AT THE MARKET WITH ALLIANCE CAPITAL LIMITED Pension Fund Asset Managers Let us manage your pension fund

investments for optimal returns. Call us today. Money Market Brokers We pool funds from many investors and achieve the critical mass and economies of scale to get you better interest rates on your money. Call us for more information. Portfolio Investment Managers We can manage your investment portfolio professionally, giving you insightful information on recent and upcoming developments based on our research and knowledge of the market. Try us. Share Investment Services Trust us to give you objective advice when you want to buy or sell shares and allow us to handle the transaction on your behalf. You only pay the normal stockbroking fee! Corporate Finance Advisors Contact us for business plans, capital raising, strategic planning, balance sheet restructuring, due diligence, company valuations, pre-listing and listing advice.
CONTACT US NOW FOR FINANCIAL ADVICE AND YOUR INVESTMENT MANAGEMENT NEEDS. Call or e-mail Chikavu Nyirenda or Wasili Mfungwe cnyirenda@alliancecapitalmw.com or wmfungwe@alliancecapitalmw.com

Tel: (265) 1 830 704/5 01 830 687 Fax: (265) 1 834 336 Email:info@alliancecapitalmw.com

Week Ending 24th June, 2011 Vol. 129/2011 This Weeks Contents Page 1 Page 2 Page 3 Page 4 PAGES 5
Stock Market Indicators Index Dec 2010 Week-Ending 24th June 2011 4890.94 3862.76 Week-Ending 17th June 2011 4889.70 3861.77 % change this week 0.0000 0.0000 % year to date % Gain 2010 % Gain 2009 % Gain 2008

Stock Market Indicators Money Market Operations/ Foreign Exchange Stock Market Update Weekly Article Quote of the Week/ Contacts

MASI DSI

4953.09 3922.61

-1.2798 -1.5510

-3.92 -4.03

-15.73 -15.13

25.00

Source: Malawi Stock Exchange

1. MONEY MARKET OPERATIONS

TENOR 91 day TB 182 day TB 273 day TB Totals 5,000.00
Source: Reserve Bank of Malawi

Announced (Cost)KM 1,000.00 1,500.00 2500.00

Applied For (Cost) KM 4,302.48 46.00 1,902.09 6,131.12

Allotted (Cost) KM 3,777.49 44.39 1,323.85 5,145.73

Average Yield % 7.32 7.25 7.90

Lowest Yield % 6.9902 7.2523 7.9000

Highest Yield % 7.5398 7.2531 7.9313

Investors this past week surprised the monetary authorities with an over-subscription, the first in a good number of weeks. The K5 billion announced by the Reserve Bank was oversubscribed by 23% with investors willing to invest K6.1 billion. As has been the trend in recent weeks, a good chunk of this (70%) was directed towards the 91-day tenor. The authorities, perhaps in a bid to cover some deficits in past auctions, accepted K5.14 Billon, 3% more than they were initially looking for. The oversubscription was particularly surprising considering that a bond issue is coming up later this week and investors were expected to withhold funds to play the bond market. The 91-day paper was the only gainer this past week, going up with a marginal 3 basis points to close the week at 7.32%. The 182-tenor, on the other hand, shed 2 basis points to fetch an average yield of 7.25%. The 273-day tenor also lost 6 basis points to close with a yield of 7.90%. FOREIGN EXCHANGE MARKET Currencies USD GBP Rand Euro Yen Mid Rate Week ending 24th June, 2011 150.7988 241.7003 22.6531 215.2955 1.9115 Mid Rate Week ending 17th June, 2011 150.7983 243.9314 22.5633 214.4503 1.9093 Previous Year 140.5997 217.1327 16.1082 211.3969 1.6061

Source: Malawi Stock Exchange

In the week just gone by, the local unit lost some ground against all major trading partners expect the Pound Sterling. The American Dollar appreciated very marginally to close the week trading at K150.7988 from K150.7983 the previous week. The British Pound though, as has been the trend for a number of weeks now, depreciated by 0.9 percentage points to fetch K241.7003 at the close of the week. The Euro and the Yen all appreciated against the local currency last week, gaining 0.39 and 0.11 percentage points to close the week at K215.2955 and K1.9115 respectively. The South African Rand was also a gainer, albeit marginally, to fetch K22.6531 from K22.5633 last week. The stand-off between the government and the IMF on devaluation of the local currency is now official. Given that actual trading rates in the commercial market are somewhat above the official rates and that tobacco earnings are close to 80% down on last year, it has become increasingly problematic to discuss the countrys foreign exchange position with any measure of reliability in the face of the disparities in rates, reported substantial, long-standing payment backlogs and continued strong demand. Cash rates at foreign exchange bureaux, now predominantly owned by authorised dealer banks, have reached unprecedented levels, with the US dollar trading at an average of MK190.00. Parallel market rates are said to be at not less than MK200.00 to the US dollar. So, who is fooling who? Officially, forex reserves at USD391 million represent 3.03 months of import cover.

