December 88,977 (70,527) 17,146 35,596 77,774 11,203 88,977 The impairment loss recognized of MK17,146,000 (2007: MK 11,203,000) relates to post paid airtime receivables and amounts due from dealers and distributors. 452009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=48http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=48The ageing of trade receivables at the reporting date was: In thousands of Malawi Kwacha Not past due Past due 0-30 days Past due 30-120 days Past due 121-360 days More than one year Gross 2008 102,592 102,208 96,036 94,825 34,376 430,037 Impairment 2008 (1,594) (7,504) (26,498) (35,596) Gross 2007 65,092 31,966 29,700 24,683 90,500 241,941 Impairment 2007 (88,977) 88,977 18.a Amount due from related party Due from: Malawi Telecommunications Limited 7,112 221 18.b Related party disclosures The company transacts part of its business with shareholders and parties related to or under the control of its shareholders. Details of such related party transactions of the company are set out below: Malawi Telecommunication Limited Interconnection income Interconnection charges Leased circuit rentals Leased circuit, co-siting and data line charges Net income Livingstone Exports Limited Premises rental Old Mutual Life Assurance Company Limited Pension contributions and group life insurance Press Management Services Limited Management fees (392,122) 149,673 (79,521) 105,390 (216,580) 23,615 40,106 - (429,886) 208,336 162,678 (58,872) 21,000 20,665 12,000 462009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=49http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=49In addition, related parties, including shareholders, Directors and parties related thereto are subscribers to the company’s phone network for which they are charged on an arms-length basis. In thousands of Malawi Kwacha Compensation of Directors and key management personnel Directors’ fees Senior management salaries and other short-term benefits Greenhurst Inc (Anguilla, British West Indies) 2008 6,880 29,471 72,960 2007 5,791 27,056 - With effect from January 2008, the company contracted Greenhurst Inc (Anguilla, British West Indies) to provide management services. 19. Cash and cash equivalents Bank and cash balances Short term investments Cash and cash equivalents in the statement of cash flows 20. Share capital and share premium 20.1 Authorized ordinary share capital 247,119 1,287,247 1,534,366 378,717 453,421 832,138 Number Nominal value per share (Malawi Kwacha) 10 Nominal value (Malawi Kwacha) 10,040,450,000 401,618,000 35,000,000 0.04 350,000,000 On 4 September 2008 the authorized share capital of the company was restructured by converting each existing authorized and issued ordinary share of 1,000 tambala each into 250 ordinary shares of 4 tambala each and increasing the authorized capital by the creation of a further 1,290,450,000 ordinary shares of 4 tambala each, which were issued in November 2008. Consiquently, the Company’s number of authorised and issued share capital at year end 2008 was 10,040,450,000 20.2 Share premium On 3 November 2008, in an offer to the public, 1,290,450,000 ordinary shares of 4 tambala each were allotted at a premium of 196 tambala per share. The resultant premium on issue of MK 2,529,282,000 less offer expenses of MK182, 361,000 was credited to share premium account as follows: 472009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=50http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=50Share premium continued In thousands of Malawi Kwacha 2008 2,529,282 (182,361) 2,346,921 2007 - Share issue premium proceeds during the year Less: Offer expenses Offer expenses include an amount of MK2, 800,000 which was paid to the auditors in respect of midyear audit in relation to listing of the company on the Malawi Stock Exchange. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share on a poll at meetings of the company. 