bulawayo hotels - rtg annual report 2009 finale …...management contract over harare sheraton hotel...

ContentsContentsPage

Destiny, Cause & Calling 2

RTG History 3

Divisional Composition 5

Board of Directors 7

Chairman’s Statement 10

Chief Executive’s Review of Operations 11

Corporate Governance 14

Report of the Directors 16

Directors’ Responsibility Statement 17

Independent Auditor's Report 19

Consolidated Statement of Financial Position 22

Consolidated Statement of Comprehensive Income 23

Consolidated Statement of Changes in Equity 24

Consolidated Statement of Cashflows 25

Notes to the Financial Statements 26-45

Top 20 Shareholders 46

Notice to Shareholders 47

Proxy Form 49

Rainbow Tourism Group Limited page 1

To exude passion for Unique African hospitality.

To position the Rainbow brand as the leading provider of Unique African Hospitality.

To commit teams to serve with integrity.

.

Being devoted to serve and inspire all stakeholders in order to attain success and greatness for Rainbow Tourism Group.

Continuously improving our cooperation as a family through open and honest communication to achieve our purpose.

Honouring win-win relationships grounded in the virtues of listening, and truthfulness.

The love to deliver exceptional customer service while uplifting our self esteem in order to achieve personal growth.

Commitment

Teamwork

Integrity

Respect

Passion

A professional work ethic underpinned by accountability, trust and transparency.

Our Values

Destiny

Cause

Calling


Year

1981

1983

1984

1985

1986

1987

1991

1992

1994

1995

1996

1997

1998

1999

Zimbabwe Tourist Board is formed as a corporate body.

Government of Zimbabwe commissions construction of a 5-star Hotel and Conference Centre in Harare and

engages Sheraton Overseas Management Services (a subsidiary of ITT Sheraton) to manage the 5-star

hotel upon completion.

Zimbabwe Tourist Development Corporation (ZTDC) is formed.

The 5-star Hotel And Conference Centre construction completed and hotel starts operating under

management contract with the name Harare Sheraton Hotel. Conference Centre is named Harare

International Conference Centre operated by Ministry of Environment and Tourism.

ZTDC acquires 3 hotels namely: Ambassador Hotel, A’Zambezi River Lodge and Rainbow Hotel in Victoria

Falls to avert their closure.

ZTDC establishes touring division as a joint venture under a different name, Zimbabwe Tours.

Zimbabwe Tourism Investment Company Pvt Ltd (ZTIC), a company wholly owned by Government, is

registered under the Companies Act, Chapter 190. First Board appointed in November to turn around ZTDC

loss making operations, namely Hotels Division: A’ Zambezi River Lodge, Rainbow Hotel, New Ambassador

Hotel (formerly Ambassador Hotel) and Christmas Pass Hotel, Tours Division (comprising Zim Tours),

Conference Division (comprising Harare International Conference Centre) and the Investment Division

(represented by the Harare Sheraton Hotel which was operated under a management contract with

Sheraton Overseas Management Services).

First CEO appointed and commercial business assets transferred from ZTDC and Ministry of Environment

and Tourism to ZTIC. Operations commence on 1 April.

ZTIC changed name to Rainbow Tourism Group (RTG) with RTG still wholly owned by Government. Zim

Tours becomes a joint venture on a shareholding structure of 60% for RTG and 40% for a strategic partner,

Ireland Blyth Ltd (IBL) Mauritius, and is renamed Zimbabwe Mauritius Tours and Travel (Pvt) Ltd trading as

Tourism Services Zimbabwe.

RTG acquires Rhodes Nyanga Hotel and Kadoma Ranch Motel.

Chimanimani Hotel is acquired on a shareholding of 75% for RTG and 25% for a strategic partner, Bervin

Investments; Zambezi Safari Lodges is commissioned on a shareholding of 50% for RTG and 50% for a

strategic partner, Conservation Corporation Zimbabwe.

Christmas Pass Hotel, Mutare, is disposed off. Bulawayo Sun Hotel is purchased and renamed Bulawayo

Rainbow Hotel.

Touch the Wild Lodges and Safaris acquired on a shareholding structure of 60% for RTG and 40% for IBL

Mauritius. ITT Sheraton is bought by Starwood Hotels and Resorts Worldwide Inc.

Management contract over Harare Sheraton Hotel renegotiated by RTG and Starwood Hotels and Resorts

Worldwide Inc. and the Hotel is renamed Sheraton Harare Hotel and Towers. RTG is restructured into four

business units (Rainbow Hotels and Conferences division, Sheraton Harare Hotel and Towers division,

Touch the Wild (Pvt) Ltd and Tourism Services Zimbabwe). A voluntary retirement scheme is offered.

Cabinet approval for RTG privatisation is given on 29 June. RTG’s strategic partnership with Accor is

RTG History


approved on 19 October. RTG becomes the 72nd quoted company on the Zimbabwe Stock Exchange on 1

November.

RTG/Accor strategic partnership agreement is concluded; Accor’s 35% shareholding becomes fully

subscribed on 1 March. Chimanimani Hotel and Rhodes Nyanga Hotel are disposed off as they could not

achieve critical mass in capacity and yield.

Rebranding of A’Zambezi River Lodge to Hotel Mercure A’Zambezi.

Rebranding of Rainbow Hotel In Victoria Falls to Hotel Mercure Rainbow.

By mutual agreement, management contract with IBL Mauritius is terminated. However IBL Mauritius

maintains its shareholding.

Management Agreement with Starwood expires and not renewed. Sheraton Harare Hotel and Towers and

Harare International Conference Centre, merged and rebranded to Rainbow Towers Hotel and Conference

Centre. RTG successfully carries out a rights issue in September and new shareholders emerge as Accor,

Laaico, and Ministry of Enviroment and Tourism get diluted. Management Contract for Sheraton Harare

Hotel and Towers expires on 31December 2005 and is not renewed. Operations of the hotel merged with the

Harare International Conference Centre.

The merged business successfully rebranded The Rainbow Towers Hotel and Conference Centre on 19

March. Management contract with Accor terminated. Hotel Mercure A’Zambezi and Hotel Mercure Rainbow

rebranded to A’Zambezi River Lodge and Victoria Falls Rainbow Hotel respectively under the Rainbow

Hotels Division. Group reverses losses of the past 3 years and wipes out foreign debt incurred over

management contracts.

South African marketing office established. Regional expansion strategy unveiled. Group finds partner with

piece of land for construction of hotel in Beitbridge.

RTG takes over management of first hotel in the Region namely, Hotel Edinburgh in Kitwe, Zambia. RTG

also signs a management contract for Savoy Hotel in Ndola, Zambia. A hospitality business school is

established and is named Rainbow Hospitality Business School (RHBS).

2000

2001

2002

2004

2005

2006

2007

2008

RTG History



• The Rainbow Towers Hotel and Conference Centre

(100%)

• Bulawayo Rainbow Hotel• Kadoma Hotel and Conference Centre• Victoria Falls Hotel• A’Zambezi River Lodge• New Ambassador Hotel

Rainbow

(100%)

• Sable Valley Lodge• Sikumi Tree Lodge• Matobo Hills Lodge• Lodge at the Ancient City

Harare Safari Lodge(60%)•

• Touring Coaches• Cruise Boats• Excursions• Accomodation(60%)

Divisional Composition

Divisional CompositionContd

• Matetsi Water Lodge, Victoria Falls (100%)

• Hotel Savoy, Ndola, Zambia (Management contract)

• Hotel Edinburgh, Kitwe, Zambia (100%)

Other Properties

(100%)


NATURE OF BUSINESSThe company and its subsidiaries are incorporated in Zimbabwe. The Group is involved in the tourism services industry as hoteliers, tour operators, providers of conference facilities and safari lodges.

DirectorsP. F. Timba Chairman Y. Mariuma (Alt. F. Montfort) Non-executiveC. Mtasa (Mrs) Chief Executive T. Kufazvinei Non-executiveP. Changunda Finance Director E.R.M Nyoni Non-executiveC. R. Daniels (Mrs) Non-executive G.T. Manhambara Non-executiveJ. M. Chikura Non-executive

REGISTERED OFFICE CORPORATE OFFICERainbow Towers Hotel and Conference Centre Chipo Mtasa Chief ExecutiveNo. 1 Pennefather Avenue Paschal Changunda Finance DirectorHARARE Cinderella Masimbe Human Resources Director

Lewis Chasakara Operations DirectorGodfrey Pasipanodya Commercial DirectorAldo Musemburi Company SecretaryAnorld Chidakwa Business Development

ExecutivePeter Mandimutsira Internal Audit Manager

AUDITORS BANKERSBDO

Stanbic Centre59 Samora Machel Avenue HARARE

LAWYERS TRANSFER SECRETARIESKantor and Immerman First Transfer Secretaries (Private) LimitedMacDonald House 4th Floor, Gold Bridge10 Selous Avenue Eastgate ComplexHARARE Cnr Sam Nujoma St/ R. Mugabe Rd

HARARE

Zimbabwe Chartered Accountants Stanbic Bank Zimbabwe 3 Baines AvenueHARARE

Registration No. 4880/91

Rainbow Tourism Group



1. OPERATING ENVIRONMENT

2. COMMENTARY ON RESULTS

2.1 Statement of Comprehensive Income

It is pleasing to note that although 2009 remained a difficult year for the Group and the country as a whole, tremendous strides have been made to stabilise the economy following the introduction of the multiple currency system and the formation of the Inclusive Government. The business confidence that had disappeared over the years is slowly resurfacing following the liberalisation of the economy. The lifting of travel bans, socio-economic and political stability as well as support by regional economies are welcome developments that are expected to have a positive impact on business.

The economy continued to be severely constrained by the limited availability of credit as liquidity constraints militated against the smooth operation of the financial services sector. The availability of bank credit remained low, while the cost remained highly unsustainable in an economy operating well below capacity.

The unsustainable real cost of utilities and employment expenses also militated against the Group's performance and the industry at large.

The Group achieved an annual profit before tax (PBT) of US$179 000 from a loss of US$742 000 incurred in the first half of the year. Turnover was US$17.5 million. This performance was attained against a background of depressed volumes particularly in the first half of 2009. The volumes improved in the second half for the city hotels.

The contributions from The Rainbow Towers Hotel and Conference Centre and Bulawayo Rainbow Hotel were commendable during the year. However, resort hotels had subdued performances as tourist arrivals into Victoria Falls remained low throughout the year. The Group room occupancy stood at 40% compared with 37% in 2008. Zambian operations contributed 5% to the Group's turnover.

The operations were adversely affected by the decline in copper prices at the beginning of 2009 that led to a slowdown in activities in the Copperbelt. The situation has improved following the recovery of the commodity prices on the world markets.

Pricing distortions in the market had a negative impact on the Group's procurement, employment and recurrent expenses. The overall cost to income ratio stood at 99%, largely driven by employment costs that stood at 32% of turnover. The interest cost, at US$338 000, representing 2% of turnover was high. This is a reflection of the tight liquidity conditions that obtained on the financial markets in 2009.

