Dawn Properties Limited - 2009 annual report


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Dawn Properties Limited 2009 annual report

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Dawn Properties Limited - 2009 annual report

  1. 1. Topic Page • Group Profile 2 • Group Structure 3 • Mission and Core Values 4 • Directorate and Management 5 • Chairman's Statement 6 • Corporate Governance 8 • Report of the Directors 10 • Directors' Responsibility Statement 12 • Report of the Independent Auditor 13 • Consolidated Income Statement 16 • Consolidated Balance Sheet 17 • Consolidated Statement of Changes in Equittj 18 • Consolidated Cash Flow Statement 19 • Company Balance Sheet 20 • Accounting Policies 21 • Notes to the Consolidated Financial Statements 37 • Analysis of Shareholders 45 • Notice to Members 47 • Company Details 48 • Proxy Fonn
  2. 2. Group Profile Dawn Properties Limited (Dawn Properties), Dawn Properties provides investors with formerly a wholly owned subsidiary of an opportunity to invest in a collection of African Sun Limited (Afrisun), was sought after hotel properties. The counter incorporated as a variable rate loan stock is not only a good inflation and currency (VRLS)company by converting its ordinary hedge but also has the potential to generate shares into linked units. Afrisun now owns strong cash flows and high yields. The 17.72%of the company enabling it to have properties are professionally managed an independent mission. The core business ensuring that the highest standards are of the company, which is incorporated in maintained at all times. Zimbabwe, is that of an investment property holding company and through its wholly The Group is well represented in all major owned subsidiaries owns properties in the tourist destinations as detailed below. tourism sector. Although the fact that the Group has a predominant tourism exposure is of concern On 9 September 2003 Dawn Properties to some investors,it is equally important to became the first VLRSinvestment property note that it is a sector that never ceases to holding company to be listed on the attract the attention of internationalinvestors Zimbabwe Stock Exchange. even in hard times. This probably gives the properties a premium ahead of other property classessuch as industrial property, for example. Nevertheless, the Group has taken a view to further diversifythe portfolio at the earliestopportune time. Carribea Bay Sun 83 Kariba Carribea Bay Marina NjA Kariba Crowne Plaza Monomotapa 245 Harare Elephant Hills Resort and Conference Centre 276 Victoria Falls Express by Holiday Inn, Beitbridge 104 Beitbridge Great Zimbabwe Hotel 56 Masvingo Holiday Inn Mutare 96 Mutare Hwange Safari Lodge 106 Hwange Lake View Sun 42 Kariba Troutbeck Sun 70 Nyanga
  3. 3. Dawn Properties LId (listed on the ZSE) - CBRE (Pty) LId Va Laclede Investments PfL Cafpine Investments P/I CBRE Regional I (100%) (100%) (100%) Holds 1 property Holds 1 property
  4. 4. Mission and Core Values Quality To create sustainable value for stakeholders, We are committed to the highest standards which is in line with the industrial index. of delivery. This is to be achieved by; Teamwork a) Investing in high yielding properties. We believe in creating a happy work b) Optimising net rentals by drafting environment premised on teamwork. appropriate lease agreements and closely managing costs. Environmental issues c) Ensuring that properties are properly We are committed to safeguarding the maintained. environment for this and future d) Ensuring that adequate attention is given generations. The assessment of to risk management. environmental issues is therefore critical for all projects we are involved in. We Vision are committed to compliance with environmental, health and safety To be a successful investment property standards. holding company. Investment policy Dawn Properties intends to diversify from the current hospitality portfolio in order to minimize risk associated with anyone asset class and to increase the liquidity of the portfolio. Core values Employment equity We are committed to ensuring that employees are offered equal opportunities and appropriate participation. Integrity We conduct our business in an honest, fair and transparent manner. Passion We believe in our products and this drives all our innovations. -----------------
  5. 5. Directorate and Management Chairman Remuneration Committee F. Rwodzi E. 1.Manikai - Chairman M. Manyika Executive Director S. A. Munyeza M. Manyika Finance and Investment Committee S. A. Munyeza - Chairman T. P. Chimuriwo T. P. Chimuriwo E. 1.Manikai E. 1.Manikai C. A. Mataure M. Manyika S. A. Munyeza C. B. Thorn C. B. Thorn D. Goldwasser Audit and Risk Committee C. B. Thorn - Chairman M. Manyika C. A. Mataure Management Chief Executive Officer - M. Manyika Adminstration and Human Resource Executive - N. M Tome (Mrs) Finance Executive - B. Magura Managing Director - CB Richard Ellis (Zimbabwe) - T. Matonda Managing Director - CB Richard Ellis (Botswana) - S. Hove
  6. 6. Chairman's Statement Introduction A number of options to procure cheaper The period under review was characterised materials are being investigated. by political uncertainty that threatened the The redevelopment of Lakeview Inn Hotel near collapse of the country's economy and is still under consideration. Progress was service delivery capacity. The formation of hampered by a number of challenges the inclusive government couldn't have which are now behind us. We anticipate come at a better time as it gave respite to that progress will be made to bring the the ailing economy. During the last two project to fruition. There are several projects months of the period under review the which the group is pursuing and amongst multi currency regime was introduced them is the development of a resort area in among other measures designed to stimulate Harare. The group owns about 16 hectares economic activity. This made it possible for of land along Harare Drive which is being businesses to charge and collect revenue in rezoned for commercial use. Once rezoned foreign currency. The full impact of the a mixed use development will be embarked measures should be realised in the medium on. The development will incorporate term. residential, commercial and retail sections. Interim land use The group has about 280 hectares of land The hotel operations suffered from depressed in New Marlborough which is zoned for guest arrivals, stringent foreign exchange residential and commercial developments. regulations and price controls for the better The current economic environment part of the year under review. In the last few however, has made it uneconomic to months city hotels have experienced an develop the land. Consequently your upsurge in occupancies but this does little for board has decided to lease the land out our fortunes as our portfolio is skewed in for niche farming as an interim measure. favour of holiday destinations. Nevertheless, A potential operator has been identified this is a welcome development as it signals an and discussions are currently underway. increase in the level of interest in the country. It is envisaged that the group will have a Our property consultancy was favoured with shareholding in the operating company. more instructions than last year however, the This venture is expected to make a work was executed at thin margins. The significant contribution to the cash flows quality of earnings has improved in the last of the group. two months. Human Resources New developments Our staff endured a very challenging year Plans for the construction of 264 two-bed in many respects not least of all the high flats in Marlborough were approved by cost and unavailability of medical services. the Harare City Council. Unfortunately the Despite this our staff complement has cost of construction is significantly higher remained steady and a couple of key than the market value of the development, appointments have been made to position mainly driven by the high cost of building the group for the future. Fortunately materials. the challenges being faced by staff have also largely subsided as the sociQ-€Conomic ------------ environment improves. Annual Report 2009
