REIZ: 2011 Annual report

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REIZ: 2011 Annual report

  1. 1. Farmers House Plc and its subsidiaries Consolidated financial statements for the year ended 31 March 2011
  2. 2. Farmers House Plc and its subsidiariesConsolidated financial statementsfor the year ended 31 March 2011Contents PageNotice of Annual General Meeting – 28th June 2011 1Minutes of the Twenty-eighth Annual General Meeting – 30th June 2010 2 – 10Minutes of the Extraordinary General Meeting – 14th June 2010 11 – 13Company information 14Directors’ report 15 - 17Statement on corporate governance 18 – 20Directors’ responsibility statement 21Report of the auditors to the members of Farmers House Plc 22 - 23Consolidated statement of comprehensive income 24Consolidated statement of financial position 25Consolidated statement of changes in equity 26Consolidated statement of cash flows 27Notes to the financial statements 28 – 66
  3. 3. Farmers House Plc and its subsidiariesNotice is hereby given that the Twenty-ninth Annual General Meeting of Farmers House Plc willtake place at Southern Sun, Ridgeway Hotel, Lusaka on Tuesday 28th June 2011 at 10:00 Hrs. AGENDA1) To read the Notice of the Meeting.2) To read and approve the minutes of the Twenty-eighth Annual General Meeting held on 30th June 2010.3) To consider any matters arising from these minutes.4) To read and approve the minutes of the Extraordinary General Meeting held on 14th June 2010.5) To consider any matters arising from these minutes.6) To receive the Report of the Directors, the Auditors Report and the Financial Statements for the year ended 31st March 2011.7) To appoint Auditors for the ensuing year and to authorise the Directors to fix their remuneration.8) To elect Directors to fill any vacancies. In terms of the Articles Mr. Kenny H. Makala, Mr. Robin P.S. Miller, and Mr. Patrick Wanjelani retire. Mr. Kenny H. Makala, Mr. Robin P.S. Miller, and Mr. Patrick Wanjelani, being eligible, offer themselves for re-election.9) To approve the Directors’ remuneration.10) To declare a Final Dividend. The proposed Final Dividend of K65 per share, if approved, will be declared payable to members registered in the books of the Company on close of business on 27th June 2011. Warrants in payment will be posted for payment on or about 31st August 2011. The transfer books and register of members will be closed from 27th June 2011 – 8th July 2011 (both dates inclusive).11) To consider any competent business of which due notice has been given.BY ORDER OF THE BOARDRobin P.S. MILLER - Managing DirectorArticle 16.1“A member entitled to attend and vote is entitled to appoint a proxy, who need not also be a member, toattend and vote instead of him.” Proxies must be lodged at the registered office of the company at least48 hours before the time fixed for the meeting. Proxy forms are included with the Annual Report.Article 24.5“No person other than a Director retiring at the meeting shall, unless recommended by the Directors, beeligible for election to the office of Director at any general meeting, unless not less than 21 days beforethe date appointed for the meeting there has been left at the Registered Office notice in writing signedby a member (not being the person to be proposed) duly qualified to attend and vote at the meeting, ofhis intention to propose the person for election, and a notice in writing signed by that person of hiswillingness to be elected.” 1
  4. 4. Farmers House Plc and its subsidiariesMinutes of the Twenty-eighth Annual General Meeting of Farmers House Plc held at SouthernSun, Ridgeway Hotel, Lusaka on Wednesday 30th June 2010 at 10:00 Hours.Directors PresentMr. Richard D. Frost - ChairmanMr. Robin P.S. Miller - Managing DirectorMr. Kenny H. Makala - DirectorMr. Timothy T Mushibwe - DirectorMr. Munakupya Hantuba - DirectorApologies (Directors)Ms. Doreen Kabunda - DirectorMr. William P. Saunders - DirectorMr. Patrick Wanjelani - DirectorShareholders Present NAME REPRESENTING Mr. Morris S. Mulukutu Self Mr. Charles P. Youngson Self Mr. Bruce Landless Self Mr. Eran S. Kanjanga Self Mr. Sidney Chileshe Self Mr. Lindunda Ngenda Self Mr. Nelly Phiri Self Mr. Christine Musambachime Self Mr. Aggai Nzonzo Self Mr. Ackim Nyagonye Self Mr. Frank Arthur Green Self Mr. Joseph Chiliava Proxy Workers Compensation Fund Ms. M.D Landless Proxy Arimex International Ltd Ms. Lindani Kamwi Proxy Mr. Aniel F.S Kamwi Mr. Jack Kanyanga Proxy Saturnia Regna Pension Trust Mr. Jack Kanyanga Proxy Konkola Copper Mines Pension Trust Mr. Patrick Serere Proxy Barclays Bank Staff Pension Scheme Mr. Patrick Serere Proxy Stanbic Bank Retirement Benefit Scheme Mr. Patrick Serere Proxy Chilanga Cement Pension Trustees Mr. Patrick Serere Proxy CEC Pension Trust Scheme Mr. Patrick Serere Proxy Standard Chartered Pension Trust Fund Mr. Patrick Serere Proxy Sun International Pension Trust Fund Mr. Patrick Serere Proxy Children Christian Fund Ms. Makwebo Minja Proxy National Pension Scheme Authority Mr. Munakupya Hantuba Proxy Sinyuka Property Development & Management Company 2
  5. 5. Farmers House Plc and its subsidiariesMinutes of the Twenty-eighth Annual General Meeting of Farmers House Plc held at SouthernSun, Ridgeway Hotel, Lusaka on Wednesday 30th June 2010 at 10:00 Hours (continued)Apologies (Shareholders)Mr. Nicholas Beckett - Momba Farms LimitedMr. Michael Beckett - SelfMr. Newton Barton Young - SelfIn Attendance:Mr. Alf Francis - Amazon Associates Limited (Transfer Secretary)Mr. Hastings Mtine - KPMG (Auditor)Mr Sydney E. Popota - City Investments LimitedMs. Ottilia Moyo - City Investments LimitedMr. Alex Kabwiku - Minerva Property Management CompanyMr. Rudie Nortje - Minerva Property Management CompanyMr. Chanda Mutoni - Stockbrokers Zambia LimitedMrs. R. Malukutu - GuestMr. Mataka Nkhoma - African AllianceMr. Davis Daka - Intermarket SecuritiesMr. Joseph Lungu - Intermarket SecuritiesMrs. S.C Frost - GuestMaimbolwa Mulikelela - Times of ZambiaNchimunya Muganya - Times of ZambiaNkole Chitala - Zambia Daily Mail 1.00 To read the Notice of the Meeting 1.01 The Chairman called the meeting to order and welcomed the Shareholders, Directors, and everyone in attendance to the Twenty-eighth Annual General Meeting. 1.02 The Chairman called upon the Managing Director to read the notice of the meeting and to inform the meeting of any proxies and apologies. 1.03 The Managing Director recognised the presence of Mr. A.L Francis and Mr. Hastings Mtine. He proceeded to announce the apologies received from the Directors and the Shareholders as recorded above. 1.04 The Managing Director read the notice of the meeting and stated that there was one amendment to the agenda: Item 11, Resolution 11.4, amend “Article 23.7” to read “Article 24.7”. 1.05 There being no objections, the agenda was unanimously adopted. 1.06 The Managing Director read out the proxies received as recorded above. 2.00 To read and approve the minutes of the Twentieth-seventh Annual General Meeting held on 30th June 2009. 2.01 The Chairman recommended that the minutes should be taken as read. No objection to this proposal was received from shareholders. 2.02 The minutes were unanimously adopted, with no corrections required, on the proposal of Mr. Patrick Serere and seconded by Mr. Bruce Landless. 3
