Refreshing Hotels, Amazing Experiences

Annual Report | 2012

Indulge in fresh moments under the Rainbow.

Refreshing hotels, amazing

experiences

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Vision, Mission and Values 2

Group Structure 3

Product Portfolio 4

Rainbow Service Promise 5

RTG History 6

Board of Directors 8

Senior Management 11

Corporate Information 12

Chairman’s Statement 13

Chief Executive’s Review of Operations 17

Corporate Governance 22

Directors’ Responsibility Statement 24

Report of Directors 25

Independent Auditors’ Report 28

Consolidated Statement of Financial Position 30

Consolidated Statement of Comprehensive Income 31

Consolidated Statement of Cash flows 32

Consolidated Statement of Changes in Equity 33

Notes to the Consolidated Financial Statements 35

Top 20 Shareholders 62

Notice to Shareholders 63

Form of Proxy 64

contents

We love what we do, we deliver refreshing experiences every time.

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OUR VISIONTo be the premier provider of

diversified hospitality services in Zimbabwe by 2015.

OUR STRATEGYOperational efficienciesCashflow managementRevenue generationRefreshed productService delivery

SUCCESS FACTORSService excellenceFresh productVibrant people

OUR STRATEGYOperational efficienciesCashflow managementRevenue generationRefreshed productService delivery

OUR MISSIONWe exist to create sustainable shareholder value through the deployment of dynamic hospitality services that consistently deliver refreshing guest experiences.

OUR VALUESFreshnessConsistencyIntegritySynergiesVibrancy

OUR VISIONTo be the premier provider of diversified hospitality services in Zimbabwe by 2015.

OUR MISSIONWe exist to create sustainable shareholder value through the deployment of dynamic hospitality services that consistently deliver refreshing guest experiences.

RTG VALUESFreshnessIn all that we do, we guarantee freshness; fresh food, fresh pillow, fresh smile.

ConsistencyWe will provide consistent and reliable service to all our guests all the time.

IntegrityWe have integrity; we do what we say, we keep our promises.

SynergiesWe activate synergies to achieve amazing guest success every time.

VibrancyWe are vibrant. We are full of life and we enjoy what we do.

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Rainbow Bulawayo Hotel

A’Zambezi River Lodge

Rainbow Victoria Falls Hotel

100% Owned Management Contract LeasedLeased

Zimbabwe Zambia Mozambique

Rainbow Towers Hotel & Conference Centre

Kadoma Hotel & Conference Centre

New Ambassador Hotel

Rainbow Hotel Savoy Rainbow Hotel Mozambique

The Group has operations in Zimbabwe, Zambia and Mozambique through a combination of owner managed and leased hotels as well as management contracts.

Group Structure

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CATEGORY NO. OF UNITS CONFERENCE NO. OF ROOMS

CApACITY

ZIMBABWE OpERATIONS

5 StarRainbow Towers Hotel and Conference Centre 1 7,000 305

3-4 StarA’ Zambezi River Lodge, Rainbow Victoria Falls Hotel, Rainbow Bulawayo Hotel,Kadoma Hotel and Conference Centre andNew Ambassador Hotel. 5 1,010 566

Sub-total 6 8,010 871

REGIONAL OpERATIONS

Rainbow Savoy Hotel – Ndola (Zambia) 1 350 154

Rainbow Hotel Mozambique (Beira) 1 600 182

Sub-total 2 950 336

Grand Total 8 8,960 1,207

RTG South Africa Marketing and Channel Management office

Product Portfolio

From the moment of contact, our service bell rings!

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At Rainbow Tourism Group, we offer fresh experiences to our customers. From the time customers check into our hotels, their experiences will be of freshness in all respects. The Rainbow service promise is encapsulated in three pillars of freshness which are: Fresh food, Fresh pillow and Fresh smile.

Any encounter with the RTG brand will imprint fond memories that will leave customers yearning to return, leading to the fulfilment of the Rainbow promise: refreshing hotels, amazing experiences.

Rainbow Service Promise

Let the Rainbow carry you beyondthe obvious and expose you

to new possibilities.

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1981Zimbabwe Tourist Board is formed as a corporate body.

1983Government 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.

1984Parastatal, Zimbabwe Tourist Development Corporation (ZTDC) is formed.

1985The 5-star Hotel and Conference Centre construction is completed and hotel starts operating under management contract with the name Harare Sheraton Hotel. The Conference Centre is named Harare International Conference Centre operated by the Ministry of Environment and Tourism.

1986ZTDC takes over Victoria Falls Rainbow Hotel closed during Zimbabwe’s liberation war. Victoria Falls Rainbow Hotel closes again due to security problems; Government asks for its reopening. ZTDC acquires two hotels, Ambassador Hotel and A ’Zambezi River Lodge, to avert their closure.

1987ZTDC establishes touring division as a joint venture under a different name, Zimbabwe Tours.

1989The Zimbabwe Tourist Development Corporation Act is amended to hive off commercial side of ZTDC operations.

1991Zimbabwe 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 turnaround ZTDC loss making operations, namely Hotels Division [A ‘Zambezi River Lodge, Rainbow Victoria Falls Hotel, New Ambassador Hotel (formerly Ambassador Hotel) and Christmas Pass Hotel], Tours Division (comprising Zimbabwe 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).

1992First CEO appointed and commercial business assets transferred from ZTDC and Ministry of Environment and Tourism to ZTIC. Operations start on 1 April. 1994ZTIC changed name to Rainbow Tourism Group Limited (RTG) with RTG still wholly owned by Government. Zimbabwe 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.

1995RTG acquires Rhodes Nyanga Hotel and Kadoma Ranch Motel.

1996Chimanimani 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.

1997Christmas Pass Hotel, Mutare, is disposed. Bulawayo Sun Hotel is purchased and renamed Bulawayo Rainbow Hotel.

1998Touch 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.

