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AICO 2010 annual report

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2010 annual report

2010 annual report

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  • 1. Annual Report 2 0 0 9 ANNUAL REPORT
  • 2. Our Vision: To be a dominant agro-industrial business in our chosen markets. Our Values: We believe in honesty and integrity - trust is the foundation of our business. We believe in innovation, teamwork and mutual respect - together we achieve exceptional results. We are passionate about delivering world class quality pr oducts and services - it is the cor nerstone of our success. We cherish our role as creators and custodians of wealth - it is our legacy for present and future generations. Our Mission: To be the leading pr oducers, processors and marketers of agr o-industrial commodities and brands of world-class quality in the markets we serve. We are dedicated to achieving superior returns for our stakeholders and to pursuing gr owth opportunities by optimising our competencies and leveraging on our r esource base. We foster innovation and all round excellence in everything we do.
  • 3. Contents N OTICE TO SHAREHOLDERS 2 PROXY FORM/CHANGE OF ADDRESS 3 GROUP PROFILE 6 CORPORATE INFORMATION 7 BOARD OF DIRECTORS 8 GROUP COMPANIES’ BOARD COMPOSITION 10 BOARD COMMITTEES AND GROUP MANAGEMENT 11 CORPORATE GOVERNANCE STATEMENT 13 CHAIRMAN’S STATEMENT 16 DIRECTORS’ RESPONSIBILITY STATEMENT 19 GROUP CHIEF EXECUTIVE’S REPORT 20 DIRECTORS’ REPORT 24 INDEPENDENT AUDITOR’S REPORT 26 STATEMENTS OF FINANCIAL POSITION 28 INCOME STATEMENTS 29 STATEMENTS OF COMPREHENSIVE INCOME 30 STATEMENTS OF CASH FLOW 31 STATEMENTS OF CHANGES IN EQUITY 32 GROUP SEGMENT REPORTS 34 ACCOUNTING POLICIES 37 NOTES TO THE FINANCIAL STATEMENTS 45 SHAREHOLDERS ANALYSIS 67 SHAREHOLDERS’ CALENDAR 67 CORPORATE DIRECTORY 69 Annual Report 2010 1
  • 4. Notice to Shareholders Notice is hereby given that the Second Annual General b) That, accordingly, the issued shar e capital of Meeting of the members of AICO Africa Limited will the Company of 531,065,109 or dinary shares be held at The Cotton Pavilion, Harar e Exhibition be re-denominated to US$5 310 651 consisting Centre, Zimbabwe on Wednesday, 4 August 2010 at of 531,065,109 ordinary shares of US$0.01 each. 15:00 hours for the following business: c) That the Directors be authorised to transfer from ORDINARY BUSINESS the capital reserves of the Company, an amount sufficient to fund the aforesaid re-denomination 1. FINANCIAL STATEMENTS of the Company's shar e capital and to do all To receive and adopt the financial statements for such things and execute all such documents the year ended 31 March 2010 together with the as may be necessary to give effect to the above. reports of the Directors and the Auditors thereon. d) That the Memorandum and Articles of 2. ELECTION OF DIRECTORS Association of the Company be amended such In terms of Article 32.1 of the Company's Articles that any and all reference to 'nominal value' of of Association, Messrs B. L. Nkomo and L.F Preston . shares shall mean and read 'US$0.01' per share. retire by rotation. Mr P Devenish who was appointed . during the year will step down. Both r etiring 6. ANY OTHER BUSINESS Directors, and the new Director, being eligible, offer To transact such other business as may be themselves for re-election. transacted at an Annual General Meeting. 3. DIRECTORS' REMUNERATION NOTE: A member entitled to attend and vote at To approve the fees paid to the Dir ectors for the the meeting may appoint any person or persons year ended 31 March 2010. to attend and speak in his stead. A proxy need not be a member of the company . Proxies must be 4. AUDITORS lodged with the Secretary at least 48 hours before To approve the remuneration of the Auditors and the time of holding the meeting. to consider the re-appointment of KPMG as auditors for the ensuing year. BY ORDER OF THE BOARD SPECIAL BUSINESS 5. RE-DENOMINATION OF SHARE CAPITAL P. MANAMIKE To Resolve: GROUP COMPANY SECRETARY a) That the authorised share capital of the Company 13 July 2010 denominated in Zimbabwe dollars consisting of one billion five hundred million (1 500 000 000) REGISTERED OFFICE ordinary shar es of ZW$1 each be r e- denominated to one billion five hundred million 1st FLOOR SAZ BUILDING (1 500 000 000) or dinary shares of US$0.01 NORTHEND CLOSE,NORTHRIDGE PARK each. BORROWDALE, HARARE 2 AICO Africa Limited
  • 5. 2nd Annual General Meeting 2nd Annual General Meeting Proxy Form Change of Address Notice I/We of NAME: (In full block letters) being the registered holder/holders of shares in AICO Africa Limited hereby appoint NEW ADDRESS: Of or failing him, the Chairman of the meeting, as my/our proxy to vote on my/our behalf at the second annual general meeting of the Company to be held on Wednesday 4 August 2010 at 15:00 hours and at any adjournment thereof. OLD ADDRESS: Signed this day of 2010 Signature of shareholder NOTE A member entitled to attend and vote at the meeting may appoint any person or persons to speak in his stead. A pr oxy need not be a member of the Company. Proxies must be lodged with the Secretary at least forty-eight hours befor e the meeting. Annual Report 2010 Annual Report 2010
  • 6. Stamp Stamp Transfer Secretaries Transfer Secretaries AICO AFRICA Limited AICO AFRICA Limited First Transfer Secretaries (Private) Limited First Transfer Secretaries (Private) Limited P O Box 11 P O Box 11 Harare Harare Zimbabwe Zimbabwe Annual Report 2010 Annual Report 2010
  • 7. Each problem has hidden in it an opportunity so powerful that it literally dwarfs the problem. The greatest success stories were created by people who recognised a problem and turned it into an opportunity. Joseph Sugarman
  • 8. Group Profile PREAMBLE AICO holds a 51.21% contr olling stake in Seed Co AICO Africa Limited (AICO) is a diversified agr o- Limited (Seed Co). Seed Co develops and markets industrial conglomerate. hybrid maize and other broad acre crop seeds. Seed Co, in turn, holds a 100% interest in a cotton planting It was incorporated in Zimbabwe on 23 July 2008 seed pr oduction house, Quton Seed Company and subsequently reverse listed on the Zimbabwe (Private) Limited. These two seed houses make up Stock Exchange on 1 September 2008, in place of the Group’s seed operations. The Cotton Company of Zimbabwe Limited (Cottco) t h ro u g h a G r o u p r e s t r u c t u r i n g e x e r c i s e . AICO has a 75% controlling stake in a local spinning mill, Scottco (Private) Limited (Scottco), which INVESTMENTS produces yar n mainly for the export market. This AICO wholly owns Cottco, which, with nine ginneries constitutes the spinning operations of the Gr oup. across Zimbabwe, constitutes the Cotton operations of the Group. Cottco is the single lar gest ginner of AICO also has a 49% stake in Olivine Holdings (Private) cotton in Souther n Africa, and is involved in every Limited (Olivine), a major player in the local fast moving facet of cotton production and sales. This includes consumer goods (FMCG) market. Its key pr oducts the pr ovision of agr onomic advisory services, include edible oils and fats, canned vegetables, soaps, production and merchandising of planting seed, supply cotton and soya meal. In addition, AICO has a 100% of chemicals and fertiliser, ginning, warehousing as interest in a fr ozen foods outfit, Exhort Enterprises well as marketing of lint and cotton seed in global (Private) Limited (Exhort). T ogether, these two and local markets. investments constitute the Group’s FMCG operations. GROUP STRUCTURE Incorporating 75% 100% 100% 51.21% 100% 49% 100% Cottco Zambrano Investments International (Private) Limited Limited PRINCIPAL ACTIVITIES COMPANY PRINCIPAL ACTIVITIES PRODUCTS MARKETS Ginning of seed cotton and selling of lint and by products Lint, ginned seed, delinted seed and linters. Africa, Asia and Europe Cottco of the ginning process. Seed Co Development, production and selling of broad acre crop Maize, soya beans, wheat, cotton, Africa seeds. sorghum and a variety of other crop seeds. Scottco Selling of yarn and woven products. Cotton yarn and grey cloth. Africa and Europe Manufacturing of edible oils and fats, jams and marmalades, Cooking oil, margarine, candles, baked Africa Olivine soaps, candles as well as canned fruits and vegetables. beans, bath soaps, canned foods etc. Exhort Processing of frozen vegetables. Frozen carrots, beans, peas, cauliflower, Africa sweet corn, broccoli etc. Zambrano Investment vehicle for inflation hedged assets. Quoted shares and investment property. Zimbabwe 6 AICO Africa Limited
  • 9. Corporate Information Registered Office Company Secretary 1st Floor SAZ Building Northend Close Northridge Park Box BW 537 Borrowdale P. Manamike HARARE ZIMBABWE Tel: 263-4-852795 Fax: 263-4-850705 Email: info@aicoafrica.com Auditors Transfer Secretaries KPMG Chartered Accountants (Zimbabwe) First Transfer Secretaries Mutual Gardens 4th Floor, Goldbridge 100 The Chase (West) Eastgate Emerald Hill HARARE HARARE ZIMBABWE ZIMBABWE Main Bankers African Banking Corporation CBZ Bank Limited 1 Endeavor Crescent 60 Kwame Nkrumah Avenue Mount Pleasant Business Park HARARE HARARE ZIMBABWE ZIMBABWE Standard Chartered Bank Zimbabwe African Export and Import Bank Africa Unity Square World Trade Center Building Sam Nujoma Street 1191 Comiche El Nil HARARE CAIRO ZIMBABWE EGYPT Standard Chartered Bank 22 Billiter Street LONDON UNITED KINGDOM Lawyers Gill Godlonton & Gerrans Kantor & Immerman Legal Practitioners 19 Selous Avenue Beverly Court HARARE 100 Nelson Mandela Avenue ZIMBABWE HARARE ZIMBABWE Annual Report 2010 7
  • 10. Board of Directors Patison Sithole Bekithemba Nkomo (Non-Executive Chairman) (Non-Executive Director) Patison was appointed Bekithemba was appointed Chairman of the AICO to the AICO Boar d on 15 Board on 15 August 2008. August 2008. Prior to that, Until his appointment to this he had been on the Cottco position, he had served as Board since 1 December the Chairman of the Cottco 2002. He is a pr ominent Board since 22 February businessman and Managing 2006. A former pr esident of Director of Lloyd Corporate the Confederation of Zimbabwe Industries, Patison Capital (Private) Limited. Bekithemba sits on the has vast experience in business, and is the Gr oup boards of CABS and African Sun Limited and is also Chief Executive of Starafrica Corporation Limited and a dir ector of Gaskets and Cuttings Inter national Chairman of Red Star Holdings Limited, both of which (Private) Limited, Willsgr ove Ware Pottery (Private) are listed on the Zimbabwe Stock Exchange. He also Limited and Rubber Products Manufacturers (Private) sits on the boards of ABC Zimbabwe Limited, Sugar Limited. He holds a Bachelor of T echnology in Industries (Pr oprietary) Limited in Botswana and Accounting degree from the University of Zimbabwe Consolidated Sugar Industries (Proprietary) Limited and is a certified Business Excellence Assessor with in Namibia. Patison was voted Zimbabwe Institute of The South African Excellence Foundation. Management Manager of the year in 2004. He holds a Bachelor of Accountancy (Honours) degr ee from Catherine Chitiyo the University of Zimbabwe, a Masters in Business (Non-Executive Director) Leadership from University of South Africa, and is a Catherine was appointed to Chartered Accountant. the Boar d on 15 August 2008, and is a partner with Atherstone & Cook Patrick Devenish (Incorporating Wickwar & (Group Chief Executive) Chitiyo) Legal Practitioners. Patrick was appointed to Prior to this appointment, the position of Group Chief she was a Cottco Boar d Executive for AICO Africa member since 1 December 2002. She holds a Bachelor Limited with ef fect from 1 of Laws (Honours) degr ee fr om the University of January 2010. Pat is the Zimbabwe and several years of commer cial law former Gr oup Chief experience. Catherine also sits on various company Executive of Seed Co boards. Limited, a subsidiary of AICO Africa Limited. He brings with him a wealth of experience in management, strategy and business development and is well positioned to lead the Group into the future. He is a holder of an Executive Masters in Business Administration from the University of Cape Town. 8 AICO Africa Limited
  • 11. Board of Directors (continued) Albert Nhau Pious Manamike (Non-Executive Director) (Company Secretary) Albert was appointed to the Pious was appointed the Board on 15 August 2008. Group Company Secretary Prior to this appointment, on 15 August 2008. He Albert was a Cottco Board joined the Group in August member since June 2007. 2005 after holding various He has vast experience in positions in finance and business and is the Group administration for 15 years. Chief Executive of Mike Appel He holds a Bachelor of Organisation (Private) Limited. He sits on the boards Accountancy (Honours) degree from the University of Nestle Zimbabwe (Private) Limited, Riozim (Private) of Zimbabwe, a Masters in Business Administration Limited and is the Chairman of National Social Security degree fr om Midlands State University and is a Authority (NSSA) and Beta Holdings (Private) Limited. Chartered Secretary. Bernard Mudzimuirema Lawrence F. Preston (Group Finance Director) (Non-Executive Director) Bernard was appointed to Lawrence has been the post of Group Finance involved in cotton Director on 15 August 2008. merchandising for mor e Prior to this he was the than 56 years and is Finance Director for Cottco currently the pr esident of since 1 September 2005. Lawrence Pr eston He is a fellow of the Associates, a commodity C h a r t e re d I n s t i t u t e o f brokerage and advisory Management Accountants and holds a Masters in group. Lawrence has considerable experience in Business Administration fr om Nottingham T rent international trading having served as pr esident of University, United Kingdom. Prior to his appointment, the Liverpool Cotton Association in 1976 and the he exercised his skills in finance, business and strategy American Cotton Shippers Association in 1991/2. He development as a Consultant. Ber nard is a former also served as Chairman of the Committee for Finance Dir ector of Zimboar d Pr oducts (Private) Inter national Cooperation between Cotton Limited and has worked for several blue chip Associations (C.I.C.C.A) from 1978 to 1980. He was companies and groups of companies in Zimbabwe, appointed to the Board on 15 August 2008. Prior to including Car naudmetalbox, Unilever (then Lever this appointment he was a Cottco Boar d member Brothers), Innscor Africa Limited and PG Industries since October 2000. Zimbabwe Limited. Bernard also sits on the boards of Seed Co Limited, Seed Co Zambia Inter national (Private) Limited, Olivine Industries (Private) Limited as well as Scottco (Private) Limited and Exhort Enterprises (Private) Limited. Annual Report 2010 9
  • 12. Group Companies’ Board Composition SUBSIDIARIES JOINT OPERATIONS The Cotton Company of Zimbabwe Limited Olivine Holdings (Private) Limited P Sithole - Chairman M Ndudzo - Chairman D Machingaidze - Managing Director P Devenish - Deputy Chairman J Chindanya J Mushangari - Managing Director C Chitiyo (Ms) C Chitiyo (Ms) P Devenish O Dangwa (Mrs) B Mudzimuirema B Nkomo M Dzinoreva A Nhau S Mavende W Ntini S Mazhandu L Preston B Mudzimuirema T Wicks E Mugamu A Nhau Scottco (Private) Limited P Devenish - Chairman A Kamali - Managing Director S Bobat B Mudzimuirema V Patel Seed Co Limited F Rwodzi - Chairman M Nzwere - Group Chief Executive P Devenish DE Long J Matorofa B Mudzimuirema JP Rooney C Utete (Dr) Exhort Enterprises (Private) Limited P Devenish - Chairman S Manyonda (Mrs) - Managing Director B Mudzimuirema Zambrano Investments (Private) Limited P Devenish - Chairman B Mudzimuirema T Wicks 10 AICO Africa Limited
  • 13. Board Committees and Group Management BOARD COMMITTEES GROUP MANAGEMENT Audit Committee AICO Africa Limited B Nkomo - Chairman P Devenish - Group Chief Executive C Chitiyo (Ms) B Mudzimuirema - Group Finance Director B Mudzimuirema P Manamike - Group Company Secretary A Nhau A Nyakonda - Group Audit Manager Remuneration Committee The Cotton Company of Zimbabwe Limited P Sithole - Chairman D Machingaidze - Managing Director P Devenish W Ntini - Finance Director B Nkomo J Chindanya - Director, Crop Procurement and Inputs T Wicks - Director, Ginning and Marketing Investment Committee B Nkomo - Chairman Seed Co Group C Chitiyo (Ms) M Nzwere - Group Chief Executive P Devenish J Matorofa - Group Finance Director B Mudzimuirema D Zaranyika - Managing Director, Seed Co Zimbabwe A Nhau D Clements - Managing Director, Seed Co Zambia R Jarvis - Managing Director, Quton Seed Company Exhort Enterprises (Private) Limited S Manyonda - Managing Director Scottco (Private) Limited A Kamali - Managing Director Olivine Holdings (Private) Limited J Mushangari - Managing Director S Mavende - Finance Director V Nkomo - Human Resources Director S Madondo - Supply Chain Director F Mtangadura - Marketing and Sales Director Annual Report 2010 11
  • 14. Always bear in mind that your own resolution to succeed is more important than any other. Abraham Lincoln