  6. 6. Farmers House Plc and its subsidiariesMinutes of the Twenty-eighth Annual General Meeting of Farmers House Plc held at SouthernSun, Ridgeway Hotel, Lusaka on Wednesday 30th June 2010 at 10:00 Hours (continued)3.00 To consider any matters arising from the minutes3.01 There were no matters arising from the minutes of the Twenty-seventh Annual General Meeting. The Chairman proceeded to the next item on the agenda.4.00 To read and approve the minutes of the Extraordinary General Meeting held on 15th December 2009.4.01 The Chairman recommended that the minutes should be taken as read. No objection to this proposal was received from shareholders.4.02 The minutes were unanimously adopted on the proposal of Mr. Frank A. Green and seconded by Mr. Jack Kanyanga.5.00 To consider any matters arising from these minutes.5.01 Mr. Jack Kanyanga sought to know the progress made regarding the resolutions passed to raise capital.5.02 The Managing Director responded that an offer circular for a corporate bond would be distributed within the next 6 weeks. He added that the corporate bond would be a rights offer.5.03 The Managing Director reported that there was still some work to be done on the equity capital raise hence the company would go to the market to raise equity at a later stage.5.04 Mr. Jack Kanyanga sought to know what had been done regarding the proposed transformation of Farmers House Plc into a Loan Stock company.5.05 The Managing Director referred the meeting to item 3.00 of the Extraordinary General Meeting (EGM) and pointed out that this matter had been addressed as reported upon in that meeting. He stated that Zambian tax legislation does not allow for such structures.5.06 The Managing Director stated that the forth coming corporate bond was as a direct response to the benefits sought by pension fund shareholders from a Loan Stock company.5.07 Mr. Jack Kanyanga stated that he felt that the idea of Property Loan Stock company was not being pursued aggressively.5.08 The Managing Director referred the meeting to item 3.06 where it was reported to the EGM that what was required to get the tax shield being sought by pension funds was an industry- wide approach to the Government and to the Zambia Revenue Authority under the leadership of Pension Funds.5.09 The Chairman stated that if Pension Funds were so eager to drive the process themselves, they could consider buying out everyone else, as such structures do not necessarily apply to individual shareholders, who do currently benefit from the tax regime that applies to LuSE listed companies. 4
  7. 7. Farmers House Plc and its subsidiariesMinutes of the Twenty-eighth Annual General Meeting of Farmers House Plc held at SouthernSun, Ridgeway Hotel, Lusaka on Wednesday 30th June 2010 at 10:00 Hours (continued)5.10 Mr. Charles P. Youngson sought to know what percentage of the Company was owned by Pension funds.5.11 The Managing Director referred the meeting to page 28 of the annual report were it was noted that it was about 80%.5.12 Mr. Patrick Serere stated that the Property Loan Stock Company would not only benefit pension funds but all other shareholders as well.5.13 The Chairman stated that the bottom line was that a Property Loan Stock Company was not allowable at the moment hence it should not only be Farmers House Plc that should be lobbying for legislation but other players such as pension funds who might even have a heavier voice than Farmers House Plc alone.6.00 To receive the Report of the Directors, the Auditors Report and the Financial Statements for the year ended 31st March 2010.6.01 The Chairman read the Directors’ report and called for questions from the floor.6.02 Mr. Patrick Serere sought to know how the properties that had been bought fitted into the targeted portfolio.6.03 The Managing Director responded that the two properties that had been bought so far included: 1. Eureka which was intended to be rehabilitated into wholesale and warehousing facilities; and 2. Thistle Land Development Company Limited (Counting House Square) which was still in the process of completion awaiting clearance from the Zambia Competition Commission.6.04 The Managing Director reported that the Board had determined that there are five targeted development nodes in Lusaka as follows: 1. Central Park and “down town”; 2. Zain and Stanbic Bank developments along Addis Ababa road; 3. Corner of the show grounds and Thabo Mbeki roads; 4. Further east, towards Chelston and the airport; and 5. Eureka Park & the Lilayi area.6.05 The Managing Director added that the sixth node is to look at projects outside Lusaka and since Farmers House was “overweight” on office space, the Board was also looking at opportunities in residential and industrial properties.6.06 The Chairman highlighted that the current management structure of Farmers House only has one employee – the Managing Director, Mr. Robin Miller. He stated that the Board had recognised the need to alter the management structure to suit the present nature of the Company hence the appointment of the Management Structure Committee of the Board (MSCB) headed by Ms. Doreen Kabunda.6.07 As there were no further comments, the Directors’ report was approved on the proposal of Mr. Lindunda Ngenda and seconded by Mr. Frank A. Green. 5
  8. 8. Farmers House Plc and its subsidiariesMinutes of the Twenty-eighth Annual General Meeting of Farmers House Plc held at SouthernSun, Ridgeway Hotel, Lusaka on Wednesday 30th June 2010 at 10:00 Hours (continued)6.08 Mr. Charles P. Youngson proposed a vote of thanks to the entire Board and particularly the Chairman, Mr. R.D Frost for the job well done for many years.6.09 The Chairman stated that he was humbled and it was so because he was assisted by a very efficient management and a strong Board of Directors.6.10 The Auditor’s Report6.11 The Chairman called upon KPMG’s senior partner, Mr. Hastings Mtine to present the Auditor’s Report.6.12 Mr. Mtine apologised for not having been around during the Annual General Meeting of the previous year (2009).6.13 Mr. Mtine read the Auditor’s Report and gave explanations on the various parts of the report.6.14 Mr. Mtine called upon the Managing Director to take the shareholders through the detail of the financial statements.6.15 In his presentation of the financial statements, the Managing Director explained the following with reference to the respective notes; 1. The five year financial summary; 2. Statement of comprehensive income; and 3. Statement of financial position.6.16 Mr. Charles P. Youngson asked whether tax was payable on revaluation surplus.6.17 The Managing Director responded that no tax was payable on revaluation surplus because it was not realised income.6.18 The Auditor’s Report and financial statements for 2010 were approved on the proposal of Mr. Jack Kanyanga and seconded by Mr. Charles P. Youngson.7.00 To appoint Auditors for the ensuing year and to authorise the Directors to fix their remuneration.7.01 KPMG were retained as Auditors for the year 2010/11 and Directors were authorised to fix their remuneration on the proposal of Mr. Robin Miller and seconded by Mr. B. Landless.8.00 To elect Directors to fill any vacancies. In terms of the Articles Mr. R.D Frost, Mr. M. Hantuba and Mr. W.P Saunders retire. Mr. M. Hantuba and Mr. W.P Saunders, being eligible, offer themselves for re-election. Mr. R.D Frost retires and the Directors recommend Ms. D.A Bwalya for election in his place.8.01 The Chairman asked the Managing Director to confirm whether or not there were any further nominations to which the Managing Director reported that there were none.8.02 The Managing Director reported to the Shareholders that Ms. D.A Bwalya is a lawyer and the current company secretary of Konkola Copper Mines (KCM). 6
  9. 9. Farmers House Plc and its subsidiariesMinutes of the Twenty-eighth Annual General Meeting of Farmers House Plc held at SouthernSun, Ridgeway Hotel, Lusaka on Wednesday 30th June 2010 at 10:00 Hours (continued)8.03 Mr. M. Hantuba, Mr. W.P Saunders and Ms. D.A Bwalya were duly elected to the Board on the proposal of Mr. Patrick Serere and seconded by Mr. Frank A. Green.8.04 The Chairman congratulated the three Directors on their election to the Board.9.00 To approve the Directors’ remuneration.9.01 The Managing Director referred the Shareholders to note 8 of the financial statements on page 56 and explained the 6% increase in the Directors’ fee expense as being due to extra meetings held during the year.9.02 The Directors’ remuneration was approved on the proposal of Mr. Frank A. Green and seconded by Mr. Sidney Chileshe.10.00 To declare a Final Dividend. The proposed Final Dividend of K60 per share, if approved, will be declared payable to members registered in the books of the company on close of business on 29th June 2010. Warrants in payment will be posted for payment on or about 31st August 2010. The transfer books and register of members will be closed from 29th June 2010 – 7th July 2010 (both dates inclusive).10.01 The Managing Director presented the Board’s recommendation of a proposed final dividend of K60/share. He stated that an interim dividend of K50/share was paid in January 2010 giving a total dividend of K110/share for the year 2009/10.10.02 The proposed final dividend of K60 per share was approved on the proposal of Ms. Nelly Phiri and seconded by Ms. Christine Musambachime.11.00 To consider the amendment of Articles of Association by adoption of Special Resolutions 11.1 to 11.711.01 Special Resolution for the Annual General Meeting of Farmers House Plc held on the 30th of June 201011.02 The Chairman, Mr. R.D. Frost, on behalf of the Directors of Farmers House Plc proposed by special resolution the following amendments to the Articles of Association in order to align them to prevailing corporate governance best practices:11.03 Resolution 11.111.04 That the Articles of Association of Farmer’s House Plc be amended by the inclusion of the following new Articles:11.05 Article 19. MEMBER’S REGISTER 19.1 The Company shall keep at its Registered Office, a register of all the members of the Company. 19.2 The Register shall state the full names of a member, number of shares held and the address of such member. 19.3 The register shall be available for inspection to all members as and when requested. 7