1999Management contract over Harare Sheraton Hotel renegotiated by RTG and Starwood Hotels and Resorts Worldwide Inc. and 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, Tourism Services Zimbabwe). A voluntary retrenchment scheme is offered. Cabinet approval for RTG privatisation is given on 29 June. RTG’s strategic partnership with Accor is approved on 19 October. RTG becomes the 72nd quoted company on the Zimbabwe Stock Exchange on 1 November.

2000RTG/Accor strategic partnership agreement is concluded; Accor’s 35% shareholding becomes fully subscribed on 1 March. Chimanimani Hotel and Rhodes Nyanga Hotel disposed as they could not achieve critical mass in capacity and yield.

RTG History

1981-1991 1992-2000

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2001Re-branding of A ‘Zambezi River Lodge to Hotel Mercure A‘Zambezi.

2002Re-branding of Victoria Falls Rainbow Hotel to Hotel Mercure Rainbow.

2004By mutual agreement, management contract with IBL Mauritius terminated. However, IBL Mauritius maintains its shareholding.

2005Management agreement with Starwood comes to an end and is not renewed. Management of Sheraton Harare Hotel and Towers localized. Business of Sheraton Harare Hotel and Towers and Harare International Conference Centre merged. RTG successfully carries out a rights issue in September and new shareholders emerged. Accor, Laaico, and Ministry of Environment and Tourism get diluted.

2006The 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.

2007South African marketing office established and Tourism Services Zambia registered. Regional expansion strategy unveiled. Group finds partner with piece of land for construction of a hotel in Beitbridge.

2008RTG takes over management of first hotel in the region in the name of Hotel Edinburgh in Kitwe, Zambia. RTG also signs a management contract for Savoy Hotel in Ndola, Zambia. Rainbow Hospitality Business School (RHBS) is established.

2010Refurbishment of A ‘Zambezi River Lodge commences. Matetsi Water Lodge is acquired as a going concern effective 1st of March. RTG also acquired a long term lease over Hotel Mozambique in Beira and commences operations in July. Rainbow Hotels in Zimbabwe acquired ISO 9001:2008 certification in March.

2011A ‘Zambezi River Lodge refurbished and rebranded to a 4-star hotel. The hotel was opened mid-May.

RTG seeks to recapitalise and to dispose subsidiaries, TTW, Matetsi Water Lodge and TSZ in order to focus on core hotel operations and retire short term debt.

2012RTG embarks on a recapitalisation exercise to address short term debt burden. RTG secures a US$10 million long term loan and concludes a US$4.5 million rights issue. The Group disposes of some of its subsidiaries which were TTW and TSZ to focus on core hotel operations.Hotel Edinburgh in Ndola, Zambia is closed.

2001-2010 2011- CuRReNT

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Mr. Grant Gore(47)Finance Director

Grant is a Chartered Accountant with a Master of Business Administration (Edinburgh), Postgraduate Diploma Risk Management (Glasgow), and Bachelor of Accountancy Honours (UZ). He trained as a Chartered Accountant with Deloitte & Touché. His has held several roles in Zimbabwean companies including being former Chief Finance Officer and Chief Operations Officer of Aon Risk Services before relocating to the UK. In the UK he held roles in Campbell Dallas Chartered Accountants, Interflex Scotland Limited, and as freelance Business Transformation Analyst of GCCS Global Contracts UK Ltd. He brings over 25 years experience in finance and risk management.

Mrs. Rosa Dube(50)Non-Executive Director Mrs. Dube is currently the Operations Director of Design Technology Business Solutions, specializing in Business Advisory Services and Public Sector Financial Compliance and Corporate Governance. Mrs. Dube holds a Bachelor of Accountancy (Honours) degree from the University of Zimbabwe and Master of Science in Finance and Financial Information Systems from the University of Greenwich UK. She is also a Certified SAP Financials Consultant. Her other directorships include Eloah Vires Minerals and National Social Security Authority.

Mr. John Mafungei Chikura (57)Non-Executive Director Mr. John Chikura is the Chief Executive Officer of the Deposit Protection Board and current Chairman of the Africa Region, International Association of Deposit Insurers (IADI) based in Switzerland. He holds a Master of Business Administration in Finance and Banking (Manchester University) and is a Fellow of the Institute of Chartered Secretaries and Administrators (FCIS). His vast experience at senior management level includes the post of Finance and Administration Manager for Cluff Resources (now Ashanti Gold Mining) and Lonrho Zimbabwe as well as General Manager – Finance and Company Secretary for Southern Africa Reinsurance Limited. He also sits on the board of directors of Africa First ReNaissance Corporation Limited and certain of its subsidiaries.

Mr. Tendai Madziwanyika (45)Chief Executive Officer

Tendai Madziwanyika was appointed Chief Executive of the Group with effect from 5 November 2012. Tendai has held senior positions in the FMCG and hospitality industries including, being the Managing Director of a listed hospitality group in Zimbabwe. He has a wealth of experience in hospitality operations, marketing and general management. He is the immediate past President of the Zimbabwe Council for Tourism. He holds a Bachelor of Accounting Science (B Compt.) from the University of South Africa. A Chevening scholar, he holds a Master of Business Administration (with distinction) from Hull University (United Kingdom).

Dr. Joseph Kanyekanye (46)Non-Executive Chairman

Dr. Kanyekanye is presently the Group Chief Executive for Allied Timbers Zimbabwe. He is the past President of the Confederation of Zimbabwe Industries (CZI). Dr. Kanyekanye holds a Diploma in Forestry from the Zimbabwe College of Forestry, a Bachelor of Science (Honours) in Wood Science from the University of Wales (UK), a Master of Business Administration from the University of Zimbabwe and Doctorate in Business Administration from Calvary University (UK). He also sits on various boards including Capital Bank, NSSA and Starafrica Corporation Limited.

Board of Directors

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Board of Directors

Mr. Shadreck Chamunorwa Vera (43)Non-Executive Director

Mr. Vera is the Investments Director at National Social Security Authority (NSSA). He holds a Master of Business Administration degree from the Nottingham Trent University and a Postgraduate Diploma in Management Studies from the same University. He also holds an Advanced Diploma in Treasury Management and Finance from Institute of Bankers South Africa and a Certificate in Management Information Systems (London). He is a certified associate member of the Institute of Bankers in South Africa. Mr. Vera is currently studying towards a Doctorate in Business Administration with Nottingham Trent University.