  • 15. Corporate Governance Statement The Gr oup is committed to the principles of To ensur e unity of objectives and pr oper co- ethics, transpar ency, r esponsibility, integrity, ordination, the Company elects management accountability and good governane in its dealings representatives to sit on the various boar ds. with stakeholders. Each board is r esponsible for maintaining the direction and contr ol of its company thr ough: The primary objective of corporate governance systems is to ensure that Directors, Executives • Setting and playing a pr ominent role in and Management carry out their responsibilities strategy development as well as determining effectively and efficiently. The Group's structures the strategic direction of the company and/or are, ther efore, continuously r eviewed and the Group; updated to ensure compliance with applicable • Determining performance targets and the laws and generally accepted corporate remuneration of Executive Management; governance practices. • Monitoring management performance against set targets; FINANCIAL STATEMENTS • Liaising with inter nal and exter nal auditors The Directors recognise that they are responsible on the financial and business affairs of the for the preparation and integrity of the financial company; statements and related information contained in • Reviewing, deciding and acting on material the annual report in a manner that fairly presents business transactions and/or matters; and the state of affairs and the results of the Group's • Promoting ethical conduct in business operations. affairs of the Group. The annual financial statements have been The composition of each board ensures a well- independently examined by the Company's balanced team with a br oad range of business external auditors. Their r eport is presented on and industry expertise. pages 26 and 27. The Board of AICO Africa Limited comprises five INTERNAL CONTROL non-executive Dir ectors and two executive The Gr oup has developed and continues to Directors. The Chairman of the Board is a non- maintain systems of inter nal contr ol. These executive Director. All Directors have access to controls are designed to provide reasonable, but outside professional advice through the Company not absolute, assurance as to the r eliability of Secretary who is r esponsible to the Boar d for the financial statements and to safeguard, verify ensuring that correct procedures are followed. and maintain accountability of assets and to prevent and detect misstatement and loss. The The Group Chief Executive is responsible for the Group has adopted a risk based audit approach day-to-day management of the Group. There is and the inter nal auditors have been tasked to clear separation of r esponsibility between the ensure compliance with policies, pr ocedures, Board and Management. internal controls and systems through continuous programmes that are designed to cover all risks ATTENDANCE OF BOARD MEETINGS and pr ovide r egular feedback to Executive The Board met five times during the year under Management and the Audit Committee. The review. The number of Directors' meetings and internal audit function has free and unrestricted the number attended by each Dir ector during access to the Audit Committee. the period are: BOARD OF DIRECTORS All companies in the Gr oup have unitary board structures. The boards meet regularly, retaining full and ef fective contr ol over the r espective companies and monitor the performance of executive management. Annual Report 2010 13
  • 16. Corporate Governance Statement (continued) • Reviewing business risks and the adequacy B oard Meetings of the company's risk management systems Held Attended and processes. C Chitiyo 5 5 Both the internal audit function and the external P Devenish** 2 2 auditors have unrestricted access to the Audit H Mapara* 2 2 Committee and all of their significant findings B Mudzimuirema 5 5 a re b r o u g h t t o t h e a t t e n t i o n o f t h e A u d i t A Nhau 5 3 Committee and the Board. BL Nkomo 5 5 LF Preston 5 2 The Audit Committee meets at least once every quarter. P Sithole 5 5 * Resigned during the year ** Appointed during the year The Committee met four times during the year. Members' attendance of these meetings is shown below: Board meetings ar e held at least once every quarter. A udit Committee Meetings Held Attended BOARD COMMITTEES The Board has established committees to assist C Chitiyo 4 4 in discharging its duties as follows: B Mudzimuirema 4 4 BL Nkomo 4 3 • Audit Committee; A Nhau 4 4 • Executive Committee; • Remuneration Committee; and • Investment Committee. Remuneration Committee The Remuneration Committee consists of two Audit Committee non-executive Directors, as well as the Gr oup The Audit Committee, which includes one Chief Executive, and is chair ed by a non- executive Dir ector, consists of thr ee non- executive Director. executive Directors and is chaired by one of the non-executive Directors. The Audit Committee The committee's task is to r eview, assess and is responsible for: make recommendations to the main Boar d on the following matters: • Internal and exter nal audit policy; • Reviewing the performance of external • The Group's remuneration policies in general; auditors; • Remuneration packages for top management, • Reviewing the scope, adequacy and especially executive Directors; effectiveness of the inter nal audit function; • Incentive schemes including share incentive • Reviewing and acting on matters relating to plans; financial and internal control, fraud, regulatory • Measurement criteria for the performance of compliance, accounting policies, financial executive Directors; reporting and disclosure; • Reviewing financial statements prior to The Remuneration Committee met twice during publication and adoption by the Boar d of the year. Members' attendance of these meetings Directors; is shown below: • Reviewing material financial transactions and projects prior to adoption by the Board of Directors; and 14 AICO Africa Limited
  • 17. Corporate Governance Statement (continued) Executive Committee R emuneration The Executive Committee consists of two Committee Meetings executive Dir ectors and selected senior Held Attended executives. P Devenish** 1 1 The committee's functions are to: H Mapara* 1 1 BL Nkomo 2 2 • Assist the Gr oup Chief Executive Of ficer in P Sithole 2 2 managing the Group; * Resigned during the year • Provide a working link between the Boar d ** Appointed during the year and senior management; • Ensure that strategic decisions are effectively implemented; and The Remuneration Committee meets at least • Ensure that management and operations twice every year. performance are adequately and regularly monitored in between Boar d meetings. Investment Committee The committee consists of three non-executive The committee meets at least once each month. Directors and two executive Dir ectors. SHARE DEALINGS BY DIRECTORS, The committee is responsible for: MANAGEMENT AND STAFF The Group's policy concer ning dealings in the • Providing advice to the Board in establishing shares of AICO Africa Limited and its listed policies r elated to investments and subsidiaries, by Dir ectors, Management, Staf f re c o m m e n d i n g t h e s e t o t h e B o a r d f o r and their immediate families, stipulates the approval; periods when they can or cannot deal in its • Reviewing, approving and recommending to shares. the Boar d investment transactions that management may consider within the DIRECTORS' INTERESTS investment guidelines; The Directors of the Company ar e required to • Monitoring the management of investment disclose, in writing, any material interest in any funds; significant contract with the Company that may • Evaluating investment performance, taking result in a conflict or potential conflict of interest. into account investment policies, guidelines No such conflicts were reported during the year. and risk levels; • Monitoring, as r equired, staff's compliance EMPLOYEE RELATIONS with guidelines and pr ocesses of the The Gr oup has formally constituted works investment policy; and councils in each operating company. These deal • R e v i e w i n g a n n u a l l y t h e c o n t i n u e d with issues that af fect the employees dir ectly appropriateness of the investment policy and and provide platforms for: recommending to the Boar d any pr oposed modifications. • Productivity improvements; • Information sharing and dissemination; The Investment Committee did not meet during • Enhancing good employer/employee relations; the year and meets, largely, on an ad hoc basis. • Consultation and dispute/conflict resolution; and • Collective bargaining. Annual Report 2010 15
  • 18. Chairman’s Statement I am pleased to present my report consumer demand. Global for the year ended 31 March 2010. commodity prices which fell in 2008 have recovered and should O P E R AT I N G E N V I R O N M E N T propel improvements in r evenue and aggr egate ear nings going The year under r eview was both forward. exciting and challenging. GROUP FINANCIAL First, we saw the liberalisation of PERFORMANCE the economy and the introduction of the multi-currency regime. With Aggregate sales volumes grew by this, we saw an end to 37% over prior year, driven in the Patison Sithole hyperinflation which had so main by volume gr owth in the ravaged this economy for the past FMCG and Cotton business. few years. Inflation r eceded for most of the year while supply and G ro u p t u r n o v e r o f U S $ 1 6 2 . 9 availability of basic commodities million is 35% higher than last improved significantly . year due to tur nover gr owth in Inflation receded Nevertheless, costs of running Seed Co Limited arising mainly businesses r ose in r eal terms from improvements in Zimbabwe for most of the resulting in local businesses, particularly the manufacturing maize seed prices and volumes. Despite strong performance from year while supply sector, being put under sever e strain. the Seed Strategic Business Unit (SBU), Group operating pr ofit of and availability of Second, we experienced US$12.8 million (last year: US$26.9 million) was negated by unprecedented liquidity the operating losses in the Cotton, basic commodities constraints acr oss the entir e FMCG and Spinning businesses. economy. Funds were scarce and, As a result, Group profit after tax improved when available, facility tenur es fell by 84% to US$2.4 million. were short causing challenges to Earnings attributable to significantly. the smooth flow of operations. shareholders declined by US$12.0 Consequently, the cost of money million fr om US$7.8 million last was expensive with interest rates year, to a loss of US$4.3 million. migrating fr om about 13% per annum in Mar ch/April 2009 to Discontinued operations between 20% and 25% per annum contributed US$1.5 million to in March 2010. This, together with revenue and recorded combined increased operating costs (in real losses after tax of US$2.1 million. terms) and competition fr om Otherwise, pr ofit after tax fr om imported pr oducts, caused continuing operations amounted viability challenges for local to US$4.5 million (last year: businesses. US$15.3 million). Despite notable improvements in Capital expenditure amounted to capacity utilisation, power outages US$6.1 million. Net cash flow remained a major bottleneck to generated fr om operations was recovery of business and US$8.4 million. production levels. On the other hand, disposable incomes remained low and af fected 16 AICO Africa Limited
  • 19. Chairman’s Statement (continued) OPERATIONS REVIEW The company invested US$11 to pr oduce some of the key million in crop inputs last year varieties required by the market. Cotton and we expect this to result in Maize seed volumes grew 70% The national cotton crop fell to much higher intake in the on the back of firm demand in 211,000 tonnes fr om 230,000 forthcoming buying season. all markets. Revenue grew 43% tonnes last year. Consequently, to reach US$77.0 million. Costs Cotto's intake volumes fell to World lint prices have recovered rose in real terms in Zimbabwe 9 8,000 tonnes fr om 122,000 and are now quoted at above due to “dollarisation”' while tonnes last year. Sales volumes 80US cents per pound. This, regional overhead costs went were 67% higher than prior year together with anticipated up on the back of initiatives to due to higher carryover stocks. increases in cr op intake and increase maize seed However, r evenue of US$78 sales volumes, should see a production. Consequently, profit million was 3% lower than prior significant impr ovement in before tax of US$17.9 million year due to lower commodity profits in the new financial year. rose by 7% over prior year . prices obtained during the year under review. Seed Future performance will be Performance was more exciting propelled by the tr ebling of Seed cotton buying price in the Seed business str eam, production in Zimbabwe and by averaged US$330 per tonne with all SBU's reporting profits harnessing the gr owth of the leading to cost overruns of and positive cash balances. East African business units. US$17 million r elative to World lint prices have budget. This, together with low FMCG sales prices and other cost recovered and are now quoted Despite the many challenges overruns, resulted in a reduction at above 80US cents per facing this business, it remains in margins and subsequently a pound. This, together with one of the mor e exciting loss befor e tax of US$10.4 anticipated increases in crop opportunities within the Group. million. Inter est costs of intake and sales volumes, Nevertheless, volume and sales US$9 .7 million ar e extr emely should see a significant performance were hampered by high and will be addr essed low demand due to low improvement in profits in the going forward. disposable incomes and, in new financial year some instances, the narr ow Efforts ar e underway to Government and NGO inputs product range occasioned by restructure this business and support programmes in Malawi, funding constraints. its cost base. A voluntary Zambia, T anzania and retrenchment package has been Zimbabwe meant that all maize Notwithstanding power and approved and concluded. seed available had a r eady working capital constraints, Regulatory framework in the market. In fact, low production sales volumes gr ew by 86% form of Statutory Instrument in the pr evious season relative to prior year. Volumes 142 of 2009 (SI142) was occasioned by dry conditions sold amounted to 17,305 promulgated in August 2009 . coupled with low carryover tonnes (last year: 9,300 tonnes). SI142 will gover n the or derly stocks meant that demand The product range herein enjoys production and marketing of outstripped supply. Efforts are good brand equity and cotton in the country . W e, being intensified to incr ease preference and has held its own therefore, expect a significant production and addr ess this against imported pr oducts - reduction in side marketing and shortfall. In Zimbabwe, albeit at lower mar gins. concomitant increases in crop production will incr ease support, cr op pr oduction threefold, T anzania will Revenue r ose by 464% to volumes and intake. We project commence local seed US$14.9 million. Revenue the company's market shar e production, Malawi will enhance increased significantly as a under these cir cumstances to resources and seed production result of the r emoval of price be above 51%. capacity, while the new farm controls and growth in volumes. acquired in Zambia will be used Lower mar gins and high Annual Report 2010 17
  • 20. Chairman’s Statement (continued) operating costs r esulted in a Exhort Enterprises (Private) PROSPECTS loss befor e tax of US$3.6 Limited Prospects for the Gr oup ar e million. The Group's frozen vegetables good. Pr ojected r ecovery in operation has continued to intake and sales volumes in Rationalisation of costs and the perform unsatisfactorily . In Seed Co Zimbabwe and the product range are ongoing with particular it continues to face Cotton business as well as a view to enhancing both sales challenges relating to on-farm i m p ro v e m e n t i n u n d e r l y i n g volume performance and overall quality of contracted pr oduce commodity prices will result in earnings. together with very low yields a significant impr ovement in thereon. In addition, it is the earnings. The FMCG business Subject to availability of Board's view that this operation will gr ow substantially on the working capital and attendant has now become sub-scale back of higher ef ficiencies improvements in efficiency and relative to the Gr oup's other arising from improving capacity capacity utilisation, we expect operations and no longer fits utilisation. production and sales volumes, the Gr oup's strategy going p ro f i t a b i l i t y a n d forward. Consequently , the Appropriate funding of key competitiveness to impr ove. Board has decided to wind Group operations and down and dispose of this rationalisation of the Gr oup Spinning operation. balance sheet will, however, be Yarn prices, despite r ecovery critical for overall futur e of lint prices, remained low for Salamax Trading (Proprietary) performance. most of the year . Resistance Limited to price incr eases in South In 2008, the Group established DIRECTORATE Africa af fected r evenue. As a a buying office in South Africa, M r. P a t r i c k D e v e n i s h w a s result, operating mar gins fell appointed Gr oup Chief substantially. This has, however, Prospects for the Group are Executive for AICO Africa now been corrected. good. Projected recovery in Limited with ef fect fr om 1 intake and sales volumes in January 2010 and joined the The supply of raw materials was Seed Co Zimbabwe and the Board on the same date. He erratic due to liquidity Cotton business as well as replaced Mr . Happymor e constraints. Consequently , improvement in underlying Mapara who left the Gr oup in production levels were 55% of commodity prices will result November 2009 to pursue capacity resulting in substantial private interests. in a significant improvement cost under recoveries. in earnings. ACKNOWLEDGEMENTS However, yar n volumes wer e under the name Salamax I wish to extend my sincer e 9 % higher than prior year . Trading (Pr oprietary) Limited. gratitude and appreciation and Turnover of US$5.9 million is Given the change in that of the Boar d to 20% higher than last year. The c i rc u m s t a n c e s , p a r t i c u l a r l y Management and Staff across loss after tax amounted to "dollarisation" of the economy the Gr oup for the dedication US$1.7 million. and subsequent improvements and commitment. I also want to in availability of goods and extend my gratitude to my Yarn prices are now recovering services at competitive costs, colleagues on the Boar d for and this, coupled with attendant it is the Board's view that this their invaluable contribution. improvements in working vehicle is no longer necessary. capital, will see ear nings Accordingly, the Boar d has improve in the new financial decided that this operation be year. closed down. DISCONTINUED OPERATIONS DIVIDEND P. Sithole D u r i n g t h e y e a r, t h e G r o u p Due to the pr evailing liquidity CHAIRMAN Board decided to close down challenges, the Directors have two of its smaller operations. not declar ed a dividend. 23 June 2010 18 AICO Africa Limited
