Annual report

2008
Packaging industries (Malawi) Ltd.

Contents
Mission Statement ................................................................................................................ 4 Financial Highlights................................................................................................................ 7 The Board of Directors........................................................................................................... 8 Senior Management............................................................................................................... 9 Chairmans Statement...........................................................................................................10 Managing Directors Report................................................................................................. 13 Corporate Governance......................................................................................................... 16 Report of the Directors......................................................................................................... 18 Statement of Directors Responsibility................................................................................19 Auditors Report.................................................................................................................... 20 Financial Statements............................................................................................................ 21 Notes to the Financial Statements...................................................................................... 26 Value Added Statement. ....................................................................................................... 49 Statistics................................................................................................................................ 50 Analysis of Shareholders..................................................................................................... 51 Notice of the Fortieth Annual General Meeting................................................................. 52 Proxy Form .......................................................................................................................... 55

Contents

Annual report 2008

Mission Statement
OUR VISION
To continuously supply packaging products that satisfy customer requirements and expectations.

OUR MISSION
Packaging Industries (Malawi) Limited, recognising its responsibility to satisfy customers needs, sets out to achieve the following: Facilitate the effective distribution of agricultural and manufactured goods. Provide reliable and quality protection and storage of goods. Render professional advice and quality service on packaging to customers. Enhance presentation of products by continuously investing in new design technologies.

Above, corrugated board production line Opposite, paper sack production

Annual report 2008

notes to the financial statements

Financial Highlights

TURNOVER
2500 160

PROFIT BEFORE TAX

160

PROFIT AFTER TAX

2000

140

140

120 1500 MK (Million) MK (Million)

120

MK (Million) 2004 2005 2006 YEARS 2007 2008

100 80

100

80

1000

60 40

60

40

500

20

20

0 2004 2005 2006 YEARS 2007 2008

0 2004 2005 2006 2007 YEARS 2008

Above, liquid packaging, carton manufacture

EARNINGS PER SHARE

160 140 120 TAMBALA TAMBALA 100 80 60 40 20 0 2004 2005 2006 YEARS 2007 2008 45 40 35 30 25 20 15 10 5 0

DIVIDEND PER SHARE

2004

2005

2006 YEARS

2007

2008

Above, stacking of paper sacks

Annual report 2008

mission statement

financial highlights

Annual report 2008

Board of Directors

Senior Management

Willie Wiese (47)

M.Sc (E.Eng), M.Sc. (Ind.Eng), MBA

Chairman Gift Mtileni (37)

B.Acc., FCCA

Limbani Medi (36)

B.A. (PA)

Gregory Mhango (44)

B.Sc.

Financial Controller/ Company Secretary

Human Resources Manager

Procurement and logistics Manager

Simon Itaye (51)

B.Com., FCCA, MBA

Gautoni Kainja (52)

LL.B (Hons), LL.M (Monash)

Shadreck Ulemu (49)

M.Sc. (E.Eng), B.Sc. (Ind.Eng)

Managing Director

Patrique Chithila (41)

B.Sc. (Mech. Eng)

Nyakhoko Nsona (51)

B.Sc.

Harry Chimenya (43)

B.Sc.

Factory Manager

Marketing Manager

Information Systems

Nebert Nyirenda (46)

M.A. (Econs)

Raymond Lund (43)

B.Sc. (Eng), UCT, Ph.D.

John van Gend (42)

B.Com., ACMA

Annual report 2008

board of directors

senior management

Annual report 2008

Chairmans Statement
were fuel and maize price increases experienced early in the year. A good maize crop and the implementation of governments price controls resulted in the stability of food prices thereby mitigating the impact that food prices could have had on overall inflation. With maize price controls and recent trends in fuel prices, annual average inflation for 2008 is forecast at 8.5% and that for 2009 is estimated at 7%. With total tobacco sales at 189 million kilograms and export proceeds for the year to August at US$459 million compared to last years tobacco sales of 110 million kilograms which fetched US$185 million, the foreign currency situation in the economy should have improved. This however did not materialise because of increases in monthly requirements for foreign currency for imports mainly arising from high prices in fertilizer and fuel. Sporadic shortages in foreign currency were therefore common in the market which negatively impacted on the companys ability to service all foreign raw material suppliers and transporters on schedule. As some of the bills were long overdue, some suppliers, in an attempt to obtain payment from the company, withheld supplies which in turn affected the companys operations in the year just ended.

BUSINESS ENVIRONMENT OVERVIEW

There has been remarkable improvement in the performance of the economy in the last two years. Forecast real GDP growth of 7.5% is expected to be realised in the year following last years real GDP growth of 8.4%. Governments focus on fiscal discipline, growth in agricultural production dominated by small scale farmers and growth in other sectors including construction, transport and communication are some of the factors that have contributed towards the successive growth of the economy in the past years. In addition to these improvements the ratio of investment to GDP also rose to 28.1% in 2007 and is expected to be at about 24.4% in 2008. The base lending rate which was reduced to 19% following a reduction in the bank rate from 20% to 15% in 2007 remained stable in the year under review. As a result of this decline in interest rates, financial charges for the company were 12.1% below prior year expenses. Inflation which was at 7.2% in October 2007 has been going up and was at 9.3% in September 2008. Major contributing factors towards the increase in inflation

Corrugated boards for box making in the companys profit performance. Margins were however under pressure due to increases in input costs especially those of raw materials and in-bound freight costs. Prior year results for the company have been restated in compliance with advice from the Society of Accountants in Malawi (SOCAM) on the treatment of severance pay provisions. into account ethical values, compliance with legal requirements and respect for all stakeholders including employees, communities and the environment. As part of the companys corporate governance activities, group internal auditors from Nampak, the majority shareholder, periodically visit the company to conduct internal audits. The board has also a very active audit committee and an appointment and remuneration committee entrusted with the responsibility for corporate governance issues and directors and senior staff appointment, remuneration and succession planning matters. As part of our contribution towards combating HIV/ AIDS pandemic, in the year we implemented an HIV/ AIDS workplace policy whose major aim is to ensure consistent and equitable approach to the prevention of HIV and Aids among staff and their families. The policy is also aimed at helping the management of consequences of HIV/AIDS which includes care of and support to staff living with HIV and AIDS. As part of

2008 PERFORMANCE
Revenue for the year at MK2.2 billion was up on prior year results of MK1.59 billion by 38.9%. The major contributing factor in improvements in turnover was an increase in sales volumes in corrugated and liquid packaging cartons. Sales volumes especially of tobacco cartons could have been higher had it not been for customer delivery delays experienced in the year due to raw material stock outs and some factory operational constraints. Profit before tax at MK97.0 million was higher than last years restated pre-tax profit of MK68,8 million by 41.0%. Apart from volume increases, managements focus on overheads also contributed to improvements

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY

The board and management continue upholding and are committed to the principles of good corporate governance and highest ethical standards. In line with this commitment, the company has a code of conduct and control procedures to ensure that principles of good corporate governance are in place and that the highest ethical standards are at all times upheld. The companys business decision making process recognises and places a lot of importance on the need to take