20.3. Proceeds from issue of share capital Issue of share capital Share capital 51,618 Share premium 2,346,921 Total 2,398,539 21. Deferred tax (assets)/ liabilities Deferred tax assets and liabilities are attributable to the following items:Assets 2007 Liabilities 2008 2007 Net 2008 2007 2008 Severance pay provision Exchange differences Excess capital allowances 21,035 21,035 21,035 1 (1) 305,927 193,414 (305,927) (193,414) 305,927 193,415 (284,892) (193,415) Movement in temporary differences during the year:Balance 1 Jan 2008 Property, plant and equipment Exchange differences Severance pay provision 193,414 1 193,415 Recognized in income statement Balance 31 Dec 2008 305,927 (21,035) (284,892) 112,513 (1) (21,035) 91,477 482009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=51http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=5122. Employee benefit liabilities In thousands of Malawi Kwacha 2008 40,903 29,215 70,118 2007 40,903 40,903 Severance pay provision Balance at 1 January Charge for the year Balance at 31 December 23.Trade and other payables Other payables Accrued expenses VAT and Excise tax Customer deposits 572,661 578,839 155,641 30,221 1,337,362 412,918 38,521 65,708 26,828 543,975 24. Capital commitments Authorized and contracted for Authorized but not contracted for 568,000 497,000 2,800,000 50,000 25. Financial instruments-exposure to currency risk TNM’s exposure to foreign currency risk was based on the notional amounts: US Dollar Trade receivables-international roaming Trade payables-international roaming Other foreign liabilities Balance sheet exposure Euro Trade payables-international roaming Other foreign liabilities Balance sheet exposure Gross currency risk balance sheet exposure 51,272 (68,234) (154,981) (171,943) (6,625) (430,076) (436,701) (608,644) 104,786 (30,060) (16,899) 57,827 (573) (30,322) (30,895) 26,932 492009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=52http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=5226. Sensitivity analysis Transaction losses arising on a 10 percent strengthening of the United States Dollar and Euro against the Malawi Kwacha as at 31 December would result in a decrease in equity and profit after tax as shown below: In thousands of Malawi Kwacha Equity and profit after tax (12,036) (15,959) (4,054) (2,163) 31 December 2008 US Dollar Euro 31 December 2007 US Dollar Euro A 10 percent weakening of the United States Dollar and the Euro against the functional currency as at 31 December would have had an equal but opposite effect. 27. Financial instruments-exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum credit exposure to credit risk at the reporting date was: In thousands of Malawi Kwacha Trade and other receivables (note 17) Amount due from related parties (note 18) Cash and cash equivalents 2008 1,073,998 7,112 1,534,366 2,615,476 2007 344,698 221 832,138 1,177,057 502009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=53http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=5328. Financial instruments-exposure to liquidity risk The following are the contractual obligations due within 1 year which may affect the liquidity of the company. In thousands of Malawi Kwacha 2008 1,073,998 7,112 1,534,366 2,615,476 1,337,362 1,337,362 1,278,114 2007 344,698 221 832,138 1,177,057 543,975 543,975 633,082 Financial assets Trade and other receivables (note 17) Amount due from related parties (note18) Cash and cash equivalents (note 19) Total financial assets Financial liabilities Trade and other payables (note 23) Total financial liabilities Net liquidity cover 29. Dividend liability Dividend declared Dividend paid Dividend payable 880,809 (680,000) 200,809 820,000 (820,000) - 30. Deferred income Deferred income consists of the value of unused air time on prepaid services, recharge vouchers sold to customers as at 31 December 2008 512009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=54http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=5431. Exchange rates and inflation The average of the buying and selling exchange rates at year end of major foreign currencies