  • 21. Directors’ Responsibilty Statement ACCOUNTING RECORDS AND FINANCIAL GOING CONCERN STATEMENTS After r eviewing the Gr oup’s budgets and r elated The Directors are responsible for the maintenance of financial projections, the Directors have no reason, adequate accounting r ecords as well as the in all material respects, to believe that the Group will preparation and integrity of the financial statements not continue to operate in the for eseeable future. and related information contained in the annual report Accordingly, these financial statements have been in a manner that fairly pr esents the state of af fairs prepared on a going concern basis. and the r esults of the Gr oup’s operations. ACCOUNTING POLICIES EXTERNAL AUDITORS’ ROLE In preparing the Group financial statements set out The external auditors are responsible for carrying out on pages 28 to 66 appr opriate accounting policies an independent examination of the financial statements have been applied, as have the relevant International in accordance with International Standards on Auditing Financial Reporting Standar ds, unless otherwise and reporting their findings thereon. stated, and ar e supported, wher e necessary, by reasonable and prudent judgement and estimates. SYSTEMS OF INTERNAL CONTROL The Directors are also responsible for the Gr oup’s APPROVAL OF FINANCIAL STATEMENTS systems of inter nal financial contr ol. These ar e The financial statements for the year ended 31 March designed to provide reasonable, but not absolute, 2010 have been approved by the Board of Directors assurance as to the r eliability of the financial and are signed on its behalf by: statements and to safeguar d, verify and maintain accountability of assets and to pr event and detect misstatement and loss. Nothing has come to the attention of the Directors to indicate that any material P. Sithole P. Devenish breakdown in the functioning of these contr ols, CHAIRMAN GROUP CHIEF EXECUTIVE procedures and systems has occurr ed during the year under review. 23 June 2010 Annual Report 2010 19
  • 22. Group Chief Executive’s Report OVERVIEW for further growth. Cottco had a very The year ended 31st Mar ch 2010 difficult year primarily due to side was a dif ficult year for AICO. The marketing of seed cotton by growers introduction of the multi-curr ency who had been funded by us. Olivine system in February 2009 saw a registered meaningful gr owth but significant incr ease in r eal costs volumes are still significantly below which, apart from a small downward levels that will fully absorb overheads trend at midyear, has continued until and produce profits. now. Inflation in US dollars, which is ahead of the r est of the world, is GROUP STRUCTURE making Zimbabwe uncompetitive on Structure of the Gr oup r emains the world stage. On the bright side unchanged, smaller subsidiaries are dollarisation has created enormous being closed or sold off so as to leave Patrick Devenish opportunity for Zimbabwe to regain the Group with three large businesses its rightful place as the agricultural, that fit well together. business and intellectual hub of the region. The r emoval of exchange A large part of the pr evious Chief controls and, theoretically, the free Executive's time last year was spent flow of money has given industry the in finalising the AICO structure; this The removal of opportunity to r ecapitalise and included the r ecruitment of a exchange controls embrace new technology. The quality substantive Managing Dir ector for of Zimbabwean managers and Cottco. It is pleasing to r eport that and, theoretically, businessmen means that we ar e the Gr oup is now fully and the free flow of better qualified than our peers in the competently staf fed at SBU money has given region to take advantage of the new leadership level. African realities. Our neighbours in industry the Zambia and Malawi have, as a result The AICO management team of the opportunity to of well directed input programmes Chief Executive, Gr oup Finance and the use of improved seed, largely Director, Gr oup Inter nal Audit recapitalise and supplied by Seed Co, been able to Manager and Company Secr etary embrace new produce significant surpluses of grain. has now relocated to offices away technology. Sadly, they do not own sophisticated from Cottco.This gives independence grain storage facilities such as those to Cottco management and allows of our own Grain Marketing Boar d the AICO team to focus on Gr oup and may have problems in storing it. level activities. Structural issues in the financial OPERATIONS REVIEW sector in Zimbabwe have restricted the flow of capital and borr owings Cottco that started of f at a tough but This business had a very tough year manageable 13%, moved up to 25% in 2009/10. Statutory instrument 142 and beyond in the period under (SI142) was still in the pr ocess of review. This had a dampening effect being drafted and taken through the on our companies, particularly legislature for most of last year. This Olivine, which was carrying a fairly meant that ginners and traders who large debtors book as a result of the had not funded the growing of cotton liquidity problem. were allowed to buy seed cotton. As a result, these or ganisations were Of the three key business units, Seed able to offer a price higher than the Co had a good year and is poised serious players. This was obviously 20 AICO Africa Limited
  • 23. Group Chief Executive’s Report (continued) an unsustainable practice and now CORPORATE SOCIAL and other commercial experience that SI142 has been implemented, RESPONSIBILITY is invaluable. only players who have funded the A wide range of programmes have production of Seed Cotton are able been undertaken over the year . SAFETY, HEALTH AND to buy and we expect Cottco to These ar e primarily focused on ENVIRONMENT benefit substantially. As a result of helping the young, the disabled The company has a clearly defined the side marketing , Cottco's intake and the aged. The Cottco schools HIV/AIDS policy and this is helping dropped significantly . This, rugby festival is the highlight of the to r educe the incidence of combined with incr eased schools rugby calendar and this HIV/AIDS related illness across the overheads and high inter est event is gaining inter national Group. Anti-retroviral drugs (ARV's) charges, r esulted in a US$10 recognition and is thought to be are pr ovided by the company . million loss for the company . the largest event of its kind in the world. There were very few work related Seed Co accidents in the year. Seed Co had a solid year; profits The Group has before tax wer e ahead of F2009 ambitious plans for OUTLOOK AND STRATEGY but were slightly lower after tax as Looking ahead, ther e is good a result of the Zimbabwe dollar growth and it is reason to be optimistic about the effect on last year's income future of the Group. Cottco has a statement. Volumes increased from expected that the large crop of seed cotton in the 45,140 tonnes to 47,900 tonnes people who do this ground and intake is pr oceeding and this was in spite of a reduction in an or derly fashion albeit with in sales of both winter cereal and work will come from some challenges to SI142 fr om soya bean seed. Resear ch within the Group. unregistered players in the industry. activities continue to be the The company is confident of cornerstone of Group activities and PEOPLE support from Government in this a new research farm was acquired AICO continues to work towar ds regard. World demand for cotton just outside Lusaka. New factories being a people driven and focused lint is curr ently strong and ther e for both the Zambian and Malawian organisation. In this regard training are plans, both at Cottco and business units will be built in the and development is a key area of industry level, to increase plantings new year. Growth will come from focus. The Gr oup has ambitious in the summer. It is interesting to ramping up the level of activity in plans for growth and it is expected note that Zimbabwe is the only East Africa as well as incr easing that the people who do this work country in Africa to have expanded business in existing markets. will come from within the Group. the crop in the last year. Several pr omotions have taken Olivine place r ecently and a lar ge Olivine, as previously mentioned Volumes grew by 87% over last percentage of these have been is slowly growing its output. It is year but are still significantly below internal. hoped that we will reach maximum capacity. Working capital shortages capacity utilisation within the next were possibly the biggest single At top management level, David two years. Ther e is tr emendous impediment to rebuilding capacity. Machingaidze comes in as scope for this business and its Other issues are local inflation, high Managing Director of Cottco. He products in Zimbabwe and the cost of labour versus r egional brings experience from the retail region. Current activity is focused competitors, imported pr oducts and tobacco business. Mor gan on identifying appr opriate and aged and technologically Nzwere took over from me at Seed technology and ensuring that outdated plant and equipment. Co and has a wealth of experience existing plant and equipment is Olivine products and brands ar e both at Seed Co and r egional fully maintained. still prized by consumers and, as business levels. Jonas Mushangari capacity is rebuilt, there will be a has been at Olivine for nearly two Seed Co has built a strong platform ready market. years now and his experience as for growth over the past few years an engineer at Olivine in the past and this is expected to continue Annual Report 2010 21
  • 24. Group Chief Executive’s Report (continued) into the futur e. V olumes ar e I would like to r ecord my growing fast and the company is appreciation to all members of staff consolidating its position in existing across the Gr oup for their markets and engaging in planned invaluable work; we usually work expansion in new and less harder when businesses are having developed markets. Resear ch hard times than when they ar e activities continue to expand and doing well! we have been successful in recruiting some of the brightest talent in the r egion to drive this. APPRECIATION AICO has a str ong and diverse group of Directors both at Group P. Devenish and business unit level. The Group Chief Executive contribution made by these people is much appreciated and their level 23 June 2010 of commitment and expertise are amongst the very best in the market. 22 AICO Africa Limited
  • 25. An empowered organisation is one in which individuals have the knowledge, skill, desire, and opportunity to personally succeed in a way that leads to collective organisational success. Stephen R. Covey
  • 26. Directors’ Report The Directors have pleasure in presenting their report Following the introduction of the multi-currency regime together with the audited financial statements for the in February 2009, the Register of Companies requires year ended 31 March 2010. that all shar e capital, authorised and issued, be redenominated into United States dollars. Accordingly, PRINCIPAL ACTIVITIES the Dir ectors will, at the next AGM, pr opose the AICO Africa Limited (AICO) is a diversified agr o- redenomination of the Company's authorised share industrial conglomerate with interests in cotton ginning capital into 1,500,000,000 or dinary shares with a and marketing, spinning, fast moving consumer goods nominal value of US$0.01 per shar e, together with and production and marketing of planting seed. The the redenomination of the issued shar e capital into Company was incorporated in July 2008 and was 531,065,109 ordinary shares with a nominal value of subsequently reverse listed on the Zimbabwe Stock US$0.01 per share. Exchange on 1 September 2008 in place of The Cotton Company of Zimbabwe Limited and thus RESERVES emerged as the new investment holding entity for the The movements in the reserves of the Group are as Group. shown in the statement of changes in equity . DIRECTORS' RESPONSIBILITY ST ATEMENT DIRECTORS' SHAREHOLDING While the audit opinion is modified in r espect of The details of Directors' shareholding are shown in comparative information on account of the unique the shareholder analysis report accompanying the circumstances that prevailed in Zimbabwe in the prior financial statements. year, the Directors believe that the financial information that has been presented fairly reflects the underlying IMPAIRMENT performance of the Group and its entities for the years The income statement includes impairment losses of then ended and its financial position as of those dates. US$0.8 million for the Group, US$0.2 million of which was in the Cotton business, US$0.4 million in the SHARE CAPITAL Spinning business and US$0.2 million was in the The authorised shar e capital of the Company is FMCG business. Impairment losses were in respect 1,500,000,000 ordinary shares, of which 531,065,109 of trade receivables, other financial assets as well as are issued and fully paid. property, plant and equipment. At the time the shares were issued, the nominal value OPERATING RESULTS per share was 1 Zimbabwe dollar. Between the date The results for the year fr om continuing operations of issue and 31 Mar ch 2009, the Zimbabwe dollar are summarised below and are set out in more detail was debased by r emoving twenty-two zer os. The in the accompanying financial statements. nominal value of these shares in Zimbabwe dollars is Commentary on these results is also provided in the now virtually zero. The nominal value of the issued Chairman's and Gr oup Chief Executive's r eports. share capital at 31 March 2010, when converted to US dollars, amounts to US$61. 31 March 2010 Issued share capital as at 1 April 2010 530,512,042 Share options exercised 553,067 Issued share capital as at 31 March 2010 531,065,109 24 AICO Africa Limited
  • 27. Directors’ Report (continued) 31 March 2010 DIVIDENDS US$'000 Due to concurrent operating challenges and attendant Group liquidity constraints, the Directors are of the opinion Profit before taxation 4,875 that it is not appropriate to declare a dividend for the Income tax expense (339) year ended 31 March 2010. No interim dividend was Profit after tax - continuing declared during the year. operations 4,536 Loss after tax from discontinued DIRECTORS operations (2,139) In terms of Article 32.1 of the Company's Articles of Profit for the year 2,397 Association, Messrs B. L. Nkomo and L.F. Preston retire by rotation. Mr P. Devenish who was appointed during the year will step down. Both retiring Directors, Attributable to: and the new Director being eligible offer themselves Equity holders of the parent (4,270) for re-election. Minority interest 6,667 2,397 AUDITORS Members will be asked to approve the remuneration Retained earnings 29,919 of the auditors for the year ended 31 March 2010 and to consider the reappointment of KPMG as auditors Equity attributable to equity to the Company for the ensuing year. holders of the parent 82,455 Non-controlling interest 32,117 For and on behalf of the Board Total equity 114,572 P. Manamike CAPITAL EXPENDITURE COMPANY SECRETARY Capital expenditure for the year ended 31 March 2010 amounted to US$6.1 million and capital expenditure 23 June 2010 for the following year is budgeted at US$10.5 million. Annual Report 2010 25
  • 28. Independent Auditor’s Report KPMG Telephone +263 (4) 303700 Mutual Gardens +263 (4) 302600 100 The Chase (West), Emerald Hill Fax +263 (4) 303699 P O Box 6, Harare Zimbabwe To the Members of AICO Africa Limited Report on the financial statements We have audited the accompanying financial statements of AICO Africa Limited (the Company) and its subsidiaries (the Group) as set out on pages 28 to 66, which comprise the statements of financial position at 31 March 2010, the income statements, statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes. Directors' responsibility for the financial statements The Directors are responsible for the pr eparation and fair pr esentation of these financial statements in accordance with Inter national Financial Reporting Standar ds (IFRS's) and in the manner r equired by the Companies Act (Chapter 24:03) of Zimbabwe and the r elevant statutory instruments. This r esponsibility includes: designing, implementing and maintaining inter nal control relevant to the pr eparation 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. Auditor's 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 auditor's judgement, including the assessment of the risks of material misstatement of the financial statement s, whether due to fraud or err or. In making those risk assessments, the auditor considers inter nal control relevant to the entity's pr eparation and fair presentation of the financial statements in or der to design audit pr ocedures that ar e appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appr opriateness of accounting policies used and the r easonableness of accounting estimates made by the Directors, 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 qualified audit opinion. KPMG, a Zimbabwean partnership and a member firm of the KPMG network of independent member firms af filiated with KPMG international, a Swiss co-operative. 26 AICO Africa Limited