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chairmans statement

chairmans statement

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11

the implementation process, an awareness campaign for all employees was conducted in conjunction with consultants who assisted management in the formulation of the policy. The Private Sector Initiative (PSI) programme whose aim was the development and expansion of the role of corporate private sector in generating market-led economic development initiatives through collective support for small and medium enterprises came to an end in the year under review. Through the programme small enterprises that provide goods and services to the company were identified and some of them have been included in the companys list of preferred suppliers. Following the sale, to a local private entrepreneur, of a small starch factory operation owned by a Nkhotakotabased smallholder cassava growers cooperative, which the company was closely working with in the production of starch, management with the assistance of Malawian Entrepreneurs Development Institute (MEDI) has identified other groups of smallholder cassava farming communities who are based in Lilongwe to provide starch to the company. MEDI is working with other strategic partners including Southern Africa Root crops Research Network (SARRNET) and the Ministry of Agriculture in promoting cassava value chain, for smallholder farmers empowerment and poverty reduction purposes. The project is funded by USAs Kellogg Foundation which is also supporting different projects in six other countries in Southern Africa. The company has been identified as a market of cassava starch grown by the smallholder farmers in Lilongwe. Tests on the starch produced by these farmers which will be used by PIM as an ingredient for glue formulation in the corrugated board making process were already conducted by the company and production by the farmers is expected to commence sometime in December 2008.

entirely satisfactory. Customer service delivery was negatively affected due to a number of factors including inadequate in-bound road trucking capacity, some operational shortfalls and foreign exchange shortages that led to stock outs. Estimates for next years tobacco crop still remain uncertain but recent forecasts indicate an improved crop over that attained in the 2008 season. Improvements in the economy recently experienced and expected further economic improvements in 2009 including forecast real GDP growth of 8.5% partly because of the expected commencement of uranium mining in early 2009 should result in some improvements in the countrys business environment. Bearing in mind that next year is an election year, the over-valued Malawi Kwacha is however unlikely to be adjusted - which could affect the availability of foreign currency regardless of the expected improvements in the economy. Inflation has been going up but recent trends in fuel prices and agricultural input prices should assist in addressing the situation. The performance of the company in the year ahead is dependent on many factors including those outlined above. We however intend to focus on improving factory operations and customer service delivery standards, efforts which coupled with expected improvements in the economy should lead to improved earnings for the company.

Managing Directors Report

In addition to the forex shortages, a switch in the out-bound flow of some export traffic from Durban to Beira also affected raw material delivery schedules. Since the bulk of the companys raw materials are obtained from overseas and normally transit through the port of Durban, because of this switch there were inadequate return loads for most transporters plying the Durban/Blantyre route. The lack of capacity on the route did not only affect cost of transport which went up by an average of about 40% but also affected delivery lead times. We are as a result of the inefficiencies experienced on the Durban route exploring possibilities of using the port of Beira for raw materials imported from overseas and for those originating from South Africa. World-wide paper prices have been going up, a factor which coupled with the above transport increases negatively impacted on the companys margins. The loss of value of the Rand towards the year end and the stability of the Kwacha/US$ rate had however some mitigating effect on the increase in input costs. Total overheads increase for the year at 7.9% was below annual inflation and was within forecasts.

INTRODUCTION
Improvements in the performance of the company in the year just ended are as a result of increases in sales volumes in all major product lines except paper sacks. Improvements in the economy and the high tobacco crop that the country attained in the last season both positively contributed to high sales volumes for the company. Loss of market share to substitute packaging and competition from imports however affected sales of paper sacks. Results for the year would have been better had it not been for intermittent raw material supplies, unprecedented increases in transport costs and shortage of foreign currency. Because of shortages of forex in the country especially from around June 2008, the company was unable to service in full all its foreign raw materials suppliers and transporters some of whom suspended deliveries. The result of this was that raw material receipts were disrupted thereby affecting overall sales volumes as delivery schedules for some major customers could not be met.

FACTORY OPERATIONS
The three year corrugated cartons divisions plant and machinery rehabilitation at a total cost of about MK124 million was completed in the year. As discussed in my last years report, the aim of the programme was to replace critical sections of the corrugated board making plant and to modernise the box making section of the factory. As part of this rehabilitation programme, we replaced an old Platen Press flat bed die cutter with a more versatile Klett Rotary die cutter. We have already started benefiting from the programme through the enhancement of capacity and improvement of product quality on the board making plant. We have through the acquisition of the rotary die cutter been able to diversify into new die cut box markets that we were unable to service in the past.

APPRECIATION
The past year has not been an easy one and I would like to thank management and staff for facing up to the challenges that the company went through. I also take this opportunity to thank all other directors for their wise counsel and contributions.

2009 OUTLOOK
Results attained in the year especially those relating to sales volumes have been encouraging but were not

Willie Wiese 5th December 2008

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chairmans statement

managing directors report

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13

Having completed the rehabilitation of the corrugated division we intend to embark on the rehabilitation of the remaining two major product lines, liquid packaging cartons and paper sack divisions starting from the 2009 financial year. The company was in the year under review certified as ISO 9001:2000 Quality Management System compliant by the South African Bureau of Standard (SABS) making PIM the first company in the country to be certified by the South African standards body. Following a request from the Malawi Bureau of Standards (MBS) and as part of our corporate social responsibility, we agreed with the local standards body to use the company for the training of MBS staff as part of a programme towards international affiliation of the bureau. We believe that through this arrangement, the company will benefit as MBS staff will be conducting periodic audits on our ISO certified systems while we will at the same time assist the local standards bureau in its attempts to be recognised as an international certification body. We have continued with the implementation of a company wide Hazard Analysis and Critical Control Point (HACCP) programme as indicated in my last years report. We have so far developed a HACCP pre-requisite programme and we have engaged all employees on the programme through conducting in-house training and awareness campaign. Critical control limits for all identified hazards were set and we expect to be HACCP certified within the next financial year. A HACCP specialist from Nampak has been the leading consultant in the implementation programme.

high tobacco crop in the year, which impacted on the level of disposable income especially of the rural masses, account for the increase in sales volumes for these two product lines. Sales of paper sacks however suffered from use of substitute packaging in form of polywoven sacks and from some direct imports of tea sacks. Deliveries of some product lines especially to the tobacco sector was affected by delays in receipt of materials because of shortage of foreign currency and lack of trucking capacity by some of the transporters that we normally use. We have implemented appropriate strategies to ensure that raw materials are in future readily available when required. Due to lack of capacity for heavier kraftliner from regional sources, we have continued importing more expensive materials from overseas with longer lead

times. This together with some of the above factors and competition in the market especially from imports put a lot of pressure on margins for almost all product lines. Pre-tax profit at MK97.0 million was up on last years results by 41.0% but overall profit margin for the company was down by about 27%.

in South Africa, including a management development programme. In addition visiting engineers and a HACCP specialist from Nampak organised in-house training for some of our shop floor staff in order to up skill them and ensure that technical staff are updated on new packaging technology and processes.

BALANCE SHEET AND WORKING CAPITAL

An additional loan of MK67 million was obtained in the year to finance the acquisition of the Rotary die cutter and some other board making equipment as part of the rehabilitation programme. This brought the balance of total borrowings to MK138 million as at year end. Although the level of borrowings was higher than prior year, finance charges for the year were lower than prior year because of the reduction of interest base rate in late 2007 and competitive interest rates offered to the company for part of the loan obtained in the year. A huge increase in inventories at year end is as a result of raw material price increases and delays in receipt of raw materials. Part of the materials was also meant for conversion during the first quarter of the 2009 financial year to meet a backlog of and additional orders for corrugated cartons. Trade and other payables which were almost three times the 2007 balance is on account of delayed foreign suppliers remittances which was awaiting allocation of forex at the year end. Because of the huge increase in inventories, cash generated from operations, which was used for payment of provisional tax and interest, was down on last year regardless of the increase in the operating profit for the year. Total capital expenditure for the year at MK123 million was used for the acquisition of a die cutter and for the rehabilitation programme.