Chairman's Statement

The Rainbow

Towers Hotel and

Conference Centre

and Bulawayo

Rainbow Hotel

achieved

commendable

results during the

year.

P atterson F. Timba


2.2 Statement of Financial Position

5. DIVIDEND

3. EXPANSION PROGRAMME6. DirectorATE

7. OUTLOOK

8. ACKNOWLEDGEMENTS

4. REFURBISHMENTS

revamping the Group's product offering to acceptable standards in line with international trends. In view of this,

Total non-current assets amounted to the Group is at an advanced stage of concluding a US$7.5 US$27 million, mainly due to the property million finance facility for the refurbishment of The portfolio. Net working capital was negative, at Rainbow Towers Hotel and Conference Centre. US$ 1,924,600, and the Group's gearing ratio stood at 2%.

Total cash and cash equivalents amounted to Given the liquidity situation and the Group's funding a negative US$958,585. requirements, the Directors have deemed it prudent not

to declare a dividend.

The Group continues to explore business opportunities in Zimbabwe and the region. During the period under review, Mrs. Grace Muradzikwa resigned from the Board on 28 RTG signed a Lease Agreement for the 182-roomed Hotel May 2009 and Mr. Canaan Dube left the Board on the same Mocambique in Beira, Mozambique, effective from 1 April date. My colleagues and I take this opportunity to express 2010. Discussions are at an advanced stage regarding a our profound gratitude for the two ex-Directors' invaluable new business transaction in East Africa. The market will be contribution to the Board and the Group. advised of developments at an appropriate time.

Mr. John M.Chikura was appointed to the Board with effect The Group acquired the business assets of Matetsi Water from 1 December 2009. I extend a warm welcome to Mr. Lodge from Zambezi Safari Lodges (Private) Limited (ZSL) Chikura and wish him a fruitful and rewarding tenure on the and took cession of the lease from the Ministry of Board. His appointment will be confirmed at the next Environment and Natural Resources with effect from Annual General Meeting.15 March 2010, through the settlement of a debt of USD 1.5 Million which ZSL owed to a local financial institution. The acquisition of this prime 18 roomed luxury lodge in Victoria Falls fits within the Group's strategy to develop its The economic challenges experienced during the year Safari business, grow the number of five star properties under review are expected to persist for the greater part of under its portfolio and increase its presence in Victoria 2010. Consequently, business is forecast to remain low in Falls ahead of the anticipated upswing in tourism. the first half of the year due to liquidity challenges.

However, efforts will focus on ensuring that all business The Beitbridge Hotel project is behind schedule and will units achieve reasonable volumes and prudently manage not be ready by June 2010. Tenders for the construction their cost profiles. works have been submitted to the Government Tender Board and adjudication is expected in March 2010. Efforts are ongoing to explore opportunities to expand the Group's portfolio in Zimbabwe.

I would like to thank my fellow Board members, management and stakeholders for their continued support and commitment in driving this Group forward.

Preparatory work for the refurbishment and upgrade of Special thanks go to the management team and all RTG A'Zambezi River Lodge to a 4-Star Hotel at an estimated associates for their dedication and resilience during a cost of US$ 3.2 million has been concluded. Project difficult year.implementation commenced in mid March 2010, and is expected to stretch over 12 months.

Some refurbishments were done at some of the Group's properties, using internal resources. However, a P.F. TIMBAwholesome strategy has been put in place with a view to CHAIRMAN

Chairman's StatementContd


1. INTRODUCTION

2. OPERATING ENVIRONMENT

The year 2009 saw major developments in the country which resulted in a significant change in the operating environment. The establishment of a multi-currency system, along with the formation of the Government of National Unity (GNU) in the first quarter of 2009, brought in new hope and business optimism. Unfortunately, the positive impact of these developments is yet to be fully realised as the country is still to access the much needed lines of credit to stimulate the economic recovery process.

Following a negative operating performance in the first half of the year, the second half has seen a return to profitability on the back of an upturn in volumes.

Revenues generated during the second half reversed the US$742,000 loss incurred in the first six months. However, despite the softening in the operating environment compared with prior years, the Group achieved a break-even performance as a result of liquidity constraints and uncertainty that characterised the political landscape.

Tourist arrivals were depressed mainly due to the global recession, whose adverse effects will continue to be felt for some time. Internationally, the peak season months of July and August showed a decline of 3% compared with an 8% decline in the first half of 2009. An overall 5% decline in international tourist arrivals is forecast for 2009. The year 2010 is expected to see a moderate growth of between 1% and 3%. Travel trends continue to exhibit the following broad patterns:

• Substitution of long haul with short haul and domestic travel;• Repeat visitors, visiting friends and relatives and special

interest travelers to be more resilient;• Decline in average length of stay and expenditure per visit;• "Value for money" destinations with favourable rates of

exchange are generally more attractive.

Despite a projected decline of 3.5% in tourist arrivals in South Africa in 2009, the country remained a significant contributor to arrivals in Africa for 2009. The industry's performance has been boosted by the hosting of various international sporting events, the fact that South Africa is the gateway to the world for many Southern African countries and preparatory activities for the 2010 Soccer World Cup Tournament. North Africa has also contributed significantly to African growth during the year under review.

Zimbabwe is yet to fully benefit from the lifting of travel warnings by the following traditional markets: USA, Sweden, Germany and Japan. These markets continue to take a cautious approach to socio-political developments in the country. This, in addition to tight liquidity conditions in the economy, resulted in constrained business levels throughout the year.

Chipo Mtasa

The Group expects

to conclude a US$7,5

million long-term

facility for the

Rainbow Towers

Hotel refurbishment

Chief Executive’s Review of Operations


3. COMPANY PERFORMANCE

Table 3.1: Group Revenue Contribution (US$000)

4. PRODUCT UPGRADE and PROJECTS

The Rainbow Hotels Division's performance was enhanced by the city hotels, particularly Bulawayo Rainbow Hotel. This once again confirms the fact that the country will The Group achieved profit from operations of continue to benefit from business tourism, particularly US$437,600 and revenue of US$17,5 million. The conferences from the Non-Governmental Organisations financial performance, especially profitability was (NGOs) and Government. The leisure resorts, on the other adversely affected by high staff costs and overhead hand, remained subdued due to the global recession that

cost distortions particularly utility costs which were negatively affected international arrivals. The division

pegged at unrealistic levels for the greater part of the achieved a profit margin of 5% at 42% occupancy.year following the adoption of a multi-currency system. Employment costs were pegged at 32% and revenue Touch The Wild (TTW) and Tourism Services Zimbabwe remained high throughout the year despite short term (TSZ) are 60% owned RTG subsidiaries whose measures implemented. This will be monitored in the performance has been unfavourable over the past years. new year in order to attain a cost ratio below 25% of The TTW and TSZ combined loss was US$394,000, while revenue. the lodges' occupancy level was a mere 15% in 2009. It is

evident that there has not been a positive contribution from the Safari business. In fact, the hotels' business has been The full year average room rate was US$55 compared and continues to cross -subsidise the Safari operations. to US$12 in prior year. Revenue Per Available Room

(RevPar) improved to US$22 from US$4 last year. The Group is currently operating two hotels in Zambia namely, Hotel Edinburgh which is under a License The Group was not spared from the liquidity challenges Agreement and Savoy Hotel, which is under a Management burdening the economy, which resulted in very high Contract.

cost of borrowings. Consequently, the effective cost of the Group's borrowings was 25% per annum. This Hotel Edinburgh recorded a profit of US$30,000 for the nine amounted to an interest bill of US$335,000. months from April to December. However, this is after the

Hotel had contributed US$98,000 in management fees to As a result, profit before tax achieved was US$179,000, the Group. Thus, the realised profit from the hotel is US$ representing a 1% return on revenue. 128,000. It is pleasing to report that a two year lease for this

hotel commencing the 1st of January 2010, pending an outright purchase, was concluded in December 2009.

The Management Contract for Savoy Hotel in Ndola generated fees amounting to US$75,400 against a budget of US$93,000. The top line for this hotel is expected to improve once it has been refurbished, a programme that is expected to commence in 2010.

Capital expenditure of US$1 million covered some kitchen works for all the hotels, rooms refurbishment at the Rainbow Towers Hotel and some preparatory work for the A'Zambezi rooms refurbishment.

The US$3,2 million A'Zambezi River Lodge upgrade project is now at procurement stage. The draw down on the US$3,2 The Rainbow Towers Hotel and Conference Centre once million borrowed from PTA Bank was hampered by delays again re-affirmed its position as the Group's flagship. experienced in the registration of the requisite securities Having won several awards in the past year, including the which was concluded in the new year. Best City Hotel from the Zimbabwe Tourism Authority (ZTA)

and first runner up of the Best City Hotel by the Association of The Group expects to conclude a US$7,5 million long-term Zimbabwe Travel Agents (AZTA), the hotel achieved an facility for the Rainbow Towers Hotel refurbishment.occupancy of 43% with an operating margin of 11%. High

utility costs which were initially pegged at very high levels at The upgrade of the other products in the Group continues to the beginning of the multi-currency system weighed down be slowed down by low cash generation. However, various the hotels' performance.options for raising funds for this purpose are being explored.

Programmes to continue repositioning this five star facility The civil works for the 140 roomed Beitbridge Hotel have internationally are currently being implemented .These been completed and work on the main hotel building is include an extensive refurbishment along with a expected to commence at the end of the first quarter of 2010. re-assessment of the brand positioning in the year 2010.

Rainbow Hotels

Rainbow Towers

Touch The Wild

TSZ

RTG Zambia

RAINBOW TOWERS

7 684

43%

TOUCH THE WILD

394 2%

RAINBOW HOTELS

7 585

43%

TSZ

624 4%

RTG ZAMBIA

1 124 6%

Contd



Regionally, the Group has signed a 10 year lease for a 182 roomed three star hotel in Beira. The lease is effective from 1 April 2010. The Group is also close to The Environmental Policy which promotes awareness finalising a Management Contract for a hotel in Kigali, of sustainability issues was implemented during the Rwanda with a total of 82 rooms which is at an year. This has resulted in initiatives that are not only advanced stage of construction and should be beneficial for the Group's Green Programme, but also completed in the first half of the year. have downstream beneficial effects for the Community.

A total of 1,180 rooms were under management during The Environment Reporter Awards were enhanced and the year. The new developments will increase the conducted every quarter. The Group also continued room inventory to 1,362 by the end of first quarter of with its countrywide programme to assist health 2010. institutions in the country. To this end, Wilkins (Harare),

Kadoma General, Mpilo (Bulawayo) and Victoria Falls hospitals have benefited from these CSR initiatives.

Associate development programmes remained a priority throughout the year with the Rainbow Hospitality Business School (RHBS) having been fully The acquisition of Matetsi Water Lodge in Victoria Falls established to roll out extensive training programmes in the first quarter of 2010 is a positive development for associates at all levels. This, along with the within the Group. This will help the Group establish Graduate Management and General Management itself in the five star eco-tourism market which it has Development Programmes, resulted in skills sought over the past years. Efforts to refurbish and improvement throughout the operational units. reposition the Rainbow Towers Hotel and Conference

Centre are under way while the Rainbow brand will be The average number of associates was 966 in 2009 re-energised. The Group will use the Rainbow brand compared with 1,040 in 2008 as head count continued for its local and regional expansion initiatives.to be monitored against productivity levels.