  7. 7. The group made an operating loss of The political environment has ushered in USD303 578 mainly because of the a wave of excitement in the market. The depressed economic environment group will seize opportunities that permit characterised by low hotel occupancies. the company to grow and diversify The company recorded a profit before tax revenue streams. of USD769 977. This result was achieved after disposing of part of the residential land bank which the group serviced last Let me take this opportunity to thank all year. the stakeholders for their invaluable support. To the board members and management your dedication is priceless. The balance sheet, with assets worth USD 75 million, is robust and unencumbered, save for the debentures which are indivisibly linked to the share capital and as such may be considered as F. Rwodzi part of equity. The investment property Chairman portfolio was fair valued by professional valuers as in prior years. In determining the fair values, the valuers applied the cost approach, market comparison and the discounted cash flow (DCF) methods. The results were moderated as appropriate taking into account available local and regional market information. In compliance with International Financial Reporting Standards deferred income tax of $13.9 million has been provided by applying a tax rate of 30.9% on the uplift of the buildings and property. In the event that the properties are disposed of at the stated values, the group would in fact be liable to 20% capital gains tax or about $11.6 million. It should be emphasized that this is a mere provision as the tax liability only crystallizes in the event that the properties are sold. Capital Raising The group will approach the relevant stakeholders at the right time to raise capital required to fund the various projects being currently packaged
  8. 8. Dawn Properties accepts and oomplies with the The committee is required to provide principles of the Code of Corporate Practicesas satisfaction to the board that adequate and enunciated in the King Report The Dire:tors are appropriate financial and operating controls fully aware and oognisant of the importan::eof are in place, that significant financial, business exffiltingtheir dutiesin keepingwith the principles and other risks have been identified and are of transparency,integrity, airnessand accountability f being suitably managed and that satisfactory and in accordancewith aa:epted oorporatepractices standards of governance, reporting and in order to enhancethe interestsof its shareholders, compliance are in operation. employees and other stakeholders.This includes Its responsibilities includes overseeing the timely and meaningful reporting to all its financial reporting process, reviewing audit stakeholders. results, audit processes and risk management, the cost effectiveness, independence and Board of Directors objectivity of the auditors and compliance The board currently comprises six non- issues. executive and one executive director. The non-executive directors bring to the board b) Risk a wide range of skills and experience that To identify, assess, manage and monitor enable them to contribute independent views the risks to which the business is exposed and to exercise objective judgements in to. The most significant risk is one material matters requiring the directors' decisions. customer exposure. Others are single sectorial exposure, total or partial The board is responsible for the strategic destruction of property and the direction of the Group, reviews the replacement of electro mechanical gadgets. investment policy and approves all significant investments or disinvestrnents. The Group is cautiously looking for The board has ultimate'responsibility for opportunities to diversify its portfolio and proper management, risk management in this should give it a broader customer base. general, compliance and ethical behaviour The tenant insures all properties at gross of the business. To achieve this, the board replacement values. has established three committees to give detailed attention to each specific area. The audit and risk committee comprises two Audit and risk committee non-executive Directors and the Chief The committee has two mandates: Executive Officer. The external auditors a) Audit have full access to the committee and its chairman. The committee is expected to To provide the board with additional meet at least three times per year. assurance regarding the efficacy and reliability of the financial information used by the directors to assist them in the discharge of their duties. 1IL1 _
  9. 9. Corporate Governance (continuation) Remuneration committee The remuneration committee comprises two non-executive Directors and the Chief Executive Officer. Its mandate is to ensure that the company adopts market related remuneration policies and to review and approve remuneration for senior executives. The committee meets quarterly. The finance and investment committee makes recommendations to the board on all material investments. It also reviews banking arrangements. It is comprised of four non-executive Directors and the Chief Executive Officer. ----------------
  10. 10. Report of the Directors The directors have pleasure in presenting The company has the following directly their report with the audited financial and indirectly held subsidiaries:- statements of the Group for the year ended 31 March 2009. Nhaka Properties (private) Limited 100% LacledeInvestments(private)Limited 100% Results for the year-historical cost Gold CoastProperties(Private) imited 100% l USD Calpine Investments (private)Limited 100% Profit before income tax 769,977 Dawn Real Estate (private) Limited 100% Income tax expense CB Richard Ellis (private) Limited 100% Income tax CBRichardEllis(Proprietary)imited 100% l Deferred income tax Property, plant and equipment Profit attributable to Capital expenditure for the year ended 31 linked unit holders March 2009 on operating assets totalled USD622,382. Share capital Debenture interest and dividends The board has resolved that the debenture As at 31 March 2009,the Authorised Share interest for the year be zero and no Capital and Debentures was 4,000,000,000 dividend be declared. ordinary shares and Debentures of 4,000,000,000. In terms of the Articles of Association, Messrs T. P. Chimuriwo, E. I. Manikai The issued share capital and debentures was 2,407,090,019 ordinary shares and and C. A. Mataure, retire by rotation at 2,407,090,019 debentures. the forthcoming Annual General Meeting and being eligible, these directors offer themselves for re-election. Reserves No directors had, during or at the end The movements in the reserves of the of the year, any material interest in any Group are shown in the consolidated contract of significance in relation to the statement of changes in equity. Group's business. Directors' fees Members will be asked to approve the payment of the directors' fees for the year ended 31 March 2009 of USD27,424. 11II _
  11. 11. Auditfees Members will be asked to approve the remuneration of the auditors for the financial year ended 31 March 2009 and to appoint auditors of the Group to hold office for the ensuing year. F Rwodzi SA Munyeza Chairman Director ___________ 11I
  12. 12. The directors of the Group are required material loss, which were reported to the by the Companies Act (Chapter 24:03) to directors in respect of the period under maintain adequate accounting records and review. to prepare financial statements that present The consolidated financial statements a true and fair view of the financial position for the year ended 31 March 2009, which of the Group at the end of the financial year appear on pages 16 to 44 have been and of its financial performance and cash approved by the board of directors and flows for the year then ended. In preparing are signed on its behalf by: the accompanying statements, cognisance has been taken of the current financial reporting environment and procedures followed to present information that C. B. Thorn M. Manyika adequately discloses the status of the Group Director Director in the new functional currency, being United State Dollars (USD"). Suitable accounting policies have been used and consistently Harare applied, and reasonable and prudent 11 June, 2009 judgments and estimates have been made. The directors have satisfied themselves that the Group is in a sound financial position and has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they are satisfied that it is appropriate to adopt the going concern basis in preparing the inflation adjusted financial statements. The board recognises and acknowledges its responsibility for the Group's systems of internal financial control. Dawn Properties maintains internal controls and systems that are designed to safeguard the assets of the Group, prevent and detect errors and fraud and ensure the completeness and accuracy of the Group's records. There were no breakdowns in the systems of internal control involving m _
  13. 13. To the members of Dawn Properties Limited We have audited the accompanying consolidated financial statements of Dawn Properties Limited and its subsidiaries ("the Group") and the accompanying balance sheet of Dawn Properties Limited (the "Company") standing alone (together the "financial statements") which comprise the consolidated and separate balance sheets as at 31 March 2009, and the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory notes, set out on pages 16 to 44. Directors' Responsibility/or the Financial Statements The company's directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Companies Act (Chapter 24:03) and the relevant Statutory Instruments ("51") 5133/99 and 5162/99. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. 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 statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaiuating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our adverse audit opinion.