Mr. Douglas Mavhembu (40)Non Executive Director

Mr. Mavhembu is the Acting Director- International Tourism Directorate in the Ministry of Tourism and Hospitality Industry. He has worked in various senior capacities within the Ministry of Tourism and Hospitality including being the Deputy Director (Tourism) and Acting Under Secretary (Tourism). Mr Mavhembu is the Co-Chairperson for the Zimbabwe/Zambia Joint Technical Committee on the UNWTO General Assembly to be held in Victoria Falls in 2013. He holds a Master of Science degree in Tourism and Hospitality Management from the University of Zimbabwe, a Bachelor of Business Administration in Tourism Management from Azaliah University and various certificates in Tourism and Hospitality Management.

Mrs. Thandiwe Thando Mlobane (51)Non Executive Director

Mrs. Mlobane is currently the Municipal Consultant for Aline Hope Business Solutions and Training Services. She is also a director at Civil Aviation Authority of Zimbabwe (CAAZ). She has previously been a director at Hwange Colliery Company Limited (2005-2011), Air Zimbabwe Corporation (September 2007 to February 2012) and National Railways of Zimbabwe (2005- August 2007). Mrs. Mlobane has previously held senior positions at the Reserve Bank of Zimbabwe, Genesis Investment Bank and at the City of Bulawayo. She holds a Bachelor of Accountancy Degree from the University of Zimbabwe, Masters in Business Administration Degree from the University of South Africa and is currently studying for a Doctorate in Business Administration with the National University of Science and Technology (NUST).

Mr. Douglas Hoto (48)Non-Executive Director

Mr. Hoto is the Group Chief Executive Officer of Africa First ReNaissance Corporation Limited. He has previously worked as Chief Executive Officer for Altfin Holdings Limited. Mr. Hoto has over 22 years’ experience as an Actuary and has worked in various roles in the Insurance industry in Zimbabwe and the SADC region. He is the Chairman of the Zimbabwe National Statistics Agency (ZIMSTAT), a board member of the Insurance Pension Commission (IPEC), the Chairman of the Actuarial Society of Zimbabwe and a Trustee of the S. V. Muzenda Foundation. Mr. Hoto is a Fellow of the Faculty of Actuaries of Scotland and holds a Bachelor of Science Honours Degree in Mathematics (UZ). Mr. Hoto is also a non-executive director of Capital Bank.

Mr. Shingirayi Norman Chibanguza (29)Non-Executive Director

Mr. Chibanguza is currently the Managing Director for Farhigh Trading Transportation and Property Management, Cladmont Investments, Property Plus Realtors and Haddon and Sly Properties. His other directorships include Hwange Colliery Company Limited, Central Estates Farm and Nyaya Industries. Mr. Chibanguza previously held senior positions at Chibanguza Group of Hotels and Guy Chibanguza Enterprises (Pvt.) Ltd (Retail supermarkets) between 2003 and 2007. He is currently studying towards a Bachelor of Commerce in Entrepreneurship (SA) from the University of South Africa.

Mr. Ian Chamunorwa Haruperi (34)Non-Executive Director

Mr. Haruperi is currently the Managing Director of Chardore Holdings and has more than seven years’ experience at the helm of an organization dealing in mining, properties, finance and investment. He is a former Director of Mining Procurement for Memotek Ltd (2001 to 2003). He is currently a non executive director at Hwange Colliery Company Limited. Mr. Haruperi holds a Bachelor of Science in Economics from Middlesex University, (UK).

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Discover the difference! Book with us for a unique and refreshing hospitality experience.

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Senior Management

Operations DirectorGeorge Manyumwa

Human Resources DirectorCaroline Mapfumo

Chief Executive OfficerTendai Madziwanyika

Acting Company SecretaryNapoleon Mtukwa

Commercial Director Shupai Marware

Head Internal Audit and RiskSamson Chitsato

Group Projects and Facilities ManagerRenica Mapfunde

Communications ManagerEltah Sanangura

Finance DirectorGrant Gore

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NATURE OF BUSINESS The Group is a dominant player in the tourism industry as a provider of hotel and conference facilities.

DIRECTORS Joseph Kanyekanye (Dr.) (Chairman)Tendai Madziwanyika (Chief Executive Officer)Grant Gore (Finance Director) Rosa Dube (Non-Executive) Shingirayi N. Chibanguza (Non-Executive)John M. Chikura (Non-Executive)Ian C. Haruperi (Non-Executive) Douglas Hoto (Non-Executive) Douglas Mavhembu (Non-Executive) Thandiwe T. Mlobane (Non-Executive)Shadreck C. Vera (Non-Executive)

ACTING COMpANY SECRETARY Napoleon Mtukwa

REGISTERED OFFICE Rainbow Towers Hotel and Conference Centre No.1 Pennefather Avenue / Samora Machel AvenueHARARE

AUDITORS Grant Thornton CamelsaChartered Accountants (Zimbabwe)Registered Public Auditors135 Enterprise RoadHighlands HARARE

LAWYERS Kantor and Immerman MacDonald House 10 Selous Avenue HARARE

CORpORATE OFFICE Tendai Madziwanyika (Chief Executive Officer)Grant Gore (Finance Director)Caroline Mapfumo (Human Resources Director)Shupai Marware (Commercial Director) George Manyumwa (Operations Director)Napoleon Mtukwa (Acting Company Secretary)Samson Chitsato (Head Internal Audit & Risk)Renica Mapfunde (Group Projects and Facilities Manager)Eltah Sanangura (Communications Manager)

Corporate Information

pRINCIpAL BANKERS CBZ Bank Union Avenue 60 Kwame Nkrumah HARARE

TRANSER SECRETARIES First Transfer Secretaries (Private) Limited 1 Armagh Road Eastlea HARARE

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Chairman’s Statement

HIGHLIGHTS• Turnover up by 1% to $27.6 million from $27.3 million.• Average room rate growth from $75 to $82.• Occupancy down to 43% from 44%.• EBITDA dropped to $0.6 million from $2.8 million.• Sales Mix: Current: Domestic – 71% Export – 29% prior year: Domestic – 70% Export – 30%• Loss before tax of $4.6 million vs. prior year profit of $0,1

million.• Loss after tax from continuing operations of $3.4 million from

prior year profit of $0.6 million.• Loss from discontinued operations of $2,5 million as compared

to $0,9 million in prior year.