6. CORPORATE SOCIAL RESPONSIBILITY (CSR)

5. ASSOCIATES (EMPLOYEES)

7. OUTLOOK

Contd



Adherence to Corporate Governance The Audit and Finance Committee

The Board

The Human Resources, Remuneration and Nominations Committee

The Rainbow Tourism Group is committed to the highest The Committee currently comprises four non-executive standards of corporate governance and best practice as Directors, and is chaired by a non-executive Director. The contained in the King II Report on Corporate Governance. head of Internal Audit and the Group's external auditors These standards and practices are strictly adhered to attend the Committee's meetings by invitation. Also, the throughout the Group's operations. head of Internal Audit has unrestricted access to the

Chairperson of the Committee. The main function of the The Board fully appreciates the essential pillars of corporate Committee is to assist the Board in fulfilling its governance, which are Fairness, Accountability, responsibilities by reviewing;Responsibility, Transparency, Discipline, Independence and Social Responsibility. The Directors continually review i. Financial information which will be provided to the Group's policies and procedures to enhance awareness shareholders and other stakeholders, including of corporate governance. In this way, the Group's corporate internal and external audit reports, interim and year-governance systems continue to evolve in pursuit of best end financial statements.practice and as the needs and expectations of stakeholders develop. ii. The systems of internal control which management

and the Board of Directors have established. In this regard, the Committee assists the Board in the assessment and management of risk and legal

The RTG Board currently comprise two executive Directors compliance within the Group to ensure an and seven non-executive Directors. Among them, the appropriate risk management culture, practices, Directors have a wide range of expertise in areas that policies, resources, systems and controls are in include finance, marketing and general commerce. The place.objective is to have a Board with a healthy balance of skills and experience to support the Group's strategy and steer it iii. The audit process and the Company's compliance effectively towards the attainment of its set goals. with laws and regulations and its own code of

business conduct.All new Directors go through an induction process arranged by the Company Secretary, with a view to acquainting them iv. Monitoring and reviewing the appointment of the with the Group's operations to enable them to effectively external auditors and overseeing their relationship carry out their duties. The induction includes a detailed with the Group. information pack, meeting with senior management, reviewing background material and touring the Group's The Committee meets at least four times a year and is operational units country wide. The Company Secretary governed by its terms of reference, which are aligned with arranges for additional training and updates for Directors on relevant legislation and are reviewed annually.corporate governance and other relevant issues.

The Board meets formally at least four times a year and the agenda and supporting documents are usually furnished to all Directors a week prior to each Board Meeting. No The Committee is chaired by a non-executive Director and individual Director has unfettered powers of decision the Chief Executive and Human Resources Director attend making. The responsibility for running the Board and its meetings. The Group's compensation philosophy is to executive responsibilities are differentiated. Accordingly, set remuneration that is appropriate, taking cognisance of the role of the Chairman and Chief Executive are vested in levels of responsibility and the need to attract, motivate and separate individuals. In terms of the Company's Articles of retain Directors, executives and critical individuals of high Association, one third of the Directors retire at every annual calibre. The primary functions of the Committee are general meeting and their re-appointment is subject to therefore to assist the Board by reviewing:approval by the Shareholders.

i. Policies relating to senior executives and The Company Secretary provides counsel and guidance to Directors’ remuneration, and different methods of the Board and individual Directors on procedural matters remunerating senior executives. and the discharge of their responsibilities. He is the central source of information to the Board and the Group on ii. Current industry practice and professional matters of ethics, compliance and good governance. All executive recruitment.Directors have unlimited access to the Company Secretary and the Directors and officers of the Group keep him iii. Existing or proposed compensation schemes.advised of their dealings in RTG shares.

iv. Succession plans.

Corporate Governance


v. Making recommendations to the Board on the iii. Resources are acquired in an economic manner, composition of the Board and the balance used efficiently and safeguarded adequately. between executive and non-executive Directors. Group objectives and plans are achieved. Skills diversity and experience are taken into account in this process. iv. Continual improvement in the quality of the

internal control processes as well as the risk vi. Identifying and nominating candidates for management framework is fostered across the

appointment as additional Directors or to fill Group.casual vacancies on the Board.

v. Significant legislative and regulatory issues that The Committee meets at least four times a year and is have an impact on the Group are recognised and governed by terms of reference that are reviewed annually. addressed properly.

The internal audit function reports to the Audit and Finance Committee on its findings and has unrestricted access to

This Committee is made up of three non-executive the Committee and its Chairperson. Audit plans are drawn Directors, one of whom chairs it. The Chief Executive and up annually and take cognisance of the dynamic business Commercial Director also attend its meetings. The needs and risk assessment issues highlighted by the Audit Committee's main functions are: and Finance Committee and management. These issues are considered and follow up audits are planned in areas in

i. To review and advise on the Group's marketing which shortcomings have been identified. The Audit and strategy. Finance Committee approves the audit plan.

ii. To ensure that there is adequate follow up on all action items and that set targets are met.

The Group subscribes to sound principles of ethics and iii. To review and recommend marketing policies for good business practice and the ethical standards and

the Group which address pricing, advertising and criteria for compliance with these, as contained in the King II communication, among other issues and- Report, are being met. A code of conduct is in place and is

consistently enforced, with disciplinary measures and iv. To identify and explore new business appropriate action taken to prevent the recurrence of an

opportunities for the Group and recommend offence. Full details of Directors’ business interests are appropriate strategies. disclosed in writing by Directors on joining the Board and at

regular intervals thereafter. Interested party transactions are The Committee meets at least four times a year and declared at Board meetings.is governed by terms of reference that are reviewed annually.

The Group has an internal audit function with a charter approved by the Board. The head of Internal Audit attends the Audit and Finance Committee meetings.

The scope and activities of the internal audit function are primarily to review the reliability of financial and operating systems throughout the Group to determine whether the Group-wide network of risk management, control and governance processes are adequate and function in a manner that ensures that:

i. Risks are appropriately identified and managed.

ii. Significant financial, managerial and operating information is accurate, reliable and timely.

The Marketing Committee

Ethics

Internal Audit

Corporate GovernanceContd


Your Directors have pleasure in presenting their report and the company including share premium.audited financial statements for the year ended 31 December 2009. The Directors confirm, that during the year under review the

company's borrowings were within the above limits.

The authorised share capital of the company remained unchanged from the previous year at Z$250 000 divided into 2 500 000 000 ordinary shares of 0.0001 cents each, of The Group acquired the business assets of Matetsi Water which Z$164 555 divided into 1 645 545 913 ordinary shares Lodge, from Zambezi Safari Lodges (Private) Limited (ZSL) of 0.0001cents each has been issued. and took cession of the Lease from the Ministry of

Environment and Natural Resources with effect from 15 March 2010, through the settlement of a debt of USD 1.5 Million which ZSL owed to a local financial institution. The

The movement of the reserves of the Group is shown in the acquisition of this prime 18 roomed luxury lodge in Victoria statement of changes in equity. Falls fits within the Group's strategy to develop its Safari

business and grow the number of five star properties under its portfolio and increase its presence in Victoria Falls ahead of the anticipated upswing in tourism.

The Directors deemed it prudent not to declare a dividend in order for the Group to conserve cash and meet the requirements of the on-going refurbishment programme. The Directors are responsible for the maintenance of

adequate accounting records and the preparation of the financial information included in this Annual Report. The Financial Statements have been consistently prepared in

Mr. John M. Chikura was appointed to the Board on accordance with International Financial Reporting 1 December 2009. Shareholders will be requested to Standards (IFRS) save for the exclusion of comparative confirm his appointment at the Annual General Meeting. inflation adjusted figures for 2008, as more fully explained in

note 2 of the Financial Statements, and where required, Shareholders will be requested to elect Mr E. R. M. Nyoni reflect our best estimates and judgements.and Mrs C. R. Daniels who retire by rotation and, being eligible, offer themselves for re-election. Shareholders will To fulfill this responsibility the Group maintained systems of also be requested to note the resignation of Mr Y. Mariuma internal control which are designed to provide reasonable from the Board and that of his Alternate Director, assurance that the records accurately reflect the Mr F. Montfort transactions of the Group and safeguard its interests.

The financial statements have been prepared on the going concern basis since the Directors have every reason to

Shareholders will be asked to approve payment of Directors believe that the Group has adequate resources to continue fees of $34 351 for the year ended 31 December 2009. into the foreseable future.

For and on behalf of the Board

A resolution seeking the re-appointment of Messrs. BDO Zimbabwe and approval of their remuneration for the past year's audit will be submitted at the Annual General Meeting. J A Musemburi

Company Secretary

In terms of the Articles of Association, the company is authorised to borrow funds amounting to, but not exceeding twice the aggregate of:-

i. The amount of issued and paid up share capital of the company; and

ii. The total amount of capital and revenue reserves of

Share Capital

Events occurring after the balance sheet date

Reserves

Dividends

Responsibility for financial statements

Directors

Director's fees

Auditors

Borrowing Powers

since the last Annual General Meeting.

Report of the Directors


The Directors are required by the Companies Act (Chapter 24:03), to maintain adequate accounting records and are responsible for the content and integrity of the financial statements and related financial information included in this report. It is their responsibility to ensure that the financial statements fairly present the state of affairs of the Group as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards (IFRS).

The Directors acknowledge that they are ultimately responsible for the system of internal financial control established by the Group and place considerable importance on maintaining a strong control environment. To enable the Directors to meet these responsibilities, the Board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Group and all employees are required to maintain the highest ethical standards in ensuring the Group's business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the Group is on identifying, assessing, managing and monitoring all known forms of risk across the Group. While operating risk cannot be fully eliminated, the Group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The Directors are of the opinion, based on the information and explanations given by management that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the financial statements. However, any system of internal financial control can provide only reasonable, and not absolute assurance against material misstatement or loss.

The Directors have not presented comparative information because they believe that it will be misleading. Due to the prevailing economic environment in the previous year as described in note 1.3, it is not possible to convert financial statements into United States Dollars in a manner consistent with IAS 21 and IAS 29 as described in note 3.

The Directors have assessed the ability of the Group to continue operating as a going concern and believe that the preparation of these financial statements on a going concern basis is still appropriate. However, the Directors believe that under the current economic environment, a continuous assessment of the ability of the Group to operate as a going concern will need to be performed to determine the continued appropriateness of the going concern assumption.

The external auditors are responsible for independently auditing and reporting on the Group's financial statements. The financial statements and related notes have been examined by the Group's external auditors and their report is presented on pages 19 to 20

The financial statements and the related notes set out on pages 22 to 45, which have been prepared on the going concern basis, were approved by the Board and were signed on its behalf by:

.................................................................. .....................................................................Mr. P. F. Timba (Chairman) Mrs. C. Mtasa (Chief Executive)

Directors’ Responsibility Statement

HIGHLIGHTS

• Turnover - US$17.5 million.