affecting the performance of the company are stated below, together with the increase in the National Consumer Price Index, which represent an official measure of inflation. Exchange rates Kwacha/GBP Kwacha/Euro Kwacha/Rand Kwacha/US Dollar Inflation rate 2008MK 217.13 211.40 16.11 140.60 9.9% 2007MK 283.95 216.2 21.21 140.32 7.5% 2006MK 279.8 187.0 20.5 139.34 10.1% Exchange and inflation rates did not change significantly up to the time of signing these financial statements 32. Events after balance sheet date. Subsequent to the balance sheet date no events have occurred which require adjustment to or disclosure in the financial statements. 522009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=55http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=558. Historical operating & financial summaries The following historical financial performances figures (available on our investor relations website for download in Excel) have been extracted from, audited accounts, management records and estimates and appear in abridged form without explanatory notes. Abridged operating summary MK'000 Estimated population at year end Mobile Penetration Rate Subscribers at period end:Pre-paid Post-paid Growth in TNM subscribers:Pre-paid Post-paid Average subscribers for the period:Pre-paid Post-paid Deactivations for the year Average Annual Churn % Average blended monthly ARPU MK:Average blended monthly ARPU US$:- Actual to 31 Dec. 08 13,600,000 13.9 627,611 617,622 9,949 293,633 293,074 559 480,795 471,125 9,670 116,247 18 1,032 7.4 Year ended 31 Dec. 07 31 Dec. 06 31 Dec. 05 31 Dec. 04 31 Dec. 03 13,200,000 12,700,000 11,400,000 11,200,000 11,000,000 7.5 333,978 324,588 9,390 89,590 88,659 981 289,159 280,259 8,900 101,551 30 1,434 10 4.7 244,388 235,929 8,409 102,155 101,838 267 193,286 185,010 8,276 58,051 24 1,534 11 3.1 142,233 134,091 8,142 58,172 57,409 763 113,147 105,387 7,761 33,784 24 1,652 13 1.8 84,061 76,682 7,379 22,017 22,608 -591 73,053 65,378 7,675 50,312 60 1,640 15 1.2TNM 62,044 54,074 7,970 62,044 54,074 7,970 52,898 44,213 8,685 38,601 62 1,538 14 As at 31 December 2008 TNM’s subscriber base comprised 9,949 and 627,611 post-paid and pre-paid subscribers respectively. With effect from 1 January 2009 TNM will adopt a more internationally consistent definition of “subscriber” to a customer with a mobile originated income earning event within the previous 3 months, rather than 6 months. Abridged income statements The following 6-year abridged statements appears in abridged form without explanatory notes and for the 2008 and 2007 years, should be read with the notes to the financial statements on pages (31) to (53) For explanatory notes for years prior to 2007 readers should refer to TNM’s prospectus available on . These tables appear in the “Downloads” section in TNM’s website in Microsoft Excel format. 532009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=56http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=56Abridged income statement Year ended MK'000 Revenue Direct operational costs Gross Profit Other income Administration expenses Operating profit Financing income Financing expense Profit before taxation Taxation Profit after tax Proforma earnings per share MK Proforma dividend per share MK 31 Dec. 08 6,701,931 31 Dec. 07 5,771,254 31 Dec. 06 4,275,229 31 Dec. 05 31 Dec. 04 31 Dec. 03 2,835,123 1,892,352 1,444,210 (2,788,062) (2,421,309) (1,508,408) (1,075,568) (656,232) (479,033) 3,913,869 92,615 3,349,945 19,439 2,766,821 1,751 (802,665) 1,965,907 61,598 (208,045) 1,819,460 (549,778) 1,269,682 0.15 1,759,555 1,236,120 5,480 4,067 965,177 2,489 (1,822,951) (1,198,037) 2,183,533 42,201 (3,473) 2,222,261 (692,296) 1,529,965 0.17 0.09 2,171,347 43,494 (13,505) 2,201,336 (748,827) 1,452,509 0.17 0.09 (604,051) (425,250) (398,910) 1,160,984 79,647 (208,764) 1,031,867 (537,547) 494,320 0.06 0.06 814,937 19,556 568,756 11,540 (51,691) (312,901) 782,802 (200) 782,602 0.09 267,395 (200) 267,195 0.03 - Abridged balance sheet MK'000 Assets