STRATEGIES AND PROSPECTS FOR 2009

There were some factors that affected our performance and efficiency standards in the year just ended. We have analysed these and we intend to focus on in-bound logistics, productivity and customer service improvements. Competition in the year ahead is likely to intensify but we are confident that with the rehabilitation of our board making plant that we have just completed, the acquisition of a die cutter, ISO certification and our focus on productivity and service improvements we should be able to retain and grow our market share. With the expected high tobacco volumes and the commencement of uranium mining, the economy is forecast to improve. Activities leading to the election in the year ahead should lead to some improvements in disposable income which is likely to impact on sales volumes of some of our product lines including that of liquid packaging cartons. We are confident that improvements in the economy and our focus on critical operational areas that are within our control should result in performance improvements in 2009

APPRECIATION
I would like to thank management and staff for their dedication and hard work, customers for their loyalty and suppliers for their support during a year when we faced many challenges on remittance of foreign currency. I also would like to thank my fellow directors for their guidance.

FINANCIAL HIGHLIGHTS
Performance of the company in the year shows some improvements when compared to 2007 results. Turnover at MK2.2 billion went up by 38.9% and total sales volume for the year at 9,908 tons was 35.2% above prior year sales volumes of 7,330 tons. High growth in sales volumes and consequently sales revenue was attained in two major product lines, liquid packaging cartons and tobacco corrugated cases. The

HUMAN RESOURCES
We have continued with the training of some artisans at the Polytechnic and we have already started benefiting from this arrangement. Some members of staff attended block release Nampak organised courses

Corrugated box stitching

Simon Itaye 5 December 2008

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Annual report 2008

managing directors report

managing directors report

Annual report 2008

15

Corporate Governance
Packaging Industries (Malawi) Limited upholds the principles of Integrity and Accountability as advocated by the King report on Corporate Governance. The company complies with the provisions of the King report save for circumstances where such compliance is not practicable. In such cases adequate procedures and systems are maintained to ensure good corporate governance. and the current board is composed of individuals with vast experience in a wide range of professions. The board meets four times a year with additional meetings being held depending upon need. The board is responsible for strategic and policy decisions, the approval of budgets and monitoring the companys performance. The day to day running of the operations of the company is vested in the companys Managing Director who is in constant contact with the Chairman of the board. At each meeting of the board, the Managing Director presents a comprehensive report on the operations of the company, which includes financial results.

In addition to the above, the Audit Committee has been entrusted with the functions of the Appointments and Remuneration committee responsibilities which includes ensuring that the companys directors and senior management are appropriately appointed and fairly rewarded for their individual contributions towards the companys overall performance. The committee plays an active role in succession planning activities for the managing director and senior management positions.

WORKERS PARTICIPATION
An employee representative committee is in place with the objective of handling issues that affect employees welfare as well as the companys productivity. The committee meets with management every month to discuss issues affecting their well-being and productivity issues. Through this committee, employees are encouraged to have free and open communication and have access to information concerning company performance and they are also encouraged to discuss company performance in their own meetings.

BOARD OF DIRECTORS
The Board of Directors is composed of seven directors, out of which six are non-executive directors. The directors are chosen for their skills and professionalism

INTERNAL AUDIT
Toilet tissue core production The company has access to the services of Nampak group internal auditors. These auditors visit Packaging Industries every two years and their reports are made available to the Board of Directors as well as external auditors.

AUDIT COMMITTEE/APPOINTMENTS AND REMUNERATION COMMITTEE

The company has an audit committee composed of four non-executive directors. The committee operates within written terms of reference and meets at least twice a year. Among other responsibilities, the committee reviews interim and annual results before presentation to the board of directors. The committee also reviews the effectiveness of the companys internal controls. The companys external auditors are invited to attend all audit committee meetings. The Managing Director and the Financial Controller attend audit committee meetings by invitation. An overview of factory operations

CODE OF CONDUCT
Directors and Management are required to maintain high ethical standards at all times. A formal code of business conduct was circulated and signed by management and other senior employees. In addition, the company observes a closed period during which directors, management and senior employees are not allowed to deal in the companys shares. The closed period is 30 days before the end of the first six months of the financial year until the publication of the interim results and 30 days before the financial year end until the publication of the year end results.

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corporate governance

corporate governance

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17

Report of the Directors

For the year ended 30 September 2008
The Directors have pleasure in submitting their report together with the annual financial statements for the year ended 30 September 2008.

Statement of Directors Responsibilities

For the year ended 30 September 2008
The 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 Act also 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 enable them to ensure that the financial statements comply with the Companies Act, 1984. In preparing the financial statements the directors accept responsibility for the following: Maintenance of proper accounting records; Selection of suitable accounting policies and consistent application thereof; Making judgements and estimates that are reasonable and consistently applied; Compliance with applicable accounting standards when preparing financial statements; and Preparation of financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business in the foreseeable future. The directors also accept responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to maintain adequate systems of internal control to prevent and detect fraud and other irregularities. The directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the Company and of its operating results.

DIRECTORS
The following directors served in office during the year: Willie Wiese Raymond Lund John Van Gend Simon Itaye Gautoni Kainja Nebert Nyirenda Shadreck Ulemu

REGISTERED OFFICE
The address of its principal place of business and registered office is plot number NY 189, Makata Industrial Area, P O Box 30533, Chichiri, Blantyre 3, Malawi.

NATURE OF BUSINESS
The principal activity of the company, which is incorporated in Malawi, consists of the manufacture of cardboard and paper containers.

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 30 September 2009.

FINANCIAL PERFORMANCE
2008 MK000 2007 MK000 Restated Revenue Profit before tax Income tax expense Profit after tax 2,206,689 97,037 29,401 67,636 1,588,509 68,807 18,913 49,894

HOLDING COMPANY
The Companys immediate holding Company is Transmar (Isle of Man) Limited, a wholly owned subsidiary of Nampak Limited, a Company incorporated in the Republic of South Africa.

FOR AND ON BEHALF OF THE BOARD

CHAIRMAN

MANAGING DIRECTOR

CHAIRMAN

MANAGING DIRECTOR

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report of the directors

directors responsibilities

Annual report 2008

19

Report of the Independent Auditors

Balance Sheet
30 September 2008
2008 MK000 2007 MK000 Restated Notes ASSETS NON-CURRENT ASSETS Property, plant and equipment CURRENT ASSETS

569,872

363,133

We have audited the financial statements of Packaging Industries (Malawi) Limited as set out on pages 21 to 48, which comprise the balance sheet as at 30 September 2008, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Managements Responsibility for the Financial Statements Management is responsible for preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion the financial statements give a true and fair view of the financial position of Packaging Industries (Malawi) Limited as of 30 September 2008, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and in the manner required by the Companies Act, 1984.