• Average room rate- US$52.00.

• Revenue per available room (RevPar) - US$21.00.

• Occupancy increased by 3% to 127 000 room nights.

• Profit before tax - US$179 000.

• EBITDA - US$1.4million.

• Sales mix: Domestic 79%, Export 21% - Prior year: 78% domestic, 22% export.

• Basic earnings per share - 0,009 cents.

• Net asset value per share - US$0.01.

Audited Financial Statementsfor the year ended 31 December 2009


TO THE MEMBERS OF RAINBOW TOURISM GROUP LIMITED AND ITS SUBSIDIARIES

Directors' responsibility for the financial statements

Auditor's responsibility

Qualifications

(i) Non-compliance with IAS 1: Presentation of financial statements

(ii) Composition of equity

We have audited the accompanying financial statements of RAINBOW TOURISM GROUP LIMITED AND ITS SUBSIDIARIES set out on pages 22 to 45 which comprise the statement of financial position at 31 December 2009, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and the notes to the financial statements, which include a summary of the significant accounting policies and other explanatory notes.

The Group's Directors are responsible for the preparation and fair presentation of the 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 ("SI") SI 33/99 and SI 62/99. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the 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. The Directors have elected to comply with the guidance in the Joint Media Statement On The Impact On Financial Reporting as a Consequence Of The Change In Functional Currency ( 'the Financial Reporting Guidance') issued jointly by the Public Accountants and Auditors Board ("PAAB"), the Zimbabwe Accounting Practices Board ("ZAPB") and the Zimbabwe Stock Exchange ("ZSE") in July 2009.

Our responsibility is to express an opinion on the 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 judgment, 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 evaluating 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.

Our audit report has been modified in the manner in which we report on the compliance of these financial statements with provisions of the Companies Act (Chapter 24:03) and the relevant Statutory Instruments (SI 33/99 and SI 62/96), as set out in the guidance and recommendations on audit reports issued jointly by the Public Accountants and Auditors Board, the Zimbabwe Stock Exchange and the Zimbabwe Accounting Practices Board in July 2009 ("the Guidance on Audit Reports").

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

The Directors have not presented comparative information as required by IAS 1 because they believe the information will be misleading for reasons stated in note 3.

The Directors were unable to present the composition of equity on the statement of financial position, as required by IAS 1. The opening equity balance was recognised as the residual of the Group's net assets as recommended in the 'Financial Reporting Guidance'. The reasons for the non-compliance with IAS 1 are more fully explained in Note 4.


Report of the Independent Auditors

Adverse opinion on non-compliance with International Financial Reporting Standards.

In our opinion, because of the significance of the matters described in paragraph (i) above, the statement of comprehensive income and the statement of cash flows do not give a true and fair view of the results of the Group's operations and cash flows for the year ended 31 December 2009 in accordance with International Financial Reporting Standards.

In our opinion, except for the possible effects of the matter relating to the presentation of the composition of equity, the statement of financial position, in all material respects, gives a true and fair view of the financial position of Rainbow Tourism Group Limited and its subsidiaries at 31 December 2009 in accordance with International Financial Reporting Standards.

In our opinion, the financial statements have not been properly prepared in compliance with the disclosure requirements of the Companies Act (Chapter 24:03) and Statutory Instruments (SI 33/99 and SI 62/96) due to the inability to comply with IAS 1 and IAS 21.

In our opinion, the Group has complied, in all material respects with the Financial Reporting Guidance. This guidance was issued jointly by the Public Accountants and Auditors Board, the Zimbabwe Stock Exchange and the Zimbabwe Accounting Practices Board to assist preparers of financial statements in converting their financial statements from Zimbabwe Dollars into their new functional currency in a manner that is consistent with the principles of IFRS, in as far as is practicable, in the Zimbabwean economic environment, at the date of the change of functional currency.

Without further qualifying our opinion, we draw your attention to Note 1.3 and 25, which along with other matters indicates that the Group is operating in an uncertain economic environment. We draw specific reference to the matter below.

A significant subsidiary, Touch The Wild Safari and Lodges Group which has been consolidated, is facing going concern problems. The company posted a significant loss of US$366,615. There is also no certainty whether Sikumi Tree Lodge which contributes 24% of the subsidiary’s revenue will remain under the control of the subsidiary due to wrangles of ownership. The ability of the subsidiary to continue operating as a going concern is therefore dependent on a return to profitable operations, satisfactory resolution of the ownership wrangle of Sikumi Tree Lodge and continued support from the bankers, trade payables and the Holding company.

The determination of fair values of land and buildings presented in the financial statements is affected by the prevailing economic environment and may therefore be distorted. This may result in significant variations in fair values, depending on factors and assumptions used in the determination of the fair values. The significant assumptions and the estimation uncertainties have been disclosed in Note 5 to these financial statements.

BDO Zimbabwe HarareChartered Accountants (Zimbabwe) 04 March 2010

Qualified opinion on the statement of financial position

Report on legal and regulatory requirements

Emphasis of matter

Going concern of a significant subsidiary

Fair value determination for transactions, assets and liabilities


Contd

Report of the Independent Auditors

2009 Group Company

Notes US$ US$ASSETS

Non current assetsProperty, plant and equipment 7 26,536,417 24,009,469 Long-term investments 8 900,000 1,000

27,436,417 24,010,469

Current assetsInventories 9 1,082,730 1,001,423 Accounts receivable 10 4,528,238 6,340,427 Held for trading investments 11 37,373 37,373 Bank and Cash 303,062 187,643

5,951,403 7,566,866

Total assets 33,387,820 31,577,335

EQUITY AND LIABILITIES

Capital and reservesShare capital - -Non distributable reserve 17,338,593 16,380,258Foreign currency translation reserve (2,072) -Revaluation reserve 1,011,492 1,232,550Retained earnings 393,669 362,934

Equity attributable to owners of the company 18,741,682 17,975,742Non controlling interest (146,646) -

18,595,036 17,975,742

Non current liabilitiesInterest bearing liabilities 13 427,350 -Deferred tax 14 6,489,432 6,196,895

6,916,782 6,196,895

Current liabilitiesTrade and other payables 15 5,475,293 5,224,328Tax payable 57,303 50,639Interest bearing liabilities 1,081,759 868,084Bank overdraft 1,261,647 1,261,647

7,876,002 7,404,698

Total liabilities 14,792,784 13,601,593

Total equity and liabilities 33,387,820 31,577,335

............................................................. .......................................................................CHAIRMAN CHIEF EXECUTIVE

1212.1

13


as at 31 December 2009

Consolidated Statement of Financial Position

for the year ended 31 December 2009


2009 Group Company

Notes US$ US$

Revenue 17,505,716 15,286,181 Cost of sales (2,752,341) (2,254,142)

Gross profit 14,753,375 13,032,039

Investment income 69,967 6,967 Exchange gain / (loss) 1,377 (2,342)Other operating income 683,615 752,978 Operating expenses (15,007,734) (13,183,461)

Profit from operations 500,600 606,181

Net finance cost (321,666) (192,608)

Finance Income 16,782 16,213 Finance Cost (338,448) (208,821)

Profit before tax 16 178,934 413,573

Tax 17 (19,972) (50,639)

Profit for the year 158,962 362,934

Other Comprehensive Income:

Gain on property revaluation 1,490,000 1,660,000Exchange loss arising on translation of foreign operations (2, 072) -Tax related to components of other comprehensive Income (383,675) (427,450)Other comprehensive income net of tax 1,104,253 1,253,550

Total comprehensive income for the year 1,263,215 1,595,484

Profit attributable to:Owners of the Parent 307,816 362,934 Non controlling interests (148,854) -

158,962 362,934

Total comprehensive income attributable to:Owners of the Parent 1,409,861 1,595,484

(146,646) -

1,263,215 1,595,484

Basic earnings per ordinary share- US cents 18.1 0.010 0.022

Headline earnings per ordinary share- US cents 18.2 0.007 0.221

Non controlling interests

Consolidated Statement of Comprehensive Income

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2009 Group Company

Notes US$ US$

CASHFLOWS FROM OPERATING ACTIVITIES

Cash generated from operations 19.1 1,955,097 (1,084,822)

Interest received 16,782 16,782 Interest paid (338,448) (208,821)

Net cash inflow from operating activities 1,633,431 (1,276,861)

CASHFLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment (2,574,720) (910,578)Proceeds from sale of property, plant and equipment 117,700 84,630 Other investments (937,373) (38,373)

Net cash outflow from investing activities (3,394,393) (864,321)

CASHFLOWS FROM FINANCING ACTIVITIES

Increase in short term borrowings 868,084 868,084 Repayment of borrowings (368,742) -

Net cash inflow from financing activities 499,342 868,084

NET DECREASE IN CASH AND CASH EQUIVALENTS (1,261,620) (1,273,099)

CASH AND CASH EQUIVALENTS AT 01 JANUARY 2009 303,035 199,095

CASH AND CASH EQUIVALENTS AT 31 DECEMBER 2009 19.2 (958,585) (1,074,004)

Consolidated Statement of Cash Flows

1 GENERAL INFORMATION

1.1 CURRENCY

1.2 Functional and presentation currency

1.3 Limitations of financial reporting in the general environment prevailing.

Zimbabwe Dollar transactions incurred prior to the formalisation of multi-currency trading into the new

RAINBOW Tourism Group Limited, incorporated in functional currency for reasons explained in Note 2.Zimbabwe, is involved in the tourism services industry as hoteliers, tour operators, providers of conference facilities As a result of these uncertainties and inherent limitations, and safari lodges. Its registration number is 4880/91. the Directors advise caution on the use of all monetary

comparative information, the statement of comprehensive income, statement of cash flows and statement of changes in equity for decision making purposes. The

The financial statements are expressed in United States Directors, however, believe that the statement of financial Dollars. The currency was changed from Zimbabwe position fairly presents the assets and liabilities of the dollars to United States Dollars. Group and therefore fairly presents the shareholder’s

equity. However, the Directors have not been able to present the Group’s equity into its various components as required by International Accounting Standard 1:

The Group’s functional and presentation currency “Presentation of Financial Statements” as further changed from Zimbabwe dollars to United States of explained in Note 4.America (“USD”) on 1 February 2009 following the legislation of the use of multi currencies for day to day transactions from 30 January 2009.