Non current assets Current assets Total assets Equity & liabilities Shareholders equity Non current liabilities Current liabilities Total equity and liabilities Proforma net asset value per share MK 6,205,853 355,010 2,067,741 8,628,604 0.62 3,158,158 234,318 1,026,675 4,419,151 0.36 2,525,649 440,942 757,734 3,724,325 0.29 1,255,967 780,347 1,322,133 3,358,447 0.14 1,251,647 742,328 603,084 2,597,059 0.14 469,045 916,624 503,142 1,888,81 0.05 5,833,910 2,794,694 8,628,604 3,133,532 1,285,619 4,419,151 2,594,013 1,130,312 3,724,325 2,050,803 1,307,644 3,358,447 1,800,193 796,866 2,597,059 1,463,509 425,302 1,888,811 31 Dec. 08 31 Dec. 07 31 Dec. 06 31 Dec. 05 31 Dec. 04 31 Dec. 03 542009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=57http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=57Abridged cash flow statements MK'000 Operating Activities Cash reciepts from customer Cash paid to suppliers and employees Cash generated from operations Interest recieved Interest paid Payment of income tax Net cash from operating activities Net cash used in investment activities Net cash from used/ used in financing activities Cash and cash equivalents; Net (decrease) / increase At the beginning of the period At period end 31 Dec. 08 6,541,323 (3,684,692) 2,856,621 42,201 (884) (618,383) 2,279,555 (3,295,866) 1,718,539 702,228 832,138 1,534366 31 Dec. 07 6,350,365 (2,624,872) 3,725,493 43,494 (12,146) (722,733) 3,034,108 (1,406,237) 998,380 629,491 202,647 832,138 31 Dec. 06 4,570,443 (2,795,382) 1,775,061 61,031 (65,309) (430,611) 1,340,172 (805,933) (937,484) 403,245 605,892 202,647 31 Dec. 05 2,360,557 (1,095,031) 1,265,526 72,302 (69,951) (156,769) 1,111,108 (482,221) (260,273) 368,614 237,278 605,892 31 Dec. 04 1,698,833 (733,098) 965,735 19,556 (49,404) 935,887 (510,892) (240,168) 184,827 52,451 237,278 31 Dec. 03 1,493,194 (682,947) 810,247 12,123 (6,816) 815,554 (616,672) (187,657) 11,225 41,226 52,451 Shareholder analyses The following statistics were extracted from TNM’s shareholder register at 31 December 2008 By significant shareholders By significant shareholders (top 10 shareholders plus TNM staff ESOS / or those holding over 0.3% shares) In thousands of Malawi Kwacha Rank 1 2 3 3 4 5 6 7 8 9 10 11 12 shareholder Malawi Telecommunications Limited Livingstone Holdings Telecom Ltd Press Corporation Limited Old Mutual Life Assurance co mw Ltd Ulalo Telecomms Ltd Lamya Corporation Ltd NBM nominees sc 1091 TNM staff -esos Nico Life Insurance Company Old Mutual Life Assurance Company (South Africa) First Merchant Bank Limited Standard Bank pension fund Others Shares selected Holders 31 December 2008 shares 4,462,325,000 1,296,837,200 1,050,000,000 1,050,000,000 429,264,900 190,965,000 180,720,000 97,390,000 60,634,300 54,249,800 38,338,700 33,140,000 1,096,585,100 10,040,450,000 27,077 % 44.44 12.92 10.46 10.46 4.28 1.90 1.80 0.97 0.60 0.54 0.38 0.33 10.92 100.00 During 2008, TNM successfully completed an initial public offer for subscription of 1,290,450,000 ordinary shares at MK2.00 each. 552009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=58http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=58By investor category Industry codes Local companies Pension funds Citizen resident individuals Employees Insurance companies Foreign companies Banks Investment companies & trusts Other organisations Permanent resident Nominees local Non residents Financials Other resident individuals Non resident citizens Totals Shares Number Holders Number 334 32 25,992 307 6 9 2 83 93 112 42 61 1 2 1 27,077 % % 1.23 0.12 95.99 1.13 0.02 0.03 0.01 0.31 0.34 0.41 0.16 0.23 0.00 0.01 0.00 100 7,713,045,987 76.82 1,225,401,207 12.20 778,734,004 7.76 99,164,983 0.99 70,837,457 0.71 56,025,800 0.56 43,205,700 0.43 19,691,300 0.20 13,282,700 0.13 7,808,100 0.08 6,782,765 0.07 4,673,900 0.05 1,178,800 0.01 522,297 0.01 95,000 0.00 10,040,450,000 100 By country Countries Malawi United Kingdom India Portugal Nigeria Mozambique Zimbabwe Other Oceanic Cities Other USA Totals