  • 29. Independent Auditor’s Report (continued) Basis for qualified opinion The Directors have not presented comparative information r elating to cash flows as they believe that the information will be misleading for reasons stated in notes 29 to 31. Consequently, the Company and Group have not complied with Inter national Accounting Standard (IAS) 1 (Presentation of Financial Statements). An adverse audit opinion was issued on the financial performance and cash flows relating to the prior year due to non-compliance with IAS 29 (Financial Reporting in Hyperinflationary Economies) and IAS 21 (The Effects of Changes in Foreign Exchange Rates) for the reasons stated in notes 29 to 31. Qualified opinion In our opinion, except for the effects of the matters described in the Basis for qualified opinion paragraph, the financial statements give a true and fair view of the financ ial position of the Company and Group at 31 March 2010, and the Company and Group’s financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards. Report on other legal and regulatory requirements In our opinion, the financial statements have, in all material respects, been properly prepared in compliance with the disclosure requirements of the Companies Act (Chapter 24:03) of Zimbabwe and Statutory Instruments (SI 33/99 and SI 62/96), except for the presentation of the comparative information relating to the Company and Group’s financial performance. Emphasis of matter Without further qualifying our opinion, we draw attention to note 15 to the financial statements which describes that no provision has been made on a trade account receivable with a carrying amount of US$3 376 004 for reasons stated in that paragraph. KPMG Chartered Accountants (Zimbabwe) Harare 23 June 2010 Annual Report 2010 27
  • 30. Statements of Financial Position As at 31 March 2010 GROUP COMPANY 31 March 31 March 31 March 31 March 2010 2009 2010 2009 Notes US$'000 US$'000 US$'000 US$'000 Non-current assets Property, plant and equipment 6 116,800 132,770 222 - Investment property 7 684 1,141 - - Investments held in subsidiaries 8 - - 120,074 113,537 Investment held in joint venture 9 - - 6,825 6,825 Investment held in associate 10 65 65 - - Total non-current assets 117,549 133,976 127,121 120,362 Current assets Biological assets 12 588 777 - - Inventories 13 37,369 29,624 - - Inputs scheme receivables 14 9,717 5,206 - - Prepayments for current assets 12,004 6,205 10 - Trade and other receivables 15 29,885 30,788 64 - Other financial assets 16 2,131 583 - - Assets classified as held for sale 27 3,277 51 - - Bank and cash balances 17 12,161 5,700 39 - Balances owed by Group companies 18 - - 5,803 5,678 Total current assets 107,132 78,934 5,916 5,678 Total assets 224,681 212,910 133,037 126,040 EQUITY AND LIABILITIES Capital and reserves Share capital 19 - - - - Capital reserves 52,536 52,143 118,145 111,946 Retained earnings 29,919 33,512 (1,419) (1,175) Equity attributable to equity holders of the parent 82,455 85,655 116,726 110,771 Non-controlling interest 32,117 29,621 - - Total equity 114,572 115,276 116,726 110,771 Non-current liabilities Borrowings 20 10 189 - - Deferred tax liabilities 11 25,974 39,589 250 - Finance lease liabilities - third party 28 258 - - - Total non-current liabilities 26,242 39,778 250 - Current liabilities Borrowings 20 48,528 35,020 - - Trade and other payables 21 20,626 15,646 40 - Finance lease liabilities 28 518 - - - Taxation 4,581 1,724 10 - Bank overdrafts 17 8,767 5,466 - - Liabilities classified as held for sale 27 847 - - - Balances owed to Group companies 18 - - 16,011 15,269 Total current liabilities 83,867 57,856 16,061 15,269 Total equity and liabilities 224,681 212,910 133,037 126,040 P. SITHOLE - CHAIRMAN P. DEVENISH - GROUP CHIEF EXECUTIVE 23 June 2010 23 June 2010 28 AICO Africa Limited
  • 31. Income Statements For the Year Ended 31 March 2010 GROUP COMPANY 31 March 31 March 31 March 31 March 2010 2009 2010 2009 Notes US$'000 US$'000 US$'000 US$'000 Continuing operations Revenue 162,879 120,677 - - Cost of sales (109,352) (51,600) - - Gross profit 53,527 69,077 - - Other operating income 4,215 6,448 5 - Operating expenses (44,959) (48,639) (601) (441) Administration expenses (22,856) (26,285) (457) (441) Distribution and selling expenses (12,990) (9,296) - - Other operating expenses (9,113) (13,058) (144) - Profit/(loss) from operations 1 12,783 26,886 (596) (441) Investment income 2 519 275 - - Other gains/(losses) 3 2,413 (1,350) - - Interest expense (10,840) (8,966) - (734) Profit/(loss) before taxation 4,875 16,845 (596) (1,175) Taxation for the year 4 (339) (1,519) 77 - Profit/(loss) after tax from continuing operations 4,536 15,326 (519) (1,175) Discontinued operations Loss after tax from discontinued operations 27 (2,139) - - - Profit/(loss) for the year 2,397 15,326 (519) (1,175) Attributable to: Equity holders of the parent (4,270) 7,774 (519) (1,175) Non-controlling interest 6,667 7,552 - - 2,397 15,326 (519) (1,175) Basic (loss)/earnings per share (US cents) 5 (0.80) 1.47 (0.10) (0.22) Diluted (loss)/earnings per share (US cents) 5 (0.78) 1.42 (0.09) (0.21) Annual Report 2010 29
  • 32. Statements of Comprehensive Income For the Year Ended 31 March 2010 GROUP COMPANY 31 March 31 March 31 March 31 March 2010 2009 2010 2009 US$'000 US$'000 US$'000 US$'000 Profit/(loss) for the year 2,397 15,326 (519) (1,175) Other comprehensive income Foreign currency translation differences from foreign operations 1,026 (4,914) - - Exchange differences arising from change in functional currency - (32,936) - (1,881) Revaluation of property, plant and equipment (141) 8,702 - - Impairment charge against revaluation reserve (12,130) - - - Gains/(losses) on available for sale investments - - 6,538 (83,703) Income tax on other comprehensive income 7,894 (1,847) (327) - Other comprehensive (loss)/income for the year (3,351) (30,995) 6,211 (85,584) Total comprehensive (loss)/income for the year (954) (15,669) 5,692 (86,759) Total comprehesive (loss)/income attributable to: Equity holders of the parent (4,102) (27,705) 5,692 (86,759) Non-controlling interest 3,148 12,036 - - (954) (15,669) 5,692 (86,759) 30 AICO Africa Limited
  • 33. Statements of Cash Flow For the Year Ended 31 March 2010 GROUP COMPANY 31 March 31 March 31 March 31 March 2010 2009 2010 2009 Notes US$'000 US$'000 US$'000 US$'000 Cash flows from operating activities Operating cash flows before reinvesting in working capital 25 18,154 - (449) - Increase in working capital 26 3,094 - 681 - Interest paid (10,840) - - - Net taxation paid (2,022) - - - Net cash generated from operations 8,386 - 232 - Cash flows from investing activities Proceeds from disposal of property, plant and equipment 251 - - - Acquisition of property, plant and equipment (6,080) - (225) - Acquisition of other investments (42) - - - Net cash out flow from investing activities (5,871) - (225) - Cash flows from financing activities Proceeds from issue of option shares 32 - 32 - Net third party borrowings paid (179) - - - Increase in finance lease liabilities 776 - - - Dividends paid (289) - - - Net cash in flow from financing activities 340 - 32 - Net increase in cash and cash equivalents 2,855 - 39 - Cash and cash equivalents Balance at the beginning of the year 234 - - - Effect of exchange rate fluctuations on cash held 305 - - - Cash and cash equivalents at the end of the year 17 3,394 - 39 - Annual Report 2010 31
  • 34. Statement of Changes in Equity - GROUP For the Year Ended 31 March 2010 TTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT MINORITY A Total Share Capital Retained Total INTEREST equity capital reserves earnings Group US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Balances as at 31 March 2008 - 83,642 25,738 109,380 17,486 126,866 Changes in equity for 2009 Share based payment transactions - 3,980 - 3,980 99 4,079 Total comprehensive income for the year (net of tax) - (35,479) 7,774 (27,705) 12,036 (15,669) Balances as at 31 March 2009 - 52,143 33,512 85,655 29,621 115,276 Changes in equity for 2010 Share based payment transactions - (11) 476 465 74 539 Reversal of minority share of reserves - 236 201 437 (437) - Dividends paid - - - - (289) (289) Total comprehensive income for the year (net of tax) - 168 (4,270) (4,102) 3,148 (954) Balances as at 31 March 2010 - 52,536 29,919 82,455 32,117 114,572 32 AICO Africa Limited
  • 35. Statement of Changes in Equity - COMPANY For the Year Ended 31 March 2010 Share Capital Retained Total Company capital reserves earnings equity US$'000 US$'000 US$'000 US$'000 Balances as at 31 March 2008 - - - - Changes in equity for 2009 Issue of shares on restructuring - 193,651 - 193,651 Share based payment transactions - 3,879 - 3,879 Total comprehensive income for the year (net of tax) - (85,584) (1,175) (86,759) Balances as at 31 March 2009 - 111,946 (1,175) 110,771 Changes in equity for 2010 Share based payment transactions - (12) 275 263 Total comprehensive income for the year (net of tax) - 6,211 (519) 5,692 Balances as at 31 March 2010 - 118,145 (1,419) 116,726 Annual Report 2010 33
  • 36. Group Segment Report For the Year ended 31 March 2009 For the year Ended 31 March 2010 Primary Segment Report BUSINESS SEGMENT Cotton FMCG Seed Spinning Other Total Discontinued Continuing business business business business operations operations US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 31 March 2010 Revenue 77,770 14,880 76,990 5,896 855 176,391 (1,484) 174,907 Inter-segment revenue (8,241) - (3,170) (92) (525) (12,028) - (12,028) Revenue from external customers 69,529 14,880 73,820 5,804 330 164,363 (1,484) 162,879 (Loss)/profit from operations (7,811) 1,872 17,071 (164) (275) 10,693 (2,090) 12,783 Investment income 51 - 441 27 5 524 5 519 Other gains 1,076 11 28 364 954 2,433 20 2,413 Interest (expense)/income (9,683) (130) (1,090) (8) (2) (10,913) (73) (10,840) Income tax credit/(expense) 1,247 2,374 (4,642) 596 85 (340) (1) (339) (Loss)/profit for the year (15,120) 4,127 11,808 815 767 2,397 (2,139) 4,536 Other information Segment assets 85,729 40,046 85,806 6,714 2,995 221,290 3,391 224,681 Segment liabilities (65,541) (14,529) (28,702) (949) (388) (110,109) - (110,109) Segment net assets 20,188 25,517 57,104 5,765 2,607 111,181 3,391 114,572 Capital expenditure 1,352 404 3,560 532 232 6,080 96 5,984 Depreciation 3,986 1,692 1,238 363 8 7,287 232 7,055 34 AICO Africa Limited
  • 37. Group Segment Report (continued) For the Year ended 31 March 2009 For the year Ended 31 March 2010 Primary Segment Report BUSINESS SEGMENT Cotton FMCG Seed Spinning Other Total Discontinued Continuing business business business business operations operations US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 31 March 2009 Revenue 78,806 2,636 53,850 4,931 469 140,692 - 140,692 Inter-segment revenue (14,570) (4) (5,269) (172) - (20,015) - (20,015) Revenue from external customers 64,236 2,632 48,581 4,759 469 120,677 - 120,677 Profit/(loss) from operations 12,803 (1,112) 16,477 811 (2,093) 26,886 - 26,886 Investment income 252 4 1 12 6 275 - 275 Other (losses)/gains (1,355) - 885 (4) (876) (1,350) - (1,350) Interest (expense)/income (8,475) 143 (622) (2) (10) (8,966) - (8,966) Income tax credit/(expense) 778 205 (2,879) 265 112 (1,519) - (1,519) Profit/(loss) for the year 4,003 (760) 13,862 1,082 (2,861) 15,326 - 15,326 Other information Segment assets 81,170 40,069 82,128 7,482 2,061 212,910 - 212,910 Segment liabilities (52,883) (12,005) (29,370) (2,489) (887) (97,634) - (97,634) Segment net assets 28,287 28,064 52,758 4,993 1,174 115,276 - 115,276 Capital expenditure 2,738 195 2,063 18 16 5,030 - 5,030 Depreciation 5,365 992 868 623 2 7,850 - 7,850 Annual Report 2010 35
  • 38. Group Segment Report (continued) For the Year Ended 31 March 2009 Secondary Segment Report GEOGRAPHICAL SEGMENT Rest Europe Discontinued Continuing Zimbabwe of Africa & Asia Total operations operations US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 31 March 2010 Revenue from external customers 60,315 69,382 34,666 164,363 (1,484) 162,879 Segment assets 186,097 38,584 - 224,681 - 224,681 Capital expenditure 2,951 3,129 - 6,080 (96) 5,984 31 March 2009 Revenue from external customers 8,985 59,862 51,830 120,677 - 120,677 Segment assets 184,168 28,742 - 212,910 - 212,910 Capital expenditure 3,341 1,689 - 5,030 - 5,030 Composition of geographical segments Segment Operating companies Products and services AICO Africa Limited Investment company The Cotton Company of Zimbabwe Limited Ginning of seed cotton and selling of lint and by-products of the ginning process Seed Co Limited Development, production and selling of broad acre crop seeds Zimbabwe Quton Seed Company (Private) Limited Development, production and selling of cotton seeds Scottco (Private) Limited Selling of yarn and woven products Exhort Enterprises (Private) Limited Manufacturing and selling of fast moving consumer goods Olivine Holdings (Private) Limited Manufacturing and selling of fast moving consumer goods Zambrano Investments (Private) Limited Investment company Cottco International Limited Investment company Rest of Africa Seed Co International and subsidiaries Development, production and selling of broad acre crop seeds Europe and Asia None None Sales for segments outside Zimbabwe are made by all Group companies and are not limited to companies operating outside the Zimbabwe geographical segment. Basis of pricing inter-segment sales Inter-segment transfers, segment revenue, segment expenses and segment results include transfers between business segments and geographical segments. Such transfers are accounted for at market prices charged to unaffiliated customers for similar goods and services. Those transfers are eliminated on consolidation. 36 AICO Africa Limited
  • 39. Accounting Policies 1. REPORTING ENTITY AICO Africa Limited (the “Company” or “AICO”) is a limited liability company incorporated in Zimbabwe and is listed on the Zimbabwe Stock Exchange. The consolidated financial statements of the Company as at, and for the year ended 31 March 2010, comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”), and the Group's interest in associate and jointly controlled entity. The principal activities of the Group are: the buying and ginning of seed cotton, and the marketing of cotton lint and ginned seed, the pr oduction and selling of cr op planting seeds, the pr oduction and selling of fast moving consumer goods (“FMCGs”), the pr ocurement and selling of cr op inputs and the pr oduction and selling of cotton yar n. 2. BASIS OF PREPARATION The basis of pr eparation for the financial statements is Inter national Financial Reporting Standar ds. (a) Statement of compliance The financial statements have been pr epared in conformity with Inter national Financial Reporting Standar ds (IFRS's), promulgated by the Inter national Accounting Standar ds Board (IASB), which includes standar ds and interpr etations approved by the IASB as well as International Accounting Standards (IAS's) and Standing Interpretations Committee (SIC) interpretations issued under previous constitutions except in the prior year due to non-compliance with the following: • IAS 1 - Presentation of Financial Statements; • IAS 21 - The Effects of Changes in Foreign Exchange Rates; and • IAS 29 - Financial Reporting in Hyperinflationary Economies. The effects of these departures were not quantified but, having regard to their nature, are considered to be material and pervasive to the financial statements. These exceptions arise from the circumstances which gave rise to a change in the company's functional currency from the Zimbabwe dollar to the United States dollar, as more fully explained in notes 29 to 31. The financial statements were approved by the Board of Directors on 23 June 2010. (b) Basis of measurement The consolidated financial statements have been pr epared on the historical cost basis except for the following: • property, plant and equipment held at valuation; • financial instruments at fair value through profit or loss are measured at fair value; • available-for-sale financial assets are measured at fair value; • biological assets are measured at fair value less estimated point-of-sale costs; and • investment property is measured at fair value. The methods used to measure fair value are discussed further in notes 6, 7, 8 and 9. (c) Functional and presentation currency These consolidated financial statements are presented in United States dollars (US dollars), which is the Group's functional currency. All financial information pr esented in US dollars has been r ounded to the near est thousand. (d) Use of estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about significant areas of estimation uncertainty and critical judgement in applying accounting policies that have the most significant ef fect on the amounts r ecognised in the consolidated financial statements is included in the following notes: Annual Report 2010 37