The Group's functional currency changed during the course of the financial period ended 31 December 2009

The uncertainties in the adverse Zimbabwean economic from Zimbabwe Dollars to United States Dollars. The environment prior to introduction of trading in multiple Group has chosen to report all its transactions in United currencies resulted in limitations in financial reporting. States Dollars because it is the new functional currency

applicable to all current transactions. The inflation indices applicable to the Zimbabwe Dollar during the period prior to formalisation of multi-currency The Group has not been able to comply with the trading were not published from 31 July 2008. Estimates requirements of IAS 21 because this standard requires by economists of Zimbabwe Dollar inflation in the period that all transactions that are in the currency of a post 31 July 2008 were wide ranging and extremely high hyperinflationary economy to be adjusted to a unit of (percentages in excess of hundreds of trillions to measure current at the measurement date before quadrillions, in some cases). It was impossible to reliably conversion to an alternative presentation currency. The measure inflation in Zimbabwe during this period because Group has not been able to adjust its Zimbabwe Dollar the rate of change of inflation on a daily basis was transactions to comply with IAS 29 as more fully explained extremely high. Any attempt to measure inflation was in note 1.3. subject to various limitations because reliable and timely price data was not available. The inability to reliably Transactions that were previously reported in Zimbabwe measure inflation was also exacerbated by the existence Dollars in prior periods need to be converted into United of multiple exchange rates, the use of foreign currency for States Dollars in order to present the prior year financial some transactions and the existence of multiple pricing information in a similar currency of presentation to the criteria for similar products based on the mode of current financial year. Due to the macroeconomic settlement. environment prevailing in the previous year, as explained

in note 1.3, the comparative information if disclosed would However, on 29 January 2009 the Monetary and Fiscal be misleading. The Directors have not presented authorities authorised the use of multiple foreign comparative information because they believe that it will currencies for trading in Zimbabwe. This resulted in a be misleading. change in the functional currency for most entities reporting in Zimbabwe. In accordance with the requirements of International Financial Reporting Standards, entities are required to convert their financial statements into the new functional currency at the date of changeover. The Group was not able to convert its

2 NON COMPLIANCE WITH IAS 21



Notes to the Financial Statements

3 NON COMPLIANCE WITH IAS 1 (b) Impairment testing

(c) Residual values

4 COMPOSITION OF EQUITY ON THE STATEMENT OF FINANCIAL POSITION

(d) Translation of balances from Zimbabwe dollars to United States dollars

5 CRITICAL JUDGEMENTS IN APPLYING THE GROUP'S ACCOUNTING POLICIES

(e) Fair values

(a) Trade receivables

The Directors have not presented comparative information because they believe that it will be misleading. Due to the prevailing economic environment in the previous year as described in note 1, it is not possible to convert financial statements into United States Dollars in a manner consistent with IAS 21 and IAS 29 as described in notes 1.3 and 2.

The Directors were unable to present the composition of equity that is reflected on the statement of financial position. The Group changed its functional currency from the Zimbabwe dollar to the United States dollar with effect from 01 February 2009. The circumstances that gave rise to the change are explained in Note 1 above and in common with other entities in Zimbabwe, the Group is unable to report the change in its financial statements in accordance with International Financial Reporting Standards as explained in note 2.

Equity was recognised as the residual of the Group's net assets and has been treated as a non-distributable reserve.

The Group reviews the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable.

The Group is required to assess residual values and the remaining useful lives of its property, plant and equipment on an annual basis. This affects the amount of depreciation that is recognised in the statement of financial position. Management assessed residual values at nil for all assets as it intends to use the assets until the end of their economic useful lives.

Account balances were translated using the ICAZ guideline which states that the opening balances should be established on a line by line basis in the new functional currency considering the following guidance:

Non-monetary items - establish the "deemed cost" depending on the specialty of the assets concerned for property and equipment.In preparing the financial statements, management is

required to make estimates and assumptions that affect Monetary items - for assets use the recoverability the amounts presented in the financial statements and approach to establish the "deemed cost" and for related disclosures. Use of available information and liabilities establish the settlement amount as the the application of judgment is inherent in the formation "deemed liability".of estimates. Actual results in the future could differ from

these estimates which may be material to the financial statements. Significant judgments include:

The Group determines the fair values of investment properties and financial instruments that are not quoted, using valuation techniques. The Group assesses its trade receivables for Those techniques are significantly affected by the impairment at each statement of financial position assumptions used, including discount rates and date. In determining whether an impairment loss estimates of future cash flows. In that regard, the should be recorded in the statement of derived fair value estimates cannot always be comprehensive income, the Group makes substantiated by comparison with independent judgments as to whether there is observable data markets and, in many cases, may not be capable indicating a measurable decrease in the of being realised immediately.estimated future cash flows from a financial asset.


for the year ended 31 December 2009 Contd


(f) Income tax values

6 ACCOUNTING POLICIES

6.1 Basis of preparation

Statement of compliance

Changes in accounting policies

Income tax value for assets in United States dollar terms are derived from the conversion of Zimbabwe dollar balances at exchange rates subject to the approval by the Commissioner General. In determining the Income tax values, the Group has adopted certain exchange rates to be approved by the Commissioner General.

interest of various stakeholders, such as investors who have an interest in high quality financial information. The PAAB, the ZAPB and the ZSE recommended that all entities reporting in Zimbabwe adopt this Financial Reporting Guidance for converting their financial statements into the entity's new functional currency at the date of change over. Although it is not a legal requirement to apply the Financial Reporting Guidance, the Directors, in line with their fiduciary responsibilities to prepare financial statements that fairly present the state of affairs and performance of the Group have adopted these recommendations as it is the best possible manner in which they can present financial statements that are as fair as is practical under the circumstances prevailing.

The financial statements have not been prepared in As suggested in the Financial Reporting Guidance, conformity with IFRS, promulgated by the assets and liabilities carried at fair value were valued International Accounting Standards Board (IASB), at the date of change of the functional currency and which includes standards and interpretations carried at their fair values in the new functional approved by the IASB as well as International currency. Non-monetary assets and liabilities were Accounting Standards and Standing Interpretations valued at their deemed cost. Equity was recognised Committee (SIC) interpretations issued under as the residual of the Group's net assets and will be previous constitutions (IFRS's), due to non treated as a non-distributable reserve.compliance with the following:

• IAS 1 - Presentation of Financial Statements;• IAS 21 - The Effects of Changes in Foreign

a) New standards, in terpretat ions and Exchange Rates;amendments effective from 1 January 2009• IAS 29 - Financial Reporting in

Hyperinflationary EconomiesThe following new standards, interpretations and amendments, applied for the first time from 1 The effects of these departures have not been January 2009, have had an effect on the financial quantified but, having regard to their nature, are statements:considered to be material and pervasive to the • Improving Disclosures about Financial financial statements. The exceptions arise from the

Instruments (Amended to IFRS 7)circumstances which have given rise to a change in • Amendments to IAS 1 Presentation of the Group's functional currency from the Zimbabwe

Financial Statements: A Revised Presentationdollar to the United States dollar, as more fully • Financial Instruments: Amendments explained in note 1.

enhancing disclosures about fair value and liquidity riskAs a result of the inability of most entities reporting in

• Presentation of Financial Statements - Zimbabwe to report fully in terms of IFRS, the PAAB, Comprehensive revision including requiring a the ZAPB and the ZSE issued recommendations statement of comprehensive incomethat assisted preparers of financial statements in

As a result of the application of the Amendment to converting their financial statements from IAS 1 the Group has elected to present a single Zimbabwe dollars into their new functional currency statement of comprehensive income. The in a manner that is consistent with the principles of Amendment does not change the recognition or International Financial Reporting Standards, in as measurement of transactions and balances in the far as is practicable, in the Zimbabwean economic financial statements.environment, at the date of the change of the

functional currency. The following new standards, interpretations and amendments, also effective for the first time from These recommendations were also made in order to 1 January 2009, have not had a material effect on achieve a fair measure of market comparability and the financial statements:consistency for regulatory oversight and in the


for the year ended 31 December 2009 Contd


Contd


• Amendment to IAS 23 Borrowing Costs selling in the short term, if it forms part of a portfolio • Amendment to IFRS 2 Share-based Payment: of financial assets in which there is evidence of short

Vesting Conditions and cancellations term profit-taking, or if so designated by • Amendments to IAS 32 and IAS 1 Puttable Financial management in terms of the Group's long term

Instruments and obligations arising on liquidation investment strategy. Financial assets designated as • Improvement to IFRSs (2009) at fair value through profit or loss at inception are • IFRIC 15 Agreements for the Construction of Real those that are managed and whose performance is

Estate evaluated on a fair value basis. Information about • Embedded Derivatives (Amendments to IFRIC 9 and these financial assets is provided internally on a fair

IAS 39) basis to the Group's key accounting policies of • Operating Segments ( IFRS 8) financial assets in which there is evidence of short • Presentation of Financial Statements (IAS1) - profit-taking, or if so designated by management in

Amendments relating to disclosure of puttable terms of the Group's long term investment strategy. instruments and obligations arising on liquidation.

• Amendment to IAS 40 Investment Property: Changes in the fair value of the financial assets at fair Investment Property under construction value through profit or loss category are included in

the statement of comprehensive income in the b) New Standards, interpretations and amendments finance income or expense line item in the period in

not yet effective which they arise. The fair values of quoted investments are based on current bid prices. If the

The following new standards, interpretations and market for a financial asset is not active or if they are amendments, which have not been applied in these unquoted, the Group establishes fair value by using financial statements, will or may have an effect on the valuation techniques. These include discounted Group's future financial statements: cash flow analysis, use of recent arm's length

transactions, and reference to other instruments that • Related Party disclosures (IAS 24) - Revised are substantially the same, discounted cash flow

definition of related parties analysis, price earnings valuations and net asset • Improvements to IFRSs values basis. Financial assets at fair value through • Financial Instruments - Classification and profit or loss are subsequently carried at fair value.

Measurement • Financial Instruments - Amendments relating to

classification of rights issues• Investments in Associates - Consequential These assets are non-derivative financial assets with

amendments arising from amendments to IFRS 3 fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of services to customers. They are

initially recognised at fair value plus transaction Turnover comprises the invoice value of sales in respect of costs that are directly attributable to their acquisition trading operations and excludes non-operating income or issue, and are subsequently carried at amortised and value added tax. Revenue from provision of services is cost using the effective interest rate method, less recognised when the service has been provided. provision for impairment.

Interest is recognised on a time proportion basis taking account of the principal outstanding and effective rate

Available-for-sale financial assets are non-derivative over the period to maturity.financial assets that are either designated in this category or not classified in any of the other categories. Available-for-sale financial assets are subsequently carried at fair value. Changes in the fair value are recognised in other comprehensive income and accumulated in the available for sale reserve; exchange differences on corporate bonds This category has two sub-categories: financial denominated in a foreign currency and interest assets held for trading and those designated as at calculated using effective interest rate method is fair value through profit or loss at inception. A recognised in profit or loss. Where there is financial asset is classified into this category at significant or prolonged decline in the fair value of an inception if acquired principally for the purpose of

(ii) Loans and Receivables

6.2 Revenue recognition

(iii) Available-for-sale financial assets

6.3 Financial Instruments

(i) Financial assets at fair value through profit or loss



Contd


available for sale financial asset (which constitute income. When an impairment loss subsequently objective evidence of impairment), the full amount of reverses, the carrying amount of the asset (cash impairment, including any amount previously generating unit) is increased to the revised estimate recognised in other comprehensive income, is of its recoverable amount so that the increased recognised in profit or loss. Purchases and sales of carrying amount does not exceed the carrying available for sale financial assets are recognised on amount that would have been determined had no settlement date with any changes in fair value impairment loss been recognised for the asset (cash between trade date and settlement date being generating unit) in prior years. A reversal of the recognised in the available for sale reserve. On sale, impairment loss is recognised as income the cumulative gain or loss recognised in other immediately unless the relevant asset is carried at a comprehensive income is reclassified from available revalued amount in which case the reversal of the for sale reserve to profit or loss. impairment loss is treated as an increase in the

revaluation reserve.