  10. 10. Farmers House Plc and its subsidiariesMinutes of the Twenty-eighth Annual General Meeting of Farmers House Plc held at SouthernSun, Ridgeway Hotel, Lusaka on Wednesday 30th June 2010 at 10:00 Hours (continued)11.06 Resolution 11.1 was adopted on the proposal of Mr. Charles P. Youngson and seconded by Ms. Makwebo Minja.11.07 Resolution 11.211.08 That Article 19.1 of the Articles of Association of Farmer’s House Plc be amended to raise the minimum number of directors at any one time from two (2) to five (5), and to establish a maximum number of Directors as eight (8). Article 19 will become Article 20 as follows:11.09 Article 20. DIRECTORS 20.1 Unless otherwise determined by ordinary resolution, the number of Directors (other than alternate Directors) shall be subject to a maximum number of eight but shall not be less than five. 20.2 The Directors shall elect from amongst themselves every two years, a Chairperson and Vice-Chairperson of the Board.11.10 Articles 19.2 – 19.12 are Articles 20.3 – 20.13 in the new articles.11.11 Resolution 11.2 was adopted on the proposal of Mr. Charles P. Youngson and seconded by Mr. Sidney Chileshe.11.12 Resolution 11.311.13 That Article 22.1 be amended by deleting the words “chairman, vice-chairman,” in line 3 of the first sentence.11.14 Further that Article 22.1 of the Articles of Association of Farmers House Plc be amended by deletion of the words “or any other salaried office” in line 5 of the first sentence.11.15 Article 22.1 is Article 23.1 in the revised Articles.11.16 Further that a new Article 23.2 be inserted into the Articles to read as follows: 23.2 The number of Executive Directors on the Board at any one time shall not exceed the number of Non-executive Directors.11.17 Articles 22.2 – 22.3 are Articles 23.3 & 23.4 in the revised Articles.11.18 Resolution 11.3 was adopted on the proposal of Mr. Lindunda Ngenda and seconded by Ms. Nelly Phiri.11.19 Resolution 11.411.20 That Article 23.1 of the Articles of Association of Farmer’s House Plc be amended by deleting the reference to “Article 22.7” and substituting it with the reference to “Article 23.7”.11.21 Article 23.1 is Article 24.1 and Article 23.2 to Article 23.8 are Articles 24.2 to 24.8 in the revised Articles. 8
  11. 11. Farmers House Plc and its subsidiariesMinutes of the Twenty-eighth Annual General Meeting of Farmers House Plc held at SouthernSun, Ridgeway Hotel, Lusaka on Wednesday 30th June 2010 at 10:00 Hours (continued)11.22 Resolution 11.4 was adopted on the proposal of Mr. Jack Kanyanga and seconded by Mr. Charles P. Youngson.11.23 Resolution 11.511.24 That Article 24.3 of the Articles of Association of Farmer’s House Plc be amended to instead read “The quorum necessary for the transaction of the business of the Directors shall be 50% + 1 of the composition of the Board.”11.25 Article 24.3 is Article 25.3 in the revised Articles.11.26 Resolution 11.5 was adopted on the proposal of Ms. M.D Landless and seconded by Mr. Mr. Patrick Serere.11.27 Resolution 11.611.28 That a new Article 25.9 be inserted into the Articles of Association of Farmer’s House Plc as follows: Article 25.9 The Board shall establish the following committees of the Board, the Audit and Risk Management Committee, the Executive Committee, the Nomination Committee, the Remuneration Committee and any other Committees that the Board might deem necessary for the efficient and effective running of Board affairs. Article 25.9.1 The Board will determine the composition, structure and the terms of reference of such Committees as and when they are established.11.29 Article 24.9 is Article 25.10 in the revised Articles. Resolution 11.6 was adopted on the proposal of Mr. Lindunda Ngenda and seconded by Ms. Lindani Kamwi.11.30 Resolution 11.711.31 That as a result of the inclusion of the new Articles introduced under Resolution 11.1 to Resolution 11.6 above, the Articles of Association of Farmer’s House Plc be amended by renumbering the parts of the Articles affected by the inclusions.11.32 Resolution 11.7 was adopted on the proposal of Mr. Sidney Chileshe and seconded by Mr. Frank Arthur Green.12.0 To consider any competent business of which due notice has been given.12.01 The Managing Director reported that there had been no notice of other competent business. 9
  12. 12. Farmers House Plc and its subsidiaries Minutes of the Twenty-eighth Annual General Meeting of Farmers House Plc held at Southern Sun, Ridgeway Hotel, Lusaka on Wednesday 30th June 2010 at 10:00 Hours (continued) 12.02 The Managing Director thanked Mr. R.D Frost for the many years of service he had offered to the Company giving a background to his involvement in the various names and forms that the Company had gone through from North Western Rhodesia Farmers Cooperative, Farmers House Limited and now Farmers House Plc. 12.03 The Managing Director reported that Farmers House Plc was the second company to list on the Lusaka Stock Exchange. 12.04 The Managing Director reported that under Mr. R.D Frost’s leadership, the Company had issued a number of “firsts” and the Zambian capital market – successful Corporate Bond and Preference Share issues among other capital raising mechanisms. He stated that on behalf of the Board and the Shareholders, it was his pleasure to present a small gift to Mr. Frost for all his work over the years. 12.05 In response, Mr. Frost stated that it had been a wonderful experience and he wished to recognise the contributions of others including: 1. Mr. Oliver Irwin 2. Mr. Reg Holmes (Late) 3. Mr. Peter Miller (Late) 4. Mr. Michael Galaun (who sat and then recommended Mr. K.H Makala and Mr. R. Daya to the Farmers House Board) 5. Many others that he could not mention by name 12.06 Mr. Frost stated that the efficiency of the present management team and the competence of the Board of Directors had made the job of the Chairman easy. 12.07 Mr. Frost stated that he believed he was leaving the Company clean without any skeletons in the cupboard. 12.08 Shareholders rose to their feet in acclamation of the many years’ work of Mr. Frost. 12.09 The Chairman thanked the Shareholders and all those in attendance, and there being no further business to discuss declared the meeting closed at 11:53.Chairman__________________________________Date____________________________ 10
  13. 13. Farmers House Plc and its subsidiariesMinutes of the Extraordinary General Meeting of Farmers House Plc held at Southern SunRidgeway Hotel, Lusaka on Monday 14th June 2010 at 14:30 hours.Directors Present: Mr. Richard D. Frost - Chairman Mr. Robin P.S. Miller - Managing Director Mr. Timothy T. Mushibwe - Director Mr. Munakupya Hantuba - DirectorApologies: Mr. Kenny H. Makala - Director Mr. Patrick Wanjelani - Director Ms. Doreen Kabunda - Director Mr. William P. Saunders - DirectorShareholders: Mr. Ngenda Lindunda - Self Mr. Aggai Nzonzo - Self Mr. Charles Mate - Self Mr. Chiti Nzima - Self Mr. Eran S. Kanjanga - Self Ms. Siphiwe Nkunika - Self Ms. Susan Mackenzie - Arimex International Mr. Alf Francis - Alice Patricia Park Mr. Frank A. Green - Self - J.D Hewitt Mr. Robin P.S. Miller - Self - Stenham Trustees Limited - M.A Miller Mr. Jack Kanyanga - Saturnia Regna Pension Trust Limited - KCM Pension Trust Scheme Mr. Patrick Serere - Barclays Bank Staff Pension Trust Fund - Stanchart Bank Pension Trust FundIn Attendance: Mr. Alf Francis - Amazon Associates Limited Mr. Sydney E. Popota - City Investments Ltd Mr. Girish Nair - City Investments Ltd Mr. Chitalu Chisanga - Pangaea Renaissance Ms. S. Randee - Pangaea Renaissance Mr. Arshad Dudhia - Musa Dudhia & Co Ms. C. Musonda - Musa Dudhia & Co Mr. Charles Mate - Stockbrokers Zambia Limited Mr. Chanda Mutoni - Stockbrokers Zambia Limited Mr. Dave Clements - Minerva Property Management Co. Ltd Mr. Rudie Nortje - Minerva Property Management Co. Ltd 1.00 To read the Notice of the Meeting 1.01 The Chairman declared the meeting open and welcomed the Shareholders, Directors, and everyone in attendance to the Extraordinary General Meeting. 1.02 The Chairman called upon the Managing Director to read the notice of the meeting. 1.03 After reading the notice of the meeting, the Managing Director called upon Mr. Girish Nair, Company Secretary to read proxies received as noted above. 11