INTRODUCTION In many respects, 2012 was a difficult year for Rainbow Tourism Group Limited (RTG). The operating environment was characterised by high liquidity challenges leading to severe working capital pressures. The Group had to deal with expensive short term debt as well as management and structural changes. The process was arduous but necessary in order to set strong foundations for a turnaround and creation of value for shareholders.

FINANCIAL REVIEWThe Group revenues increased by 1% from $27.3 million in prior year to $27.6 million. The growth was driven by improvement in average daily rate from $75 to $82. Occupancies dropped slightly from 44% to 43%. The slight drop was mainly caused by the regional operations, in particular Hotel Mozambique where occupancies were affected by the ongoing refurbishment of the hotel. Occupancies for Zimbabwe operations closed at 47%, which was the same level achieved during the prior year.

EBITDA dropped to $0.6 million from $2.8 million achieved during the same period in prior year. The drop was largely as a result of high staff costs which were 47% of revenue. Employment costs were driven by an increase in NEC wages of 35% which was effective September 2011. The effect of the wage increase was

“Finance costs for the period were $3.7 million which was an increase of 121% compared to

the prior year.”

Dr. J. Kanyekanye | CHAIRMAN

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Chairman’s Statement (continued)

fully experienced in 2012 against an unmatched increase in revenue. Cost of utilities remained high and this affected the Group’s operating margins.

Finance costs for the period were $3.7 million which was an increase of 121% compared to the prior year. The resultant loss before tax was $4.6 million.

Total assets dropped by $3.6 million from $52 million which is a decrease of 7% from the prior year. The drop was largely attributable to the provision for doubtful debts and the disposal of non-core assets during the year.

ASSETS HELD FOR SALE AND DISCONTINUED OpERATIONSDuring the year, the Group successfully disposed of Touch the Wild lodges and the destination management company Tourism Services Zimbabwe.

The assets, and liabilities, classified as held for sale at year-end relate to Hathanay Investments (Private) Limited trading as Matetsi Water Lodge. The Group closed the lodge operations in anticipation of a sale which could not be concluded within the period. The company is exploring possible strategies of dealing with Matetsi Water Lodge.

On expiry of its lease on 31 December 2012, the Group discontinued the operations of Hotel Edinburgh in Kitwe, Zambia.

REFURBISHMENT pROGRAMMERainbow Towers Hotel and Conference CentreThe hotel refurbishment resumed in April 2012, following the re-opening of Capital Bank where the funds for the project are held. The estimated completion date of the project is 30 September 2013.

Rainbow Hotel MozambiqueThe refurbishment of this property commenced during the last quarter of 2012 and will be completed by 30 June 2013. The scope of the refurbishment project includes the modernisation of 180 bedrooms with specific emphasis on the bathrooms, public areas and elevators. The project is being funded from internally generated resources of the hotel.

Other propertiesThe Group will focus on upgrading facilities of Bulawayo Rainbow Hotel, Kadoma Hotel & Conference Centre and Victoria Falls Rainbow Hotel. Refurbishment of Bulawayo Rainbow Hotel commenced in January 2013. The scope of works of this project includes carpeting of the entire hotel and minor touch ups of bathrooms and bedrooms soft furnishings.

RECApITALISATIONThe Group successfully completed its $14,5 million capital raise, which was composed of a $10 million loan and a $4,5 million rights issue. Funds raised in the capital raise were channelled towards restructuring and retiring short term debt respectively. Your board is grateful for the support it received from shareholders in connection with this rights offer.

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CORpORATE SOCIAL INVESTMENTThe Group sponsored the 2012 Environmental Reporter Awards in partnership with Environmental Africa and participated in the Green Fund established to promote environmental awareness in Victoria Falls.

DIVIDENDSIn view of the losses incurred and the ongoing refurbishment programmes, the directors have recommended that no dividend be declared for the year ended 31 December 2012. CORpORATE GOVERNANCEAt the last annual general meeting, shareholders confirmed the appointment of the following persons as directors, Dr. J. Kanyekanye, Mrs. R. Dube and Messrs. S. N. Chibanguza, D. Hoto, I. Haruperi, T. M. Madziwanyika and D. Mavhembu. Mrs. T. Mlobane and Mr G. Gore were co-opted to the board after the annual general meeting.

As a result of the reconstitution of the board of directors, all significant shareholders now have proportional representation on the board. The directors are confident that this will address the shareholder disputes which have previously affected the Group.

OUTLOOKThe Group will protect and grow its existing business revenues while actively continuing cost reduction measures across its hotels. Given changes in the Group’s debt structure, and the implementation of the turn-around strategies, your board is optimistic that the Group will be able to sustainably enhance shareholder value going forward.

The Beitbridge Hotel being constructed by NSSA is 95% complete. The hotel will be operated by RTG and is expected to open during the second half of 2013.

ACKNOWLEDGEMENTOn behalf of the board, I would like to express gratitude to all those who have contributed to our sustainability through their unwavering commitment and passion for RTG. This includes our shareholders, customers, employees, business partners, suppliers and the communities where we operate.

I thank my fellow board members for making significant contributions in guiding the business under difficult conditions and I look forward to their ongoing support.

Dr. J. KanyekanyeCHAIRMAN

13 March 2013

Chairman’s Statement (continued)

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Treat your taste buds to a sumptuously fresh meal at any Rainbow restaurant.