4 The Stock Market At the stock market the past week, trading was recorded over 7 counters with 3,231,856 shares officially changing hands. These transactions were conducted over 20 deals and at a total consideration of MK21, 742 510.58 million. These figures may be indicative of a number of players anxious to dispose their stock before the implementation of the capital gains tax on the 1st trading day of July, 2010. The Malawi All Share Index moved upwards by 1.24 points to finish the week at 3862.76 points despite share price losses in NBS from MK10.50 to MK10.00 and Sunbird from MK8.00 to MK7.20. These losses were effectively offset by a gain in NICO from MK12.50 to MK13.00 resulting in a movement of the Domestic Share Index by 0.99 points from 3861.77 points to 3862.76 points. The Foreign Share Index registered no movement at all to remain at 465.04 points at the close of trading last week. Malawi Stock Exchange Closing Stock Sheet as at 17 June 2011

Counter Code BHL FMB ILLOVO MPICO NBM NBS NICO NITL PCL PIM Real STD SUNBIRD TNM

Closing Price(t) 640 643 11000 300 5300 1000 1300 1600 17700 625 120 9600 720 160

Share Volume

Divided Net (t) 44.00

P/E Dividend Earnings ratio Yield % Yield % Times 6.88 4.04 5.73 5.33 7.89 7.50 8.08 4.38 2.63 3.60 0.00 6.59 4.44 3.75 10.86 12.17 8.19 73.92 13.86 26.01 20.89 6.20 36.37 28.31 8.66 11.84 18.44 6.60 14.89 9.20 8.22 12.21 1.35 7.21 3.84 4.79 16.12 2.75 3.53 11.55 8.45 5.42 15.16 6.72

P/BV Ratio

Market After-Tax Capitalisation Profit MK mm 89.3110 1,828.595 6,425.000 2,547.907 3,429.000 1,354.529 2,833.000 133.970 7,742.000 119.007 25.968 2,424.000 347.297 1,059.721 30,359.31

0.75 822.08 1.99 15,022.09 4.55 78,478.88 0.61 3,447.07 2.07 24,736.96 1.61 5,207.43 1.16 13,559.53 0.78 2,160.00 0.79 21,285.28 0.44 420.31 1.67 300.00 2.12 20,480.07 0.41 1,883.39 2.21 16,064.72 1.81 203,867.82

1,722,006

26.00 630.00 16.00 418.00

548,000 183,340

75.00 105.00 70.00

2,700

466.00 22.50

577,810

0.00 633.00

196,700

32.00 6.00

3,230,556

53.83

OML

37000

1,300 3,231,856

1,054 234.27

2.85 3.56

7.06 8.04

14.17 11.16

1.94 1,417,862.01 1.92 1,621,729.83

100,091.20 130,450.51

So you want to play the Bond Market?

For Malawian investors that are cannot stomach the risk imbedded in the stock market with its swings and frustrations, there is an alternative for such not so risk- loving investors in the form of fixed income securities such as bonds.

But what is a Bond?

A bond is nothing more than a loan where you are the lender. The organization that sells a bond is known as the issuer. You can think of a bond as an IOU given by a borrower (the issuer) to a lender (the investor) just like Treasury Bills only that the loan is expected to last for not less than a year. The issuer of a bond must pay the investor something extra for the privilege of using his or her money. This "extra" comes in the form of interest payments, which are made at a predetermined rate and schedule. An investor also makes money from the discount to face value when purchasing the bond. The interest rate is often referred to as the coupon. The date on which the issuer has to repay the amount borrowed (known as face value) is called the maturity date. Bonds are known as fixed-income securities because you know the exact amount of cash you'll get back if you hold the security until maturity For example, you can buy a bond with a face value of K100, 000 with an annual coupon of 8.5% and a maturity of 3 years. This means you'll receive a total of K8, 500 (K100, 000*8.5%) of interest per year for the next 3 years. Actually, because most bonds pay interest semi-annually, you'll receive two payments of K4, 250 a year for 3 years. When the bond matures after the three years, you'll get your K100, 000 back.