  • 40. Accounting Policies Note 6 Property, plant and equipment Note 7 Investment property Note 8 Investments held in subsidiaries Note 9 Investment held in joint venture Note 12 Biological assets Note 14 Inputs scheme receivables Note 24.3 Share based payments 3. SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies set out below have been applie d consistently by all entities within the Gr oup. The accounting policies adopted by the Group are consistent with those used in the preparation of prior year consolidated financial statements. (a) Basis of consolidation Subsidiaries Subsidiaries are those entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits fr om its activities. In assessing contr ol, potential voting rights that ar e presently exercisable or convertible ar e taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries are in line with those of the Group. Acquisitions from entities under common control Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the date that common control was established. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group's consolidated financial statements. The components of equity of the acquir ed entities are added to the same components within Gr oup equity. Associates Associates are those entities in which the Gr oup has significant influence, but not contr ol, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity. Associates are accounted for using the equity method (equity accounted investees) and are recognised initially at cost. The consolidated financial statements include the Group's share of the income and expenses and equity movements of equity accounted investees, after adjustments to align accoun ting policies with those of the Gr oup, from the date that significant influence commences until the date that significant influence ceases. When the Group's share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest is reduced to nil, and the recognition of losses is discontinued except to the extent that the Gr oup has an obligation or has made payments on behalf of the investee. Jointly controlled entities A joint venture is a contractual arrangement wher eby the Group and other parties undertake an economic activity that is subject to joint control, that is when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control. Joint venture arrangements that involve a separate entity in which each ventur er has an inter est are referred to as jointly controlled entities. The Group reports its interests in jointly controlled entities using proportionate consolidation. The Group's share of the assets, liabilities, income and expenses of jointly contr olled entities are combined with the equivalent items in the consolidated financial statements on a line-by-line basis. A ny goodwill arising on the acquisition of the Group's interest in a jointly controlled entity is accounted for in accordance with the Group's accounting policy for goodwill arising on business combinations (see below). Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised gains and losses or income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. (b) Adoption of new and revised financial reporting standards A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 March 2010, and have not been applied in preparing these consolidated financial statements. 38 AICO Africa Limited
  • 41. Accounting Policies • Amended IFRS 2 - Share Based Payments - Vesting Conditions and Cancellations Combinations (effective for annual financial statements for periods beginning on or after 1 January 2010). • Amended IFRS 3 - Business Combinations - Business combinations accounting (effective for annual financial statements for periods beginning on or after 1 July 2009). • Amended IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations - Intention to sell the contr olling interest in a subsidiary (ef fective for annual financial statements for periods beginning on or after 1 July 2009). • Revised IAS 1 - Presentation of Financial statements - Current/non-current classification of convertible instruments (effective for annual reporting periods beginning on or after 1 January 2010). • Amended IAS 10 - Events after the Reporting period - Amendment r esulting from the issue of IFRC17 (ef fective for annual financial statements for periods beginning on or after 1 July 2009). • Revised IAS 23 - Borrowing Costs - Components of borrowing costs(effective for annual reporting periods beginning on or after 1 January 2009). • Amended IAS 27 - Consolidated and Separate Financial Statements - Measurement of subsidiary held for sale in separate financial statements (effective for annual financial statements for periods beginning on or after 1 July 2009). • Amended IAS 28 - Investments in Associates - Consequential amendments from changes to Business Combinations (effective for annual financial statements for periods beginning on or after 1 July 2009). • Amended IAS 31 - Interests in Joint Ventures - Consequential amendments from changes to Business Combinations (effective for annual financial statements for periods beginning on or after 1 July 2009). • Amended IAS 32 - Financial Instruments (effective for annual financial statements for periods beginning on or after 1 February 2010). • Amended IAS 38 - Intangible Assets - Measuring the fair value of an intangible asset acquired in a business combination (effective for annual financial statements for periods beginning on or after 1 July 2009). • Amended IAS 39 - Financial Instruments: Recognition and Measurement - Treating loan prepayment penalties (effective for annual financial statements for periods beginning on or after 1 January 2010). • Amended IFRIC 9 - Reassessment of Embedded Derivatives (effective for annual periods effective on or after 1 July 2009). • Amended IFRIC 16 - Hedges of a Net Investment in a Foreign Operation (effective for annual financial statements for periods beginning on or after 1 July 2009). • IFRIC 17 - Distribution of Non-cash Assets to Owners (effective for annual financial statements for periods beginning on or after 1 July 2009). • IFRIC 19 - Extinguishing of financial liabilities with equity in struments (effective for annual financial statements for periods beginning on or after 1 July 2009). (c) Property, plant and equipment Items of property, plant and equipment are measured at cost or valuation less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials, direct labour and any other costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Items of property, plant and equipment are revalued at least once every three years, or earlier if it becomes apparent that their carrying amount has declined below their recoverable amount to a material extent. When parts of an item of pr operty, plant and equipment have dif ferent useful lives, they are accounted for as separate items of property, plant and equipment. The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The cost of the day-to-day servicing of property, plant and equipment is recognised in profit or loss when incurred. Depreciation is recognised in profit or loss on a straight line basis over the useful life of each item of pr operty, plant and equipment as follows: Buildings 15 - 50 years Plant and machinery 20 - 40 years Mobile equipment 5 - 50 years Motor vehicles 5 - 5 years Office and depot equipment 5 - 10 years Annual Report 2010 39
  • 42. Accounting Policies Land and capital work in progress are not depreciated. Depreciation methods, useful lives and residual values of items of property, plant and equipment are reassessed at each reporting date. Depreciation is not charged when the carrying amount of an item of property, plant and equipment becomes equal to or less than the residual value. (d) Research and development costs Research and development costs ar e r ecognised in pr ofit or loss during the period in which they ar e incurr ed. (e) Impairment Financial assets A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of financial assets is calculated as the difference between its carrying amount and its current fair value. Significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For available for sale financial assets that are equity securities, the reversal is recognised directly in the statement of compr ehensive income. For other financial assets the r eversal is r ecognised in pr ofit or loss. Non-financial assets The carrying amounts of the Group's non-financial assets, other than inventories and deferr ed tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset's recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that ar e not yet available for use, the recoverable amount is estimated at each reporting date. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its r ecoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to r educe the carrying amount of the other assets in the unit (gr oup of units) on a pr o rata basis. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated futur e cash flows are discounted to their present value using a pre-tax discount rate that r eflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each r eporting date for any indications that the loss has decr eased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the r ecoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depr eciation or amortisation, if no impairment loss had been r ecognised. (f) Investment property Investment property, which is property held for capital appreciation, is measured initially at its cost, including transaction costs. Subsequent to initial r ecognition, investment property is measured at fair value. Gains and losses arising fr om changes in the fair value of investment pr operty ar e included in pr ofit or loss in the period in which they arise. (g) Biological assets Biological assets are measured at fair value less estimated point-of-sale costs, with any change ther ein recognised in profit or loss. Point-of-sale costs include all costs that would be necessary to sell the assets. 40 AICO Africa Limited
  • 43. Accounting Policies (h) Inventories and stores Inventories are measured at the lower of cost and net r ealisable value. Cost is determined on the following basis: Inventory category Basis of valuation Seed cotton Actual weighted average cost Packaging, stores and At weighted average cost consumables The proportion that the realised value of each product bears to the weighted Lint and ginned seed average costs of the seed cotton, ginning and other direct production costs Yarn Actual lint cost, other direct material costs and processing related costs Planting seed Actual seed cost, other direct material costs and processing related costs The proportion that the realised sales value of each product bears to the weighted Linters and delinted seed average costs of the ginned seed and other direct mechanical delinting costs FMCG's Actual weighted average cost (i) Foreign currencies Foreign currency transactions Foreign currency transactions (which are currencies other than the functional currency), on initial recognition, are translated at the exchange rates ruling on the date of the transaction. Subsequent to that, all foreign currency denominated financial assets and liabilities are translated at each reporting date, using the exchange rates ruling at that date. Accordingly, foreign currency denominated income and expenses ar e recorded at exchange rates ruling on the date of the transaction. Exchange differences are recognised in profit or loss in the period in which they arise. Translation of foreign entities Assets, liabilities, income and expenses of foreign entities are translated into the functional currency at exchange rates ruling at the reporting date. The income and expenses of for eign operations, excluding operations in hyperinflationary economies, ar e translated to US dollars at exchange rates ruling on the date of the transaction. Foreign currency differences arising fr om translation of for eign entities ar e recognised directly in the statement of comprehensive income as a non-distributable for eign currency translation reserve (FCTR). When a foreign operation is disposed of, in part or in full, the r elevant amount in the FCTR is transferr ed to pr ofit or loss. (j) Financial instruments The Group's financial instruments are classified into the following categories: 'Fair value through profit or loss' (FVTPL), 'available-for-sale', 'held-to-maturity' and loans and receivables. Classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. The Group does not hold or issue derivative financial instruments. Financial assets - recognition and measurement Financial instruments are recognised initially at fair value, when the Group has rights or other access to economic benefits. Subsequent to initial recognition these instruments are measured as set out below. Financial assets at FVTPL A financial asset is classified as at FVTPL where it is held for trading. A financial asset is classified as held for trading if: it has been acquired principally for the purpose of selling in the near future; or it is a part of an identified portfolio of financial instruments that the Gr oup manages together and has a r ecent actual patter n of short-term pr ofit-taking. Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. Financial assets at FVTPL consist of listed securities. The fair value is determined with r eference to market prices. Annual Report 2010 41
  • 44. Accounting Policies Available-for-sale financial assets The Company's investments in subsidiaries and joint venture are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, are recognised directly in the statement of comprehensive income. When an investment is derecognised, the cumulative gain or loss in equity is transferred to profit or loss. Loans and receivables Trade receivables, inputs scheme receivables, loans and other receivables are measured at fair value on initial recognition, and are subsequently measured at amortised cost using the ef fective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the pr esent value of estimated futur e cash flows discounted at the ef fective inter est rate computed at initial r ecognition. Held-to-maturity debt securities At subsequent reporting dates, debt securities for which the Gr oup has expressed the intention and ability to hold to maturity (held-to-maturity debt securities) are measured at amortised cost using the effective interest rate method, less any impairment losses. An impairment loss is r ecognised in the profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the investment's carrying amount and the present value of estimated future cash flows discounted at the ef fective interest rate computed at initial recognition. Impairment losses are reversed in subsequent periods when an increase in the investment's recoverable amount can be related objectively to an event occurring after the impairment was r ecognised, subject to the r estriction that the carrying amount of the investment at the date the impairment is r eversed shall not exceed what the amortised cost would have been had the impairment not been recognised. Cash and cash equivalents Cash and cash equivalents comprises cash balances, call deposits and investments in money market instruments. The carrying amount of cash and cash equivalents appr oximates their fair value. Any gain or loss arising fr om marking to market is recognised in profit or loss. Bank overdrafts that are repayable on demand and form an integral part of the Gr oup's cash management strategy are included as a component of cash and cash equivalents. Financial liabilities - recognition and measurement Financial liabilities are recognised when there is an obligation to transfer benefits and that obligation is a contractual liability to deliver cash or another financial asset or to exchange financial instruments with another entity on potentially unfavourable terms. Where these criteria no longer apply, a financial liability is no longer recognised. Borrowings Borrowings are recorded at cost less any payments made. Any subsequent change in value is included in the determination of net profit or loss for the period. Borrowing costs that ar e directly attributable to the acquisition, construction or pr oduction of a qualifying asset ar e capitalised as part of the cost of that asset. Capitalisation of borrowing costs ceases when substantially all activities necessary to prepare the qualifying asset for its intended use or sale are complete. Trade and other payables Trade and other payables are stated at cost adjusted for payments made to reflect the value of the anticipated economic outflow of resources. Offset If a legally enforceable right exists to set-off recognised amounts of financial assets and liabilities, which are in determinable monetary amounts and the Group intends to settle on a net basis, the r elevant financial assets and liabilities are offset. (k) Leases Leased assets Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial r ecognition the leased asset is measur ed at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. 42 AICO Africa Limited