  14. 14. Independent Auditor's Report (continuation) Basis for adverse opinion As explained in note 2.5 to financial statements, the functional currency of the Company and the presentation currency of the Group and Company chan~ed on 1 February 2009 from Zimbabwe Dollar to United States of America Dollar ("USD'). As the Zimbabwe economy was recognised as being hyperinflationary for purposes of financial reporting, the Company and the Group were required by International Accounting Standard CIAS") 21, The Effects of Changes in Foreign Exchange Rates, to restate their financial statements as at and for the 10 months ended 1 February 2009 in accordance with IAS 29, Financial Reporting in Hyperinflationary Economies, before translating the amounts (i.e assets, liabilities, equity items, income and expenses) at the closing rate as at 1 February 2009, and to translate the comparative financial statements at the closing rate as at 31 March 2008. The Company and Group however accounted for their share capital, share premium and debentures as at 31 March 2009by translating the proceeds from the issue at the exchange rate prevailing on the dates of issue. Income and expenses for the 10 months ended 1 February 2009 were translated into USD using the average exchange rate prevailing during the period without first restating these numbers as required by IAS 29, Financial Reporting in Hyperinflationary Economies. The comparative information for investment property, debentures, share capital and share premium have been recorded at the same value as that stated in the year-end balance sheet as at 31 March 2009. It was impracticable for us to quantify the effects of the non- compliance with IAS 21 and IAS 29 on the Financial Statements. The Directors have furthermore not presented comparative information for the consolidated income statement, consolidated cash flow statement and consolidated statement of changes in equity in accordance with IAS 1, Presentation of Financial Statements, because they believe the information will be misleading for reasons stated in note 2.5 (c) to the financial statements. The accounting treatment adopted, as disclosed in note 2.5 c(ii) to the Financial Statements, for share capital, share premium and debentures and the translation thereof and the translation of income and expenses for the ten months ended 1 February 2009, do not comply with the requirements of the Companies Act, (Chapter 24;03) and the relevant Statutory Instrument ("SI") 33/99 and 62/99 because of non compliance with IAS 21, The Effects of Changes in Foreign Exchange. Adverse opinion In our opinion, because of the significance of the matters described in the Basis for Adverse Opinion paragraph, the financial statements do not give a true and fair view of the financial position of the Group and of the Company as at 31 March 2009, and of the Group's consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards and the Companies Act (Chapter 24:03) and the relevant Statutory Instruments ("SI") S133/99 and SI62/99. ID _ Annual Report 2009
  15. 15. Emphasis of matter Without further qualifying our opinion, we draw your attention to notes 2.2 and 3 (c), which along with other matters indicates that the Group and Company are operating in an uncertain macro-economic environment. Q. Uw cUu ~0..0()~ PRICEWATERHOUSECOOPERS CHARTERED ACCOUNT ANTS (ZIMBABWE) HARARE ___________ Annual Report 2009 (' m
  16. 16. Revenue 6 1,044,652 Operating expenses (1,348,230) Fair value adjustment to investment property Operating loss 7 (303,578) Fair value adjustment to financial assets Profit on disposal of non-current asset 1,073,555 Net finance income/ (charges) 8 Profit before tax income 769,977 Income tax expense 9 Profit attributable to linked unit holders 769,977 Fully diluted & basic earnings per linked unit (cents) 10 0.03 11'I _
  17. 17. , 2009 2008 US$ US$ I Investment property 69,300,000 69,300,000 Property, plant and equipment 5,695,797 440,358 Financial asset available for sale 275 275 Goodwill 120,186 120,186 75,116,258 69,860,819 Current assets Inventory 16,762 4,997 Trade and other receivables 465,878 132,093 Cash and cash equivalents 66,840 13,946 549,480 151,036 287,000 75,952,738 Total assets Equity and Liabilities Capital and reserves Ordinary share capital 17,784 17,784 Share premium 16,188,889 16,188,889 Revaluation reserve 4,160,000 Retained income 39,436,368 38,666,391 Shareholders' equity 59,803,041 54,873,064 Non-current liabilities Debentures 1,760,658 1,760,658 Deferred income tax 13,983,679 13,244,926 15,744,337 15,005,584 Current liabilities Trade and other payables
  18. 18. Consolidated Statement of Changes in Equity for the year ended 31 March 2009 Ordinary share capital At the beginning of the year Share capital issued during the year • A t the end of the year Share premium At the beginning of the year Share premium arising during the year A t the end of the year At the beginning of the year Arising during the year 5,200,000 Deferred income tax (1,040,000) 4,160,000 At the beginning of the year 38,666,391 Arising during the year 769,977 At the end of the year 39,436,368 Shareholders equity at 31 March 2009 59,803,041
  19. 19. Consolidated Cash Flow Statement [or the year ended 31 March 2009 Cash generated from operations Profit before income tax Adjustments for: • Depreciation 90,742 Profit on disposal of property plant and equipment (1,073,555) (212,836) Changes in working capital Trade and other receivables (333,784) Trade and other payables 272,153 Inventory (11,765) (73,396) Net cash utiUsed by operations (286,232) Cash flows from investing activities Purchase of property, plant and equipment (622,382) Proceeds from sale of property, plant and equipment 1,073,556 451,174 Net increase in cash and cash equivalents 164,942 Movement in exchange rate (112,048) At the beginning of the year 13,946 Cash and cash equivalents at 31 March 2009 66,840 Represented by;- Cash
  20. 20. Company Balance Sheet Group company loans Investment in subsidiaries •• 680 16,214,100 680 16,214,100 16,214,780 16,214,780 Equity and liabilities Ordinary share capital 17,784 17,784 Share premium 16,188,889 16,188,889 Retained income 8,107 8,107 Shareholders' equity 16,214,780 16,214,780 Total equity and liabilities 16,214,780 16,214,780 fD _
  21. 21. 1 GENERAL INFORMATION It also requires management to exercise its The principal business of the group is that judgement in the process of applying the group's of investing in investment property and accounting policies. property management. The areas involvinga higher degree of judgement The Group is a limited liability company or complexity, or areas where assumptions and incorporated and domiciled in Zimbabwe estimatesare significantto the financialstatements, are disclosedin note 3. and is listed on the Zimbabwe Stock Exchange. The address of its registered (a)Interpretations effectivein 2008 but not relevant office is 8th, Floor Beverley Court, corner The following interpretation to published Fourth Street/Nelson Mandela Avenue, standards is mandatory for accounting periods Harare. beginning on or after 1 January 2008 but not These financial statements have been relevant to the company's operations: approved for issue by the Board of IFRIC 12, 'Service concession arrangements'; Directors on 11 June 2009. IFRIC 13, 'Customer loyalty programmes'; 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES IFRIC 14, 'IAS 19 - The limit on a defined The principal accounting policies applied benefit asset, minimum funding requirements in the preparation of these consolidated and their interaction'; and financial statements are set out below. These policies have been consistently (b) Standards, amendments and applied to all years presented, unless interpretations to existing standards otherwise stated. that are not yet effective and have not been early adopted by the group. 2.1 Basis of presentation The following standards and Dawn Properties limited financial statements amendments to existing standards have have been prepared in accordance with been published and are mandatory for International Financial Reporting Standards the company's accounting periods (IFRS) except for the non compliance with beginning on or after 1 January 2009 or International Accounting Standard (IAS) 1; later periods, but the Group has not Presentation of Financial Statements, IAS 29; adopted them early: Financial Reporting in Hyperinflationary Economies and IAS 21;The Effectsof Changes * IAS 1 (Revised), , Presentation of in Foreign Exchange Rates. The financial financial statements' (effective 01 statements are based on statutory records that January 2009). The revised standard are maintained under the historical cost will prohibit the presentation of items convention as modified by the revaluation of of income and expenses ( that is , 'non- investment property, land and available for owner changes in equity') in the sale financial assets. The preparation of statement in changes in equity, financial statements in conformity with IFRS requiring 'non -owner changes in requires the use of certain critical accounting equity' to be presented seperately from ___________fD estimates. owner changes in equity.