Shares Number 10,037,682,000 1,413,500 656,600 228,300 186,100 90,600 87,400 62,900 37,600 5,000 10,040,450,000 Holders Number 27,014 23 24 1 4 2 5 1 2 1 27,077 % 99.97 % 99.77 100 100 562009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=59http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=59By size of shareholding Shareholding 1-5,000 5,001-10,000 10,001-25,000 25,001-50,000 50,001-100,000 100,001-200,000 200,001-500,000 500,000-1,000,000 1,000,000 + Totals 10. Share trading statistics Share price performance Valuation indicators at 31 December 2008 Share price Earnings per share PER ratio Dividends per share* Dividend yield Dividend cover Net asset value per share MK MK Times MK % Times MK 3.30 0.17 19.4 0.09 3% 1.74 0.62 Shares Number Holders Number 258 13,578 9,347 1,797 1,044 502 313 93 144 27,076 % % 0.95 50.15 34.52 6.64 3.86 1.85 1.16 0.34 0.53 100 699,768 0.01 135,605,799 2.43 137,617,847 2.47 59,204,628 1.06 68,181,306 1.22 68,390,748 1.23 94,885,489 1.70 63,616,482 1.14 4,949,922,933 88.74 5,578,125,000 100 * Inclusive of intended proposed dividend to be declared by the Directors at the Annual General Meeting whose notice appears on page 60. Share capital Authorised & issued share capital - no of shares Shares held by Public Shareholders* (Free Float) Shares held by Non-Public Shareholders 10,040,450,000 2,008,125,000 8,032,325,000 % 20 80 * As defined by Section 2.32 of the Malawi Stock Exchange Listing Of Securities Listing Requirements 572009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=60http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=60Share trading statistics from 3 November 2008 to 31 December 2008:- 582009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=61http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=61Shares traded as a % of total shares in issue Shares traded as a % of Free Float From date of listing: 3 November 2008 to 31 December 2008:Average daily volume of shares traded Total volume of shares traded Total value of shares traded Listing price Highest price Lowest price Closing price Market capitalization Market capitalization % % 3 26 Million Million MKm MK MK MK MK MKm US$m 7.90 308 1,196.48 2.00 4.50 3.30 3.30 33,133 236 Other indicators MSE Domestic Share Index MK: US$ exchange rate:Prime overdraft rate 2 Jan 2008 3,823 144 19.63 3 Nov 2008 5,001 145 19.63 31 Dec 2008 4,816 140.60 19.63 592009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=62http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=62Notice of Annual General Meeting th Notice is hereby given that the 14 Annual General Meeting of the th shareholders of Telekom Networks Malawi Limited will be held at Mount Soche Hotel, Njamba Room, Blantyre on Thursday, the 18 June, 2009 at 14:00hrs at which the following business shall be transacted: 1. Financial statements To receive and consider st for adoption the report of the Directors, the report of the Auditors and the Annual Financial Statements for the year ended 31 December, 2008. 2. Directors re-election and appointment 2.1 To re-elect Messrs Pius Percy Mulipa and John Michael O’Neill who retire in terms of the Articles of Association, by rotation but are eligible for re-election. 2.2 To confirm the appointments of : Dr Harry Sam Harrison Gombachika BSc EEng, Dip Eng, MSc EEng, PhD (Telecommunication) Dr Gombachika is a senior Lecturer in Telecommunication Engineering at the Malawi Polytechnic, University of Malawi. He is currently the Dean of Postgraduate Studies and Research at the Polytechnic. He has served in various University of Malawi Committees. Currently, he is a Senate Representative in the University Council. In addition he is an external examiner for Masters Degree (Telecommunication Major) thesis at the University of Botswana. He has conducted research and published on various issues of wireless networking both fixed and mobile. Dr. Stephanus Johannes Minnaar Steve is Head of Investment Research at Old Mutual Investment Group (SA),the largest asset