  • 45. Accounting Policies Other leases are operating leases and, except for investment property, the leased assets are not recognised in the Group's statement of financial position. Investment property held under an operating lease is recognised in the Group's statement of financial position at its fair value. Lease payments Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases ar e apportioned between the finance expense and the r eduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to pr oduce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the r emaining term of the lease when the lease adjustment is confirmed. Determining whether an arrangement contains a lease At inception of an arrangement, the Gr oup determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Group the right to control the use of the underlying asset. At inception or upon r eassessment of the arrangement, the Gr oup separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their r elative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments reliably, an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance charge on the liability is recognised using the Group's incremental borrowing rate. (l) Provisions A provision is recognised in the statement of financial position when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, wher e appr opriate, the risk specific to the liability . (m) Taxation Income tax Income tax comprises current and deferred tax. Income tax is r ecognised in profit or loss except to the extent that it relates to items recognised directly to equity in which case it is recognised in equity. Current tax Current tax is the expected tax payable on the taxable income for the year, using rates enacted or substantially enacted at the reporting date and any adjustments to tax payable in respect of previous years. Deferred tax Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences are not provided for on the initial recognition of assets or liabilities that affect neither accounting nor taxable profit or loss. The amount of deferred tax provided is based on the expected manner of r ealisation or settlement of the carrying amount of assets and liabilities, using tax rates enact ed or substantially enacted at the r eporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the unused tax losses and credits can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (n) Employee benefits Pensions Pensions are provided for employees through pension funds to which both the Group and its employees contribute. The schemes include both the Group schemes and the national social security schemes of the respective countries in which the Group entities operate. The Group pension fund is a defined contribution plan after conversion fr om a defined benefit plan on 1 July 2000. Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss as they are incurred. Annual Report 2010 43
  • 46. Accounting Policies Equity compensation benefits The fair value of any options granted to employees of the Group is determined at the grant date using the Black-Scholes- Merton valuation model. The fair value of shar e options granted to employees is r ecognised as an expense with a corresponding increase in equity over the period in which the options ar e expected to vest. The amount r ecognised as an expense is adjusted to reflect the actual number of options that vest. (o) Segment reporting A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or providing products or services within a particular economic envir onment (geographical segment), which is subject to risks and r ewards that are different from those of other segments. The Gr oup's primary format for segment reporting is based on the Group's business segments. (p) Revenue Revenue from the sale of goods is recognised in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer and is measured at the fair value of the consideration r eceived or receivable. No revenue is recognised if ther e are significant uncertainties r egarding recovery of the consideration due, measur ement of the associated costs incurred to earn the revenue or the possible return of the goods. (q) Intangible assets Goodwill Goodwill is stated at cost less any accumulated impairment losses. Goodwill arising on business combinations represents the excess of the cost of acquisition over the fair value of the net identifiable assets acquired. The excess of the fair value of assets acquired over the pur chase consideration is r ecognised directly in profit or loss on r ecognition. Goodwill is tested for impairment on an annual basis. Business combinations involving entities under the common contr ol of the Gr oup do not give rise to goodwill in the consolidated financial statements. Instead, surpluses or deficits arising between the fair value of assets acquired and the purchase consideration are recognised directly in equity as a non-distributable reserve. (r) Earnings per share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the pr ofit or loss attributable to or dinary shareholders and the weighted average number of or dinary shares outstanding for the ef fects of all dilutive potential ordinary shares, which comprise share options granted to employees. 44 AICO Africa Limited
  • 47. Notes to the Financial Statements For the Year Ended 31 March 2010 GROUP COMPANY 31 March 31 March 31 March 31 March 2010 2009 2010 2009 US$'000 US$'000 US$'000 US$'000 1 Profit/(loss) from operations Profit/(loss) from operations is stated after charging: 1.1 Cost of sales (109,352) (51,600) - - 1.2 Other costs Launch costs - 257 - 257 Staff costs 25,048 6,926 - - Depreciation 7,287 7,850 3 - Impairment losses 755 18,986 - - Property, plant and equipment 200 1,416 - - Trade receivables 355 2,984 - - Inputs scheme receivables - 6,923 - - Inventories - 7,591 - - Other financial assets 200 - - - Other - 72 - - Remuneration of directors 456 95 124 - Fees 363 79 120 - Other 93 16 4 - Auditors' remuneration 461 395 25 - 2 Investment income Interest received - third party 519 274 - - Dividends received - 1 - - Total 519 275 - - Interest received - third party Bank deposits 470 241 - - Other loans and recievables 49 - - - Held-to-maturity investments - 33 - - Total 519 274 - - Investment income earned on financial assets analysed by category Available for sale financial assets - 1 - - Loans and receivables including bank and cash balances 519 241 - - Held to maturity investments - 33 - - Total 519 275 - - Annual Report 2010 45
  • 48. Notes to the Financial Statements For the Year Ended 31 March 2010 GROUP COMPANY 31 March 31 March 31 March 31 March 2010 2009 2010 2009 US$'000 US$'000 US$'000 US$'000 3 Other gains/(losses) Loss on disposal of property, plant and equipment (214) (82) - - Foreign exchange loss - (4,563) - - Foreign exchange gain 1,629 4,283 - - Changes in fair value of financial assets and liabilities 1,455 (988) - - Changes in fair value of investment property (457) - - - Total 2,413 (1,350) - - Changes in fair value of financial assets and liabilities Change in fair value of financial assets designated at FVTPL 1,455 (989) - - Change in fair value of financial liabilities designated at FVTPL - 1 - - Total 1,455 (988) - - 4 Taxation 4.1 Charge based on profit/(loss) before taxation Current tax (4,627) (2,010) - - Deferred tax (note 11) 4,540 1,342 77 - Residents’ tax on interest (252) (851) - - Net tax charged (339) (1,519) 77 - 4.2 Reconciliation of tax charge Standard tax on profit/(loss) 1,255 5,205 (154) (363) - Effect of revenue that is exempt from tax (309) - - - - Effect of revenue that is taxed at special rates 1,175 - - - - Effect of expenses that are not deductable in determining taxable profit 356 - - - - Effect of unused tax losses and tax offsets not recognised as tax assets 79 - - - - Subsidiaries taxed at non-standard rates of tax 1,079 - - - - Permanent differences - (15,377) - - - Effect of revaluation of assets for tax purposes (124) - - - - Unrecognised deferred tax assets - 12,542 77 363 - Recognition of previously unrecognised tax losses (1,877) - - - - Effect on deferred tax balances due to change in income tax rate (1,043) - - - - Residents’ tax on interest (252) (851) - - Total tax charge 339 1,519 (77) - Standard rate of tax 25.75% 30.90% 25.75% 30.90% Effective income tax rate 6.95% 9.02% (12.87%) 0.00% 46 AICO Africa Limited
  • 49. Notes to the Financial Statements For the Year Ended 31 March 2010 GROUP COMPANY 31 March 31 March 31 March 31 March 2010 2009 2010 2009 US$'000 US$'000 US$'000 US$'000 5 (Loss)/Earnings per share The calculation is based on the following data: Weighted average number of ordinary shares in issue (thousands) For the purposes of basic earnings per share 530,650 529,822 530,650 529,822 Add dilutive impact of shares 19,469 18,300 19,469 18,300 For the purposes of diluted earnings per share 550,119 548,122 550,119 548,122 (Loss)/earnings per share (Loss)/earnings for the purposes of basic and diluted (loss)/earnings per share (4,270) 7,774 (519) (1,175) Basic (loss)/earnings per share (US cents) (0.80) 1.47 (0.10) (0.22) Diluted (loss)/earnings per share (US cents) (0.78) 1.42 (0.09) (0.21) Annual Report 2010 47
  • 50. Notes to the Financial Statements For the Year Ended 31 March 2010 Land and Plant and Capital work buildings equipment in progress Total US$'000 US$'000 US$'000 US$'000 6 Property, plant and equipment 6.1 Group Cost/valuation 31 March 2009 98,535 42,990 639 142,164 Additions 1,009 4,448 623 6,080 Disposals - (895) - (895) Transfers (1,779) (939) - (2,718) Transfer to assets classified as held for sale (1,734) (706) - (2,440) Revaluation (10,048) (123) - (10,171) Exchange rate movements 413 516 - 929 31 March 2010 86,396 45,291 1,262 132,949 Accumulated depreciation and impairment 31 March 2009 1,762 7,632 - 9,394 Charge for the year 2,147 5,140 - 7,287 Disposals - (464) - (464) Transfers - (16) - (16) Transfer to assets classified as held for sale - (125) - (125) Revaluation (81) (116) - (197) Exchange rate movements 33 237 - 270 31 March 2010 3,861 12,288 - 16,149 Carrying amount at 31 March 2009 96,773 35,358 639 132,770 Carrying amount at 31 March 2010 82,535 33,003 1,262 116,800 Capital commitments Authorised and contracted for 19 924 - 943 Authorised and not contracted for 1,483 4,880 - 6,363 Total 1,502 5,804 - 7,306 Financing of capital commitments Capital commitments will be financed out of a combination of own resources of the Group and borrowings from both local and offshore financial institutions. Proceeds from insurance payouts There were no material proceeds from insurance payouts during the year. Significant estimates and judgments The revalued amount is determined by reference to recent arm's length market transactions. Residual values and useful lives of items of pr operty, plant and equipment ar e reviewed annually at the r eport date. Residual values are determined by reference to an active market of similar items of property, plant and equipment taking into account the operating conditions and expected wear and tear. Where an active market does not exist, the residual value is assumed to be nil at which point the useful lives of affected assets are extended to levels consistent with this assumption. Useful lives of items of property, plant and equipment are determined with reference to expected duration of the assets' utility to the Gr oup, taking into account the operating conditions, expected wear and tear and the Gr oup’s asset replacement policy. Encumbrances Refer to note 20. 48 AICO Africa Limited
  • 51. Notes to the Financial Statements For the Year Ended 31 March 2010 Land and Plant and Capital work buildings equipment in progress Total US$'000 US$'000 US$'000 US$'000 6 Property, plant and equipment (continued) 6.2 Company Cost/valuation 31 March 2009 - - - - Additions - 137 88 225 Disposals - - - - Revaluation - - - - 31 March 2010 - 137 88 225 Accumulated depreciation and impairment 31 March 2009 - - - - Charge for the year - 3 - 3 Disposals - - - - Revaluation - - - - Exchange rate movements - - - - 31 March 2010 - 3 - 3 Carrying amount at 31 March 2009 - - - - Carrying amount at 31 March 2010 - 134 88 222 Capital commitments Authorised and contracted for - - - - Authorised and not contracted for - - - - Total - - - - GROUP COMPANY 31 March 31 March 31 March 31 March 2010 2009 2010 2009 US$'000 US$'000 US$'000 US$'000 7 Investment property Balance at 31 March 2009 1,141 921 - - Change in fair value (457) 220 - - Balance at 31 March 2010 684 1,141 - - The investment pr operty comprises a number of r esidential stands, which ar e held for capital appr eciation and a residential property that is leased out to a third party. In the prior year, the residential property was used by the Group. The fair value of the investment pr operty has been determined by the Dir ectors with r eference to r ecent market transactions, discounted for estimated costs to sell. The pr operty has been adjusted for the r eduction in fair value. Investment property consists of certain residential land, situated in Harare, on which conveyancing is incomplete. Consideration for the purchase of this land is held in trust subject to full transfer of ownership. In the event that full transfer fails, the Directors believe they will be able to recover full value in respect of this property. Other than the operating lease on the r esidential property, there are no other contractual obligations associated with the investment properties. Annual Report 2010 49
  • 52. Notes to the Financial Statements For the Year Ended 31 March 2010 Group Company Company 31 March 31 March 31 March 2010 2010 2009 US$’000 US$’000 US$’000 8 Investments held in subsidiaries Name of subsidiary Principal Place of Proportion Proportion activity incorporation interests of voting power held The Cotton Company of Zimbabwe Ginning Zimbabwe 100.00% 100.00% - 36,622 55,834 Seed Co Seed Zimbabwe 51.21% 51.21% - 79,754 53,112 Scottco Spinning Zimbabwe 75.00% 75.00% - 3,011 2,954 Exhort Enterprises Vegetables Zimbabwe 100.00% 100.00% - 5 2,606 Cottco International Investment Mauritius 100.00% 100.00% - - (708) Zambrano Investment Zimbabwe 100.00% 100.00% - 682 (261) - 120,074 113,537 The investments in subsidiaries are designated as available-for-sale financial assets. The fair value of the subsidiaries have been determined with r eference to their net assets values. There are no indications of impairment on the fair values determined. Seed Co is listed on the Zimbabwe Stock Exchange (ZSE). On 31 Ma rch 2010, the market value of the Company's shares in Seed Co was US$155.7 million. On the date the financial statements wer e appr oved, the market value of the Company's shares in Seed Co was US$157.7 million. 9 Investment held in joint venture Name of subsidiary Principal Place of Proportion Proportion activity incorporation interests of voting power held Olivine Holdings FMCGs Zimbabwe 49.00% 49.00% - 6,825 6,825 The investment held in joint ventur e is designated as an available-for -sale financial asset. The fair value of the joint ventur e has been determined with r eference to the consideration paid in the prior year . There are no indications of impairment on the purchase price. Significant judgement The Company holds a 49% shar eholding in Olivine. The Industrial Development Corporation (IDC) holds the other 51%. The Olivine Board of Directors is composed of eleven Directors of which four Dir ectors are appointed as representatives of the Company, five as representatives of IDC, while two are executive Directors appointed by the Board of Directors. IDC appoints the Chairman who is their representative but the Chairman does not have a casting vote in boar d meetings. Each shar eholder effectively has four voting Directors on the board. While there is a management contract that delegates the operational management of Olivine to the Company, the strategic, financial and operating decisions rest with the board and mutual consent between the two shareholders is required for all decisions. The Company's proportionate share of profit for the year was US$911,247. The effect of Olivine on the Group's assets and liabilities at the reporting date is given below: Property, plant and equipment 30,974 - - Investment in associate 65 - - Inventories 7,532 - - Prepayments 252 - - Trade and other receivables 1,048 - - Bank and cash balances (802) - - Deferred tax liabilities (7,684) - - Borrowings (2,666) - - Trade and other payables (1,877) - - Taxation 21 - - Balances owed to Group companies (3,032) - - Net identifiable assets and liabilities 23,831 - - 10 Investment held in associate RBP (Private) Limited 65 - - 50 AICO Africa Limited
  • 53. Notes to the Financial Statements For the Year Ended 31 March 2010 Assets Liabilities Net Net 31 March 31 March 31 March 31 March 2010 2010 2010 2009 US$'000 US$'000 US$'000 US$'000 11 Deferred tax assets/(liabilities) 11.1 Deferred tax assets and liabilities are attributed to the following: Group Temporary differences Property, plant and equipment 459 (27,414) (26,955) (38,455) Unrealised exchange gains - - - 150 Exchange differences in translating foreign subsidiaries - - - (1,237) Finance leases 326 - 326 - Provisions 235 (18) 217 - General allowance for doubtful debts 1,550 (83) 1,467 931 Prepayments - - - (938) Assessable tax losses 2,003 - 2,003 (349) Unrealised profits in inventories - (193) (193) 309 Reversal of impairmant (1,064) (1,775) (2,839) - 3,509 (29,483) (25,974) (39,589) 11.2 Movement in temporary differences during the year are attributed to the following: 31 March Recognised in Recognised Total Discontinued Continuing 2009 profit or loss in equity 31 March 2010 operations operations US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Group Temporary differences Property, plant and equipment (38,455) 3,207 13,114 (22,134) 738 (21,396) Accelerated depreciation for tax purposes - - (4,920) (4,920) - (4,920) Increase in share based payment reserve - - (26) (26) - (26) Income received in advance - (142) - (142) - (142) Unrealised exchange gains 150 (2) (4) 144 2 146 Unrealised profits in inventories 309 - 523 832 - 832 Exchange difference on foreign subsidiary (1,237) - (389) (1,626) - (1,626) Provisions - - 65 65 - 65 General allowance for doubtful debts 931 1,197 227 2,355 (8) 2,347 Prepayments (938) (224) 193 (969) - (969) Tax losses (349) 112 167 (70) - (70) Change in tax rate - (8) 128 120 (121) (1) Fair value adjustment for available-for-sale investments - 113 (327) (214) - (214) (39,589) 4,253 8,751 (26,585) 611 (25,974) Annual Report 2010 51