  22. 22. Accounting Policies All non - owner changes will be required to *IAS 27 (Revised). 'Consolidated and be shown in a performance statement, but separate financial statements', (effective entities can choose whether to present one from 01 July 2009). The revised standard performance statement (the statement of requires the effects of all transactions comprehensive income) or two statements with non-controlling interests to be ( the income statement or the statement of recorded in equity if there is no change comprehensive income statement). in control and these transactions will no longer result in goodwill or gains and Where entities restate or reclassify losses. The standard also specifies the comparative information,. they will be accounting when control is lost. required to restate the balance sheet Any remaining interest in the entity is as at the beginning comparative period in re-measured to fair value and a gain or addition to the current requirement to loss is recognised in profit or loss. The present balance sheets at the end of the group currently does not have non current period and comparative period. controlling interests. The group will apply IAS 1 (Revised) from 1 January 2009. !FRS 3 (Revised) , 'Business Combinations' (effective from 01 July 2009).The revised * IFRS 2 ( Amendment) , 'Share- based standard continues to apply the payment' (effective 01 January 2009). acquisition method to business The amended stan<;lard deals with combinations, with some significant vesting conditions and cancellations. It changes. For example, all payments clarifies that vesting conditions are to purchase a business are to be service conditions and performance recorded at fair value at acquisition date, conditions only. Other features of a with contingent payments classified as share-based payment are not vesting debt subsequently re-measured through conditions. the income statement. These features would need to be included in the grant date fair value for transactions There is a choice on an acquisition-by- with employees and others providing acquisition basis to measure the non- similar services; they would not impact controlling interest in the acquiree either the number of awards expected to vest or at fair value or at the non-eontrolling valuation thereof subsequent to grant date. interests proportionate share of the All cancellations whether by the entity or acquiree's net assets. All acquisition costs other parties, should receive the same should be expensed. The group will apply accounting treatment. The standard is !FRS 3 (Revised) prospectively to all expected to have immaterial impact to business combinations from 1 January the group's financial statements. 2010.
  23. 23. Accounting Policies *lAS 1 (Amendment), 'Presentation of The amendment will have an impact on the financial statements' (effective from 1 group's operations because some of the January 2009). The amendment is part group's companies ordinary activities may of the lASB's annual improvements comprise renting and subsequently selling project published in May 2008. of some assets. *IAS 36 (Amendment), 'Impairment of The amendment clarifies that some rather assets'(effective from 1 January 2009). than all financial assets and liabilities The amendment is part of the IASB's classified as held for trading in annual improvements project published accordance with lAS 39, 'Financial in May 2008. Where fair value less costs instruments: Recognition and to sell is calculated on the basis of measurement' are examples of current discounted cash flows, disclosures assets and liabilities respectively. The equivalent to those for value-in-use group will apply the IAS 39 calculation should be made. The group (Amendment) from 1 January 2009. It will apply the IAS 28 (Amendment) and is not expected to have an impact on provide the required disclosure where the group's financial statements. applicable for impairment tests from 1 January 2009. *IAS 16 (Amendment), 'Property, plant and equipment' (and consequential amendment to IAS 7, 'Statement of cash *IAS 40 (Amendment), 'Investment flows') (effective from 1 January 2009). property' (and consequential The amendment is part of the lASB's amendments to IAS 16) (effective from annual improvements project published 1 January 2009).The amendment is part of in May 2008. the IASB's annual improvements project published in May 2008. Property that is Entities whose ordinary activities comprise under construction or development for renting and subsequently selling assets future use as investment property is present proceeds from the sale of those within the scope of IAS 40. Where the fair assets as revenue and should transfer the value model is applied, such property is, carrying amount of the asset to inventories therefore, measured at fair value. when the asset becomes held for sale. However, where fair value of investment A consequential amendment to IAS 7 property under construction is not reliably states that cash flows arising from measurable, the property is measured purchase, rental and sale of those assets at cost until the earlier of the date are classified as cash flows from operating construction is completed and the date at activities. which fair value becomes reliably measurable.
  24. 24. Accounting Policies Theamendmentwillhavean impacton the (and consequential amendment group's operationsas it holds investment to IFRS 1, 'First-time adoption') property, and will be applied from 1 (effective from 1 July 2009). January2009. *IAS 19 (Amendment), 'Employee *There are a number of minor benefits' (effective from 1 January amendments to IFRS 7, 'Financial 2009). instruments: disclosures', IAS 8, 'Accounting policies, changes in *IAS 20 (Amendment), 'Accounting accounting estimates and errors', IAS for government grants and disclosure 10, 'Events after the reporting period', of government assistance' (effective IAS 18, 'Revenue' and IAS 34, 'Interim from 1 January 2009). financial reporting', which are part of the IASB's annual improvements *IAS 23 (Amendment), 'Borrowing project published in May 2008 (not costs' (effective from 1 January 2009). addressed above). These amendments are unlikely to have an impact on the *IAS 28 (Amendment), 'Investments group's accounts and have therefore in associates' (and consequential not been analysed in detail. amendments to IAS 32, 'Financial Instruments: Presentation', and IFRS (c) Interpretations and amendments to 7, 'Financial instruments: existing standards that are not yet Disclosures') (effective from 1 effective and not relevant for the January 2009). group's operations The following interpretations and *IAS 29 (Amendment), 'Financial amendments to existing standards reporting in hyperinflationary have been published and are economies' (effective from 1 January mandatory for the group's accounting 2009). periods beginning on or after 1 January 2009 or later periods but are not *IAS 31 (Amendment), 'Interests in relevant for the group's operations: joint ventures' (and consequential amendments to IAS 32 and IFRS 7) (effective from 1 January 2009). *IFRS 1 (Amendment) 'First time adoption of IFRS', and IAS 27 *IAS 32 (Amendment), 'Financial 'Consolidated and separate financial instruments: presentation', and IAS 1 statements' (effective from 1 January (Amendment),' Presentation of 2009). financial statements' - 'Puttable *IFRS (Amendment),Non-currentassets 5 ' financial instruments and obligations held-for-saleand discontinuedoperations' arising on liquidation' (effective from 1 January 2009).