Investments are derecognised when the rights to receive cash flows from the investments have For the purpose of the cashflow statement, cash and cash expired or where they have been transferred and the equivalents comprise of bank balances and amounts due Group has also transferred substantially all risks and from other banks and dealing securities. rewards of ownership. Gains and losses are recognised in statement of comprehensive income when the financial assets are derecognised or impaired, as well as through the amortization The Group operates a defined contribution plan the assets process. of which are funded by employees and the Group taking

into account the recommendations of independent qualified actuaries. Current service costs are charged to income systematically over the expected remaining

A financial asset is deemed to be impaired when its working lives of the employees who are members of the carrying amount is greater than its estimated fund. The Group is a member of NSSA a defined receivable amount, and there is evidence to suggest contribution scheme. Contributions are made by both the that the impairment occurred subsequent to the Group and the employees at 4% of the pensionable initial recognition of the asset in the financial emoluments.statements.

Land and buildings are revalued annually by an Assets that have an indefinite useful life are not independent sworn appraiser based on market evidence subject to amortisation and are tested annually for of the most recent prices achieved in the arms length impairment i.e. intangible assets and equipment. transactions of similar properties in the same area. The Assets that are subject to amortisation are reviewed surplus arising from the revaluation is recognised directly for impairment whenever events or changes in into equity. Equipment is shown at cost less accumulated circumstances indicate that the carrying amount depreciation. Costs include expenditure that is directly may not be recoverable. An impairment loss is attributable to the acquisition of the item. Subsequent recognised for the amount by which the asset's costs are included in the assets' carrying amount or carrying amount exceeds its recoverable amount. recognised as a separate asset, as appropriate, only when

it is probable that future economic benefits associated The recoverable amount is the higher of an asset's with the item will flow to the entity and the cost can be fair value less costs to sell and value in use. For the measured reliably. All other repairs and maintenance purposes of assessing impairment, assets are costs are charged to the statement of comprehensive Grouped at the lowest levels for which there are income during the period in which they are incurred. When separately identifiable cash flows (cash-generating the carrying amount of an asset is greater than its units). In assessing value in use, the estimated future estimated recoverable amount, it is written down to the cash flows are discounted to their present value recoverable amount.using a pre-tax discount rate that reflects current market assessments of the time value of money and The assets' useful lives and residual values are reviewed, the risks specific to the asset. Impairment losses are and adjusted if appropriate, at each statement of financial recognised in the statement of comprehensive position date.

6.3.1 De-recognition of financial assets

6.4 Cash and cash equivalents

6.5 Post employment benefits

6.3.2 Impairment of financial assets

6.6 Property and equipment 6.3.3 Impairment of other non-financial assets



Contd


Subject to the above property and equipment are the initial transactions.depreciated on a straight line basis over the remaining useful lives at the following rates:

Borrowing costs are recognised in the statement of • Land indefinite comprehensive income in the period in which they are • Buildings 2-4% incurred. Borrowing costs are also capitalised in relation • Motor vehicles 15-33% to assets requiring a substantial period of time for • Machinery and furniture 10-12.5% preparation of intended use. If the cost of assets, where • Library 10-15% borrowing costs have been capitalised, exceeds the • Leasehold improvements 5-20% estimated recoverable amount, then an impairment loss is • Soft furnishings 10-15% recognised for such excess.

The carrying amount of property and equipment is Current tax assets and liabilities for the current and prior reviewed at each statement of financial position date to periods are measured at the amount expected to be determine whether there is any indication of impairment. If recovered from or paid to the tax authorities. The tax rates any such indication exists, the asset's recoverable amount and tax laws used to compute the amount are those that is estimated. Impairment loss is recognised directly are enacted or substantively enacted by the balance sheet through the statement of comprehensive income when date. the carrying amounts of the assets exceed the fair values of the respective assets.

Deferred income tax is provided using the liability method on temporary differences at the balance sheet date

An item of property and equipment is derecognised upon between the tax bases of assets and liabilities and their disposal or when no future economic benefits are carrying amounts for financial reporting purposes. expected from use or disposal.

Deferred tax liabilities are recognised for all taxable temporary differences except: Where the deferred tax liability arises from the initial recognition of goodwill or of

Provisions are recognised when the Group has a present an asset or liability in a transaction that is not a business legal or constructive obligation as a result of past events combination and at the time of the transaction affects and reliable estimate of the obligation can be made. The neither the accounting profit nor taxable profit or loss; and amount recognised as a provision is the best estimate of in respect of taxable temporary differences associated the consideration required to settle the present obligation with investments in subsidiaries, associates and interests at the statement of financial position date, taking into in joint ventures where the timing of the reversal of the account the risks and uncertainties surrounding the temporary differences can be controlled and it is probable obligation. Where a provision is measured using the cash that reversal of the temporal differences can be controlled flows estimated to settle the present obligation, its and it is probable that the temporary differences will not carrying amount is the present value of those cash flows. reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of

Transactions in foreign currencies are initially recorded in unused tax credits and unused tax losses to the extent that the functional currency at the exchange rate ruling at the it is probable that taxable profit will be available against date of transaction. Monetary assets and liabilities which the deductible temporary differences and the carry denominated in foreign currencies are translated at the forward of unused tax credits and unused tax losses can functional currency rate of exchange ruling at the be utilised except: "where the deferred income tax asset statement of financial position date. All differences are relating to the deductible temporary difference arises from taken to profit or loss. Non-monetary items that are the initial recognition of an asset or liability in a transaction measured in terms of historical cost in foreign currencies that is not a business combination and at the time of the are translated using the exchange rates as at the date of transaction affects neither the accounting profit nor

6.9 Borrowing costs

6.10 Income tax

Impairment of property and equipment i) Current tax

ii) Deferred tax

Derecognition of property and equipment

6.7 Provisions

6.8 Foreign currency transactions



Contd




taxable profit or loss; and in respect of deductible temporary differences associated with investments in Rental income from operating leases is recognised on subsidiaries, associates and interests in joint ventures”. a straight-line basis over the term of the relevant lease. Deferred tax assets are recognised only to the extent that it Initial direct costs incurred in negotiating and arranging is probable that the temporary difference will reverse in the an operating lease are added to the carrying amount of foreseeable future and taxable profit will be available the leased asset and recognised on straight line basis against which the temporary differences can be utilised. over the lease term.

The carrying amount of deferred income tax assets at each balance sheet date are reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each statement of financial position date and recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income tax relating to items recognised directly in equity is recognised in equity and not in the statement of comprehensive income. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax relate to the same taxable entity and the same taxation authority. Deferred capital gains tax arises on the revalued property. The capital gains tax liability is computed on the revaluation adjustment based on rates ruling on the statement of financial position date.

Inventories are stated at the lower of cost and net realisable value. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the leasee. All other leases are classified as operating leases.

Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group's net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group's net investment outstanding in respect of the leases.

6.11 Inventories

6.12 Leases

Contd



7 PROPERTY, PLANT AND EQUIPMENT

GroupLand and Leasehold Furniture and Motor buildings improvements equipment vehicles Total

US$ US$ US$ US$ US$

Net carrying amount 1/1/2009 20,685,000 - 1,222,369 1,202,800 23,110,169

Deemed cost 20,685,000 - 1,222,369 1,202,800 23,110,169 Accumulated depreciation - - - - -

Revaluation surplus 1,569,765 - - - 1,569,765

Depreciation on revalued assets 461,698 - - - 461,698

Additions 292,324 39,929 560,599 168,845 1,061,657

Acquisition of Matetsi Water lodge - 718,252 665,915 128,896 1,513,063

Disposals (180,000) - (1,320) (78,500) (259,820)

Depreciation charge for the year (466,698) (2,941) (153,954) (296,521) (920,114)

Net carrying amount 31/12/2009 22,362,089 755,240 2,293,608 1,125,480 26,536,417

Gross carrying amount -cost/valuation 22,367,089 758,181 2,447,563 1,422,001 26,994,833 Accumulated depreciation (5,000) (2,941) (153,954) (296,521) (458,416)

Land and buildings were revalued at 31 December 2009 by Bard Real Estate, a firm of professional independent valuers who are not connected to the Group. The valuation was done on the basis of open market values and this conforms to International Valuation Standards. It is the Group’s policy to revalue land and buildings annually.

Contd



7.1 PROPERTY, PLANT AND EQUIPMENT

CompanyLand and Leasehold Furniture and Motor buildings improvements equipment vehicles Total

US$ US$ US$ US$ US$

Net carrying amount 1/1/2009 19,955,000 - 1,116,618 792,100 21,863,718

Deemed cost 19,955,000 - 1,116,618 792,100 21,863,718 Accumulated depreciation - - - - -

Revaluation surplus 1,660,000 - - - 1,660,000

Depreciation on revalued assets 455,324 - - - 455,324

Additions 253,735 19,386 478,767 158,690 910,578

Disposals - - (1,320) (78,500) (79,820)

Depreciation charge for the year (455,324) (2,941) (128,475) (213,591) (800,331)

Net carrying amount 31/12/2009 21,868,735 16,445 1,465,590 658,699 24,009,469

Gross carrying amount -cost/valuation 21,868,735 19,386 1,594,065 872,290 24,354,476 Accumulated depreciation - (2,941) (128,475) (213,591) (345,007)

Land and buildings were revalued at 31 December 2009 by Bard Real Estate, a firm of professional independent valuers who are not connected to the Group. The valuation was done on the basis of open market values and this conforms to International Valuation Standards. It is the company’s policy to revalue land and buildings annually.

Contd



2009 Group Company

US$ US$

Available for sale investmentsRTG Zambia (Private) Limited - 1,000

Held to maturity financial assetInvestment in Savoy Hotel Preference share capital (US$1.00 preference shares @ 12% (per annum) 900,000 -The Group has invested in preference shares in Savoy Hotel (Zambia) which was acquired in June 2009 and is redeemable on 1 December 2011.

Food 206,350 177,486 Beverages 118,390 96,188 Service stocks 350,045 327,034 Printing and stationery 110,020 109,452 Guest supplies 93,449 87,313 Repairs and maintenance spares 52,141 51,893 Other 152,335 152,057

1,082,730 1,001,423

Trade receivables 2,205,860 1,777,158 Other receivables 2,345,868 4,586,759

4,551,728 6,363,917 Less: Provision for doubtful debts (23,490) (23,490)

4,528,238 6,340,427

8 LONG TERM INVESTMENTS

9 INVENTORIES

10 RECEIVABLES

11 HELD FOR TRADING INVESTMENTS

Stock market quoted investments 37,373 37,373

Contd



Group Company US$

Authorised 2 500 000 000 ordinary shares of Z$ 1each at the time of authorisation - -

Issued1 645 545 913 ordinary shares of Z$1 each at the time of issue - -

The unissued shares are under the control of the Directors subject to the limitations imposed by the Companies Act (Chapter 24:03), the Zimbabwe Stock Exchange and approval by members in a general meeting.