manager in SA. As such he directs a team of equity and quantitative analysts and economists to provide research to the various investment boutiques and the larger Old Mutual group. Investment Research also manages specialist equity funds for the group. Steve still analyses companies in the telecommunication sector and is the portfolio manager for the Industrial Unit Trust and Old Mutual SA’s Shareholder Fund. He has more than 10 years investment experience. Prior to joining Old Mutual, he spent six years at Plessey, a telecommunication equipment company where his last position was that of General Manager: Product Industrialisation. Steve holds a PhD in Engineering from Stellenbosch University, where he also completed his B.Eng and M.Eng degrees in Industrial/Mechanical Engineering. He also holds a B.Com (honours) degree in Finance from the University of Cape Town and is a CFA charter holder. He serves on the advisory committee of the Engineering faculty of the University of Stellenbosch. who were co-opted during the year to fill casual vacancies. 3. Ordinary Business To consider and, if deemed fit, to pass with or without modification the following ordinary resolutions: 3.1 That unless otherwise determined by the Company in a general meeting, the Chairman and each Director shall be entitled to remuneration for his/her services at the following rates per annum respectively, payable st quarterly in arrears with effect from 1 January, 2009. 3.1.1 Directors Fees: Chairman: MK900,000.00 per annum Directors: MK750,000.00 per annum 3.1.2 Sitting Allowances Chairman: MK37,500.00 per sitting Directors: MK37,500.00 per sitting st 3.2 That audit fees of MK4.5 Million payable to KPMG in respect of the audit of the Financial Statements for the year ended 31 December, 2008 be approved. 3.3 That Deloitte & Touche be appointed as Auditors for the 2009 financial year and to authorise the Directors to fix their remuneration. st 3.4 That a final dividend of MK201 Million or 2 tambala per share for the year ended 31 December, 2008 recommended by the Directors rd be declared and be paid on 23 July, 2009 to all shareholders registere in the books of the company at the close of business on th th th 10 July, 2009. The register of members will be closed from 10 July, 2009 to 12 July, 2009 both dates inclusive and no transfers will be registered during this time. 4. Other Business To transact such other business as may be transacted at an Annual General Meeting of members of which 2009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=63http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=63Number of votes [1 Share = 1 Vote] 612009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=64http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=64Signed at ……………………………………… on this …….……………. day of .………… 2009 Signature …………………………………………………………………………………………… Assisted by me [where applicable] [see Note 3] ………………………………………. Assisted by me [where applicable] [see Note 3] ………………………………………. Full name(s) of signatory(ies) if signing in a representative capacity [see Note 4] ……………………………………………………………………………………………………. 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 Fifth Floor, Livingstone Towers, P.O. Box 3039, Blantyre, Malawi or the transfer secretaries FMB Transfer Secretaries, Livingstone Towers, Glyn Jones Road, Private Bag 122, Blantyre, Malawi by no later than 3-00PM 30 May 2009. 6. The delivery of a duly completed proxy form shall not preclude any member or his/her/its duly authorised 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. 622009-05-29T18:21:00+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=65http://ipaper.ipapercms.dk/AfricanShareHolder/mw/TNM/2008/?Page=65Always with you Designed, Produced & Printed by Notion Communication ltd Malawi. Tel : +265 (0) 1914 664 Telekom Networks Malawi Limited, Fifth floor, Livingstone Towers, Glyn Jones Road, P.O Box 3039,Blantyre,Malawi Tel: +265 (0) 1 830 888, Fax: +265 (0) 1830 077 Web: www.tnm.co.mw2009-05-29T18:21:00+02:00