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1. INTRODUCTION The tourism environment continues to grow. International tourist

arrivals grew by 4% in 2012 surpassing a record 1 billion tourists globally for the first time in history. In 2012, growth was stronger in emerging economies (+4.1%) as compared to advanced economies (+3.6%), a trend which has marked the sector for many years now. Despite ongoing economic challenges, growth of international arrivals worldwide is expected to continue in 2013 at a similar to slightly slower pace (+3% to +4%).

Arrivals from mainland Africa showed good performance as generally all significant markets went up with the exception of Angola, Kenya, Tanzania and Uganda. Africa tourist arrivals grew by 5% and South Africa was the highest in Africa with a growth of 11%. South Africa remains the best performer commanding a market share of 44% (298 430) of the arrivals from mainland Africa in 2012, a percentage down from the 45% of 2011. The growth in arrivals into South Africa is good for us as South Africa still remains the main access hub for Southern Africa.

Prospects for Zimbabwe remain high as international tourist arrivals are on the increase, maintaining a long term average annual growth of 5% in 2012. 2012 arrivals were +2.4 million as compared to 2.3 million in 2011. Of the tourist arrivals who came to Zimbabwe in 2012, mainland Africa contributed 88% followed by Europe (5%), the Americas (3%), Asia (2%) and Oceania 1.2%. The Middle East is still a depressed market for the country, having contributed less than 1% of the tourist arrivals.

pERFORMANCE FOR THE YEAR ENDED 31 DECEMBER 2012

2012 2011

Occupancy: Group 43% 44%

Zimbabwe 47% 47%

Region 30% 34%

Average Daily Rate ($) 82 75

RevPAR ($) 35 33

Staff costs to revenue 47% 34%

EBITDA Margin 2% 10%

Interest Rate on Short term borrowings 23.2% 17.8%

Interest on Long-term borrowings 6.6% 6.6%

Chief executive Officer’s Review of Operations

“Prospects for Zimbabwe remain high as international tourist

arrivals are on the increase...”

Mr. T. Madziwanyika | CHIEF ExECUTIVE OFFICER

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2. DIVISIONAL pERFORMANCE The Group achieved total revenue of $27,570,966 for the year 2012 and this performance was 2.5% below 2011.

Occupancy at 43% for the year was 1 percentage point below 2011 performance. The average daily rate (ADR) increased by $9 from same period last year and closed on $82. Revenue per available room (RevPar) moved up by $3 over the previous year to close at $35. The main reason for the below par performance being the pursuit of an aggressive ADR strategy against a weak product offering and market value proposition.

Table 1: Revenue contribution

2.1 City Hotels City Hotels drove revenues and indices for the Group, but posted a small growth of 0.2% compared to prior year.

As stated in the chairman’s report, the drop was mainly due to macro economic factors, however, compounded by depressed marketing / volume driving activities. Our strategies going forward will address this deficit.

2.2 Resort Hotels The hotels recorded revenue growth of 62% compared to same period in prior year showing the positive impact of

the refurbished A’Zambezi River Lodge. The product was re-introduced in the market in May 2011 and it excited the market as it was new, fresh and offered best value for money amongst its peers.

2.3 Regional Hotels Savoy Hotel revenues were 24% above 2011 signifying the growth being spiced in the Copperbelt due to mining and

construction activities. The refurbishment that is underway at Hotel Savoy will allow our customers to experience a refreshed product with a superior value proposition.

Going forward our revenue generation will be volume based as driven by innovative proprietary programs that are supported by a refreshed product and stimulating pillars of service: fresh food, fresh smile and fresh pillow.

Chief executive Officer’s Review of Operations (continued)

REVENU

ES

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Chief executive Officer’s Review of Operations (continued)

3. OpERATING ExpENSES Operating expenses grew by 14% compared to prior year. The significant cost drivers for the period include staff

costs which were largely driven by the retrenchments and the 35% increase in NEC wages effected in November 2011 but was fully experienced during 2012. Cost of energy and utilities were significant and various initiatives are being pursued to reduce these costs. Further reduction will be realised through centralisation of procurement and realignment of systems for business efficiencies.

4. GROUp FINANCIAL pOSITION The Group’s short term borrowings closed the period at US$14.4 million attracting an average interest rate of 23%

per annum. The interest cost for the year at US$3.6 million weighed heavily on the Group’s financial performance. During the year, the Group embarked on a recapitalisation exercise meant to address the short term debt burden. The recapitalisation exercise was concluded during the month of January 2013 resulting in the company securing a $10 million long term loan with interest of 10% and rights issue of $4.5 million. The restructuring of short term loans resulted in the effective interest rate of 11%. The loan was used to substitute expensive short term debt and the rights issue proceeds were used to retire expensive short term debt as well as funding the working capital gap.

5. SERVICE DELIVERY The Rainbow service promise will guide the Group’s service level offering. RTG will continue to engage in several

initiatives that result in the Group offering fresh experiences to customers. The Group has encapsulated its service offering in three pillars of freshness which are;

Fresh food, Fresh pillow and Fresh smile.

6. REFRESHED pRODUCT The refurbishment program for the Rainbow Towers Hotel and Conference Centre has resumed and the hotel

is expected to be completed by the third quarter of 2013. The refurbishment covers the entire room stock, replacement of furniture and fittings as well as the public areas. The Kadoma Hotel & Conference Centre hotel had

FRESH SMILE

FRESH PILLOW

FRESH FOOD

I’M FRESHSERVICE CULTURE

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its public areas modernised in 2012 and the second phase of its refurbishment exercise will include bedrooms. Refurbishment works on Rainbow Hotel Mozambique are nearing completion with an expected date of completion of 30 June 2013. The Rainbow Bulawayo Hotel refurbishment is being conducted in a phased approach. The hotel carpets were replaced during the first quarter of 2013 and other works are in progress. The Rainbow Beitbridge Hotel Project is now on course with the opening of this new hotel expected to be in the third quarter of 2013. The Group will continue to invest in product upgrades and refurbishment exercises during the course of 2013 for a more refreshed and functional product. The deliberate attempt by the Group to improve its product portfolio and the addition of new products such as the Rainbow Beitbridge Hotel is expected to strengthen the Group’s product portfolio and market share.