  14. 14. Farmers House Plc and its subsidiariesMinutes of the Extraordinary General Meeting of Farmers House Plc held at Southern SunRidgeway Hotel, Lusaka on Monday 14th June 2010 at 14:30 hours (continued)1.04 Responding to the Chairman’s question, the Managing Director confirmed that the quorum had been met.2.00 To consider the proposed Acquisition, and if deemed appropriate, pass a resolution to approve the Acquisition.2.01 The Chairman asked the floor to take the circular regarding the proposed acquisition of Thistle Land Development Ltd (“Thistle”) as read. This was unanimously agreed upon on the proposal of Mr. Patrick Serere and seconded by Mr. Ngenda Lindunda.2.02 The Chairman then drew the attention of the members to item 6 on page 9 of the circular – “Opinions and voting recommendations of the Independent Directors” and read the following; “The Independent Directors consider the Transaction and Acquisition to be fair and reasonable insofar as the Shareholders of Farmers House Plc are concerned and to be in the best interests of the Company’s future performance. Accordingly, the Independent Directors recommend that the Shareholders vote in favour of the Acquisition at the EGM to be held on Monday 14 June 2010, as they have undertaken to do in respect of their own shareholdings.”2.03 The Chairman asked if there were any questions from the floor.2.04 Mr. Jack Kanyanga asked the following questions: 1. He stated that a look at the Income Statement of Thistle Land Development Company Ltd contained in the circular reviews that expenses are too high at about 40% of operating income. He wondered how Farmers House Plc was going to manage this matter going forward. 2. He asked for a clarification of what Farmers House Plc was actually acquiring, particularly whether the acquisition of shares meant the acquisition of liabilities thereby reducing the net asset value. He referred to the headline “Salient features of the Acquisition” on page 6 and the headline “Mechanics of the Acquisition” on page 8 of the circular. 3. He wished to know what other costs would be suffered by Farmers House Plc in addition to the purchase price and whether Farmers House Plc would be taking on any liabilities related to employees.2.05 The Managing Director gave the following responses while recognising the presence of Mr. Charles Mate of Stockbrokers Zambia Limited and Mr. Arshad Dudhia of Musa Dudhia and Company both of whom are members of the advisory team to add any further clarifications they may have. 1. He stated that Thistle Land Development Company Limited is a special purpose vehicle. He was in agreement with Mr. Kanyanga that the costs were high but he stated that included in the operating costs were cost such as professional fees, depreciation and other costs that would not be continuing at the same level going forward. He stated that operating costs were expected to reduce moving forward. Mr. Kanyanga confirmed that he was satisfied with the explanation. 12
  15. 15. Farmers House Plc and its subsidiariesMinutes of the Extraordinary General Meeting of Farmers House Plc held at Southern SunRidgeway Hotel, Lusaka on Monday 14th June 2010 at 14:30 hours (continued)2.05 2. The Managing Director read the definition of acquisition as stated on page 4 of the(cont.) circular. He stated that Farmers House was buying the assets and none of the liabilities. He explained the valuation of $4,185,000 by an independent valuer Anderson & Anderson and the valuation assessed through due diligence by Minerva Property Management Company Ltd and City Investments Limited which were also more than the negotiated purchase consideration of $4,000,000. Mr. Kanyanga confirmed that he was satisfied with the explanation. 3. The Managing Director reported that extra cost relating to legal fees and financial advisory fees would amount to about 2.25% of the purchase price adding that the board believes the fees are acceptable. He stated that regarding obligations going forward, the sale agreement warrants that there are no Thistle employees and that other potential pit falls have been mitigated by warranties and representations from the vendors in the sale agreement. Mr. Kanyanga confirmed that he was satisfied with the explanation.2.06 The Chairman asked whether there were any further questions from the floor and there were none.2.07 On the proposal of Mr. Jack Kanyanga and seconded by Mr. Frank Arthur Green, it was resolved that pursuant to a majority of the votes of the shareholders of Farmers House Plc, other than the Related Party, being cast in favour of the proposed Acquisition, Farmers House may proceed with the Acquisition of Thistle Land Development Company Limited as set out in the Circular.2.08 There being no further business to discuss, the Chairman thanked everyone who attended and encouraged the members to continue supporting the Board of Directors.2.09 The Chairman reminded the members of the forthcoming AGM on 30th June 2010 and declared the meeting closed at 15.00 hours. Chairman__________________________________Date____________________________ 13
  16. 16. Farmers House Plc and its subsidiariesCOMPANY INFORMATIONREGISTERED OFFICE: Farmers House, Stand 2713 Cairo Road P O Box 30012, Lusaka, Zambia Telephone +260 211 228682DIRECTORS ALTERNATESTimothy T. Mushibwe (Chairman) N.H.C. ChiromoRobin P.S. Miller (Managing Director) A.T.S. MillerMr. Richard D. Frost (retired on 30 June 2010) P.M. d’Elbee (Ms.)Munakupya Hantuba R.B.V. LiebenthalDoreen Kabunda N. Kayamba (Ms.)Deborah A. Bwalya (appointed on 30 June 2010) S. MwapeKenny H. Makala I.M. MabbolobboloWilliam P. Saunders D.G.A. IronsidePatrick Wanjelani B. Kayumba (Ms.)TRANSFER SECRETARIES SOLICITORSAmazon Associates Limited Musa Dudhia & Co.P O Box 32001 P O Box 31198Lusaka LusakaCOMPANY SECRETARIES BANKERSCity Investments Limited Standard Chartered Bank (Zambia) PlcP O Box 30093 Main BranchLusaka P O Box 32238 LusakaAUDITORS Stanbic Bank (Zambia) LimitedKPMG Zambia Head OfficeP O Box 31014 P O Box 31955Lusaka Lusaka 14
  17. 17. Farmers House Plc and its subsidiariesDIRECTORS REPORTIt is my pleasure to present the Directors report for the year ended 31st March 2011.Financial ResultsThe Directors of Farmers House Plc are pleased to report that Zambia has seen a continuedimprovement in its economic prospects in 2010/11, which has been led in part by the substantial rise inCopper prices during the year. As a result we are pleased to have seen relative stability in the exchangerate which has moved from K4,730 to US$1 at 31st March 2010 to K4,690 at 31st March 2011.The financial statements of the Group show an 11.4% increase in gross rental income from K20.1billion in 2010 to K22.4 billion in 2011. Profit from operations (Note 28) show a further enhancementfrom K11.52 billion in 2010 to K12.97 billion in 2011. This follows the 94% increase that was recordedin 2010. Once again we continue to see an improvement in operating profit as a percentage of rentalincome. The Group’s profit after tax shows a small reduction on the previous year despite the interestpaid of K6.6 billion (2010: K2.4 billion) on the Group’s new debt. As shareholders are aware this debtwas raised in answer to the shareholders’ request for improved distribution of the Group’s income in theform of interest.As you will note from the statement of financial position there was a further increase in the Group’s netasset value to K234 billion in the 2011 financial statements from K220 billion in 2010. This was theresult of the independent property valuation carried out in the year which showed a gain in the fairvalue of the Group’s investment properties of K12.6 billion (Note 13) which includes fair value gainarising from the recently purchased Counting House Square development on Thabo Mbeki Road. Thisgain was reflected in the income statement as required by International Financial Reporting Standards.In compliance with the Group’s policy, the annual independent valuation for 2011 of investmentproperty took place as at 31st March 2011 and stands at K255 billion.The Group’s ordinary shares traded by the end of the year at a price in the K2,950 range, which