The company translated its statement of financial position from the Zimbabwe dollar to the new functional currency United States dollar. The translation was in accordance with the guidance issued by the Public Accountants and Auditors Board and the Zimbabwe Accounting Practices Board. As a result of conversions a non distributable reserve was created as follows:

Opening non distributable reserve 17,338,593 16,380,258Movement for the year

Closing non distributable reserve 17,338,593 16,380,258

2009Ordinary

Shares

Mrs Chipo Mtasa 1,474,221

Mr Elliot Nyoni 5,000

2009

US$

- -

12 SHARE CAPITAL

12.2 Directors' shareholding

12.1 Non distributable reserve

Contd



2009 Group Company

US$ US$

Deferred tax liability at the beginning of year 6,143,360 5,769,445Revaluation reserve of property, plant and equipment 383,675 427,450Portion of revaluation reserve released to statement of comprehensive income (37,603) -Deferred tax liability at the end of the year 6,489,432 6,196,895

383,675 427,4506,105,757 5,769,4456,489,432 6,196,895

Trade payables 1,117,077 986,401 Amount payable for loans guaranteed 1,556,339 - Other payables 2,801,877 4,237,927

5,475,293 5,224,328

The amount payable for loans guaranteed is for a loan that was guaranteed on behalf of Zambezi Safari Lodge with Infrastructure Development Bank of Zimbabwe. Zambezi Safari Lodge failed to honour the debt and guarantors were called to settle the debt. In return the Group took over the assets of the lodge as detailed in note 27.1

Profit before tax is arrived at after taking into account the following:

Income:- Food and beverage sales 7,445,076 6,402,765 Room revenue 7,120,750 6,266,260 other income i.e transfers and rental income e.t.c 2,939,890 2,617,156

Expenses:- Staff costs (5,705,235) (4,946,227) Audit fees (34,083) (34,083) Depreciation of property and equipment (920,114) (800,331) Directors' emoluments : For services as Directors (34,351) (34,351) For managerial services (155,665) (155,665)

13 INTEREST BEARING LIABILITIES

14 DEFERRED TAX

15 TRADE AND OTHER PAYABLES

16 PROFIT BEFORE TAX

Long term borrowings 427,350 -Current term borrowings 1,081,759 -

1,509,109 -

Movement through equityTemporary differences

The Group established borrowing facilities amounting to US$868,083 with four local banks attracting interest rates ranging from 12% to 60% per annum. The Group also secured a loan from Finance Bank in Zambia on 23 November 2009 of K 3,000,000,000 at 28% per annum converted to US$641,026 at the prevailing rate of US$1m : K4,680. The loan is repayable in twelve equal installments of K250,000,000 and interest is paid Quarterly in arrears. The loan expires on 30 September 2012 and is secured by Savoy Hotel (Zambia).

Analysis:

Contd



2009 Group Company

US$ US$

Current 57,575 50,639 Deferred (37,603) -

19,972 50,639

Tax rate reconciliationAccounting profit/ (loss) 178,934 413,572

Tax at 30.9% 55,291 127,794 (Non-taxable)/Non-deductible differences (35,319) (77,155)

Profit attributable to equity holders of the parent 158,962 362,934

Weighted number of shares in issue 1,645,545,913 1,645,545,913

Basic earnings per ordinary share - US cents 0.010 0.221

Headline earnings 122,822 362,934

Shares in issue 1,645,545,913 1,645,545,913

Reconciliation of head line earnings

Profit attributable to equity holders of the parent 158,962 362,934 Adjusted for: Profit on disposal of assets (52,301) - Tax effect thereon 16,161 -

Headline earnings 122,822 362,934

Headline earnings per ordinary share - US cents 0.007 0.221

17 TAX

18 EARNINGS PER SHARE

18.1 Basic earnings per share

18.2 Headline earnings per share

19,972 50,639

Contd




2009 Group Company

US$ US$

Profit before tax 178,934 413,573 Adjusted for:Depreciation 920,114 800,331 Investment income (69,967) (6,967 )Exchange gain (1,377) 2,342 Loss on disposal of property, plant and equipment 52,301 56,301 Other Non Cash movements (629,660) (840,083)Interest expense 338,448 208,821

Interest income (16,782) (16,213 )Operating profit before working capital changes 772,011 618,104 Increase in inventory (339,120) (300,146 )Increase in receivables (2,445,315) (5,306,675 )Increase in payables 3,967,519 3,903,894

Bank and cash balances 303,062 187,643 Bank overdraft (1,261,647) (1,261,647 )

(958,585) (1,074,004 )

The Group comprises the following companies:

Name Nature of Business Shareholding2009

Rainbow Tourism Group Limited Hotelier, Holding company 100%

Touch The Wild (Pvt) Ltd Tour and lodge operator 60%

Foursquare Investments (Pvt) Ltd Property holding company 60%

Zimbabwe-Mauritius Tours and Tour operator 60%Travel (Pvt) Ltdt/a Tourism Services Zimbabwe

Transfrontiers (Pvt) Ltd Tour operator 60%

Tourism Services Zambia (Pvt) Ltd Tour operator 60%

RTG Zambia Limited Tour operator 100%

Imal Caterers (Private) Limited t/a Training institution 100%

Hathanay Investments Lodge operator 100%

19 CASH FLOW INFORMATION

19.1 Cash generated from operating activities

19.2 Cash and cash equivalents

20 GROUP STRUCTURE

1,955,097 1,084,822

Rainbow Hospitality Business School

Contd




21 COMMITMENTS

21.1 Lease Commitments - The Rainbow Towers Hotel

21.2 Capital Expenditure Commitments

22 FINANCIAL RISK MANAGEMENT

22.1 Treasury Risk

22.2 Liquidity Risk

22.3 Credit Risk

22.4 Interest Rate Risk

22.5 Exchange Risk

In terms of a lease agreement with the Government of Zimbabwe which terminates on 1 October 2019, the company is entitled to renew the lease for a further period to be agreed by both parties. Future minimum lease payments for disclosure per IAS 17 are not determinable at each year end because the lease payments for each year are calculated as a percentage of Rainbow Towers Hotel’s annual revenue.

2010US$

Authorised but not contracted for 37,190,074

All projects will be carried out subject to availability of funds.

The main risks facing the company are treasury risk, interest rate risk, credit risk, liquidity risk, exchange rate risk and cash flow risk.

The Audit and Finance Committee, made up of executive and non-executive Directors, meets regularly to consider and analyse, among other issues, currency and interest rate exposures and to re-evaluate treasury risk management strategies against prevailing economic forecasts. Compliance with Group policies and exposure limits is reviewed at regular board meetings.

The Group has a borrowing capacity of $37 161 611 of which 98% was unutilised as at 31 December 2009. This together with cash generated from operations is adequate to enable the Group to meet its day-to day expenses and service charges as they fall due.

Financial assets which potentially subject the Group to concentrations of credit risk consist mainly of trade receivables, bank balances and cash. The Group's receivables are presented net of provision for doubtful debts where this is considered necessary. Credit risk in respect of trade debtors is limited because of the nature of the major receivables i.e local private companies and Government departments which although they take time, eventually make payments.

The Group's exposure to interest rate fluctuations is limited to the overdraft amount. Interest rates on the existing loans are contractual.

The Group is exposed to foreign currency fluctuations as it accrues foreign currency-denominated liabilities in its business activities. It is exposed to such foreign currency fluctuations to the extent that such liabilities are not matched by foreign currency receipts from operations.

A summary of the financial instruments held by category is provided below:

Contd


GroupFinancial assets

and

receivable2009 2009 2009US$ US$ US$

Cash and cash equivalents - 303,062 - Trade and other receivables - 4,528,238 - Held for trading financial assets 37,373 - - Held to maturity financial asset - - 900,000

Total financial assets 37,373 4,831,300 900,000

CompanyFinancial assets

Group

at

amortised2009 2009US$ US$

Trade and other payables - 5,532,596Held to maturity financial liabilities - 427,350 Current portion of held to maturity liabilities - 1,081,759 Bank overdraft - 1,261,647

Total financial liabilities - 8,303,352

Financial assets atfair value through Loans Held to maturity

profit or loss financial asset

Financial Liabilities

Financial liabilities Financial at fair value through liabilities

profit or loss

Financial assets at

fair value through Loans and Availableprofit or loss receivables for sale

2009 2009 2009US$ US$ US$

Cash and cash equivalents - 187,643 - Trade and other receivables - 6,340,427 - Held for trading financial assets 37,373 - - Available for sale financial asset - - 1,000

Total financial assets 37,373 6,528,070 1,000



Contd




Credit riskCredit risk is the risk of financial loss to the company if a customer or a counterparty to a financial instrument fails to meet its contractual obligations. Financial assets which potentially subject the company to concentrations of credit risk consist primarily of cash and trade receivables. The company's cash and cash equivalents are placed with high quality financial institutions. The credit risk with respect to trade receivables is limited to contractual obligations by debtors.

Carrying Maximumvalue Exposure2009 2009US$ US$

Cash and cash equivalents 303,062 303,062 Trade and other receivables 4,528,238 4,528,238 Available for sale financial asset 900,000 900,000

Held for trading financial assets 37,373 37,373

5,768,673 5,768,673

Company

GroupFinancial assets

Financial liabilities

Financial liabilities at Financial

fair value through liabilities atprofit or loss amortised

2009 2009US$ US$

Trade and other payables - 5,274,967Current portion of held to maturity liabilities - 868,084 Bank overdraft - 1,261,647

Total financial liabilities - 7,404,698

CompanyFinancial assets

Carrying Maximumvalue Exposure2009 2009US$ US$

Cash and cash equivalents 187,643 187,643 Trade and other receivables 6,340,427 6,340,427 Available for sale financial asset 1,000 1,000

Held for trading financial assets 37,373 37,373

6,556,443 6,556,443

Contd




Liquidity Risk

This is the risk of insufficient liquid funds being available to cover commitments.In order to mitigate any liquidity risk that the company faces, the company's policy has been throughout the year ended 31 December 2009, to maintain substantial unutilisable facilities and reserves as well as significant liquid resources.

Group

Between BetweenUp to 3 3 and 12 12 and 24 Over 2

months months months years2009 2009 2009 2009USD USD USD USD

Trade and other payables 5,532,596 - - - Held to maturity financial liabilities 921,503 160,256 213,675 213,675 Bank overdraft 1,261,647 - - -

7,715,746 160,256 213,675 213,675

This is a defined contribution scheme which covers employees in specified occupations of the catering industry. The majority of employees in the Rainbow Tourism Group are members of this Fund.

The Group operates a defined contribution plan under which the Group pays fixed contributions into a separate fund and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay employee benefits relating to employee service in current and prior periods.

This is a defined contribution scheme legislated under the National Social Security Act (1989).The company's obligations are limited to specific contributions as legislated from time to time, and are currently 4% of pensionable earnings.