Is there any Risk?

Bonds can be a great tool to generate income and are widely considered to be a safe investment, especially when compared to stocks. However, there are some potential pitfalls and risks to holding government, corporate and in our case central bank bonds that all investors should be aware of. Interest Rate Risk Interest rates and bond prices carry an inverse relationship; as interest rates fall, the price of bonds trading in the marketplace generally rises. Conversely, when interest rates rise, the price of bonds tends fall. This happens because when interest rates are on the decline, investors try to capture or lock in the highest rates they can for as long as they can. To do this, they will scoop up existing bonds that pay a higher rate of interest than the prevailing market rate. This increase in demand translates into an increase in bond price. On the flip side, if the prevailing interest rate were on the rise, investors would naturally jettison bonds that pay lower rates of interest. This would force bond prices down. Inflation Risk When an investor buys a bond, he or she essentially commits to receiving a rate of return, either fixed or variable, for the duration of the bond or at least as long as it is held. But what happens if the cost of living and inflation increase dramatically, and at a faster rate than income investment? When that happens, investors will see their purchasing power erode and may actually achieve a negative rate of return (again factoring in inflation). Put another way, suppose that an investor earns a rate of return of 3% on a bond. If inflation grows to 4% after the purchase of the bond, the investor's true rate of return (because of the decrease in purchasing power) is -1%.

Liquidity Risk While there may be a ready market for government bonds, sometimes a market may face a liquidity squeeze. There is a risk that an investor might not be able to sell his or her bond quickly due to a thin market with few buyers and many sellers for the bond. Low demand in a particular bond issue can lead to substantial price volatility and possibly have an adverse impact on a bondholder's total return (upon sale). Much like stocks that trade in a thin market, you may be forced to take a much lower price than expected to sell your position in the bond. The RBM Bond is expected to be listed on the Malawi Stock Exchange which should make it more liquid that previous issues and current issues of treasury bills which do not have an open price-discovery mechanism. We can only hope that this will lead to an active bond market and usher in an era of open, fixed-income trading. The Bottom Line Bonds may generate an income stream for investors and, depending on the issue(s), they may also help mitigate overall portfolio risk. Bonds generally pay out a lower return than shares. However, this doesn't mean you shouldn't invest in bonds. Bonds are appropriate any time you cannot tolerate the short-term volatility of the stock market and need to generate stable income streams. A good example is that of retirees who simply cannot afford to lose the principal sum as income generated from this is required to cater for day-to-day living expenses and bills. Bonds are also appropriate where there is need to generate a specific income stream to meet a defined, short term horizon objective like a self-funded higher education program in, say, three years time. The first bond issue is due today, Wednesday 29 June 2011. Are you ready to play bond? This article has not covered the issue of bond pricing which forms the backbone of bond trading. As we repeatedly advise, please do contact an investment professional should you need advice in how to go about investing in bonds or any other financial instruments. Overall, the introduction of listed bonds is a welcome and long overdue development and we look forward to seeing other government paper issues, corporate and municipal bonds being issued and openly traded. Invest Profitably! Quote for the week "Do not spoil what you have by coveting what you have not. But remember, that what you have now was once among the things you only hoped for Unknown Contact Chikavu Nyirenda or Wasili Mfungwe at: Tel 01 830 704/705 / 0999 676 180/ 0999 640 867 Email cnyirenda@alliancecapitalmw.com or wmfungwe@alliancecapitalmw.com This article has been prepared by Alliance Capital Limited and the content is for information purposes only and not intended as a recommendation to buy or sell any securities. Whilst care has been taken to ensure that the information in this article is correct, no liability is accepted for any loss arising from reliance on it. All opinions and estimates expressed in this report are entirely those of the writer. Readers of this article shall be solely responsible for making their own independent investigation of the businesses, financial condition and prospects of companies/ markets referred to in this report. Share markets go up and down and past performance is no guide to the future.

________________________________________
Directors: T. Daniel, FCA, CPA (Malawi), I. Nsamala, AIB, P.Dip. Mgt, P. Barratt, MBIM, MIWM (UK), MSc (Economics) LRIC Chemistry) D. Lungu, BSc. (Mech) MJM Phiri FCA, FCMA, CPA (Malawi), P. Nkosi, ACII, MSc. (Chemistry) ACII, BSc. (Chemistry) Suite C, Kabula House, Chilembwe Road, P.O Box 510, Blantyre, Malawi Tel: (265) 1 830704/5 01 830687 Fax: (265) 1 834336 Email:info@alliancecapitalmw.com