reflectsmore closely the value of the Group following the dramatic fall in share prices witnessed in 2009/2010following the world credit crunch. On a net asset basis the valuation of your Group at the reporting dateis K5,464 per ordinary share. The market price still represents a discount of approximately 46% (2010:47%) to the net asset value of the Group. The Directors are of the opinion that the current market price,although substantially improved from 2010 still does not adequately reflect either the operational resultsof the Group or its underlying value.Bharti Airtel HeadquartersShareholders will have noted the purchase by Bharti Airtel Zambia Holdings B.V. (“BAZHBV”), awholly owned subsidiary of Bharti Airtel International (Netherlands) B.V. (“Bharti Airtel”) of CeltelZambia Plc (previously trading as Zain). This transaction had no adverse effect on Farmers House Plc.All contractual arrangements stay in place with Celtel Zambia Plc, which remains the body corporatethat is now trading as Airtel. The good working relationship that existed with Zain and Celtel previouslycontinue with the new management of Airtel.Burnet Investments Ltd. (Burnet)This joint venture with Standard Bank Properties (Pty.) Ltd for the development of a new Head Officefor Stanbic Bank Zambia Ltd has faced some challenges during the year. The Company has facedcertain difficulties in respect of the completion of the construction of the property. As a resultalternative contractors have been engaged to complete the development of the property. The Directorsof Farmers House Plc who sit on the Board of Burnet are closely monitoring this matter. 15
  18. 18. Farmers House Plc and its subsidiariesDIRECTORS REPORT (continued)Thistle Land Development Company Ltd. (Thistle)Shareholders will recall the Extra-ordinary General Meeting (EGM) held on 14th June 2010. At thisEGM, approval was given by members for the purchase of Thistle for K20.0 billion (US$4 million).The purchase of Thistle and its major asset, Counting House Square, was concluded in August 2010.The financial statements reflect this transaction by the recognition of Goodwill (i.e. the excess ofpurchase consideration over the fair value of net assets of the company) as at 15th August 2010 ofK2.7 billion in the Group’s statement of financial position. From that date, income and expenses,and the statement of financial position of Thistle have been consolidated to the financial statementsof Farmers House Plc. This transaction has contributed, on consolidation, to the rental earnings ofthe Group from tenants of Counting House Square, being BDO Spencer Steward Corporate ServicesLimited, Spar Zambia Limited, Ericsson AB and the Centre for Infectious Disease Research inZambia Limited (CIDRZ). We are pleased to welcome these prestigious companies as tenants of theGroup.Contribution of subsidiaries and jointly controlled entity to the results of the GroupProfit for the year – Group K17.92 billionContributed by:Farmers House – 100% K12.62 billionThistle – 100% K 5.0 billionBurnet – 49% K 0.32 billionPeckerwood/Dreadnought – 100% K(0.02) billion K17.92 billionAll financial statements of subsidiaries jointly controlled entities are available for inspection at theregistered office, 1st floor, Farmers House, Central Park, Cairo Road, Lusaka, Zambia.2010 Corporate Bond - Capital RaisingFarmers House Plc was pleased to announce the results of the Corporate Bond Rights Offer that closedin November 2010. The offer has successfully achieved its primary objective of re-financing theGroup’s short term Commercial Paper with long-term debt. These 12 year tradable Bonds will enablethe Group to finance the Board’s on-going property acquisition strategy aimed at growing anddiversifying its property portfolio. The Board of Farmers House Plc has identified, and has and willsecure, properties that provide the requisite return to the Group when utilising these funds.Farmers House Plc issued 10,217,494 bonds of US$1.05 each and has decided that the Group wouldhold in treasury 4,031,143 Corporate Bonds that were not taken up during the rights offer. These Bondswill be held in treasury (i.e. Unissued Bonds) and will be available to Farmers House Plc to issue toinvestors as additional investment opportunities become available. This action bears no cost, will haveno effect on Farmers House Plc Shareholders or Corporate Bond holders and will enable FarmersHouse Plc to dispose of the Corporate Bonds when market conditions allow and opportunity arises.Final DividendNotwithstanding the substantial development activity noted above, the Board has recommended a finaldividend of K65 per share, following the interim dividend of K50 per share. This total dividend ofK115 per share (2010 – K110 per share), if approved, is a further demonstration of the financialperformance of the Group, its solid projected earnings and the strength of its financial position. 16
  19. 19. Farmers House Plc and its subsidiariesDIRECTORS REPORT (continued)Five Year Financial SummaryFor the ended 31 March 2011 2010 2009 2008 2007 K’000 K000 K000 K000 K000STATEMENT OFCOMPREHENSIVE INCOMEGross rental income 22,442,847 20,139,738 12,598,184 6,881,795 5,474,917Total operating expenditure (9,472,272) (8,623,333) (6,673,533) (4,189,027) (3,429,887)Profit from operation 12,970,575 11,516,405 5,924,651 2,692,768 2,045,030Change in fair value of Investmentproperty, net of exchange gains 12,580,019 13,778,005 105,138,035 18,944,235 11,382,643Net finance (expense)/income (7,310,105) (2,222,783) (279,811) 292,179 (752,085)Net foreign exchange (loss)/gain 389,773 (2,035,165) 2,342,709 (1,799,322) (1,033,974)Other non-operating income - - 30,081 1,500 182,464Profit/(loss) from equity accountedinvestees 323,355 1,619,217 (495,876) - -Profit before tax 18,953,617 22,655,679 112,659,789 20,131,360 11,824,078Income tax (expense)/credit (1,029,813) (2,795,392) (2,608,979) (645,133) 27,940Profit after tax 17,923,804 19,860,287 110,050,810 19,486,227 11,852,018STATEMENT OF FINANCIALPOSITIONPlant and equipment 4,786,693 5,373,077 6,468,315 2,577,011 3,113,644Investment properties 255,494,118 224,577,116 201,093,709 72,338,223 49,082,805Investment property underdevelopment 596,074 - - 19,612,143 7,549,737Investments - - - 880 880Amount due from equity accountedinvestee 7,358,035 4,138,801 3,070,589 - -Other long term assets 3,984,548 3,138,383 2,375,061 404,623 273,587Goodwill 2,702,988 - - - -Current assets 27,478,297 42,743,823 9,991,959 14,232,303 30,226,278Total Assets 302,400,753 279,971,200 222,999,633 109,165,183 90,246,931Shareholders funds and liabilitiesTotal equity 233,575,528 220,353,775 205,622,998 97,709,483 79,719,363Non – current liabilities 56,711,305 7,823,740 7,823,740 7,823,740 7,823,740Deferred tax liabilities 4,990,015 3,076,813 2,549,304 615,869 293,500Total current liabilities 7,123,905 48,716,872 7,003,591 3,016,091 2,410,328Total equity and liabilities 302,400,753 279,971,200 222,999,633 109,165,183 90,246,931Interim dividend paid 2,137,296 2,137,296 1,282,377 854,918 -Final dividend paid/proposed 2,778,484 2,564,755 2,992,214 854,918 641,189Total dividend paid/proposed 4,915,780 4,702,051 4,274,591 1,709,836 641,189Timothy T. MushibweChairman 17
  20. 20. Farmers House Plc and its subsidiariesSTATEMENT ON CORPORATE GOVERNANCEThe Board of Directors and CommitteesThe details of board members and the various board committees are as follows:DIRECTORS ALTERNATESTimothy T. Mushibwe (Chairman) N.H.C. ChiromoRobin P.S. Miller (Managing Director) A.T.S. MillerRichard D. Frost (retired on 30 June 2010) P.M. d’ElbeeDeborah A. Bwalya (appointed on 30 June 2010) S. MwapeMunakupya Hantuba R.B.V. LiebenthalDoreen Kabunda N. Kayamba (Ms)Kenny H. Makala I. M. MabbolobboloWilliam P. Saunders D.G.A. IronsidePatrick Wanjelani B. Kayumba (Ms.)The roles of Chairman and Chief Executive Officer are separate and no individual has unfetteredcontrol over decision-making. The Chairman is an independent Non-Executive Director appointed bythe Board.Directors CompensationDirectors receive quarterly compensation, and attendance fees for Board and Board Committeemeetings. No Director is entitled to any share option or any other benefit.Board MeetingsThe Board has met five (5) times during the year and continues to direct the Group’s affairs in a prudentmanner.Mr. Kenny H. Makala, Mr. Robin P.S. Miller, and Mr. Patrick Wanjelani are retiring from the Board atthe Annual General Meeting and being eligible, offer themselves for re-election.Directors’ InterestThe Directors’ shareholding interest as at 31 March 2011 is shown in the table below: Beneficial Non-beneficial Direct Indirect Direct IndirectExecutive DirectorsRobin P.S. Miller 300,000 Nil Nil NilNon-Executive DirectorsTimothy T. Mushibwe Nil Nil Nil NilDeborah A. Bwalya Nil Nil Nil NilMunakupya Hantuba Nil Nil Nil NilDoreen Kabunda Nil Nil Nil NilKenny H. Makala Nil Nil Nil NilWilliam P. Saunders Nil Nil Nil NilPatrick Wanjelani Nil Nil Nil Nil 18