CompanyBetween Between

Up to 3 3 and 12 12 and 24 Over 2months months months years

2009 2009 2009 2009USD USD USD USD

Trade and other payables 5,274,967 - - - Held to maturity financial liabilities 868,084 - - - Bank overdraft 1,261,647 - - -

7,404,698 - - -

23 RETIREMENT BENEFITS

23.1 Catering Industry Pension Fund (NEC)

23.2 Rainbow Tourism Group Fund

23.3 National Social Security Authority Scheme

Contd




24 COMPENSATION TO KEY MANAGEMENT

26 MANAGEMENT OF CAPITAL

27 EVENTS AFTER THE REPORTING PERIOD

27.1 Acquisition of Matetsi Water Lodge assets

2009Group Company

US$ US$

Short term benefits 252,665 -Long term benefits 27,750 -

280,415 -

A significant subsidiary, Touch The Safari and lodges Group which has been consolidated, is facing going to concern problems. The Touch The wild Group posted a significant loss of US$366,615

There is no certainty whether Sikumi tree lodge which contributes 24% of the subsidiary’s revenue will remain under the control of the subsidiary due to wranglers of ownership.

The ability of the subsidiary to continue operation as a going concern is therefore dependent on a return to profitable operations, satisfactory resolution of the ownership wrangle of Sikumi Tree lodge and continued support from the bankers , trade payables and the Holding Company.

Management believes that the eco tourism business will grow as a result of positive political developments in the country. The business is mainly for foreign customers who are sensitive to political changes.

The Group's objective when managing capital are:

• to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits for other stakeholders, and

• to provide adequate returns to shareholders by pricing products and services commensurately with the level of risk

The Group manages the capital structure and makes adjustments to it in light of the changes in economic conditions and the characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares or to reduce debt.

On 26 February 2010 the High Court made a ruling to the effect that the Group should pay an amount of US$1,513,063 to the Infrastructure Development Bank of Zimbabwe (IDBZ). The liability is as a result of a guarantee given to the bank in 1999 for the loan which was taken by Zambezi Safari Lodge in which the Group had an interest. The bank opted to call upon the guarantor to settle the amount and in return take over the property, plant and equipment of the lodge. The liability arose before 31 December 2009 hence the Group also assumed the ownership of the lodge before year end. The amount paid was proportionately allocated to the property, plant and equipment taken over, which is in line with IFRS 3 “Business Combinations”. The property, plant and equipment taken over are

25 GOING CONCERN - CONSOLIDATED SUBSIDIARY COMPANY

Contd




included in the statement of financial position at the following carrying amounts:

Leasehold improvements 718,252Office and equipment 665,915Vehicles 128,896

Total 1,513,063

These consolidated financial statements were approved by the Board of Directors on 4 March 2010.

27.1 Approval of the Financial Statements


as at 31 December 2009

Top Twenty Shareholders

Rank Account Name Shares % of Total

1 LES NOMINEES (PVT)LTD, 300,000,000 18.23%

2 E.F.E SECURITIES NOMINEES (PRIVATE) LIMITED 211,769,440 12.87%

3 NATIONAL SOCIAL SECURITY AUTHORITY 199,862,072 12.15%

4 AFRE CORPORATION LIMITED 170,980,989 10.39%

5 FIRST MUTUAL LIFE - POLICYHOLDERS 132,412,237 8.05%

6 EW CAPITAL HOLDINGS P/L 111,629,539 6.78%

7 MINISTRY OF TOURISM and HOSPITALITY INDUSTRY 83,402,508 5.07%

8 LAAICO - FCA NON-RES 60,000,000 3.65%

9 FIRST MUTUAL LIFE - MANAGED FUND 57,954,668 3.52%

10 E W CAPITAL HOLDINGS (PVT) LTD, 47,547,740 2.89%

11 PEARL PROPERTIES (2006) LIMITED 35,369,266 2.15%

12 FIRST MUTUAL LIFE - SHAREHOLDERS 11,626,156 0.71%

13 HAMILTON, NICHOLAS RHODES- NNR 16,695,788 1.01%

14 PINNACLE INVESTMENTS (PRIVATE) LIMITED 15,552,768 0.95%

15 HAMILTON, MAXIMILIAN RHETT 13,996,703 0.85%

16 HAMILTON, ALEXANDER SETHI 10,000,000 0.61%

17 HAMILTON, ORRIE LINCOLN 10,000,000 0.61%

18 HAMILTON, RICHMOND LOUIS 10,000,000 0.61%

19 EUGENIE BRITANNIA, HAMILTON 10,000,000 0.61%

20 RUHR INVESTMENTS (PRIVATE) LIMITED 9,000,000 0.55%

21 OTHER 136,746,039 8.31%

TOTAL NUMBER OF SHARES 1,645,545,913 100.00%


Notice to Shareholders

thNotice is hereby given that the 11 Annual General Meeting of Shareholders of the Company, will be held in the Jacaranda Rooms 2 and 3, Rainbow Towers Hotel and Conference Centre, 1 Pennefather Avenue, Harare on Thursday 10 June 2010 at 12:00 noon for the purpose of transacting the following business:

To table forms of proxy.To declare the meeting duly constituted.

To receive and adopt the financial statements and the reports of the Directors and auditors for the year ended 31 December 2009.

To approve payment of Directors' fees for the year ended 31 December 2009.

To elect Mr E.R.M Nyoni and Mrs C.R. Daniels who retire by rotation and, being eligible, offer themselves for re-election.

To confirm the appointment of Mr J. M. Chikura as a Director of the Company.Mr J . M Chikura was co-opted as a Director during the past financial year, and in terms of the Articles of Association of the Company, members are asked to confirm his appointment as a Director.

Appointment of Additional Directors at the instance of companies controlled or associated with Mr N. Van Hoogstraten:

Various individuals and or companies controlled by Mr N. Van Hoogstraten, holding collectively 35% of the issued share capital of the Company have requisitioned the Board for the appointment of the below named persons as Directors:

Mr M. R. Hamilton (Managing Director of family owned hotels and night clubs in the United Kingdom).

Mr A. S. Hamilton (Managing Director of family owned property companies in the United Kingdom) as an Alternate Director to Mr M.R. Hamilton.

Mr I. Haruperi (Managing Director of Chador Holdings a company dealing in properties, finance and investments).

Mr S. Chibanguza (Manager ,Chibanguza Group of Hotels).

To note the resignation of Mr Y. Mariuma (and his alternate F Montfort) from the Board since the last Annual General Meeting.

AGENDA

1. CONSTITUTION OF MEETING

1.11.2

ORDINARY BUSINESS

2. STATUTORY FINANCIAL STATEMENTS

3. DIRECTORS' FEES

4. DIRECTORATE

4.1 To reappoint retiring Directors

4.2

4.3

4.3.1

4.3.2

4.3.3

4.3.4

4. 4 Resignation

Contd



5. AUDITORS

SPECIAL BUSINESS

6.

7.

8.

9.

To approve the remuneration of the auditors for the year ended 31 December 2009 and to appoint auditors of the company for the ensuing year.

As a Special Resolution, to resolve that the Company's authorised share capital of Z$ 250 000 comprising 2 500 000 000 (two billion five hundred million) ordinary shares of $0.0001 each, be and is hereby re-denominated to US$ 250 000 (Two hundred and fifty thousand United States Dollars) comprising 2 500 000 000 ordinary shares of US$ 0.0001 (zero comma zero zero zero one United States Dollars) each.

As a Special Resolution, to resolve that the Company's issued share capital of Z$ 164 555 comprising 1 645 545 913 (one billion six hundred and forty five million five hundred and forty five thousand nine hundred and thirteen) ordinary shares of Z$0.0001 each be and is hereby re-denominated to US$ 164 555 (one hundred and sixty four thousand five hundred and fifty five United States Dollars) comprising 1 645 545 913 ordinary shares of US$ 0.0001(zero comma zero zero zero one United States Dollars)each.

As an Ordinary Resolution, to resolve that the Directors be authorised to transfer from the capital reserves of the Company an amount sufficient to fund the above re-denomination; and

That the Memorandum and Articles of Association of the Company be and are hereby amended such that any

reference to "nominal value" be changed to read as US$ 0,0001 (zero comma zero zero zero one United States Dollars).

Each member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to act in the alternative and speak in his stead. A proxy need not be a member of the Company.

Proxy forms should be forwarded to reach the registered office of the Company not less than 48 hours before the time of the meeting.

BY ORDER OF THE BOARD

J. A. MUSEMBURICOMPANY SECRETARY

Notice to Shareholders

I/We ……………………………………………… of ………………………………………………… being a member of RainbowTourism

Group Limited hereby appoint………………………...……….or failing him/her the Chairman of the meeting as my/our proxy to attend and

speak for me/us on my/our behalf at the Annual General Meeting of the Company to be held in the Jacaranda Rooms 2 and 3, Rainbow

Towers Hotel and Conference Centre, 1 Pennefather Avenue, Harare on 10 June 2010 and at any adjournment thereof and to vote or

abstain from voting as indicated below on the resolutions to be considered at the said meeting.

AGAINST ABSTAIN

SPECIAL BUSINESS FOR AGAINST ABSTAIN

Please indicate with an “X” in the spaces provided how you wish your votes to be cast. If no indication is given the proxy will vote or abstain at is/her discretion.

Signed at …………………………………………… this ……………………………………… day of ……………………………………… 2010.

Signature of member …………………………………………………………………………………………………………....................................

Number of Shares ………………………………………………………………………………………………………………………………………

NOTES

1. This proxy form should reach the registered office of the Company not later than forty–eight hours before the time of the meeting.2. A member entitled to attend and vote is entitled to appoint a proxy to attend and vote and speak in his stead. A proxy need not be

a member of the Company.

Form of Proxy


The SecretaryRainbow Tourism Group LimitedP.O. Box 10029HARARE

to effect the re-denomination.

13. To amend the Articles of Association

As an Ordinary Resolution, to authorize the Directors to fund the above re-denomination from capital reserves.

12.

11. - To approve the re United States Dollars.

denomination of the Company’s issued share capital in

10. To approve the re-denomination of the Company's authorized share capital in United States Dollars.

ORDINARY BUSINESS FOR

1. To receive and consider the financial statements, the reports of the Directors and auditors for the year ended 31 December 2009.

2. To approve Directors fees for the year ended 31 December 2009.

3. To elect Mr E. R. M. Nyoni and Mrs C. R. Daniels who retire by rotation and, being eligible, offer themselves for re-election.

4. To confirm the appointment of Mr J. M. Chikura as a Director of the Company.

5. To approve the remuneration of the auditors for the year ended 31 December 2009 and to appoint auditors for the ensuing year.

6. To appoint Mr M. R. Hamilton as a Director of the Company.

7. To appoint Mr A. S. Hamilton as an Alternate Director to Mr M. R. Hamilton.

8. To appoint Mr I. Haruperi as a Director of the Company.

9. To appoint Mr S. Chibanguza as a Director of the Company.

bulawayo hotels - rtg annual report 2009 finale …...management contract over harare sheraton hotel...

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