  25. 25. Accounting Policies *IAS 36 (Amendment), 'Impairment The inflation indices required to prepare of assets' (effective from 1 January inflationadjusted financialstatementswere 2009). not availableat the time of reporting. The *IAS 38 (Amendment), 'Intangible Central Statistics Office had not released assets' (effective from 1 January 2009). consumerprice indicesfrom July 2008and, in the opinionof management,the existence *IAS 39 (Amendment), 'Financial of marketdistortionsmade the measurement instruments: Recognition and of inflation by alternative means difficult. measurement' (effective from 1 Accordingly,only historical cost financial January 2009). statements have been provided. This is a departure from the basis on which the *IAS 41 (Amendment), 'Agriculture' financialstatementsfor previousyears have (effective from 1 January 2009). beenprepared. *IFRIC 13, 'Customer loyalty programrnes'(effective froml July 2008). 2.2 Limitations of financial reporting in the general economic *IFRIC15, 'Agreements for construction environment of real estates' (effective from 1 January The uncertainties in the adverse 2009). Zimbabwe economic environment during the period up to 31 January *IFRIC16, 'Hedges of a net investment 2009 have resulted in limitations in in a foreign operation' (effective from financial reporting. Management is 1 October 2008). unable to predict the extent, severity Inflation adjustment or duration of the current economic difficulties or their impact on the future The financial statements have been operations of the Group. prepared in accordance with International Financial Reporting Standards ("IFRS") except for the requirement to present inflation (i) Non availability of official inflation adjusted financial statements in indices accordance with International Accounting Standard ("IAS") 29: Inflation indices have not been Financial Reporting in Hyper- published since July 2008. Estimates of inflationary Economies up to 31 inflation by economists ranged from January 2009 when the functional trillions to quadrillions percent. The use currency of the Group changed to of multiple foreign exchange rates and United States of America dollars. The of multiple pricing methods also financial statements are based on distorts the process of measuring statutory records that are maintained inflation. under the historical cost convention. ___________ fB Annual Report 2009
  26. 26. Accounting Policies In these circumstances, inflation adjusted 2.3 Consolidation financial statements are not prepared as (a) Subsidiaries required by the International Accounting Subsidiaries are all entities (including Standard ("IAS") 29: 'Financial Reporting special purpose entities) over which the Hyperinflationary Economies'. Group has the power to govern the (ii) Measurement of transactions financial and operating policies generally The measurement of transactions in local accompanying a shareholding of more currency was dependent on the mode of than one half of the voting rights. The settlement. As a result, there may be existence and effect of potential voting significant variations in the valuations of rights that are currently exercisable or assets and liabilities. Accordingly, such convertible are considered when assessing valuations may be inherently unreliable. whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to (iii) Multiple exchange rates the Group. They are deconsolidated from The various exchange rates in use varied the date that control ceases. significantly. For instance, during the year The purchase method of accounting is used under review the market "cash" exchange to account for the acquisition of subsidiaries rate was less than 1 % of the market" cheque" by the group. exchange rate or the "United Nations" The cost of an acquisition is measured as the exchange rate. If a transaction occurred at fair value of the assets given, equity more than one rate and is recorded at its instruments issued and liabilities incurred or nominal value, this may result in distortions assumed at the date of acquisition, plus in financial reporting; costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a The introduction of licences to operate in business combination are measured initially foreign currencies within the country, and at their fair values at the acquisition date, the basing of most transactions on foreign irrespective of the extent of any minority currency equivalents for most of the non- interest. The excess of the cost of acquisition licensed operators, created challenges for over the fair value of the Group's share of the Group in determining its functional the identifiable net assets acquired is currency in the latter part of 2008. As a recorded as goodwill. result of these uncertainties and these inherent limitations, caution is advised on If the cost of acquisition is less than the fair the use of these financial statements for value of the net assets of the subsidiary decision making purposes. acquired, the difference is recogrused directly in the income statement. ------------------
  27. 27. Accounting Policies Intercompany transactions, balances and monetary assets and liabilities denominated in unrealised gains on transactions between foreign currencies are recognised in the Group companies are eliminated. Umealised income statement. losses are also eliminated but considered an impairment indicator of the asset transferred. Changes in the fair value of monetary securities denominated in foreign currency 2.4 Segment reporting classified as available for sale are analysed A business segment is a group of assets between translation differences resulting and operations engaged in providing from, changes in the amortised cost of the products or services that are subject to security and other changes in the carrying risks and returns that are different from amount of the security. Translation those of other business segments. A differences related to changes in the geographic segment is engaged in amortised cost are recognised in profit or providing products and services within loss, and other changes in the carrying a particular economic environment that amount are recognised in equity. are subject to risks and returns that are c (i) Comparatives different from those of segments operating The group could not translate comparative in other economic environments. figures for the income statement in line IAS 2.5 Foreign currency translation 21; The Effects of Changes in Foreign a)Functional and presentation currency Exchange Rates requirements which state that prior period figures should be restated The functional and presentation currency of for the effects of changes in the general the Group changed on 1 February 2009 purchasing power of a currency in a following the promulgation of the Multi- hyperinflationary environment. In the Currency regime. absence of the Central Statistics Offices The Group therefore traded for the last two indices the Group decided against translating (2) months of the year using the United States comparative figures for the income statement. Dollars as the functional and the presentation currency. cUi) Share capital, debentures, investment property and comparative Items included in the financial statements information translation basis of each Group's entIty are measured using the currency of the primary economic IAS 21 requires that entities whose environment in which the entity operates functional currency is the currency of a ('the functional currency'). hyperinflationary economy, restate their b)Transactions and balances financial statements in accordance with Foreign currency transactions are accounted IAS 29 before applying the translation for at the exchange rates prevailing at the method set out in the standard. However date of the transactions. Gain and losses the Group and Company did not follow resulting from the settlement of such this basis of accounting in the following translations and from the translation of areas: ------------,&
  28. 28. Accounting Policies Share capital, share premium and 2.6 Property, plant and equipment debentures were derived by translating Property, plant and equipment the historical balances at the ruling spot comprise mainly land, buildings rates on the respective dates of issuance, and motor vehicles. Land and as the equity represented the value of buildings are shown at fair value, assets acquired at the commencement of based on periodic , but at least operations. triennial, valuations by professional Comparative information for investment valuers, less subsequent property, financial assets available for accumulated depreciation for the sale and goodwill have been recorded at building. the same value as that stated in the year Land is not depreciated. end balance sheet as at 31 March 2009. Depreciation on other assets is Other comparative information was calculated using the straight line derived by converting the hyperinflated method to allocate their cost to the Zimbabwe dollar balances with the residual values over their estimated closing old mutual implied rate ruling as useful lives, as follows; at 31 March 2008. Buildings 25 - 40 years The Zimbabwe economy was recognised Vehicles 5 years as being hyperinflationary for purposes Computers 4 years of financial reporting. Furniture and fittings 10 years d) Redenomination of currency The assets' residual values and useful With effect from 1 August 2008, the lives are reviewed, and adjusted if Res e r v e Ban k 0 f Z i m b a b w e appropriate, at each balance sheet date. re-denominated the Zimbabwe dollar An asset's carrying amount is written by a factor of 1:10,000,000,000, i.e. 10 down immediately to its recoverable zeroes were removed from all amount if the asset's carrying amount monetary values. With effect from the is greater than its estimated recoverable same date the Reserve Bank of amount. Gains or losses on disposals Zimbabwe issued new currency which are determined by comparing proceeds carries the same name of a 'dollar' as with carrying amount and are charged that of the old currency. to operating profits. The Reserve Bank of Zimbabwe further When revalued assets are sold, the redenominated the Zimbabwe currency by amounts included in other dividing by 1 000 000000000i.e 12 zeros on reserves are transferred to retained 1 February 2009. All transactions in the income. current and comparative accounting period 2.7 Investment property have been restated in the new Zimbabwe Property that is held for long-term rental Dollar, as defined at 1 August 2008 and yields or for capital appreciation or both, 1 February 2009. and that is not occupied by the Group is classified as investment property. • -----------