Inventories Trade and other receivables Bank balances and cash Taxation recoverable Total current assets TOTAL ASSETS EQUITY AND LIABILITIES CAPITAL AND RESERVES Share capital Share premium Revaluation reserve Retained earnings Total capital and reserves NON-CURRENT LIABILITIES Borrowings Deferred tax Severance allowance provision Total non-current liabilities CURRENT LIABILITIES Bank overdraft Trade and other payables Related party payables Current portion of borrowings Taxation payable Total current liabilities TOTAL EQUITY AND LIABILITIES

6 7

891,875 270,534 214 11,263 1,173,886 1,743,758

568,488 214,039 36,568 819,095 1,182,228

13,450 19,220 191,832 475,038 699,540

13,450 19,220 86,351 424,667 543,688

8 9 10

84,859 101,796 51,775 238,430

59,740 56,045 61,542 177,327

11 12 13 8

167,379 407,235 177,561 53,613 805,788 1,743,758

138,532 128,973 147,418 43,000 3,290 461,213 1,182,228

The financial statements were authorised for issue by the Board of Directors on 5 December 2008 and were signed on its behalf by:

5 December 2008
Chairman Managing Director

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Annual report 2008

REPORT of the INDEPENDENT AUDITORS

balance sheet

Annual report 2008

21

Income Statement
For the year ended 30 September 2008
2008 Notes MK000 2007 MK000 Restated Revenue Cost of sales Gross profit Distribution costs Administrative expenses Other operating expenses Exchange gains/(losses) Interest payable Profit before tax Income tax expense Profit for the year Earnings per share Dividend per share 18 19 14 15 16 2,206,689 (1,914,552) 292,137 (42,362) (102,600) (21,603) 16,931 (45,466) 97,037 (29,401) 67,636 101t 29t 1,588,509 (1,272,255) 316,254 (49,705) (114,365) (23,868) (7,790) (51,719) 68,807 (18,913) 49,894 74t 12t

Cash Flow Statement

For the year ended 30 September 2008
2008 MK000 Cash flows from operating activities Profit before tax Adjustments for: - depreciation - profit on disposal of property, plant and equipment - interest receivable - interest payable - exchange (gain)/loss on borrowings Operating profit before working capital changes Movement in trade and other receivables Movemwent in inventories Movement in trade and other payables Movement in severance pay provision Movement in related party payables Cash generated from operations Interest paid Taxation paid Net cash flow from operating activities Cash flows from investing activities Purchase of property, plant and equipment Interest received Proceeds from disposal of property, plant and equipment Net cash flow from investing activities Cash flows from financing activities Finance lease repayments Dividends paid Borrowings received Borrowings repaid Net cash flow from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year Analysed as: Foreign currency denominated (US$) account Other bank accounts 2007 MK000 Restated 68,807 28,495 (3,083) (200) 51,719 554 146,292 52,974 (26,012) (9,259) 7,859 40,699 212,553 (51,719) (33,983) 126,851

97,037 35,923 (901) (289) 45,466 (10,416) 166,820 (56,495) (323,387) 278,262 (9,767) 30,143 85,576 (45,466) (14,931) 25,179

(102,722) 289 5,959 (96,474)

(77,803) 200 6,160 (71,443)

(7,581) (19,503) 67,454 (34,276) 6,094 (65,201) (101,964) (167,165)

(8,070) 102,266 (82,476) 11,720 67,128 (169,092) (101,964)

101 113 214 (167,379) (167,165)

71 36,497 36,568 (138,532) (101,964)

Bank overdraft

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income statement

cash flow statement

Annual report 2008

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Statement of Changes in Equity

30 September 2008
Share capital MK000 2007 At beginning of the year - as previously reported Prior year adjustment: Severance allowance provision Deferred tax thereon At beginning of year as restated Profit for the year Dividends declared and paid Deferred tax Realisation of excess depreciation At end of the year Share premium MK000 Revaluation reserve MK000 Retained earnings MK000 Total MK000

2008 MK000 Analysis of dividends declared and paid Final dividend in respect of prior year Interim dividend in respect of current year Total dividends declared and paid during the year 10,088 9,415 19,503

2007 MK000 8,070 8,070

Severance allowance provision The company has processed a prior year adjustment in respect of severance allowance provision for all eligible employees following recent court rulings on the matter that have clarified the position. Part of the provision has been charged against opening reserves as at 1 October 2006 as it relates to employment contracts for periods dating prior to that date. The impact on the financial statements of this change in policy with respect to the accounting for severance allowance is as follows: 2008 MK000 Impact on profit before tax Impact on opening retained earnings (9,767) 61,542 2007 MK000 7,859 53,683

13,450 13,450 13,450 Share capital MK000

19,220 19,220 19,220 Share premium MK000

104,944 104,944 (15,850) (2,743) 86,351 Revaluation reserve MK000

417,678 (53,683) 16,105 380,100 49,894 (8,070) 2,743 424,667 Retained earnings MK000

555,292 (53,683) 16,105 517,714 49,894 (8,070) (15,850) 543,688

Deferred tax on revaluation reserve The prior year adjustment relates to the under provision of deferred tax as a result of the omission of certain assets in the prior year deferred tax computation. The adjustment has not impacted the results for the current or prior periods.

Total MK000

2008 At beginning of year - as previously reported Prior year adjustment: Severance pay allowance provision Deferred tax thereon Deferred tax on revaluation reserve At beginning of the year Profit for the year Dividends declared and paid Deferred tax Realisation of excess depreciation Revaluation during the year At end of the year

13,450 13,450 13,450

19,220 19,220 19,220

97,775 (11,424) 86,351 (16,728) (2,238) 124,447 191,832

467,746 (61,542) 18,463 424,667 67,636 (19,503) 2,238 475,038

598,191 (61,542) 18,463 (11,424) 543,688 67,636 (19,503) (16,728) 124,447 699,540

Analysis of share capital The company has authorised share capital of 75,000,000 Ordinary shares of 20t each. Issued and fully paid share capital comprises 67,250,000 Ordinary shares of 20t each.

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STATEMENT OF CHANGES IN EQUITY

STATEMENT OF CHANGES IN EQUITY

Annual report 2008

25

Notes to the Financial Statements

30 September 2008 1. General information
The principal activity of the company, which is incorporated in Malawi, consists of the manufacture of cardboard and paper containers. The address of its principal place of business and registered office is plot number NY 189, Makata Industrial Area, P O Box 30533, Chichiri, Blantyre 3, Malawi. The Companys immediate holding Company is Transmar (Isle of Man) Limited, a wholly owned subsidiary of Nampak Limited, a Company incorporated in the Republic of South Africa.

Basis of preparation The financial statements are prepared in terms of the historical cost convention except for certain non-current assets which are carried at fair value. No other procedures have been adopted to reflect the impact on the financial statements of specific price changes or changes in the general level of prices. The significant accounting policies are set out below. 3.1 Property, plant and equipment Certain property, plant and equipment held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would b e determined using fair values at the balance sheet date. Any revaluation increase arising on the revaluation of such property, plant and equipment is credited to a nondistributable revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in the income statement, in which case the increase is credited to the income statement to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such land and buildings is charged to the income statement to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of that asset. Depreciation on revalued property, plant and equipment is charged to the income statement. On the realisation of revalued property, either through sale or use, the attributable revaluation surplus in the revaluation reserve is transferred directly to retained earnings. Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Companys accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are available for their intended use. Other categories of property, plant and equipment are stated at cost and valuation less accumulated depreciation and any accumulated impairment losses. Depreciation is charged so as to write off the cost or valuation of assets, other than freehold land and properties under construction, over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at each year-end, with the effect of any changes in estimate being accounted for on a prospective basis. The gain or loss arising on the sale or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement. 3.2 Income taxes Income tax expense represents the sum of the tax currently payable and deferred tax.

2. Adoption of new and revised International Financial Reporting Standards

In the current year, the company has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (the IASB) and the International Financial Reporting Interpretations Committee (the IFRIC) of the IASB that are relevant to its operations and effective for annual reporting periods beginning on 1 January 2007. There has been no impact on the financial statements of the Company as a result of the adoption of these new and revised Standards and Interpretations. At the date of authorisation of these financial statements, the following Standards and Interpretations were in issue but not yet effective: IAS 1 (Revised 2007), Presentation of Financial Statements. Effective for periods beginning on or after 1 January 2009. IAS 23 (Revised 2007), Borrowing costs. Effective for periods beginning on or after 1 January 2009. IFRIC 12 Service concession arrangements. Effective for periods beginning on or after 1 January 2008. IFRIC 14 IAS19 The limit on a defined benefit asset, minimum funding requirements and their interaction. Effective for periods beginning on or after 1 January 2008. IFRS 8 Operating segments (Effecting for annual periods beginning on or after 1 January 2009). IFRC 13 customer loyalty programmes effective for annual periods beginning on or after 1 July 2008.