  21. 21. Farmers House Plc and its subsidiariesSTATEMENT ON CORPORATE GOVERNANCE (continued)Contracts in which Directors have an interest are as follows: Farmers House Plc holds an administration contract with City Investments Limited, of which Mr. Robin P.S. Miller is the Managing Director. Farmers House Plc holds a property administration contract with Minerva Property Management Company Ltd, in which City Investments Limited is a shareholder.Board CommitteesThe Audit and Risk, Executive, Nomination and Remuneration committees during the period weremade up of the following Board members, each of which includes a majority of non-executivesDirectors:Audit and Risk Committee Executive Committee Remuneration CommitteePatrick Wanjelani (Chair) William P. Saunders (Chair) Kenny H. Makala (Chair)Munakupya Hantuba Kenny H. Makala Deborah A. BwalyaRobin P.S. Miller Timothy T. Mushibwe Munakupya Hantuba Robin P.S. Miller Doreen Kabunda William P. SaundersNomination CommitteeKenny H. Makala (Chair)Deborah A. BwalyaDoreen KabundaDuring the year, these Committees of Directors met regularly and were extremely busy overseeing thefinancial and operational affairs of the Group.As reported last year, the Directors appointed a Management Structure Committee of the Board(MSCB) to consider the administrative and management structure of the Group and any changes thatmay be required to it in acknowledgement of the continued growth of the Group. This committee wasmade up of the following Directors:Management Structure Committee of the BoardDoreen Kabunda (Chair)Kenny H. MakalaTimothy T. MushibweWilliam P. Saunders2009/10 Management Structure Committee of the BoardFollowing a detailed review process on the operations of Farmers House Plc over the past 18 months,which included receiving independent professional advice, the MSCB recommended to the Board theappointment of Mr. Robin P.S. Miller as Managing Director of Farmers House Plc on a full-time basis,which position we are pleased to say he has agreed to take up. 19
  22. 22. Farmers House Plc and its subsidiariesSTATEMENT ON CORPORATE GOVERNANCE (continued)2009/10 Management Structure Committee of the Board (continued)In view of the advice received, the size reached and nature of operations of the Group, the Directorshave agreed to bring in-house the administration and asset management of the Group. This will result,in due course, in the appointment of a Chief Operating Officer, a Finance Manager and otheradministrative staff on a full-time basis. The Board wishes to extend their sincere thanks and gratitudeto City Investments Ltd who have, up until 30 June 2011, served Farmers House Plc diligently andhelped to grow the Group. The Board proposes a vote of thanks to City Investments Limited.In respect to the property management aspects of the Group, the MSCB reviewed and maderecommendations to the Board that this contract be renewed with Minerva Property ManagementCompany Ltd subject to the re-negotiation of the terms and conditions of that contract. This has beendone, and the new terms and conditions for this contract have been approved by the Board. These newadministrative and management structures of the Group are now in place and will continue to serve thebest interests of the Group.Corporate Social ResponsibilityThe Board supports a number of charitable, social and educational causes on a case by case basis.Major shareholders Farmers House shareholding currently includes in excess of 180 shareholders. As at 31 March 2011 the top ten Farmers House shareholders held approximately 82.9% of the issued share capital of the Company: Shareholder Number of Farmers Holding House shares held (%) Saturnia Regna Pension Trust Limited 14,912,900 34.9% Workers’ Compensation Fund 4,514,178 10.6% BBZ Staff Pension Fund 4,461,458 10.4% KCM Pension Trust Scheme 3,419,522 8.0% Standard Chartered Bank Pension Trust Fund 2,210,938 5.2% National Pension Scheme Authority 2,097,576 4.9% Zambia State Insurance Pension Trust Fund 1,200,000 2.8% Kwacha Pension Trust Fund 1,000,000 2.3% Stanbic Bank Pension Trust Fund 909,601 2.1% Standard Chartered Zambia Securities Nominees Ltd 710,000 1.7% Total for top ten shareholders 35,436,173 82.9% Others 7,309,739 17.1% Total number of shares issued 42,745,912 100% Note: • BBZ – Barclays Bank Zambia Plc; and • KCM – Konkola Copper Mines Plc. 20
  23. 23. Farmers House Plc and its subsidiariesDirectors’ responsibility statementThe Group’s Directors are responsible for the preparation and fair presentation of the consolidatedfinancial statements of Farmers House Plc comprising the consolidated statement of financial position at31 March 2011, and the consolidated statement of comprehensive income, the consolidated statement ofchanges in equity and consolidated statement of cash flows for the year then ended, and the notes to thefinancial statements, which include a summary of significant accounting policies and other explanatorynotes, in accordance with International Financial Reporting Standards and in the manner required by theCompanies Act of Zambia.The Directors are also responsible for such internal controls as the Directors determine is necessary toenable the preparation of the consolidated financial statements that are free from material misstatement,whether due to fraud or error and for maintaining adequate accounting records and an effective system ofrisk management.The Directors have made an assessment of the Group’s ability to continue as a going concern and have noreason to believe the business will not be a going concern in the year ahead.The auditor is responsible for reporting on whether the consolidated financial statements are fairlypresented in accordance with the applicable financial reporting framework.Approval of the consolidated financial statementsThe consolidated financial statements, as indicated above and set out on pages 28 to 66 were approved bythe Board of Directors on 19 May 2011 and signed on its behalf by:...............................….. ................................…....Director Director 21
  24. 24. Independent auditor’s report to the shareholders of Farmers House PlcReport on financial statementsWe have audited the accompanying consolidated financial statements of Farmers House Plc whichcomprise the consolidated statement of financial position at 31 March 2011, and the consolidatedstatement of comprehensive income, the consolidated statement of changes in equity and consolidatedstatement of cash flows for the year then ended, and the notes to the financial statements, which includea summary of significant accounting policies and other explanatory notes as set out on pages 28 to 66.Directors’ responsibility for the financial statementsThe Directors are responsible for the preparation and fair presentation of these financial statements inaccordance with International Financial Reporting Standards and in the manner required by theCompanies Act of Zambia and for such internal controls as the Directors determine is necessary toenable the preparation of financial statements that are free from material misstatements, whether due tofraud or error.Auditor’s responsibilityOur responsibility is to express an opinion on these consolidated financial statements based on ouraudit. We conducted our audit in accordance with International Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance whether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal control relevant to the entity’spreparation and presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entity’s internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by management, as well asevaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion. 22
  25. 25. OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, theconsolidated financial position of Farmers House Plc at 31 March 2011, and of its consolidatedfinancial performance and consolidated cash flows for the year then ended in accordance withInternational Financial Reporting Standards and in the manner required by the Companies Act ofZambia.Report on other legal and regulatory requirementsIn accordance with Section 173 (3) of the Companies Act of Zambia, we report that, in our opinion therequired accounting records, other records and registers have been properly kept in accordance with theAct.KPMG LusakaChartered Accountants of ZambiaHastings MtinePartner 23