  • 54. Notes to the Financial Statements For the Year Ended 31 March 2010 GROUP COMPANY 31 March 31 March 31 March 31 March 2010 2009 2010 2009 US$'000 US$'000 US$'000 US$'000 12 Biological assets Balance at 31 March 2009 776 6 - - Seasonal crops planted - at cost 588 918 - - Harvested plants transferred to inventories (776) (147) - - Balance at 31 March 2010 588 777 - - Seed Co Zimbabwe (Private) Limited engaged in own production on a leased farm to augment contract production of seed by its gr owers. As at Mar ch 31 2010, the Company had 182 hectar es under seed production and it estimaters to produce 1,565 tonnes of seed with a fair value of US$876,400. 13 Inventories Raw materials 18,519 10,753 - - Work in progress 2,912 1,354 - - Finished goods 3,818 5,742 - - Consumable stores 8,074 10,804 - - Bought-in merchandise 4,046 971 - - 37,369 29,624 - - Provision for inventory write-offs Balance at 31 March 2009 (7,591) - - - Current year decrease/(increase) in provision 4,432 (7,591) - - Balance at 31 March 2010 (3,159) (7,591) - - Inventories charged to profit or loss 86,146 41,080 - - Inventories encumbered by borrowings are disclosed in note 20. 52 AICO Africa Limited
  • 55. Notes to the Financial Statements For the Year Ended 31 March 2010 GROUP COMPANY 31 March 31 March 31 March 31 March 2010 2009 2010 2009 US$'000 US$'000 US$'000 US$'000 14 Inputs scheme receivables Inputs scheme receivables 17,404 12,129 - - Allowance for doubtful debts (7,687) (6,923) - - 9,717 5,206 - - Movement in the allowance for doubtful debts Balance at beginning of the year (6,923) - - - Current year increase in provision (764) (6,923) - - Balance at the end of the year (7,687) (6,923) - - Ageing of input receivables provided for Year 2010 (5,684) (5,683) - - Year 2009 (1,928) (1,240) - - Year 2008 - - - - Prior 2007 (75) - - - (7,687) (6,923) - - Inputs receivables arise when the Gr oup advances inputs to farmers who grow crops for the Group under contract and these ar e then r ecovered fr om the farmers as they sell their contracted cr op. These receivables ar e seasonal. All past due inputs receivables were provided for. 15 Trade and other receivables Trade receivables 32,603 32,813 - - Other receivables 3,633 959 64 - Allowance for doubtful debts (6,351) (2,984) - - 29,885 30,788 64 - Ageing of past due trade and other receivables not provided for 0-30 days 3,796 6,562 - - 30-60 days 1,503 2,222 - - 60-90 days 2,837 550 - - +90 days 12,692 4,670 - - 20,828 14,004 - - Movement in the allowance for doubtful debts Balance at beginning of the year (2,984) (1,577) - - Current year increase in provision (3,367) (1,407) - - Balance at the end of the year (6,351) (2,984) - - Ageing of trade and other receivables provided for 60-90 days (504) (344) - - +90 days (5,847) (2,640) - - (6,351) (2,984) - - Annual Report 2010 53
  • 56. Notes to the Financial Statements For the Year Ended 31 March 2010 15 Trade and other receivables (continued) Included in the trade r eceivables is an amount of US$3,376,004 which is over due to Seed Co Limited. The company's attorneys have obtained a default judgement against the debtor and have proceeded to attach the assets of the debtor, while the debtor is looking for various other payment options. The Directors, therefore, do not believe that any provision for the debt is necessary, as Seed Co Limited is fully covered for the debt and it is likely that the debtor will pay before its assets are auctioned. Trade receivables encumbered by borrowings are disclosed in note 20. All trade receivables in currencies other than the US dollar are listed in note 22. GROUP COMPANY 31 March 31 March 31 March 31 March 2010 2009 2010 2009 US$'000 US$'000 US$'000 US$'000 16 Other financial assets Financial assets designated at fair value through profit or loss (FVTPL) Non-derivative financial assets designated as FVTPL 2,074 568 - - Held to Maturity Investments carried at amortised cost Short term money market investments 3 - - - Available-for-sale investments carried at fair value Unlisted shares 54 15 - - 2,131 583 - - 17 Cash and cash equivalents Bank and cash balances 12,161 5,700 39 - Bank overdrafts (8,767) (5,466) - - 3,394 234 39 - 18 Group companies Balances owed by group companies - The Cotton Company of Zimbabwe Limited - - 4,087 3,962 - Zambrano Investments (Private) Limited - - 1,716 1,716 - - 5,803 5,678 Balances owed to group companies - The Cotton Company of Zimbabwe Limited - - 15,955 15,218 - Yucatan Holdings (Proprietary) Limited - - 39 - - Cottco International Limited - - 17 51 - - 16,011 15,269 Net amounts owed to group companies - - (10,208) (9,591) Significant transactions with group companies Interest paid to The Cotton Company of Zimbabwe Limited - - - (734) Terms and conditions All transactions with related parties are at arms length. 54 AICO Africa Limited
  • 57. Notes to the Financial Statements For the Year Ended 31 March 2010 GROUP COMPANY 31 March 31 March 31 March 31 March 2010 2009 2010 2009 19 Share capital 19.1 Authorised share capital Number of ordinary shares (000) 1,500,000 1,500,000 1,500,000 1,500,000 Nominal value per share (Zimbabwe dollar) - - - - Total nominal value (Zimbabwe dollar) - - - - 19.2 Issued and fully paid Number of shares At the beginning of the year (000) 530,512 529,701 530,512 529,701 Share options exercised (000) 553 811 553 811 At the end of the year (000) 531,065 530,512 531,065 530,512 Nominal value per share (Zimbabwe dollar) - - - - Total value of shares in (US$) - - - - The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per shar e at meetings of the Company . All shar es rank equally with r egard to the Company’ s r esidual assets. Subject to the right of the shareholders to take up new shares in proportion to their existing holdings and to Section 183 of the Companies Act (Chapter 24:03), unissued shares are under the control of the Directors. 19.3 Re-denomination of share capital In February 2010, the Registrar of Companies issued a cir cular requiring that all companies r e-denominate their share capital to United States dollars. The re-denominated share capital should be determined by the Company and stated on all annual returns lodged with the Registrar of Companies. AICO Africa Limited is yet to comply with these requirements. The Directors will, at the next Annual General Meeting, propose the redenomination of the Company's share capital into 1,500,000 ordinary shares with a nominal value of US$0.01 per share, together with the redenomination of the issued share capital into 531,065,109 ordinary shares with a nominal value of US$0.01 per share. Annual Report 2010 55
  • 58. Notes to the Financial Statements For the Year Ended 31 March 2010 GROUP COMPANY 31 March 31 March 31 March 31 March 2010 2009 2010 2009 US$'000 US$'000 US$'000 US$'000 20 Borrowings Current Unsecured - at amortised cost - Bank loans 13,756 3,925 - - - Other entities 3,000 114 - - Secured - at amortised cost - Bank loans 31,772 30,085 - - - Other entities - 896 - - Total current borrowings 48,528 35,020 - - Non-current Unsecured - at amortised cost - Bank loans 10 131 - - - Other entities - - - - Secured - at amortised cost - Other entities - 58 - - Total non-current borrowings 10 189 - - Total borrowings Unsecured-at amortised cost - Bank loans 13,766 4,056 - - - Other entities 3,000 114 - - 16,766 4,170 - - Secured-at amortised cost - Bank loans 31,772 30,085 - - - Other entities - 954 - - 31,772 31,039 - - Total borrowings 48,538 35,209 - - Maturity profile of borrowings 0-3 Months 30,960 6,920 - - 3-6 Months 2,078 16,000 - - 6-12 Months 15,500 12,100 - - 48,538 35,020 - - 1-2 Years - 189 - - 2-3 Years - - - - Total 48,538 35,209 - - 56 AICO Africa Limited
  • 59. Notes to the Financial Statements For the Year Ended 31 March 2010 20 Borrowings (continued) 20.1 Included in bank overdrafts is an amount of US$0.4 million due by Exhort Enterprises (Pvt) Limited to CBZ Bank Limited secured as follows: (i) First mortgage bond for US$0.5 million over stand 210 Ruwa township of Arcon Estate. (ii) Assignment of export proceeds. (ii) Cession of insurance policy covering bonded property and stocks. 20.2 Included in short term borrowings is an amount of US$31.8 million due by The Cotton Company of Zimbabwe Limited to a syndicate of banks secured as follows: (i) a special notarial covering bond over the Company's cotton inventories and receivables worth US$10 million. (ii) a notarial general covering bond over the Company's cotton inventories and receivables for US$3.5 million. (iii) a notarial deed of cession of book debts for US$3.5 million. (iv) a cession of the Company's insurance policies covering cotton inventories. (v) a pledge of the Company's cotton inventories both present and future for US$10 million. (vii) sales contracts with a value of US$9 million. GROUP COMPANY 31 March 31 March 31 March 31 March 2010 2009 2010 2009 US$'000 US$'000 US$'000 US$'000 21 Trade and other payables Trade 14,137 9,282 - - Other 6,489 6,364 40 - 20,626 15,646 40 - The Group's exposure to currency and liquidity risk related to trade and other payables is disclosed in note 22. Annual Report 2010 57
  • 60. Notes to the Financial Statements For the Year Ended 31 March 2010 22 Financial instruments The Group finances its operations by a mixture of retained profits and financial instruments in US dollars and foreign currencies. The Group borrows in both local and international debt markets in US dollars and foreign currencies, mainly at fixed rates of inter est. In the normal course of its operations, the Gr oup is exposed to currency, interest rate, liquidity and credit risks. The Group has developed a comprehensive risk management process to control and monitor the risk. 22.1 Currency risk The Group undertakes certain transactions denominated in currencies other than the US dollar, hence exposure to exchange rate fluctuations arise. The currencies giving rise to currency risks are primarily the Malawi Kwacha, Zambian Kwacha, South African Rand and Eur o. The exposure to foreign currency fluctuations is managed by, where possible, matching liabilities with foreign assets or revenue contracts that generate suf ficient foreign currency receipts to provide a hedge against the exposure. The Board of Directors is tasked with managing the for eign currency exposures arising in consultation with the central treasury function. All material pur chases and sales in for eign currencies are transacted thr ough the central tr easury. The Group's exposure to foreign currency risk was as follows based on notional amounts: Foreign Currencies March 31 31 March 2010 2009 '000 '000 Trade and other receivables Zimbabwe dollar - 18,761 Rand 2,797 2,180 Euro - - Botswana Pula 536,569 14,235 Malawi Kwacha 4,697,800 6,900 Zambian Kwacha 2,155,805 22,737 Bank and cash balances Zimbabwe dollar 123,172 75,734 Rand 41,408 8,881 Euro 2 1,359 Botswana Pula - 3,164 Malawi Kwacha 1,658,870 82,163 Zambian Kwacha 3,273,612 12,520,606 Trade and other payables Zimbabwe dollar - (3,164,620) Rand (4,523) (1,627) Euro - - Botswana Pula - (12,806) Malawi Kwacha (761,861) (2,901) Zambian Kwacha (1,422,516) (9,764) Borrowings - third party Zimbabwe dollar - (36,000,000) Rand - - Euro - - Botswana Pula - - Malawi Kwacha (137,532) (16) Zambian Kwacha (3,487,125) (28,298,710) Net balance sheet exposure Zimbabwe dollar 123,172 (39,070,125) Rand 39,682 9,434 Euro 2 1,359 Botswana Pula 536,569 4,593 Malawi Kwacha 5,457,277 86,146 Zambian Kwacha 519,776 (15,765,131) 58 AICO Africa Limited
  • 61. Notes to the Financial Statements For the Year Ended 31 March 2010 22 Financial instruments (continued) 22.2 Sensitivity analysis The Group's assets and liabilities are predominately US dollars. The net exposure of the Group to other currencies when expressed in US dollars is insignificant, and has been summarised below. Also summarised is the gain/(charge) to profit or loss that would result in a movement of any of the foreign currencies by 10%. The Company has no foreign currency exposure. GROUP GROUP 31 March 2010 31 March 2009 Foreign Foreign Currency US$'000 Currency US$'000 '000 '000 Zimbabwe dollar 123,172 - (39,070,125) (2,961) Rand 39,682 6,544 9,434 978 Euro 2 1 1,359 1,861 Botswana Pula 536,569 359,727 4,593 603 Malawi Kwacha 5,457,277 47,580 86,146 615 Zambian Kwacha 519,776 2,181 (15,765,131) (2,795) 416,033 (1,699) Gain/(charge) to profit or loss if an exchange rate of any of the above currencies appreciated by 10% Zimbabwe dollar - (296) Rand 654 98 Euro - 186 Botswana Pula 35,972 60 Malawi Kwacha 4,758 62 Zambian Kwacha 218 (280) 41,602 (170) Annual Report 2010 59
  • 62. Notes to the Financial Statements For the Year Ended 31 March 2010 22 Financial Instruments (continued) 22.3 Interest rate risk The Group borrows in both local and offshore markets. Exposure to interest rate risk on borrowings and receivables is managed on a proactive basis. The interest rate risk profile of liabilities of the Group by currency, as at 31 March 2010 is: Total Floating rate Fixed rate 31 March 31 March 31 March 31 March 31 March 31 March 2010 2009 2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 Financial liabilities 48,943 31,282 - - 48,943 31,282 22.4 Credit risk Credit risks arise on cash and cash equivalents, investments and trade receivables. The risk on cash and cash equivalents is managed by only investing with financially sound institutions and by setting prudent exposure limits for each institution. The risk arising on trade receivables is managed through normal credit limits, continual review and exception reporting. Adequate provision is made for doubtful debts. At reporting date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position. 22.5 Liquidity risks The Group manages liquidity through the management of working capital and cash flows. A balance between continuity of funding and flexibility is maintained through the use of borrowings from a range of institutions with varying debt maturities. 22.6 Capital management The Board of Directors’ policy is to maintain a strong capital base so as to maintain creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Group G ROUP G ROUP defines as net operating income divided by total shareholders’ equity. Due to the prevailing operating economic conditions, the Board of Directors has set any net positive return in each operating period as acceptable in terms of maintenance of capital. There were no changes in the Group’s approach to capital management during the year. The Group is not subject to externally imposed capital requirements. 22.7 Carrying amounts and fair values of financial assets and liabilities as at 31 March 2010 The carrying amounts of financial assets and liabilities approximate their fair values. 60 AICO Africa Limited
  • 63. Notes to the Financial Statements For the Year Ended 31 March 2010 23 Related party transactions Group companies Group companies comprise, The Cotton Company of Zimbabwe Limited, Seed Co Limited, Olivine Holdings Limited, Cottco International Limited, Exhort Enterprises (Private) Limited, Scottco (Private) Limited and Zambrano Investments (Private) Limited. Transactions and balances during and at year end have been disclosed in note 18. Key management personnel Name Patison Sithole Chairman Patrick Davenish Group Chief Executive Bernard Mudzimuirema Group Finance Director Catherine Chitiyo Non-executive Director Albert Nhau Non-executive Director Bekithemba Nkomo Non-executive Director Lawrence Preston Non-executive Director Trevor Wicks Ginning and Marketing Director (The Cotton Company of Zimbabwe Limited) Jonas Chindanya Crop Procurement and Inputs Director (The Cotton Company of Zimbabwe Limited) Walker Ntini Finance Director (The Cotton Company of Zimbabwe Limited) Morgan Nzwere Group Chief Executive (Seed Co Limited) John Matorofa Group Finance Director (Seed Co Limited) Dennis Zaranyika Managing Director (Seed Co Zimbabwe) David Clements Managing Director (Seed Co Zambia) Abbas Kamali Managing Director (Scottco (Private) Limited) Robin Jarvis Managing Director (Quton Seed Company (Private) Limited) Sheila Manyonda Managing Director (Exhort Enterprises (Private) Limited) Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity directly or indirectly. Companies related to Directors and key senior management Africom (Private) Limited; Bermud Corporation (Private) Limited; Beta Holdings (Private) Limited; Breenel Investments (Private) Limited; Central African Building Society; Cubicle Investments (Private) Lmited; Gaskets & Cutting International (Private) Limited; Lawrence Preston Associates Inc; Lummus Corporations Inc; Mercury Engineers (Private) Limited; Mike Appel Organisation (Private) Limited; Nestle Zimbabwe (Private) Limited; Parkham Enterprises (Private) Limited; Premier Gaskets (Private) Limited; Rio Zimbabwe Limited; Starafrica Corporation Limited; Willsgrove Ware Pottery (Private) Limited; Africansun Limited; National Seed Company of Zimbabwe Limited; WR Edwards (Private) Limited; Zimplow Limited; Barrow Investments (Private) Limited; Clapham (Private) Limited; Cockarone (Private) Limited; Danegate (Private) Limited; Eldorate (Private) Limited; Endsleigh (Private) Limited; Hikem (Private) Limited; McHoyse (Private) Limited; Playfair (Private) Limited; Camisan (Private) Limited; Lima Trading (Private) Limited; JAKD UP Properties Zambia Limited. Transactions with key management personnel Loans to key management personnel During the year, no loans were advanced to key management personnel. Compensation of key management personnel 31 March 31 Mar ch 2010 2009 US$'000 US$'000 Short-term employee benefits 340 95 Termination benefits 435 12 Post employment benefits - - Share based payments 194 13 Total compensation paid to key management personnel 969 120 During the year, a total of 7.2 million shar es in the Company were granted under the Company's share option scheme. The terms of the transaction were as indicated in note 24 on share based payment plans. Companies related to key management personnel Amounts due to/(by) companies related to key management personnel There were no amounts due to or by companies related to key management personnel at the reporting date. Transactions with companies related to key management personnel There were no significant transactions between the Group and Company and companies related to key senior management personnel during the year. Annual Report 2010 61