The directors anticipate that other than the adoption of IAS 1 and IFRS 8, the adoption of these standards in future periods will have no material impact on the financial statements of the Company. The adoption of IAS 1 will impact the presentation of the financial statements.

3. Significant accounting policies

Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards.

Current tax The tax currently payable is based on the taxable profit for the period. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other

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Notes to the Financial Statements (continued) 2. Income taxes (continued) 3.5 Revenue Revenue is measured at the fair value of the consideration received or receivable. years and it further excludes items that are never taxable or deductible. The companys liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the company intends to settle its current tax assets and liabilities on a net basis. 3.3 Foreign currency translation The results and financial position of the company are expressed in Malawi Kwacha, which is the functional currency of the company and the presentation currency for the financial statements. Transactions in currencies other than the entitys functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the income statement for the period. 3.4 Inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost for the various categories of inventories is determined as follows: Merchandise, raw materials and consumable stores: cost on a first-in, first-out basis; Spares: weighted average cost; Finished products and work in progress are valued at the raw material cost plus, where appropriate, a proportion of manufacturing overhead expenses; and Goods in transit at invoiced cost. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. the company has transferred to the buyer the significant risks and rewards of ownership of the goods; the company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the entity; and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Sale of goods Revenue from the sale of goods is recognised when all the following conditions are satisfied:

Revenue is reduced for estimated customer returns, rebates and other similar allowances. 3.6 Financial assets Investments are recognised and derecognised on their value date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial assets are classified into the following specified categories: financial assets as at fair value through profit or loss (FVTPL), held-to-maturity investments, available-for-sale (AFS) financial assets and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest basis for debt instruments other than those financial assets designated as at FVTPL. Loans and receivables Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are initially measured at fair value and subsequently at amortised cost using the effective interest method less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial. Impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference

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Notes to the Financial Statements (continued) 3. Significant accounting policies (continued) the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the company s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract (asset or liability) to be designated as at FVTPL.

between the assets carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the income statement. With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through the income statement to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. In respect of AFS equity securities, any increase in fair value subsequent to an impairment loss is recognised directly in equity. 3.7 Financial liabilities and equity instruments Classification as debt or equity Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs. Financial liabilities Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities. Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL. A financial liability is classified as held for trading if: it has been incurred principally for the purpose of repurchasing in the near future; or it is a part of an identified portfolio of financial instruments that the company manages together and has a recent: (i) Actual pattern of short-term profit-taking; or (ii) It is a derivative that is not designated and effective as a hedging instrument. A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if: such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in the income statement. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. Other financial liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. 3.8 Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are initially recognised as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the income statement, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the companys general policy on borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred. 3.9 Impairment of non-financial assets At each balance sheet date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired.

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Notes to the Financial Statements (continued) 3. Significant accounting policies (continued)

4. Critical accounting judgements and key sources of estimation uncertainty

4.1 Critical judgements in applying the groups accounting policies In the application of the Companys accounting policies, which are described in note 3, management are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. There were no critical judgments in applying the Companys accounting policies. 4.2 Key sources of estimation uncertainty

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement. 3.10 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of fixed assets are capitalised as part of the cost of those assets. Borrowing costs include exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use. All other borrowing costs are expensed in the period in which they are incurred. 3.11 Retirement benefit costs The Company operates a defined contribution retirement benefit plan. NICO Life administers pensions through a defined contribution pension scheme. Employees contribute 5% (2007: 5%) and the company contributes 14.8% (2007: 14.8%) of basic salary. Payments to the scheme are charged as an expense as they fall due. 3.12 Earnings per share Earnings per share is calculated by dividing the profit for the period by the weighted average number of shares in issue during the period (note 18). 3.13 Dividend per share Dividend per share is calculated by dividing dividends declared and paid during the period by the weighted average number of shares in issue during the period (note 19). 3.14 Severance allowance provision The company provides for severance pay for all eligible employees in line with the requirements of the Employment Act as follows: Number of years worked More than 1 but less than 10 years More than 10 years Severance allowance 2 weeks pay for each year of service 4 weeks pay for each year of service

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. 4.2.1 Useful lives of plant and equipment The Company reviews the estimated useful lives of property, plant and equipment at the end of each annual reporting period as described in note 3.1 above. 4.2.2 Severance allowance provision Included under non-current liabilities is an estimated provision of MK51.7m (2007 as restated: MK61.5m) in respect of severance pay. The amount includes all eligible employees of the Company and is based on 100% of total emoluments as adjusted by the number of years served less employers pension contributions and related bonuses and gratuity paid to contract employees. The actual liability to be incurred will depend on a number of factors including rates of death, retirement, resignations and dismissals. As such the actual amounts to be paid in future may differ from the provision currently shown in the balance sheet.

Severance allowance provision is adjusted accordingly with employers pension contributions and related bonuses in line with the provisions of the Group Pension and Life Assurance Trust Deed.

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Notes to the Financial Statements (continued)

5. Property, plant and equipment

Land and buildings MK000 2008 COST OR VALUATION At beginning of the year Additions Transfers Disposals Revaluation At end of the year DEPRECIATION At beginning of the year Charge for the year Disposals Revaluation At end of the year NET BOOK AMOUNT At end of the year 2007 COST OR VALUATION At beginning of the year Additions Disposals At end of the year DEPRECIATION At beginning of the year Charge for the year Disposals At end of the year NET BOOK AMOUNT At end of the year 128,274 4,121 230,738 363,133 2,744 2,743 (301) 5,186 109,044 25,752 (9,596) 125,200 111,788 28,495 (9,897) 130,386 126,923 7,501 (964) 133,460 4,121 4,079 42 297,688 70,260 (12,010) 355,938 428,690 77,803 (12,974) 493,519 248,120 17,250 304,502 569,872 5,186 2,640 (98) (7,728) 155,334 125,200 33,283 (3,149) 130,386 35,923 (3,247) (7,728) 155,334 116,719 248,120 133,460 (2,059) 17,250 4,121 95,844 (82,715) 355,938 27,429 82,715 (6,246) 459,836 493,519 123,273 (8,305) 116,719 Capital work in progress MK000 Vehicles, plant and equipment MK000

The following useful lives were used in the calculation of depreciation: Land and buildings Plant and equipment Furniture and equipment Motor vehicles 30 years 4 - 20 years 10 years 5 - 8 years 2008 MK000 Land and buildings Cost or valuation at end of the year comprises the following: Freehold Leasehold 725,206 Total cost or valuation at end of the year 248,120 133,460 - at valuation - at cost - at valuation 30,750 217,370 5,336 7,501 120,623 2007 MK000

Total MK000

Land and buildings were valued as at 30 September 2008 by Mr. D. Whayo Bsc Dip (Urban. Man) BA, MRICS, MSIM qualified valuer, of Knight Frank (Malawi) Limited, an independent valuer, on the bases of open market value.The valuation was prepared in accordance with the RICS Appraisal and Valuation Standards. Vehicles, plant and equipment include vehicles with a carrying value of MK35.1m (2007: MK24.4m), which were purchased under finance lease arrangements. The Directors are of the opinion that the carrying values of property, plant and equipment are not materially different to their fair values. Property, plant and equipment are encumbered as indicated in note 11. The register of land and buildings is open for inspection at the registered office of the company. 2008 MK000 2007 MK000

6. Inventories
Raw materials Consumables stores Work in progress Finished goods Merchandise Goods in transit Total inventories 551,318 103,214 4,311 63,840 13,518 155,674 891,875 406,302 64,289 14,117 14,685 14,844 54,251 568,488