7. CONCLUSION Going forward, the performance for the year 2013 is likely to be a profitable position in view of the different strategic

initiatives that have been and continue to be pursued. The introduction of a new team coupled with the significant efforts being made in revenue generation, refurbishment and project upgrade of hotels, improved operational efficiencies, cash flow management, improved service delivery levels and the retirement of the short term debt burden will position the business for long term viability and profit generation.

Mr T Madziwanyika Chief Executive Officer

13 March 2013

Chief executive Officer’s Review of Operations (continued)

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Our service offering is encapsulated in three pillars of freshness:

Fresh food . Fresh smile . Fresh pillow

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1. INTRODUCTION The Board is committed to an open and disciplined governance process based on accountability, integrity,

transparency and independence. For 2012, the Board believes that it complied with the major aspects of the Code of Corporate Practices and Conduct as set out in the King Report 2009 (King III), in all material respects.

2. BOARD COMpOSITION In July 2012, the Group reconstituted its Board of Directors such that all significant shareholders now have

proportional representation on the Board. The director changes were approved at the last Annual General Meeting. The Board is confident that these changes will bring an end to the shareholder disputes which were apparently premised inter alia on the issue of inproportional shareholder representation at the Board. The Board is now composed of nine non-executive directors and two executive directors.

The Board is fully vested with the issue of increasing the number of independent directors on the Board and in this regard has set itself targets in terms of the identification, selection and co-option of independent directors through its Board Nomination Committee.

The non-executive directors provide the necessary objectivity for the Board’s effective functioning and carry sufficient weight in the Board’s deliberations and resolutions. The Board’s composition reflects varying skills, knowledge and experience. The Board members are fully aware of their duties to ensure that the Group maintains a high standard of corporate governance.

The Board meets at least once every quarter to review and monitor the performance of the Group and executive management. The Board considers and approves Group strategy, corporate governance policies and risk and compliance structures and business continuity plans.

At the next Annual General Meeting, the Group will seek the confirmation of the appointment of Mrs. Tandiwe Mlobane and Mr. Grant Gore who were co-opted during the year and therefore retire at the Annual General Meeting in terms of Article 106 of the Company’s Articles of Association.

Mr. John M. Chikura retires by rotation in terms of Article 100 of the Company’s Articles of Association and being eligible offers himself for re-election at the next Annual General Meeting.

3. BOARD COMMITTEES The Group has the following committees in place:-

3.1 Audit and Risk Committee The Committee comprises of three non executive directors. The Committee deals, inter alia, with compliance,

internal control and risk management. The external auditors attend all scheduled meetings as ex officio members. The Committee meets at least three times a year.

Corporate Governance

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3.2 projects and procurement Committee The Committee comprises of three non-executive directors. The Committee deals inter alia with the following

matters;

Proposals for decisions to approve or prequalify applicants for contracts valued at over US$ 50,000; Review of the Group’s tendering and procurement policies and practices; Ensuring that operating policies and procedures relating to tendering and procurement are recognized as best

practices; and Ensuring that all tenders are conducted in a fair and ethical manner.

3.3 Human Resources and Corporate Governance Committee The Committee comprises of three non-executive directors. The primary function of the committee is to assist the

Board by reviewing policies relating to senior executives’ remuneration and the current industry practice with regards to executive remuneration. The Committee also makes recommendations to the Board on board composition and the balance between executives and non executives. Skills and diversity are also taken into account in this process.

3.4 Marketing and Strategy Committee The marketing and strategy committee is made up of three non-executive directors. The purpose of the committee

includes to review and advice on the Group’s marketing sales and overall strategy initiatives. 3.5 Finance Committee The Finance Committee is composed of three non-executive directors. The Committee assists the Board in its

consideration and approval of various matters including; Ongoing oversight pertaining to capital structure and funding; Capital management and planning initiatives; and Due diligence on acquisitions, divestments including proposals which may have a material impact on the Group’s

capital position.

4. BOARD CHARTER The Board has approved a Board Charter which details, inter alia, the manner in which the Board conducts its

business.

5. DEALING IN SECURITIES The Board has implemented a formal trading policy prohibiting directors, officers and employees of the Group from

dealing in the Group’s shares during its closed periods as prescribed by the ZSE Listing Rules.

6. ETHICS The Group subscribes to sound principles of ethics and good business practices. A code of ethical business

conduct is in place and is consistently enforced with disciplinary measures.

Corporate Governance (continued)

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Directors’ responsibility and approval of the consolidated financial statements for the year ended 31 December 2012

To the members of Rainbow Tourism Group Limited and its subsidiaries It is the Directors’ responsibility to ensure that the consolidated financial statements fairly present the state of affairs of the Group. The external auditors are responsible for independently reviewing and reporting on the financial statements.The consolidated financial statements set out in this report have been prepared by management in accordance with International Financial Reporting Standards (IFRSs). The statements are based on appropriate accounting policies which are supported by reasonable and prudent judgements and estimates.

The Group’s accounting and internal control systems are designed to provide reasonable assurance as to the integrity and reliability of the financial statements and to adequately safeguard, verify and maintain accountability of its assets. Such controls are based on established written policies and procedures and all employees are required to maintain the highest ethical standards in ensuring that the Group’s business practices are conducted in a manner which in all reasonable circumstances is above reproach. Issues that come to the attention of the Directors have been addressed and the Directors confirm that the systems of accounting and internal control are operating in a satisfactory manner.

In light of the current financial position, the Directors are satisfied that Rainbow Tourism Group Limited and its subsidiaries is a going concern and have continued to adopt the going concern basis in preparing the consolidated financial statements. The Directors are confident that the recapitalisation exercise which was concluded during the first quarter of 2013 will strengthen the financial position of the Group which was affected by short term debt. The recapitalisation resulted in the restructuring of USD 10 million short term debt to long term debt and the capital injection of USD 4.5 million through the rights issue.