  26. 26. Farmers House Plc and its subsidiariesConsolidated statement of comprehensive incomefor the year ended 31 March 2011In thousands of Zambian Kwacha Note 2011 2010Gross rental income 7 22,442,847 20,139,738Property operating expenses 13e (4,372,401) (4,725,225)Net rental income 18,070,446 15,414,513Change in fair value of investment property 13 14,695,564 44,867,559Administrative expenses 12 (5,099,871) (3,898,108)Results from operating activities 27,666,139 56,383,964Finance income 1,153,936 977,377Finance costs (10,189,813) (36,324,879)Net finance costs 9 (9,035,877) (35,347,502)Profit from equity accounted investee 17 323,355 1,619,217Profit before income tax 18,953,617 22,655,679Income tax expense 10 (1,029,813) (2,795,392)Profit for the period 17,923,804 19,860,287Total comprehensive income for the year 17,923,804 19,860,287Profit attributable to:Owners of the Company 17,923,804 19,860,287Total comprehensive income attributable to:Owners of the Company 17,923,804 19,860,287Earnings per shareBasic earnings per share (Kwacha) 11 419.31 464.61Diluted earnings per share (Kwacha) 11 412.14 455.26There were no items of other comprehensive income during the year (2010: Nil).The notes on pages 28 to 66 are an integral part of these financial statements. 24
  27. 27. Farmers House Plc and its subsidiariesConsolidated statement of financial positionAs at 31 March 2011In thousands of Zambian KwachaAssets Note 2011 2010Plant and equipment 15 4,786,693 5,373,077Rental income receivable 16 3,984,548 3,138,383Investment property 13 255,494,118 224,577,116Investment property under development 14 596,074 -Amount due from equity accounted investments 26a 7,358,035 4,138,801Goodwill 18 2,702,988 -Total non-current assets 274,922,456 237,227,377Trade and other receivables 19a 2,592,987 2,939,137Prepayments and deposits 19b 7,031,940 4,947,770Tax recoverable 755,609 -Cash and cash equivalents 20 17,097,761 34,856,916Total current assets 27,478,297 42,743,823Total assets 302,400,753 279,971,200EquityShare capital 21 42,746 42,746Share premium 42,862,458 42,862,458Retained earnings 190,670,324 177,448,571Total equity attributable to equity holders of the parent 233,575,528 220,353,775LiabilitiesConvertible redeemable cumulative preferred stock 22 7,823,740 7,823,740Long term loans 23a 48,887,565 -Deferred tax liabilities 10 4,990,015 3,076,813Total non-current liabilities 61,701,320 10,900,553Short-term loan 23b - 43,364,882Trade and other payables 24 7,123,905 4,345,509Tax payable - 1,006,481Total current liabilities 7,123,905 48,716,872Total liabilities 68,825,225 59,617,425Total equity and liabilities 302,400,753 279,971,200The financial statements on pages 24 to 66 were approved by the Board of Directors on 19 May 2011 and were signedon its behalf by:Patrick Wanjelani Munakupya HantubaDirector DirectorThe notes on pages 24 to 66 are an integral part of these financial statements. 25
  28. 28. Farmers House Plc and its subsidiariesConsolidated statement of changes in equityfor the year ended 31 March 2011In thousands of Zambian Kwacha Share Share Retained capital premium earnings TotalAt 1 April 2009 42,746 42,862,458 162,717,794 205,622,998Total comprehensive income for the period- Profit for the year - - 19,860,287 19,860,287Transactions with owners recorded directly in equity- Dividends paid (note 21) - - (5,129,510) (5,129,510)At 31 March 2010 42,746 42,862,458 177,448,571 220,353,775At 1 April 2010 42,746 42,862,458 177,448,571 220,353,775Total comprehensive income for the period- Profit for the year - - 17,923,804 17,923,804Transactions with owners recorded directly in equity- Dividends paid (note 21) - - (4,702,051) (4,702,051)At 31 March 2011 42,746 42,862,458 190,670,324 233,575,528Retained earnings are the carried forward recognised income, net of expenses, of the Group plus current periodprofit and dividends attributable to shareholders.Share premium is the excess paid by shareholders over the nominal value for their shares.The notes on pages 28 to 66 are an integral part of these financial statements. 26
  29. 29. Farmers House Plc and its subsidiariesConsolidated statement of cash flowsfor the year ended 31 March 2011In thousands of Zambian Kwacha Notes 2011 2010Cash flows from operating activitiesProfit for the period 17,923,804 19,860,287Adjustment for:- Depreciation 15 1,109,369 1,112,997- (Profit)/loss on equity accounted investee 17 (323,355) (1,619,217)- Change in fair value of investment property 13 (14,695,564) (44,867,559)- Net finance cost 9 9,035,877 35,347,502- Income tax expense 10 1,029,813 2,795,392 14,079,944 12,629,402Change in trade and other receivables (500,015) (2,961,530)Change in prepayments and deposits (2,084,170) (4,683,235)Change in trade and other payables 2,778,396 (2,310,324) 14,274,155 2,674,313Income tax paid (2,249,069) (1,609,160)Net cash from operating activities 12,025,086 1,065,153Cash flows from investing activitiesInterest received 9 764,163 977,377Acquisition on subsidiary 29 (19,829,309) -Equity loan to equity accounted investee 26(a) (3,082,967) -Acquisition of plant and equipment 15 (86,273) (17,759)Acquisition of investment property 13 (98,546) (9,508,000)Development of investment property 14 596,074 (197,402)Net cash used in investing activities (22,929,006) (8,745,784)Cash flows from financing activitiesCoupon interest paid on preferred stock 9 (784,042) (771,371)Interest paid on short term loan 9 (5,009,000) (2,428,789)Dividends paid 21 (4,702,051) (5,129,510)Proceeds from issue of a short-term loan 23 996,000 43,389,881Redemption of a short-term loan 23 (44,314,384) -Proceeds from issue of corporate bond 23 48,831,911 -Net cash from/(used in) financing activities (4,981,566) 35,060,211Net increase/(decrease) in cash and cash equivalents (15,885,486) 27,379,580Cash and cash equivalents at 1 April 34,856,916 8,986,495Effect of exchange rate fluctuations on cash held (1,873,669) (1,509,159)Cash and cash equivalents at 31 March 20 17,097,761 34,856,916The notes on pages 28 to 66 are an integral part of these financial statements. 27
  30. 30. Farmers House Plc and its subsidiariesNotes to the consolidated financial statementsfor the year ended 31 March 20111 Reporting entity Farmers House Plc (the “Company”) is a company domiciled in Zambia. The address of the Company’s registered office is Farmers House, Stand 2713, Cairo Road, Lusaka. The consolidated financial statements of the Company as at and for the year ended 31 March 2011 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”) and the Group’s interest in associates and jointly controlled entity. The Group primarily is involved in investment, development and restructuring of commercial and non-commercial property for commercial letting.2 Basis of preparation (a) Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as promulgated by the International Accounting Standards Board and in the manner required by the Companies Act of Zambia. The consolidated financial statements were authorised for issue by the Board of Directors on 19 May 2011. (b) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for the investment property which is measured at fair value. The methods used to measure fair values are discussed further in note 5. (c) Functional and presentation currency These consolidated financial statements are presented in Zambian Kwacha, which is the Group’s functional currency. All financial information presented in Zambian Kwacha has been rounded to the nearest thousand. (d) Use of estimates and judgement The preparation of financial statements in conformity with IFRSs 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 assumption and estimation uncertainties that have significant risk of resulting in material adjustment within this financial year, and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes: Note 3 (i) - Impairment of financial and non-financial assets Note 3 (l) - Provisions Note 3 (m) - Rental income receivable Note 3 (n) - Income tax expense Note 5 ( a) - Techniques used for valuing investment property. 28