  29. 29. Accounting Policies Investment property comprises freehold Separately recognised goodwill is tested land and freehold buildings which are annually for impairment and carried at cost used principally for hotel operations. less accumulated impairment losses. Investment property is measured initially Impairment losses on goodwill are not at its cost, including related transaction reversed. Gains and losses on the disposal costs. of an entity include the carrying amount of goodwill relating to the entity sold. After initial recognition, investment property is carried at fair value. Fair value is based on Goodwill is allocated to the cash-generating alternative valuation methods such as recent units for the purpose of impairment testing. prices on less active markets or discounted The allocationis made to those cash-generating cash flow projections. units or groups of cash-generating units that are These valuations are reviewed armually by a expected to benefit from the business firm of professional property valuers. combination in which the goodwill arose. Dawn Investment property that is being redeveloped Properties limited allocates goodwill to each for continuing use as investment property or businesses segment in which it operates. for which the market has become less active continues to be measured at fair value. 2.9 Non-current assets (or disposal groups) The fair value of investment property held for sale reflects, among other things, rental income Non-current assets (or disposal groups) are from current leases and assumptions about classified as assets held for sale when their rental income from future leases in the light carrying amount is to be recovered principally of current market conditions. through a sale transaction and a sale is Fair value also reflects, on a similar basis, any considered highly probable. They are stated cash outflows that could be expected in at the lower of carrying amount and fair respect of the property. value less costs to sell if their carrying amount is to be recovered principally Some of those outflows are recognised as a through a sale transaction rather than liability, including finance lease liabilities in through continuing use. respect of land classified as investment 2.10 Financial assets property; others, including contingent rent The Group classifies its financial assets in payments, are not recognised in the financial the following categories: at fair value statements. through profit or loss, loans and 2.8 Intangible assets receivables, and available for sale. The a) Goodwill classification depends on the purpose Goodwill represents the excess of the cost of for which the financial assets were an acquisition over the fair value of Group's acquired. share of the net identifiable assets of the acquired subsidiary/associate at the date of Management determines the classification acquisition. of its financial assets at initial recognition. -----------,g
  30. 30. Accounting Policies a) Financial assets at fair value through Assets that are subject to amortisation profit or loss are reviewed for impairment whenever Financial assets at fair value through profit or events or changes in circumstances loss are financial assets held for trading or indicate that the carrying amount may designated as financial assets through profit not be recoverable. and loss upon initial recognition. A financial An impairment loss is recognised for asset is classified in this category if acquired the amount by which the asset's principally for the purpose of selling in the carrying amount exceeds its recoverable short term. Derivatives are also categorised as amount. held for trading unless they are designated as hedges. Assets under this category are classified The recoverable amount is the higher of an asset's fair value less costs to sell and as current assets. value in use. For the purpose of assessing impairment, assets are grouped at the b) Loans and receivables lowest levels for which they are separately Loans and receivables are non-derivative identifiable cashflows (cash generating financial assets with fixed or determinable units). payments that are not quoted in an active Non-financial assets other than market. They are included in current assets, goodwill that suffered an impairment except for maturities greater than 12 months are reviewed for possible reversal of the after the balance sheet date. These are impairment at each reporting date. classified as non-arrrent assets. The Group's 2.12 Inventories loans and receivables comprise 'trade and other Inventories are stated at the lower of receivables' and cash and cash equivalents in cost or net realisable value. Cost is the balance sheet. determined using the first-in, first- c) Available-Jor-sale financial assets out (FIFO) method. The cost of Available for sale financial assets are non- finished goods and work in progress derivatives that are either designated in this comprises raw materials, direct labour, category or not classified in any of the other other direct costs and related categories. They are included in non-current production overheads (based on assets unless management intends to dispose of normal operating capacity) but the investment within 12 months of the balance excludes borrowing costs. sheet date. Net realisable value is the estimated At the balance sheet date the group had selling price in the ordinary course of no available for sale securities. business, less the costs of completion and 2.11 Impairment of non-financial assets selling expenses. Assets that have an indefinite useful life 2.13 Borrowings are not subject to amortisation and are Borrowings are recognized initially at tested annually for impairment. fair value, net of transaction costs incurred . • '---------=--=-----::-::-::-::-------- Annual Report 2009
  31. 31. Accounting Policies Borrowings are subsequently stated at 2.15 Current and deferred income tax amortised cost; any difference between The tax expense for the period comprises the proceeds (net of transaction costs) and current and deferred tax. Tax is the redemption value is recognised in the recognised in the income statement, income statement over the period of the except to the extent that it relates to borrowings using effective interest method. items recognised directly in equity. In this case, the tax is also recognised in Borrowings are classified as current liabilities equity. unless the Group has an unconditional right to defer settlement of the liability for at least The current income tax expense is 12 months after balance sheet date. calculated on the basis of the tax laws enacted or substantively enacted at 2.14 Provisions the balance sheet. Provisions are recognised when the Group Deferred income tax is provided in full, has a present legal or constructive obligation using the liability method, on temporary as a result of a past event, it is probable that differences arising between the tax bases an outflow will be required to settle the of assets and liabilities and their carrying obligation, and a reliable estimate of the amounts in the financial statements. amount can be made. Provisions are not Currently enacted tax rates are used in the recognised for future operating losses. determination of deferred income tax. Where there are a nurnl:u of similar obligations, Deferred income tax assets are recognised the likelihoodthat an outflow will be Iff£Uiredin to the extent that it is probable that future settlement is detennined by considering the class taxable profit will be available against which of obligationsas a whole. the temporary differences can be utilised. Deferred income tax assets are recognised to the extent that it is probable that future Deferred income tax is provided on temporary taxable profit will be available against differences arising on investments in which the temporary differences can be subsidiaries,associatesand joint ventures, except utilised. where the timing of the reversal of the temporary A provision is re:ognised even if the likelihood differences can be controlled and it is probable of an outflow with respect to anyone item that the temporary differences will not reverse irduded in the same class of obligationsmay be in the foreseeablefuture. small. Provisions are measured at the present value of the expenditures expectedto be Iff£Uired 2.16 Revenue recognition to settle the obligation using a pre-tax rate that Revenue comprises the fair value of the reflects current market assessments of the time consideration received or receivable for value of money and the risks 5Jnilic to the the rendering of services in the ordinary obligation.The ircrease in the provision due to course of the Group's activities. Revenue ~ge of time is re:ognised as interestexpnse. is shown net of value-added tax. Revenue is recognised as follows:
  32. 32. Accounting Policies Rental income For defined contribution plans, the Group Revenue includes rental income, service pays contributions to publicly or privately charges and management charges from administered pension insurance plans on properties, and income from property a mandatory, contractual or voluntary basis. trading. The Group has no further payment Rendering of services obligations once the contributions have Sales of services are recognised in the been paid. The contributions are accounting period in which the services recognised as employee benefit expense are rendered, by reference to completion when they are due. Prepaid of the specific transaction assessed on the contributions are recognised as an asset basis of the actual service provided as a to the extent that a cash refund or a proportion of the total services to be reduction in the future payments is provided. available. Interest income National Social Security Authority Interest income is recognized on a time-portion Scheme basis using the effective interest method. The Group and its employees contribute Interest income on impaired loan is recognised to the National Social Security Authority. either as cash is collected or on a cost-recovery This is a social security scheme which basis as conditions warranty. was promulgamated under the National Dividend income Social Security Statutory Instrument. Dividend income is recognised when the The Group's obligations under this scheme right to receive payment is established. are limited to the specific contributions 2.17 Employee benefits legislated from time to time. Pension obligations Group companies operate various pension Share based compensation schemes. The schemes are generally funded The Group operates a share based through payments to insurance companies or compensation plan. The fair value of the employee services received in trustee-administered funds determined by exchange for the grant of the options periodic actuarial calculations. is recognised as an expense. The Group has defined contribution plans. The total amount to be expensed over the A defined contribution plan is a pension vesting period is determined by reference plan under which the Group pays fixed to the fair value of the options granted, contributions into a separate entity. The excluding the impact of any non-market Group has no legal or constructive vesting conditions(for example, obligation to pay further contributions if profitability and sales growth targets). the fund does not hold sufficient assets to Non-market vesting conditions are included in assumptions about the number pay all employees the benefits relating to of options that are expected to vest. employee service in the current and prior periods. ------------ Annual Report 2009
  33. 33. Accounting Policies At each balance sheet date, the entity 2.18 Accounting for leases revises its estimates of the number of (a) As Lessee options that are expected to vest. It The Group leases certain property, plant recognises the impact of the revision to and equipment. Lease of property, plant original estimates, if any, in the income and equipment where the group has statement, with a corresponding substantially all the risks and rewards of adjustment to equity. ownership are classified as finance lease. The proceeds received net of any directly The corresponding rental obligation, net attributable transaction costs are credited of finance charges, are included in non to the share capital(norninal value) and current borrowings. The interest element share premium when the options are of the lease payments is charged to the exercised. income statement over the lease period. Termination benefits Termination benefits are payable when The property, plant and equipment employment is terminated by the Group acquired under the leasing contracts is before retirement date, or whenever employee depreciated over the useful life of the accepts voluntary redundancy in exchange asset. for these benefits. (b) As lessor The Group recognizes termination benefits Assets leased out under operating leases when it is demonstrably committed to are included in investment property in the either: terminating the employment of balance sheet. The Group does not lease current employees according to a detailed out assets under finance lease. formal plan without possibility of withdrawal; or providing termination 3 CRITICAL ACCOUNTING ESTIMATES benefits as a result of an offer made to AND JUDGMENTS encourage voluntary redundancy. The Group makes estimates and Benefits falling due more than 12 months assumptions concerning the future. The after the balance sheet date are discounted resulting accounting estimates will, by to present value. definition, seldom equal the related actual results. The estimates and Profit-sharing and bonus plans assumptions that have a significant risk The Group recognises a liability and an of causing a material adjustment to the expense for bonuses and profit-sharing, carrying amounts of assets and based on a formula that takes into liabilities within the next financial year consideration the profit attributable to the are discussed below. Company's shareholders after certain a) Fair value of investment property adjustments. The Group recognises a provision where contractually obliged or In determining the open market value where there is a past practice that has CBRE first considered the market created a constructive obligation. comparison method.
  34. 34. Accounting Policies Thismethod considerscurrent prices in an c) Going concern active market for similar property in the Despite the challenging operating same location and condition subject to environment, and after the assessing similar lease and other covenants. the going concern assumption, the Appropriate adjustments are made for Directors believe the Group will the differences in nature, location or continue to operate for the condition of the property, or in the terms foreseeable future. Management has of the lease and other contracts relating put in place strategies to mitigate to the property. against the challenges the Group is As there is no active market for hotel facing and the Group's ability to pay properties in Zimbabwe, current prices its maturing obligations. were drawn from recent transactions of 4 FINANCIAL RISK MANAGEMENT commercial properties in general. The prices were adjusted for contractual, 4.1 Financial risk factor s location and inherent differences. The The Group's activities expose it to a discounted cash flow method (DCF)was variety of financial risks: market risk also employed. including currency risk, price risk and cash flow risk and interest rate: credit The DCF method is only as reliable as the risk and liquidity risk. The financial cash flows and valuer drivers (discount risks relate to the following financial factor, rate of inflation, growth rate) that instruments; trade receivables, cash and are fed into the model. The DCF model is very sensitiveto all the three variablesand cash equivalents, trade and other therefore not suitable for use in a volatile payables and borrowings. economy. Risk management is carried by the Consequently, a relatively normal ChiefExecutiveOfficerand management economy was assumed in order to apply under policies approved by the Board the model. Two models were run, a of Directors. The Chief Executive Zimbabwean dollar model and a US Officer identifies and evaluates financial dollar model. The resulting valuations risks in close co-operation with the were assessed and reasons for differences Group's operating units. were considered in arriving at the most The Board provides written principlesfor suitable reliable estimate of fair value. overall risk, interest-rate risk, credit risk, b) Income taxes use of derivativefinancialinstrumentsand Significant judgment is required in non-derivative financial instruments, and determining the provision for income investingexcessliquidity. taxes. There are many transactions and The reports on the risk management calculations for which the ultimate tax are produced on a quarterly basis at determination is uncertain during the legal entities level to the key manageme nt ordinary course of business. personnel of the gnap. ID ~-~---_ Annual Report 2009
  35. 35. Accounting Policies a) Market risk The prevailing interest rates are punitive 1) Price risk and unsustainable in the long run. The The Group is exposed to property price group will embark on medium to long and property rentals risk. The rental risk term projects which will expose the group arise from the fact that all the hotel cash flow risk due to high interest rates. properties are occupied by a single tenant. The Board and Management mitigates the b) Credit risk risk by continuously engaging the tenant The Group's properties are all leased out and reviewing the lease agreements. to African Sun Limited and there is ii) Foreign exchange risk significant concentrations of credit risk. The Multi Currency regime enunciated The Company has policies in place to during the last quarter of the period under manage its exposures to African Sun. review ushered in the foreign exchange Credit risk also arises from credit risk as the Group is operating in an exposures with respect to rental environment where the United States customers, including outstanding Dollars, the Great Britain Pound, the receivables. South African Rand and the Botswana c) Liquidity risk Pula are generally accepted as legal tenders. The currencies noted are The Group's policy is to negotiate borrowings susceptible to currency fluctuations and facilities from approved financial institutions spikes. The risk is managed by converting based on the existing asset base of the company. all currencies received into United States The borrowing powers of the Group are limited Dollars. by the memorandum and articles of association. The Group's liquidity position is monitored by iii) Cash flow and fair value interest rate management. risk The Group has no interest-bearing assets and liabilities, the group's income and operating cash flows are substantially The groups objectives when managing capital independent of changes in the market are to safeguard the group's ability to continue interest rates. as a going concern in order to provide returns Trade and other receivables and payables for shareholders and benefits for other are interest-free and have settlement dates stakeholders and to maintain optimal capital within one year. structure to reduce the cost of capital. Cashflow from operations will be affected The group monitors capital on the basis of the gearing ratio, the group is currently debt free by the cash flow interest risk in future when save for debentures. the group embarks on envisaged projects which require funding from financial institutions.