The Group’s financial statements which are set out below on pages 30 to 60 were, in accordance with their responsibilities, approved by the Board of Directors on 13 March 2013 and are signed on its behalf by:

------------------------------------ ---------------------------------------J. Kanyekanye (Dr.) T. MadziwanyikaChairperson Chief Executive

13 March 2013

Directors’ responsibility statement

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Your Directors have pleasure in presenting their report and audited financial statements for the year ended 31 December 2012.

Share CapitalThe authorised share capital of the company is US$ 250 000 divided into 2 500 000 000 ordinary shares of US$0.0001 each, whilst the US$164,555 divided into 1,645 913 ordinary shares of US$0.0001 has been issued. ReservesThe movement of the reserves of the Group is shown in the statement of changes in equity.

DividendsThe 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.

DirectorsShareholders will be requested to elect Mrs. Thandiwe Mlobane and Mr Grant Gore who were co-opted to the Board during the course of the year Mr. John M Chikura who retires by rotation and, being eligible, offer himself for re-election.

Director’s feesShareholders will be asked to approve payment of directors fees of US$46 810 for the year ended 31 December 2012.

AuditorsA resolution seeking the re-appointment of Messrs. Grant Thornton Camelsa and approval of their remuneration for the past year’s audit will be submitted at the Annual General Meeting.

Borrowing powersIn terms of the Articles of Association, the Group 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 andii. The total amount of capital and revenue reserves of the company including share premium.

The directors confirm that during the year under review the company’s borrowings were within the above limits.

Responsibility for financial statementsThe 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 accordance with International Financial Reporting Standards (IFRS), and where required, reflect our best estimates and judgements.

Report of Directors

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Report of directors (continued)

To fulfil this responsibility the Group maintained systems of internal control which are designed to provide reasonable assurance that the records accurately reflect the 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 believe that the Group has adequate resources to continue into the foreseeable future.

For and on behalf of the Board

Napoleon Mtukwa Acting Company Secretary

13 March 2013

Fresh smile...

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Be pampered with fresh linen and a wide selection of luxurious pillows for the perfect turndown.

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To the members of Rainbow Tourism Group Limited and its subsidiaries

We have audited the accompanying consolidated financial statements of RAINBOW TOURISM GROUP LIMITED and its subsidiaries as set out on pages 30 to 60 which comprise the consolidated statement of financial position as at 31 December 2012, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and the notes to the consolidated financial statements, which include a summary of the significant accounting policies and other explanatory notes.

Directors’ responsibility for the consolidated financial statementsThe Group’s directors are responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards and in the manner required by Companies Act (24:03). This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the consolidated 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.

Auditors’ responsibilityOur responsibility is to express an opinion on the consolidated 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 consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgement, including the

Independent Auditors’ Report

Grant Thornton CamelsaCamelsa Business Park135 Enterprise Road, HighlandsPO Box CY 2619Causeway, HarareZimbabwe

T +263 4 442511-4F +263 4 442517 / 496985E info@zw.gt.comwww.grantthornton.co.zw

Chartered AccountantsMember of Grant Thornton International LtdList of Partners is available for inspection at the above address

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assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated 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 consolidated financial statements.

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

OpinionIn our opinion, the consolidated financial statements, in all material respects, give a true and fair view of the financial position of RAINBOW TOURISM GROUP LIMITED and its subsidiaries as at 31 December 2012, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Emphasis of matterWithout qualifying our opinion, we draw attention to note 31 of the consolidated financial statements which indicates that the Group incurred a loss of USD 5 886 908 (2011: USD 371 433) for the year ended 31 December 2012.

Report on other legal and regulatory requirementsIn our opinion, the consolidated financial statements have been properly prepared in compliance with the requirements of the Companies Act (Chapter 24:03) and the relevant Statutory Instruments SI 33/99 and SI 62/96.

Grant Thornton CamelsaChartered Accountants (Zimbabwe)Registered public Auditors

HARARE14 March 2013

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Group Company 2012 2011 2012 2011 Notes USD USD USD USDASSETS Non current assets Property and equipment 7 35,814,057 33,385,813 34,980,030 33,041,323 Investment property 8 - 450,000 - 450,000 Intangible assets 9 206,441 235,932 206,441 235,932 Investment in subsidiaries 10.1 - - 1,759,586 1,926,024 36,020,498 34,071,745 36,946,057 35,653,279 Current assets Inventories 11 1,967,424 1,718,539 1,913,801 1,553,602Accounts receivable 12 5,688,796 6,676,245 5,486,410 7,377,994 Held to maturity investments 10.2 - 900,000 - - Held for trading investments 10.3 25,288 18,335 25,288 18,335 Cash and cash equivalents 13 2,961,923 6,113,206 2,879,205 5,497,824 10,643,431 15,426,325 10,304,704 14,447,755 Assets in disposal group classified as held for sale 14 1,722,452 2,527,243 - - Total assets 48,386,381 52,025,313 47,250,761 50,101,034 EQUITY AND LIABILITIES Capital and reserves Share capital 15.1 164,555 164,555 164,555 164,555 Non distributable reserve 15.2 16,711,500 17,174,038 16,671,182 16,395,610 Foreign currency translation reserve 1,498 8,166 - - Revaluation reserve 1,257,114 1,108,995 1,257,114 1,303,792 Accummulated losses (6,865,677) (1,441,307) (6,070,355) (1,074,340) 11,268,990 17,014,447 12,022,496 16,789,617 Non current liabilities Borrowings 16.1 10,162,903 10,872,838 10,162,903 10,872,838 Deferred tax liability 17.2 2,295,798 3,576,342 2,410,273 3,690,817 12,548,701 14,449,180 12,573,176 14,563,655 Current liabilities Borrowings 16.2 10,206,224 10,750,631 10,206,224 10,750,631 Accounts payable 18 8,570,017 7,510,057 8,287,595 6,618,643 Tax payable 122,524 378,228 - - Bank overdraft 4,161,270 1,573,439 4,161,270 1,378,488 23,060,035 20,212,355 22,655,089 18,747,762 Liabilities directly associated with assets in disposal groupclassifed as held for sale 14 1,598,655 349,331 - - Total liabilities 37,117,391 35,010,866 35,228,265 33,311,417 Total equity and liabilities 48,386,381 52,025,313 47,250,761 50,101,034

