In 2010, significant efforts focused on the implementation of a new core banking IT platform and the completion of the new Business and Office Complex project. The Bank of the Nation 2010 ANNUAL REPORT C O N T E N T S 4 Vision, Mission Statement and Core Values 5 Group Financial Highlights 6 Current Directors 8 Report of the Directors 12 Chairman’s Report 14 Senior Management 16 Chief Executive Officer’s Statement 23 Corporate Activities 31 Selected Key Clients’ Activities 39 Economic Review and Prospects for 2011 42 Corporate Governance Statement 43 Statement of Directors’ Responsibilities 44 Report of the Independent Auditor 45 Statements of Financial Position 46 Statements of Comprehensive Income 47 Statements of Changes in Equity 50 Statements of Cashflows 51 Notes to the Financial Statements 110 Correspondent Banks 111 Head Office and Service Centres 112 Map of Malawi - National Bank of Malawi Service Centres Mangochi andMulanjeServicecentres. We concludedtherenovationandre-brandingprogramwithrefurbishmentofChichiri, 3 N ATIONAL B ANK OF M ALAWI - THE B ANK OF THE N ATION VISION To be the most successful financial institution in Malawi with a visible presence in the Southern Africa Region. MISSION STATEMENT To provide the best financial services in Malawi and the region, distinguished by outstanding service, product innovation and sustained earnings growth. CORE VALUES Customer Satisfaction Employee Commitment Always striving to meet our customers’ The Bank will be commited to excellence in its 2010 expectations and putting the customer first. performance and that the employees will have a clear understanding of its objectives and goals. EPORT Employee Recruitment R and Development Integrity and Trust Employees are the key to the success of National All Bank employees will fully comply with and Bank of Malawi. share the Bank’s commitment to high moral, NNUAL ethical and legal standards. - A The Bank will recruit based on merit and competencies required for the job. Team Work The Bank will build and maintain a culture of ALAWI The Bank will ensure that employees are mutual respect, recognition and cooperation M properly trained so that it retains a disciplined and promote feedback, effective communication and motivated staff. and group work. ANK OF B The Bank will provide a working environment Corporate Social Responsibility which is conducive to continuous employee As a good corporate citizen, National Bank of self-development and advancement. Malawi will actively participate in deserving charitable and social activities. ATIONAL N 4 GROUP FINANCIAL HIGHLIGHTS K'm K'm K'm % Change 2008 2009 2010 10 vs 09 Proft before tax 4,571 5,622 5,078 -10% Shareholders Funds 9,765 11,945 13,584 14% Deposits 45,439 55,072 59,023 7% Loans and Advances 25,567 37,564 42,529 13% 16,000 70,000 14,000 60,000 12,000 50,000 10,000 40,000 8,000 K’m K’m 30,000 6,000 ATION N 20,000 4,000 2,000 10,000 ANK OF THE B 2008 2009 2010 2008 2009 2010 HE - T Profit before tax Shareholders Funds Deposits Loans and Advances ALAWI M ANK OF B ATIONAL N 5 6 N ATIONAL B ANK OF M ALAWI - ANNUAL R EPORT 2010 CURRENT DIRECTORS CURRENT DIRECTORS Centre - Standing Dr Mathews A.P. Chikaonda (56) BA (Hons), MBA, Ph.D. Chairman Front Row - Seated from left Elias J. Kambalame (64) BA (Ecom) Director Gilbert K. Chibesakunda (59) LLB. (Hons), LLM Legal Counsel/ Company Secretary Andrew G. Sesani (62) FCCA, CPA Director George B. Partridge (47) B.Soc. Sc. (Econ), Msc (Finance), FCCA, CPA Director Back Row - Standing from left Agnes J. Varela (59) B.Soc Sc., MSc. Director Pius P. Mulipa (57) Dip. (Mgt), BA, MSc (Mgt) ATION N Director Dye Mawindo (52) LLB (Hons), MBA Director ANK OF THE B Mcfussy Kawawa (46) HE B.Acc (Hons), FCCA, CPA, MBA - T Director Not in the picture ALAWI M James A. Regout (61) M. Econ Director ANK OF B ATIONAL N 7 8 N ATIONAL B ANK OF M ALAWI - ANNUAL R EPORT 2010 ended 31December2010. National BankofMalawifortheyear the ConsolidatedFinancialStatementsof The directorshavepleasureinpresenting REPORT OFTHEDIRECTORS 31 December2010 REPORT OF THE DIRECTORS 31 December 2010 The directors report a consolidated profit before tax of K5,078m (2009: K5,662m) for the year after making due provision for impairment losses. CAPITAL The authorised share capital of the Bank is K500m (2009: K500m) divided into 500,000,000 Ordinary shares of K1 each. The issued capital is K467m (2009: K466m) divided into 466,635,738 (2009: 466,019,038) Ordinary shares of K1 each, fully paid. The shareholders and their respective shareholdings are: 2010 2009 %% Press Corporation Limited 51.6 51.6 Old Mutual Group 24.6 24.6 Members of the public 22.3 22.3 Employees (ESOP) 1.5 1.5 100.0 100.0 PROFIT AND DIVIDENDS The directors report a consolidated