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Notes to the Financial Statements (continued) 2008 MK000 2007 MK000 2008 MK000 2007 MK000

7. Trade and other receivables

Trade receivables Other receivables and prepaid expenses Allowance for doubtful debts Total 257,405 18,514 275,919 (5,385) 270,534 197,128 27,369 224,497 (10,458) 214,039

8. Borrowings
National Bank of Malawi - loan Balance at beginning of the year Received during the year Foreign exchange losses Repaid during the year Balance at end of the year Less: repayable within one year 83,722 17,019 125 (25,331) 75,535 (10,284) 65,251 48,631 82,816 554 (48,279) 83,722 (34,915) 48,807

At the year-end the company had foreign currency receivables equivalent to MK12m (2007: MK18m). Non-current portion at end of the year The average credit period for the sale of goods is 60 days and no interest is charged for balances beyond this period. 2008 MK000 Movement in allowance for doubtful debts At beginning of the year Additions Recoveries At end of the year 10,458 730 (5,803) 5,385 11,381 (923) 10,458 Balance at end of the year Less: repayable within one year Non-current portion at end of the year National Bank of Malawi- Leases Present value Minimum lease of minimum payments lease payments MK000 Amounts payable under finance leases: within one year in 2 - 5 years 16,577 23,622 (8,211) 31,988 31,988 (12,380) 19,608 53,613 84,859 138,472 12,380 19,608 19,018 (8,085) 10,933 43,000 59,740 102,740 7,755 11,263 MK000 30,949 (30,949) 2007 MK000 Nampak Corrugated - loan Balance at beginning of the year Received during the year Foreign exchange gain Repaid during the year 50,435 (10,541) (8,945) -

In determining the recoverability of a trade receivable, the company considers any change in the credit quality of the trade receivables from the date credit was initially granted up to the reporting date. There is no significant concentration of credit risk, with exposure spread over a relatively large number of counterparties and customers. Included in receivables are balances with a carrying amount of MK2.7m (2007: MK5.5m) which are past due date at the reporting date for which the company has not provided for as there has not been a significant change in credit quality and the amounts are still considered recoverable. The directors consider that the carrying amount of trade and other receivables approximates to their fair value.

2007 MK000

Less future finance charges Present value of lease obligations Less: repayable within one year Non-current portion at end of the year Total borrowings repayable within one year Total borrowings repayable after one year Total borrowings at end of the year

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Notes to the Financial Statements (continued) 8. Borrowings (continued) Section 35 (1) of the Employment Act No. 6 of 2000 requires employers to pay severance allowance to employees whose employment contracts are terminated either by mutual agreement between the employer and the employee or unilaterally by the employer. Accordingly the company has made a net provision of MK51.7 million in line with the Act as a defined benefit scheme under IAS 19. The liability for previous years of MK61.5 million has been recognised in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors as a prior year adjustment, net of related deferred tax. Previously, severance pay was only disclosed as a contingent liability. A restatement of MK61.5 Million has been made by accruing for provision for severance pay following interpretations by the courts on when severance pay is payable in line with the Act. The company has assumed that the wage increase rate and market investment rate are the same and therefore a full provision has been made less pension contributions. 2008 MK000 2007 MK000

The National Bank of Malawi loan, which is denominated in US Dollars, is unsecured and repayable in sixteen quarterly instalments, which commenced on 1 October 2007. Interest rate (variable) on the loan is 8.9% (2007: 9.6%). The National Bank of Malawi leases, which are secured over five (2007: six) motor vehicles with a net book value of MK35.2m (2007: MK24.6m), cover a minimum 18-month period and a maximum of 36 months. The leases attract variable interest rates of 20.5% (2007: 22.5%) per annum. Further analysis on maturity profiles is disclosed in note 17. 2008 MK000 2007 MK000 Restated

9. Deferred tax
At beginning of year as previously reported Deferred tax on severance allowance Deferred tax on revaluation reserve At beginning of the year as restated Revaluation reserve Income tax expense At end of the year Analysed as: Accelerated capital allowances Revaluation of land and buildings Other temporary differences 68,375 50,465 (17,044) 101,796 28,392 49,989 (22,336) 56,045 63,084 (18,463) 11,424 56,045 16,728 29,023 101,796 48,719 (16,105) 11,424 44,038 4,426 7,581

11. Banking facilities

Bank overdrafts Letter of Credits National Bank of Malawi NBS Bank Limited First Merchant Bank Limited National Bank of Malawi 210,000 20,000 20,000 120,000 370,000 National Bank of Malawi 500 210,000 20,000 20,000 250,000 500

56,045 Total bank overdraft facilities Shipping guarantees

The banking facilities of the company are secured by floating charges over company assets. In addition to floating charges, National Bank of Malawi has a collateral legal mortgage of MK0.5m (2007: MK0.5m) over property with a net book value of MK216m (2007: MK133m). 2008 MK000 2007 MK000

10.Severance allowance provision

At beginning of the year as previously reported Prior year adjustments severance allowance provision computed Less: Employer pension contribution Net balance at beginning of the year Severance pay provision Increase in employers contribution and gratuity on pension scheme At end of the year 107,166 45,624 61,542 6,254 (16,021) 51,775 95,393 41,710 53,683 11,773 Total trade and other payables (3,914) 61,542

12.Trade and other payables

Trade payables Bills payable Other payables and accrued expenses 33,913 311,485 61,837 407,235 19,846 64,373 44,754 128,973

At the year-end, the company had foreign currency payables equivalent to MK311m (2007: MK64m). The average credit period on purchase is 60 days and no interest is charged on late payments. The company has financial risk management policies in place to ensure that all payables are paid within credit time frame.

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Notes to the Financial Statements (continued)

13. Related party payables

Transactions involving related parties are conducted at arms-length. Such transactions relate to both purchases and sales and at the year-end the related balances are disclosed separately on the face of the balance sheet. A significant portion of the Companys purchases are sourced from related companies whereas sales to related parties constitute a relatively small portion of turnover. During the year, the company made purchases amounting to MK580m (2007: MK520m) from group companies. In addition, MK43m (2007: MK31m) in technical assistance fees were paid to a related company (note 15. Sales to related companies amounted to MK6.9m (2007: MK5.4m) for the year. At the end of the year related party payables were as follows: 2008 MK000 Nampak International Limited Teknol BV Hunyani Limited Nampak Laminated Products Limited Nampak Liquid Packaging Limited Nampak Products Limited Nampak Paper Limited 100,589 11,816 24,086 746 1,561 38,763 177,561 2007 MK000 119,316 8,679 8,119 7,676 3,613 15 147,418

2008 MK000

2007 MK000 Restated

15. Profit before tax

Profit before tax is arrived at after (crediting)/charging the following: Staff costs Directors remuneration Technical assistance fees Depreciation Machinery rental Auditors remuneration: Audit fee Other services Stock exchange costs Interest receivable Profit on disposal of property, plant and equipment current year prior year current year prior year 5,673 198 3,818 (289) (901) 5,163 120 2,557 (200) (3,083) salaries and other costs pension contributions fees for services as directors for managerial services 130,115 9,328 (191) 20,615 42,912 35,923 (1,520) 121,223 8,143 1,183 20,995 30,656 28,495 (1,228)

16. Income tax expense

Except for the amount due to Teknol BV, which is Kwacha denominated, related party payables are primarily denominated in foreign currencies. The related party loan from Nampak Corrugated is disclosed in note 8 to the financial statements. Income tax Deferred tax Total income tax expense 2007 MK000 current year prior year 378 29,023 29,401 % Reconciliation of rate of taxation Standard rate of taxation 15,737 5,400 24,329 45,466 10,775 2,766 38,178 51,719 Effective rate of taxation 30 28 Permanent tax differences 30 30 (2) 11,346 (14) 7,581 18,913 %