  36. 36. Accounting Policies During the period under review the Zimbabwe operating environment continued to deteriorate, driven by chronic levels of hyperinflation, multiple and distorted interest rates and exchange rates, distorted pricing mechanisms, a fast deteriorating local currency unit, and other significant market distortions. The group's operations have, therefore, been significantly affected, and may continue to be affected, by these conditions. Given the developments as of February 2009 with the deregulation of foreign currency transactions, and the effective dollarisation of the economy, the functional and presentation currency of the financial statements for the year ending 31 March 2009, and periods following, is likely to be United States dollars. Having assessed the group's ability to continue as a going concern, the Directors believe that, despite the challenging operating environment, the group will continue to operate for the foreseeable future. Management strategies have been put in place to address the challenges the group is facing and to address the group's ability to pay its maturing obligations. ------------- Annual Report 2009
  37. 37. 6 Revenue Rental Commission • 277,391 767,261 1,044,652 The group leases out all its investment property under operating leases. The leases are for terms of five and ten years. Revenue excludes value added tax. 7 Operating loss The following have been charged in arriving at the operating loss: Auditors' remuneration 13,210 Directors' fees - for services as directors 27,424 - for other services Staff costs Salaries and wages 442,505 Pension 1,178 Social security costs 763 Staff welfare 12,327 456,773 Average number of employees 75 8 Net finance income Interest expense on bank borrowings Interest income 9 Income tax expense Current year income tax Deferred income tax (note 18) ----------- Annual Report 2009
  38. 38. Reconciliation of current tax charge Current rate of tax 30.90% Utilised tax losses -30.90% Other permanent differences 0.00% Fair value adjustment 0.00% Monetary adjustment 0.00% Effective rate 0.0% The group made a loss of $371,981 to be assessed in 2009. 10 Fully diluted and basic earnings per share Profit attributable to linked unit holders Weighted average number of linked units in issue at the beginning of the year Adjustments for - share options - shares issued during the year 3,555,000 Weighted average number of diluted earnings per linked unit 2,407,090,019 11 Investment property At beginning of the year Fair value gains At 31 March 2009 Consistent with the accounting policy, investment properties were fair valued to open market value by professional valuers CB Richard Ellis (Private) Limited (CBRE), who are a related party, on 31 March 2009. ------------
  39. 39. Land and Motor Computer Office Furniture & Total Buildings Vehicle Equipment Equipment Fittings Other US$ Cost At beginning of the year Additions during the year - 546,997 1,050 74,335 622,382 Revaluation and currency adjustment 5,439,001 1 9,054 1,420 1,682 5,451,158 Transfer to non- current assets ( 287,000) (287,000) Disposals (1) (1) At end of 31 March 2009 5,152,000 546,998 10,104 1,420 1,682 74,335 5,786,539 Accumulated Depreciation At beginning of the year Provision for the year (88,105) (1,304) (76) (1,257) (90,742) Disposal At end of 31 March 2009 (88,105) (1,304) (76) (1,257) 74,335 (90,742) Net Book Value At end of 31 March 2009 5,152,000 458,893 8,800 1,344 425 74,335 5,695,797 •
  40. 40. 2009 US$ 13 Goodwill Opening net book amount Goodwill on acquisition Closing net book value 14 Trade and other receivables Trade receivables 241,281 Prepayments 204,678 Staff loans 3,895 Receivables from related parties 16,024 Loans to related parties The fair values of trade and other receivables are as follows: Trade receivables 241,281 Prepayments 204,678 Staff loans 3,895 Receivables from related parties 16,024 Loans to related parties 15 Non current assets held for sale At the beginning of the year Reclassification during the year Disposals Fair value adjustment This consists of land that is in the process of being disposed of. The transaction had not been concluded as at 31 March 2009. ------------
  41. 41. 2009 US$ 16 Share capital Authorised 4,000,000,000 ordinary shares of a nominal value of Z$.OOOO1each (at time of issue) Issued Ordinary shares of a nominal value of Z$O.OOOO1 each (at time of issue) 2,403,535,019 shares at the beginning of the year 3,555,000 of $0.00001 shares issued during the year At 31 March 2009 The directors are authorised to allot or dispose of unissued linked units under their control at their discretion in accordance with the provisions of the articles of Association of the Company and the Companies Act (Chapter 24:03), and the rules of the Zimbabwe Stock Exchange. Share Options Share options are granted to directors and selected employees. The exercise price of the granted options is equal to the market price of the shares on the grant date. 17 Non-current Borrowings Authorised debentures of a nominal value 4,000,000,000 ordinary shares of a nominal of Z$0.00099 each (at time of issue) Issued Debentures of a nominal value of Z$0.00099 each (at time of issue) 2,403,535,019 debentures at the beginning of the year Debentures issued during the year At 31 March 2009 -----~-~--_. Annual Report 2009
  42. 42. The debentures bear interest at such rate as is determined by and at the sole discretion of the Directors. There are no repayment terms for the debentures. 18 Deferred income tax The gross movement on the deferred income tax account is as follows: Beginning of the year 13,244,926 Income statement charges (note 9) Through equity 738,753 End of the year 13,983,679 19 Trade and other payables and borrowings Current Trade payables 25,843 Accruals 332,083 Taxation Value added tax 47,434 405,360 20 Directors' shareholding C. A. Mataure 2,000 S. A. Munyeza 8,675,518 C. B.Thorn 12,927 Messrs F. Rwodzi, M. Manyika and S. A. Munyeza hold a total shareholding of 18.07% of Dawn Properties through various investment vehicles. 21 Related party disclosure African Sun Limited (AfriSun) owns 17.15% of the Group. All the Group's hotel properties are leased to AfricaSun on lease agreements ranging for periods between 5 and 10 years. Total rentarevenue of the Group relates to rentals invoiced to African Sun Limited. The following transactions were carried out with related parties: EJ _