  31. 31. Farmers House Plc and its subsidiariesNotes to the consolidated financial statementsfor the year ended 31 March 20112 Basis of preparation (continued) (e) Accounting for acquisitions of non-controlling interests From 1 April 2010 the Group has applied IAS 27 Consolidated and Separate Financial Statements (2008) in accounting for acquisitions of non-controlling interests. The change in accounting policy has been applied prospectively and has had no impact on earnings per share. Under the new accounting policy, acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Previously, goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of the transaction. (f) Accounting policies for new transactions and events Distributions of non-cash assets to owners of the Company From 1 April 2010 the Group has applied IFRIC 17 Distributions of Non-cash Assets to Owners in accounting for distributions of non-cash assets to owners of the Company. The new accounting policy has been applied prospectively. The Group measures a liability to distribute non-cash assets as a dividend to the owners of the Company at the fair value of the assets to be distributed. The carrying amount of the dividend is re-measured at each reporting date and at the settlement date, with any changes recognised directly in equity as adjustments to the amount of the distribution. On settlement of the transaction, the Group recognises the difference, if any, between the carrying amount of the assets distributed and the carrying amount of the liability in profit or loss. 29
  32. 32. Farmers House Plc and its subsidiariesNotes to the consolidated financial statements (continued)for the year ended 31 March 20113 Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by the Group entities, unless otherwise stated. (a) Basis of consolidation (i) Business combinations From 1 April 2010 the Group has applied IFRS 3 Business Combination (2008) in accounting for business combinations. The change in accounting policy has been applied prospectively and has had no material impact on earnings per share. Business combinations are accounted for using the acquisition method as at acquisition date. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable. The acquisition date is the date on which control is transferred to the acquirer. Judgement is applied in determining the acquisition date and determining whether control is transferred from one party to another. The Group measures goodwill as the fair value of the consideration transferred including the recognised amount of any non-controlling interest in the Group, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. Consideration transferred includes the fair values of the assets transferred, liabilities incurred by the Group to the previous owners of the acquiree, and equity interests issued by the Group. Consideration transferred also includes the fair value of any contingent consideration and share-based payment awards of the acquiree that are replaced mandatorily in the business combination. If a business combination results in the termination of pre-existing relationships between the Group and the acquiree, then the lower of the termination amount, as contained in the agreement, and the value of the off-market element is deducted from the consideration transferred and recognised in other expenses. When share-based payment awards exchanged (replacement awards) for awards held by the acquiree’s employees (acquiree’s awards) relate to past services, then a part of the market- based measure of the awards replaced is included in the consideration transferred. If they require future services, then the difference between the amount included in consideration transferred and the market-based measure of the replacement awards is treated as post- combination compensation cost. A contingent liability of the acquiree is assumed in a business combination only if such a liability represents a present obligation and arises from a past event, and its fair value can be measured reliably. The Group measures any non-controlling interest at its proportionate interest in the identifiable net assets of the acquiree. Transaction costs that the Group incurs in connection with a business combination, such as finder’s fees, legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred. 30
  33. 33. Farmers House Plc and its subsidiariesNotes to the consolidated financial statements (continued)for the year ended 31 March 20113 Significant accounting policies (continued) (a) Basis of consolidation (continued) (ii) Subsidiaries Subsidiaries are the entities controlled by the Group. 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 changed when necessary to align with the policies adopted by the Group. The financial statements have been prepared using uniform accounting policies for like transactions and other events in similar circumstances. The subsidiaries are measured at cost in the separate financial statements of the Company. (iii) Investments in associates and jointly controlled entities (equity accounted investees) Associates are those entities in which the Group has significant influence, but not control, 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. Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Associates and jointly controlled entities are accounted for using the equity method (equity accounted investees) and are recognised initially at cost. The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. 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 the accounting policies with those of the Group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. (iv) Transactions eliminated on consolidation Intra-group balances and income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. (v) Loss of control Upon the loss of control the Group derecognizes the assets and liabilities of the subsidiary, any non-controlling interest and the components of equity related to the subsidiary. Any surplus or deficit arising on the loss of controls is recognized in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity accounted investee or as an available for sale financial asset depending on the level of influence retained. 31
  34. 34. Farmers House Plc and its subsidiariesNotes to the consolidated financial statements (continued)for the year ended 31 March 20113 Significant accounting policies (continued) (b) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments, (if any) which are recognised directly in equity. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. (c) Financial instruments (i) Non-derivative financial assets The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets are recognised initially on the trade date at which the Group becomes party to the contractual provision of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the right to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The Group’s only non – derivative financial assets on its statement of financial position are loans and receivables. Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables comprise trade and other receivables as well as cash and cash equivalents. 32
  35. 35. Farmers House Plc and its subsidiariesNotes to the consolidated financial statements (continued)for the year ended 31 March 20113 Significant accounting policies (continued) (c) Financial instruments (continued) (i) Non-derivative financial assets (continued) Loans and receivables (continued) Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. (ii) Non – derivative financial liabilities The Group initially recognises debt securities issued and subordinated liabilities on the date they are originated. All other financial liabilities are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The Group has the following non – derivative financial liabilities; loans and borrowings, convertible redeemable cumulative preferred stock and trade and other payables. The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method. (iii) Share capital Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. Preference share capital Preference share capital is classified as equity if it is non-redeemable, or redeemable only at the Company’s option, and any dividends are discretionary. Dividends thereon are recognised as distributions within equity upon approval by the Group’s shareholders. Preference share capital is classified as a liability if it is redeemable on a specific date or at the option of the shareholders, or if dividend payments are not discretionary. Dividends thereon are recognised as interest expense in profit or loss as accrued. 33

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