profit before tax of K5,078m (2009: K5,662m) for the year after making due provision for impairment losses. A final dividend of K1,251m (2009: K1,250m) is proposed for the year. An interim dividend of K700m (2009: K671m) was paid to the shareholders on 4 September 2010. DIRECTORS The following directors, appointed in terms of Article 52 of the Articles of Association, served in office during the year: ATION N Chikaonda, Dr M A P All year Mulipa, P P All year Regout, J A All year Sesani, A G All year ANK OF THE Kambalame, E All year B Valera, A Mrs. All year HE Mawindo, D All year - T Partridge, G B All year Kawawa, M M From February, 2010 ALAWI M DIRECTORS' INTERESTS The following directors held shares in the Bank as at 31 December 2010: ANK OF B Mulipa, P P 20,000 (2009: 20,000) shares Partridge, G B 305,634 (2009: 33,000) shares Kawawa, M M 94,568 (2009: 77,268) shares ATIONAL N 9 REPORT OF THE DIRECTORS (Continued) 31 December 2010 From 2006 to 2010, the Bank made offers of options under the ESOP scheme to G B Partridge and M M Kawawa amounting to 30,800 and 21,500 ordinary shares, respectively. There were no other contracts between the Bank and its directors nor were there any arrangements to enable the directors of the Bank to acquire shares in the Bank. DONATIONS During the year, the Bank made charitable donations of K11m (2009: K18m). ACTIVITIES The Group is engaged in the business of commercial banking and stockbroking. Subsidiaries of Percentage Nature of National Bank of Malawi of control operations NBM Capital Markets Limited 100% (2009: 100%) Dormant NBM Securities Limited 100% (2009: 100%) Dormant National Bank of Malawi Nominees Limited 100% (2009: 100%) Holding of investments as nominee Stockbrokers Malawi Limited 75% (2009: 75%) Registered stockbroker AREAS OF OPERATION The Bank has 26 (2009: 25) service centres throughout the country. The Bank and its subsidiaries' registered offices and principal places of business are in Blantyre. AUDITORS The auditors, Deloitte, have signified their willingness to continue in office and a resolution is to be proposed at the forthcoming Annual General Meeting in relation to their appointment as auditors in respect of the year ending 31 December 2011. 2010 BY ORDER OF THE BOARD EPORT R NNUAL - A GILBERT CHIBESAKUNDA ALAWI COMPANY SECRETARY M ANK OF B ATIONAL N 10 CHAIRMAN’S REPORTTOSHAREHOLDERS CHIEF EXECUTIVEOFFICER’SSTATEMENT SENIOR MANAGEMENT 16 -21 14 -15 12 -13 11 N ATIONAL B ANK OF M ALAWI - THE B ANK OF THE N ATION CHAIRMAN’S REPORT TO SHAREHOLDERS I am pleased to report to the shareholders a Group pre-tax profit of K5.1b (2009: K5.6b). Dr Mathews A.P. Chikaonda Board Chairman 2010 EPORT R NNUAL - A ALAWI M ANK OF B ATIONAL N 12 CHAIRMAN’S REPORT TO SHAREHOLDERS THE OPERATING ENVIRONMENT STRATEGY AND PROSPECTS The Malawi economy grew by 7.1%, slower than the The economy is forecast to grow at 6.8% in 2011, growth rate registered in 2009 of 8.6%, but robust growth underpinned by strong growth in telecommunications and nonetheless. The Bank Rate came down in August 2010 construction sectors. Excess foreign exchange demand from 15% to 13%. The consistently high economic growth conditions are expected to persist, with adverse effects on rates for the past 3 years combined with the reduction of manufacturing output and trading generally. In addition, interest rates and an overvalued currency in a fixed upward pressure on general price levels is expected as a exchange rate environment created an upswing in result of 20% increase in utility tariffs in December, 2010 and aggregate demand which the domestic market was unable soaring world energy prices. to satisfy. Going forward, the bank is focusing on consolidating on the The resultant pressure manifested itself in excessive benefits of its new core banking platform now that most of demand for foreign exchange via imported goods and the teething challenges have been addressed. The strong services, exerting considerable strain on foreign exchange infrastructure in place will enable the bank to embrace the reserves. This created external trade imbalances which opportunities and deal with the challenges that the resulted in persistent shortages of foreign exchange and a operating arena presents as it seeks further growth. significant import backlog. The bank looks to expand its areas of representation in The high GDP growth and the foreign exchange shortages qualifying areas countrywide in pursuance of its growth posed both opportunities and challenges to the banking objective. In addition, the bank will roll out new products industry generally and National Bank in particular. and improve its delivery payment channels following the successful implementation of the new core banking system.