2008 MK000

14. Interest payable

Borrowings Lease finance Bank overdraft Total interest payable

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Notes to the Financial Statements (continued)

17. Financial instruments

a) Capital risk management The Company, through its Audit Committee, monitors its capital adequacy to ensure that it remains a going concern while maximising return to stakeholders. The capital structure of the Company consists of share capital and premium, non-distributable reserves and retained earnings as disclosed in the Statement of Changes in Equity. The Audit Committee reviews the capital structure on a regular basis. As a part of this review, the committee considers the cost of capital and its associated risks. Based on recommendations of the committee, the Company will balance its overall capital structure through the payment of dividends and revaluation of its assets. b) Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial assets, financial liabilities and equity instruments are disclosed in note 3 to the financial statements. c) Financial risk management objectives The Companys operations consists of provision of packaging solutions, largely to the domestic market and manages the financial risks relating to the operations of the Company through internal risk reports and executive management meetings. These risks include market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Company seeks to minimise the effects of these risks by using standardised procedures to hedge these risk exposures. The use of financial derivatives, where applicable, is governed by the Nampak Groups policies approved by the board of directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivates financial instruments, and the investment of excess liquidity. The directors on a continuous basis review compliance with policies and exposure limits. As at the reporting date, there were no derivative financial instruments. d) Market risk This is the risk that changes in market prices, interest rates, equity prices, foreign exchange rates will affect the companys income or value of holding financial instruments. The company monitors this risk on a continuing basis. There has been no change to the Companys exposure to market risks or the manner in which it manages and measures the risk. e) Foreign currency risk management The Company undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising a combination of accelerated payments and borrowing in foreign currencies.

f) Interest rate risk management The Company is exposed to interest rate risk as it finances a significant portion of its capital equipment and refurbishment through external borrowings from financial institutions. The risk is managed by maintaining an appropriate mix of maturities with business operations. Debt and currency exposures are evaluated regularly to align with interest rate projections. Optimal strategies are applied, by either borrowing in local or foreign currency depending on managements determination on the movement of foreign exchange or interest rates. The Companys exposures to interest rates on financial liabilities are detailed in the liquidity risk management section of this note. g) Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Companys exposure and the credit rating of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is monitored and controlled by executive management on a continuing basis. The Company does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds is limited because the counterparties are banks with sound integrity and robust financial positions. h) Liquidity risk management Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the management of the Companys short, medium and long-term funding and liquidity management requirements. The responsibility for the management of these risks lies with the Audit Committee of the board of directors. The Company manages liquidity risk by maintaining adequate reserves, and continuously monitoring forecast and actual cash flows.

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Notes to the Financial Statements (continued) 17. Financial instruments (contd) i) Categories of financial instruments Accounting classifications and fair values Other amortised cost MK000 Total carrying amount MK000 The following table details the Companys remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The table includes both interest and principal cash flows. Weighted average effective interest rate Fair value MK000 2008 External short-term loan *** Exteral long-term debt** Assets Receivables Bank and cash balances Total financial assets Liabilities Borrowings Severance pay provision Bank Overdraft Payables and accruals Total financial liabilities At 30 September 2007 Assets Receivables Bank and cash balances Total financial assets Liabilities Borrowings Payables and accrual Severance pay provision Bank Overdraft Total financial liabilities 8 12 9 11 102,740 128,973 61,542 138,532 431,787 102,740 128,973 61,542 138,532 431,787 102,740 128,973 61,542 138,532 431,787 7 214,039 214,039 36,568 36,568 214,039 36,568 250,607 214,039 36,568 250,607 j) Fair value of financial instruments The fair value of financial assets and financial liabilities are determined as follows: The fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted prices; and The fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions. 8 9 11 12 262,420 101,796 167,379 407,235 938,830 262,420 101,796 167,379 407,235 938,830 262,420 101,796 167,379 407,235 938,830 All long-term debt is at variable interest rates. * ** *** Denominated in Malawi Kwacha Denominated in United States Dollars Denominated in South African Rand 43,000 34,237 25,503 102,740 7 10 270,534 270,534 214 214 270,534 214 271,048 270,534 214 2007 271,048 External long-term debt** External finance leases* 9.6 22.5 34,915 8,085 27,028 7,209 21,779 3,724 83,722 19,018 53,613 34,783 50,076 138,472 External finance leases* 0.0 8.9 20.5 30,949 10,284 12,380 24,163 10,620 41,088 8,988 30,949 75,535 31,988 %

Notes At 30 September 2008

Loans and receivables MK000

Less than 12 months MK000

13 - 23 months MK000

24 - 60 months MK000

Total MK000

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Notes to the Financial Statements (continued) 2008 Tambala 2007 Tambala Restated

21. Segmental information

For management purposes, the company is currently organised into one principal business segment relating to the manufacture of cardboard and paper containers the results of which are set out on page 4 of the financial statements. During the period, export sales amounted to MK82m (2007: MK80m). Costs associated with export sales are not separately identifiable. 2008 MK000 2007 MK000

18. Earnings per share

Basic earning per share 101 74

The calculation of the basic and diluted earnings per share attributable to the ordinary equity holders of the company is based on the following data: 2008 MK000 Earnings Earnings for the purposes of basic/diluted earnings per share(thousands) 67,636 2008 Nos. Number of shares (thousands) Weighted average number of ordinary shares (thousands) The company does not have any discontinued operations. 2008 MK000 2007 MK000 67,250 67,250 49,894 2007 Nos. 2007 MK000 Restated

22. Commitments
Capital expenditure Contracted and approved Authorised, but not contracted Total capital expenditure Capital expenditure will be financed from internal and external resources. 3,000 127,577 130,577 58,768 166,901 225,669

23.

Exchange rates and inflation

19. Dividend per share

Dividend declared and paid in the year 19,503 Nos. Weighted average number of ordinary shares in issue (thousands) 67,250 Tambala Dividend per share 29 8,070 Nos. 67,250 Tambala 12

The average of the year-end buying and selling rates of the foreign currencies most affecting the performance of the company is stated below, together with the increase in the National Consumer Price Index for the preceding year, which represents an official measure of inflation. 2008 Malawi Kwacha/US Dollar Malawi Kwacha/GB Pound Malawi Kwacha/Rand Malawi Kwacha/EUR Inflation rate % 142.0 263.9 17.3 205.3 9.3 2007 139.8 288.3 20.8 99.4 7.1

As at 30 October 2008, the exchange rates had moved as disclosed below

20. Retirement benefit scheme

Some of the employees of the company are members of an independently administered defined contribution scheme. The company is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the company with respect to the retirement benefit scheme is to make the specified contributions. The scheme is eligible to employees who are not on contract and who have successfully completed their probation period for the company.

Malawi Kwacha/US Dollar Malawi Kwacha/GB Pound Malawi Kwacha/Rand Malawi Kwacha/Euro

142.0 234.7 13.2 184.1

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Notes to the Financial Statements (continued) 2008 MK000 2007 MK000

Value Added Statement

For the year ended 30 September 2008 ANNEXURE I
2008 MK000 2007 MK000 Restated

24. Contingent liabilities

Legal claims Guarantees in respects of staff loans Severance pay Total contingent liabilities (a) (b) 300 3,800 4,100 80 3,800 102,173 106,053

(a) These represent legal claims made against the company in the ordinary course of business, the outcome of which is uncertain. The amount disclosed represents an estimate of the cost to the company in the event that legal proceedings find the company to be in the wrong. In the opinion of the directors the claims are not expected to give rise to a cost to the company. (b) These represent the companys maximum exposure at the balance sheet date if guarantees entered into by the company in support of staff borrowings from Malawi Savings Bank Limited were called upon.