  • 64. Notes to the Financial Statements For the Year Ended 31 March 2010 24 Employee benefits 24.1 Defined contribution plans Contributions to defined contribution pension plans are recognised as an expense in the income statement when incurred. 24.2 National Social Security Scheme This is a defined contribution plan enacted under the National Social Security Act, 1989. Both the Group companies and the employees contribute to the scheme. 24.3 Share based payment plans The Directors of the Company may allot or grant options up to 52.9 million shares to senior management. Each set of options is exercisable over three years beginning two years after the date the options are granted. The exercise price of the options is based on the middle market share price derived from the Zimbabwe Stock Exchange prices for the trading day immediately preceding the date of the offer. The following table illustrates the number and exercise prices of the share options, as well as the movement in the share options during the year: 31 March 2010 31 March 2009 Number Average Number Average of options price of options price ’000 US cents ’000 US cents Number of share options Balance of options at the beginning of the year 18,300 0.23 15,517 0.25 Options granted during the year 7,216 0.16 3,924 0.16 Options exercised during the year (553) 0.15 (810) 0.25 Options forfeited during the year (1,990) 0.24 (331) 0.25 Balance of options outstanding at the end of the year 22,973 0.21 18,300 0.23 The Company uses the Black Scholes-Merton model to value share options, which in management’s view presents a fairer basis of valuation. However, due to inadequate historical information within the US dollar trading environment, the value of the options could not be accurately established using the Black-Scholes-Merton method. Accordingly, and based on prior experience of the outcome, management used the market value of AICO Africa Limited shares on grant date to estimate the fair value of share options granted during the year. The current year charge to the income statement amounted to US$380,610. 62 AICO Africa Limited
  • 65. Notes to the Financial Statements For the Year Ended 31 March 2010 GROUP COMPANY 31 March 31 March 31 March 31 March Statements of cash flows 2010 2009 2010 2009 US$'000 US$'000 US$'000 US$'000 25 Cash flow from operating activities Profit/(loss) for the period 2,397 - (519) - Adjustment for: Income tax expense/(credit) recognised in profit or loss 339 - (77) - Finance costs recognised in profit or loss 10,840 - - - Investment revenue recognised in profit or loss (519) - - - Gain on sale or disposal of property, plant and equipment 214 - - - Loss on valuation of investment property 457 - - - Gains on valuation of fair value through profit or loss financial assets (1,507) - - - Impairment loss recognised on trade and other receivables 355 - - - Reversal of impairment on trade and other receivables (3,433) - - - Depreciation and amortisation of non-current assets 7,287 - 3 - Impairment of non-current assets recognised in profit or loss 541 - - - Net foreign exchange loss 702 - - - Expense recognised in profit or loss in respect of equity-settled share based payments 481 - 144 - Operation cash flows 18,154 - (449) - 26 Working capital movements Change in inventories (4,526) - - - Change in inputs scheme receivables (4,640) - - - Change in prepayments (5,806) - (10) - Change in intercompany receivables - - (90) - Change in trade and other receivables 489 - (10) - Change in trade and other payables 5,160 - 49 - Change in intercompany payables - - 742 - Change in borrowings - third party 12,417 - - - 3,094 - 681 - Annual Report 2010 63
  • 66. Notes to the Financial Statements For the Year Ended 31 March 2010 27 Discontinued operations In compliance with the requirements of IFRS 5 Non current Assets Held for Sale and Discontinued Operations, the assets and liabilities of the discontinued operations amounting to US$3.4 million and US$1.3 million respectively, have been included in Group Statement of Financial Position as 'assets classified as held for sale' and as liabilities classified as held for sale'. During the year, discontinued operations recorded a loss of US$2.1 million which has been included in the Group Income Statement as 'loss after tax from discontinued operations'. The analysis of assets, liabilities and performance of the discontinued operations is shown below: Exhort Total Enterprises (Pvt) Salamax (Pty) discontinued Limited Limited operations 31 March 31 March 31 March 2010 2010 2010 US$'000 US$'000 US$'000 27.1 Results of discontinued operations Revenue 629 855 1,484 Other operating income 185 - 185 Expenses (2,835) (924) (3,759) Loss from operations (2,021) (69) (2,090) Other (expenses)/income (59) 12 (47) Loss before tax (2,080) (57) (2,137) Taxation (10) 8 (2) Loss after tax (2,090) (49) (2,139) 27.2 Cash flows from discontinued operations Net cash generated from operations (306) 73 (233) Net cash outflows from investing activities (86) (3) (89) Net cash outflows from financing activities - (4) (4) Net (decrease)/increase in cash and cash equivalents (392) 66 (326) 27.3 Effects of discontinued operations on the financial position of the Group Property, plant and equipment 2,267 17 2,284 Inventories 560 - 560 Trade and other receivables 413 20 433 Total assets classified as held for sale 3,240 37 3,277 Deferred tax liabilities 612 - 612 Borrowings - third party - 10 10 Trade and other payables 212 13 225 Total liabilities classified as held for sale 824 23 847 Net assets 2,416 14 2,430 64 AICO Africa Limited
  • 67. Notes to the Financial Statements For the Year Ended 31 March 2010 28 Finance lease liabilities - third party The Group has entered into commercial leases on certain motor vehicles. These leases have an average life of three years with no renewal option included in the contracts. There are no restrictions placed upon the Group by entering into these leases. Future minimum lease payments under the finance leases together with the present value of the net minimum payments are as follows: GROUP COMPANY 31 March 31 March 31 March 31 March 2010 2009 2010 2009 US$'000 US$'000 US$'000 US$'000 Minimum lease payments Within one year 518 - - - In second to fifth year inclusive 258 - - - 776 - - - Less unearned finance expense - - - - Present value of minimum lease payments 776 - - - Allowance for uncollectible lease payments - - - - 776 - - - Present value minimum lease payments Within one year 518 - - - In second to fifth year inclusive 258 - - - 776 - - - Less unearned finance expense Present value of minimum lease payments 776 - - - Allowance for uncollectible lease payments - - - - 776 - - - Included in the financial statements as: Current finance lease payables 518 - - - Non-current finance lease payables 258 - - - 776 - - - 29. Prior year Zimbabwean economic environment and resultant limitations in financial reporting effectiveness The uncertainties in the adverse Zimbabwean economic envir onment in the prior year resulted in limitations in financial reporting. The inflation indices applicable to the Zimbabwe dollar were not published since 31 July 2008 through to the introduction of the multi-currency regime in January 2009 and beyond. Estimates by economists of Zimbabwe dollar inflation in the period post 31 July 2008 were wide ranging and extremely high (percentages in excess of hundreds of trillions to quadrillions, in some cases). It was impossible to reliably measure inflation in Zimbabwe during this period because the rate of change of inflation on a daily basis was extremely high. Any attempt to measure inflation was subject to various limitations because reliable and timely price data was not available. The inability to r eliably measure inflation was also exacerbated by the existence of multiple exchange rates, the use of for eign currency for some transactions and the existence of multiple pricing criteria for similar products based on the mode of settlement. With effect from 1 October 2008, the Group changed its functional currency from Zimbabwe dollars to US dollars. This change occurred on the basis of the evaluation that the United States dollar better represents the currency of the primary economic environment in which the Group operates. On 29 January 2009, the monetary and fiscal authorities authorised the use of multiple foreign currencies for trading in Zimbabwe. This resulted in a change in functional currency for most entities reporting in Zimbabwe. In accordance with the requirements of International Financial Reporting Standards (IFRS’s), entities are required to convert Annual Report 2010 65
  • 68. Notes to the Financial Statements For the Year Ended 31 March 2010 their financial statements into the new functional currency at the date of changeover. For practical reasons, the Group’s: • opening balances were converted from Zimbabwe dollars to United States dollars using the Old Mutual Implied Rate (OMIR) as at 1 April 2008; and • monetary assets and liabilities were carried forward as at 1 April 2008 by converting the various currency balances at the exchange rates prevailing at that date. As a result of these uncertainties and inher ent limitations, the Directors could not fully comply with IFRS as mor e fully explained below: IAS 1 - Presentation of Financial Statements Comparative financial information and statements of cash flows w ere not presented as part of the Company and Group results for the year ended 31 March 2009 as the Directors concluded that compliance with the requirements of this standard would have been so misleading that it would have conflicted with the objective of fair pr esentation in accordance with the Framework for the Preparation and Presentation of Financial Statements. Consequently, comparative information for the statements of cash flows for the year ended 31 March 2010 have not been presented. IAS 21 - The Effects of Changes in Foreign Exchange Rates Income statement balances were converted to United States dollars using average monthly exchange rates pr evailing during the year ended 31 March 2009. IAS 21, which permits the use of an average exchange rate in converting income statement transactions, states that the use of an average exchange rate is inappropriate where exchange rates fluctuate significantly. Exchange rates were highly volatile during that period and numer ous exchange rates emerged where the variations were dependent on the mode of settlement used (cash, bank transfer or cheque). AICO's transactions wer e settled using these various means, which r esulted in varying nominal amounts being r ecorded in Zimbabwe dollars for similar transactions. Use of average exchange rates, ther efore, represented a departure from the requirements of IFRS. The financial effects of this departure could not be formally established. IAS 29 - Financial Reporting in Hyperinflationary Economies Due to unavailability of inflation indices, the Company and Group did not prepare inflation adjusted accounts for the period to 30 September 2008, being the period r elating to the year ended 31 Mar ch 2009, that the economic envir onment in Zimbabwe was hyperinflationary. 30 Limitations of financial reporting As explained in note 29, the Company and Group operated under a hyperinflationary economy in the prior year Consequently, . the comparative income statements and the comparative statements of comprehensive income have not been prepared in conformity with the requirements of IAS 29 and IAS 21 due to: • the inability to reliably measure inflation because of the interaction of multiple economic factors which were pervasive to the Zimbabwean economic environment as explained in note 29; and • the inability to adjust items that wer e recorded in Zimbabwe dollars into United States dollars at the date of change of functional currency, as more fully explained in note 29. Therefore, the information in respect of prior periods cannot be compared to the current year's financial information as it may not be measured on the same basis of accounting. 31 Comparative information The Directors have not pr esented comparative information for the statements of cash flows as they believe that this information may be misleading as more fully explained in note 29. 66 AICO Africa Limited
  • 69. Shareholders Analysis As at 31 March 2010 2009 2010 Shareholders Shares held Shareholders Shares held Number % Number % Number % Number % Shareholders Profile 0-100 3,080 22.25% 180,776 0.03% 3539 24.08% 200,342 0.04% 101-200 2,142 15.47% 322,665 0.06% 2,324 15.81% 348,521 0.07% 201-500 2,937 21.22% 901,040 0.17% 3,057 20.80% 938,580 0.18% 501-1 000 2,334 16.86% 1,612,658 0.30% 2,376 16.16% 1,640,127 0.31% 1 001-5 000 2,082 15.04% 4,653,559 0.88% 2,158 14.68% 4,782,833 0.90% 5 001-10 000 500 3.61% 3,469,575 0.65% 502 3.42% 3,485,069 0.66% 10 001-50 000 480 3.47% 10,305,934 1.94% 456 3.10% 9,592,909 1.81% 50 001-100 000 108 0.78% 7,480,538 1.41% 101 0.69% 7,054,570 1.33% 100 001-1 000 000 113 0.82% 24,377,311 4.60% 123 0.84% 26,327,792 4.96% 1 000 001-10 000 000 29 0.21% 20,418,400 3.85% 22 0.15% 15,872,360 2.99% 10 000 001-100 000 000 28 0.20% 96,071,960 18.11% 32 0.22% 115,956,816 21.83% Above 100 000 000 9 0.07% 360,717,626 67.99% 9 0.06% 344,865,190 64.94% Total 13,842 100.00% 530,512,042 100.00% 14,699 100.00% 531,065,109 100.00% Analysis by category Banks, insurance companies, nominees and pension funds 304 202,745,443 38.22% 315 315,078,100 59.33% Local companies 349 9,950,979 1.88% 423 81,274,397 15.30% Individuals and trusts 13,168 317,780,588 59.90% 13,910 80,622,689 15.18% Non-resident investors 21 35,032 0.01% 21 54,089,923 10.19% Total 13,842 530,512,042 100.00% 14,669 531,065,109 100.00% Resident 13,821 530,477,010 99.99% 14,648 476,975,186 89.81% Non-resident 21 35,032 0.01% 21 54,089,923 10.19% Total 13,842 530,512,042 100.00% 14,669 531,065,109 100.00% Major shareholders National Social Security Authority 114,236,172 21.53% 110,513,836 20.81% Old Mutual Life Assurance Co Zim Limited 64,130,413 12.09% 57,760,464 10.88% Kensington Acquisitions Ltd-NNR, C/O Addington Chinake Ref:05/422 50,000,000 9.42% 50,000,000 9.42% Burket Associates Limited NNR 40,266,667 7.59% 40,266,667 7.58% Caperal Limited NNR 27,119,370 5.11% 27,119,370 5.11% Barclays Zimbabwe Nominees (Private) Limited 309,630 0.06% 36,206,725 6.82% Old Mutual Life Assurance Company Zimbabwe 19,830,516 3.74% 13,768,083 2.59% Old Mutual Zimbabwe Limited 12,484,748 2.35% 12,787,778 2.41% Stanbic Nominees (Private) Limited 6,015,104 1.13% 10,178,257 1.92% Datvest Nominees (Private) Limited 6,994,183 1.32% 9,016,182 1.70% Zimcapital Limited 7,789,062 1.47% 12,789,062 2.41% Msasa Nominee (Private) Limited 9,302,992 1.75% 7,016,531 1.32% Manrique Investments (Private) Limited 5,933,334 1.12% 5,933,334 1.12% Dinnigan Investments (Private) Limited 7,538,262 1.42% 5,788,262 1.09% Minning Industry Pension Fund 4,303,536 0.81% 5,526,743 1.04% Tagneil 4,333,334 0.82% 4,333,334 0.82% Extern Investments 3,666,667 0.69% 3,666,667 0.69% Crisbibe Investments (Private) Limited 3,333,334 0.63% 3,333,334 0.63% Equivest Nominees (Private) Limited 2,989,528 0.56% 3,139,208 0.59% Renaissance Securites Nominees Two (Private) Limited 3,885,086 0.73% 3,033,041 0.57% Sub total 394,461,938 74.35% 422,176,878 79.50% Other shareholders 136,050,104 25.65% 108,888,231 20.50% Total 530,512,042 100.00% 531,065,109 100.00% Directors' shareholding B Mudzimuirema 552,942 568,906 Total 552,942 568,906 SHAREHOLDERS’ CALENDAR Annual General Meeting August 2010 Publication of interim results for the 6 months to September 2010 November 2010 Publication of audited full year results for the 12 months to March 2011 June 2011 Annual Report 2010 67
  • 70. Notes 68 AICO Africa Limited
  • 71. Corporate Directory HEAD OFFICE 1st Floor, SAZ Building, Northend Close, Northridge Park, Borrowdale, Harare. Box BW537, Borrowdale, Harare Tel: 263-4-852795, 853054-6, 853059 Fax: 263-4-850705 Email: info@aicoafrica.com SUBSIDIARIES The Cotton Company of Zimbabwe Limited 1 Lytton Road, Workington, Harare P O Box 2697, Harare Tel: 04-771981-5, 748682-3 Tellular lines: 0912 233 547/8 Fax: 04-753854, 708573, 707203, 748900 Email: cottco@cottco.co.zw www.thecottoncompany.com Seed Co Limited Shamwari Road, Stapleford, Harare P O Box WGT 64, Westgate, Harare Tel: 04-308881-8, 308891-7, Fax: 04-304841 Scottco (Private) Limited 3 Gleneagles Road, Southerton, Harare P O Box ST521, Southerton, Harare Tel: 04-620026/7, 666835, 666537, Fax: 04-620028 Exhort Enterprises (Private) Limited Corner Mutiti Drive/J. Tongogara Road, Ruwa Tel: 073-2491/2, 073-2744, Fax 073-2251 Cottco International Limited Ebene House, 3rd Floor, 33 Cybercity, Ebene, Mauritius Tel: +230 467 4693, F ax: +230 466 8443 JOINT OPERATIONS Olivine Holdings (Private) Limited 36 Birmingham Road, Southerton, Harare P O Box 797, Harare Tel: 04-754568, 757100, 754556 Annual Report 2010 69
  • 72. www.aicoafrica.com