REVENUE Paid to suppliers for materials and services rendered Income from investments TOTAL WEALTH CREATED WEALTH DISTRIBUTION

2,206,689 (1,853,941) 289 353,037

1,588,509 (1,266,095) 200 322,614

2008 MK000

2007 MK000 SALARIES, WAGES AND OTHER BENEFITS Salaries and wages 110,103 40,627 9,328 160,058 PROVIDERS OF CAPITAL Bank overdraft interest Interest on loans Dividends to shareholders 24,329 21,137 19,503 64,969 MONEY EXCHANGES WITH CENTRAL GOVERNMENT Income tax RETAINED TO MAINTAIN AND DEVELOP OPERATIONS Retained profit after appropriation Depreciation Deferred tax 48,133 35,923 29,023 113,079 TOTAL WEALTH DISTRIBUTED 353,037 41,824 28,495 7,581 77,900 322,614 14,931 33,983 38,177 13,541 8,070 59,788 90,972 51,828 8,143 150,943 Other benefits Pension

25. Compensation of key management

Salary and benefits 58,223 42,718

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Statistics
2008 EARNINGS AND DIVIDENDS Number of ordinary shares (000) Earnings per share Dividend per share Dividend cover (times) 67,250 101t 29t 3.5 67,250 74t 12t 6.2 67,250 145t 42t 3.5 67,250 120t 35t 3.4 67,250 94t 21t 4.48 2007 2006 2005 2004

Analysis of Shareholders
30 September 2008
Shareholders Number Category Individuals 1 5000 5001 10 000 386 82 113 6 2 3 0 0 2 594 1 1 7 8 5 9 1 626 61.66 13.10 18.05 0.96 0.32 0.48 0.00 0.00 0.32 94.89 0.16 0.16 1.12 1.28 0.80 1.44 0.16 100.00 774,682 727,926 2,331,170 536,700 325,000 771,473 1,165,544 6,632,495 40,350,000 11,846,800 5,930,289 62,000 129,700 2,264,016 34,700 67,250,000 1.15 1.08 3.47 0.80 0.48 1.15 0.00 0.00 1.73 9.86 60.00 17.62 8.82 0.09 0.19 3.37 0.05 100.00 % Ordinary shares Number held % of shares issued

FINANCIAL DATA Return on capital employed(%) Gearing(%) Interest cover (times) Effective rate of taxation (%) Cash generated from operations (MK,000) Net increase / (decrease) in cash (MK,000) 15.2 19.8 3.1 30.3 85,576 (65,201) 16.7 18.9 2.3 27.5 212,553 67,128 32.8 14.8 3.3 29.9 59,763 (120,647) 25.8 26.1 4.8 26.1 36,045 (28,394) 24.6 3.8 7.3 29.8 78,434 12,182

10 001 50 000 50 001 100 000 100 001 200 000 200 001 300 000 300 001 400 000 400 001 500 000 500 001 and over Total for individuals Holding company Insurance and assurance companies

TURNOVER AND EMPLOYEE DATA Number of permanent employees Turnover per employee (MK,000) Sales Volumes( Tons) 146 15,114 9,908 158 9,864 7,330 161 10,752 10,104 168 9,277 11,443 176 5,942 7,941

Investment and trust companies Non-resident Other corporate bodies Pension and provident funds Banks and Nominees Total shareholding

SHARE PRICE DATA Market price per share (tambala) - Highest - Lowest - Year end 625 500 625 500 425 500 425 200 425 200 190 200 190 140 165 SHAREHOLDERS HOLDING 1% OR MORE OF THE TOTAL EQUITY TRANSMAR (ISLE OF MAN) LTD OLD MUTUAL LIFE ASSURANCE (MALAWI) PRESS TRUST INDETRUST LIMITED NATIONAL INVESTMENT TRUST LTD NICO LIFE FUND 40,350,000 11,846,800 2,401,485 2,021,917 1,434,205 864,967 58,919,374 60.00 17.62 3.57 3.01 2.13 1.29 87.61

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Notice of the 40th Annual General Meeting

NOTICE IS HEREBY GIVEN that the Fortieth Annual General Meeting of the Company will be held at Mt Soche Hotel, Blantyre on Wednesday 25th February 2009 at 2:00 p.m. to transact the following business: To receive and consider the financial statements of the company for the financial year ended 30 th September 2008, Directors and Auditors Report thereon. Resolution That the audited financial statements for the financial year ended 30th September 2008, Directors and Auditors Report thereon be adopted. Date: 23rd December 2008. BY ORDER OF THE BOARD. To declare MK9.415m or 14 tambala per share, which was paid as interim dividend, as the final dividend for the financial year ended 30th September 2008 as recommended by the Directors.

Resolution
That an interim dividend of MK9.415m or 14 tambala per share paid on 30th June 2008 be maintained as the final dividend for the year ended 30th September 2008 as recommended by the Directors.

To elect Directors in place of Messrs. R. Lund and G. Kainja. In terms of Article 77 of the Articles of Association Messrs. R. Lund and G. Kainja retire as Directors by rotation but being eligible, they have offered themselves for re-election. Resolution That Messrs. R. Lund and G. Kainja be re-elected as Directors.

GIFT MTILENI COMPANY SECRETARY To re-appoint Deloitte Public Accountants as auditors and authorise the Directors to fix their remuneration. Resolution That Deloitte be and are hereby appointed as auditors for the 2009 financial year and that the Directors be authorised to fix their remuneration. Registered office: McLeod Road, Heavy Industrial Area, Makata P O Box 30533, Chichiri, BLANTYRE 3.

To confirm the remuneration of the Executive Director as determined by the Directors. Resolution That in accordance with Article 103 of the Articles of Association the remuneration of the Executive Director for the financial year ended 30 September 2008 at levels as determined by Directors be confirmed.

A member qualified to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend, speak and vote in his/her stead. A proxy need not be a member of the company. Proxy forms and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the Company Secretarys Office, not less than twenty four hours prior to the time for holding the meeting and, in default, the proxy forms shall not be treated as valid. Proxy forms shall be in the form attached hereto or a form as near thereto as circumstances permit.

To fix the remuneration of the Chairman and other Non-Executive Directors. Resolution That the remuneration of the Chairman and other Non-Executive Directors be fixed as follows: Chairman MK 253,000 per annum payable quarterly in arrears Directors MK 216,000 per annum payable quarterly in arrears.

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Proxy Form
I/We ........................................................................................................................................................................ of (address) . ............................................................................................................................................................ being a member/members of the above named company, hereby appoint . .......................................................... ................................................................................................................................................................................. of ............................................................................................................................................................................. or failing him ............................................................................................................................................................ of ............................................................................................................................................................................. as my/our proxy to vote for me/us on my/our behalf at the (annual or extraordinary, as the case may be) general meeting of the company, to be held on the 25th day of February 2009 and at any adjournment thereof.

This form is to be used:

In favour of ..................................... resolution no 1 . ........................................ against in favour of ..................................... resolution no 2 . ........................................ against in favour of ..................................... resolution no 3 . ........................................ against in favour of ..................................... resolution no 4 . ........................................ against in favour of ..................................... resolution no 5 . ........................................ against in favour of ..................................... resolution no 6 . ........................................ against

Unless otherwise instructed the proxy will vote as he thinks fit. Date .................................... Signed ................................................ Strike out whichever is not desired. A proxy need not be a member of the company.

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