J. Kanyekanye (Dr.)Chairperson13 March 2013

T. MadziwanyikaChief Executive

Consolidated Statement of Financial PositionAs at 31 December 2012

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Group Company 2012 2011 2012 2011 Notes USD USD USD USD Revenue 19 27,570,966 27,320,901 25,092,852 23,355,963 Cost of sales (3,008,238) (3,389,479) (2,854,170) (3,005,996)Gross profit 24,562,728 23,931,422 22,238,682 20,349,967 Other operating income 212,787 178,971 104,787 - Administrative expenses (9,661,235) (6,030,842) (9,035,808) (5,558,977)Distribution expenses (855,182) (614,048) (811,853) (596,634)Other operating expenses (15,181,601) (15,668,910) (13,797,852) (13,326,436)(Loss)/profit from operations (922,503) 1,796,593 (1,302,044) 867,920 Net finance cost 20 (3,653,963) (1,650,315) (3,653,963) (1,650,315) (Loss)/profit before tax 21 (4,576,466) 146,278 (4,956,007) (782,395) Income tax 22 1,160,169 417,235 1,331,910 734,600 (Loss)/profit after tax from continuing operations (3,416,297) 563,513 (3,624,097) (47,795) Loss from discontinued operations, net of tax 23 (2,470,611) (934,946) - - Loss for the year (5,886,908) (371,433) (3,624,097) (47,795) Other comprehensive income: Gain on property revaluation, net of tax 148,119 - 148,119 - Exchange loss arising on translation of foreign operations (6,668) (18,042) - - Other comprehensive income/(loss), net of tax 141,451 (18,042) 148,119 - Total comprehensive loss for the year (5,745,457) (389,475) (3,475,978) (47,795) (Loss)/earnings per share Basic (loss)/earnings per ordinary share - US cents (0.208) 0.034 (0.220) (0.003))Headline (loss)/earnings per ordinary share - US cents (0.224) 0.036 (0.238) (0.001)

Consolidated Statement of Comprehensive Income For the year ended 31 December 2012

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Group Company 2012 2011 2012 2011 Notes USD USD USD USD CASH FLOWS FROM OpERATING ACTIVITIES Cash generated from operations 25.1 1,582,468 3,981,205 1,989,837 3,275,415 Interest received 220,827 383,599 220,827 383,599 Investment income 212,787 104,473 104,787 - Interest paid (3,874,791) (2,136,097) (3,874,790) (2,033,914)Income tax paid (255,704) (124,866) - - Exchange losses on translation of foreign operations 6,668 (18,042) - - Net cash (outflow)/inflow from operating activities (2,107,745) 2,190,272 (1,559,339) 1,625,100 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (3,936,629) (6,777,490) (3,191,297) (6,167,020)Proceeds on sale of property and equipment 217,602 753,501 23,577 384,375 Proceeds on sale of subsidiaries 762,000 - - - Purchase of intangible assets - (235,932) - (235,932)Disposal/(purchase) of investment property 580,000 (450,000) 580,000 (450,000)Net cash outflow from investing activities (2,377,027) (6,709,921) (2,587,720) (6,468,577) CASH FLOWS FROM FINANCING ACTIVITIES (Decrease)/increase in borrowings (1,254,342) 5,583,600 (1,254,342) 5,883,599 Net cash (outflow)/ inflow from financing activities (1,254,342) 5,583,600 (1,254,342) 5,883,599 NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (5,739,114) 1,063,951 (5,401,401) 1,040,122 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,539,767 3,475,816 4,119,336 3,079,214 CASH AND CASH EQUIVALENTS AT END OF YEAR 13 (1,199,347) 4,539,767 (1,282,065) 4,119,336

Consolidated Statement of Cash FlowsFor the year ended 31 December 2012

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Foreign Non currency Share distributable translation Revaluation Accumulated Total capital reserve reserve reserve losses equityGroup USD USD USD USD USD USD Balance at 1 January 2011 164,555 17,174,038 26,208 1,108,995 (1,069,874) 17,403,922 Total comprehensive lossfor the year - - (18,042) - (371,433) (389,475) Balance at 31 December 2011 164,555 17,174,038 8,166 1,108,995 (1,441,307) 17,014,447 Total comprehensiveloss for the year - - (6,668) 148,119 (5,886,908) (5,745,457) Transfer within reserves - (462,538) - - 462,538 - Balance at 31 December 2012 164,555 16,711,500 1,498 1,257,114 (6,865,677) 11,268,990 Company Balance at 1 January 2011 164,555 16,395,610 - 1,303,792 (1,026,545) 16,672,857 Total comprehensiveloss for the year - - - - (47,795) (47,795) Balance at 31 December 2011 164,555 16,395,610 - 1,303,792 (1,074,340) 16,789,617 Total comprehensiveloss for the year - - - 148,119 (3,624,097) (3,475,978) Adjustment for reserves attributable to discontinued operations - 275,572 - (194,797) (1,371,918) (1,291,143) Balance at 31 December 2012 164,555 16,671,182 - 1,257,114 (6,070,355) 12,022,496

Consolidated Statement of Changes in equity For the year ended 31 December 2012

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Amazing experiences...

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1. GENERAL INFORMATION

1.1 Nature of business and incorporation Rainbow Tourism Group Limited is a limited company incorporated and domiciled in Zimbabwe with operations in Zambia and

Mozambique. The Group is in the tourism services industry as hoteliers, tour operators and providers of conference facilities. Its registration number is 4880/91. The group has a primary listing on the Zimbabwe Stock Exchange.

1.2 Currency The Group’s financial statements are expressed in United States dollars which is both the functional and the presentation

currency.

2. ACCOUNTING pOLICIES

2.1 Basis of preparation The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have

been consistently applied to all the years presented, unless otherwise stated.

These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (IASB).

The preparation of financial statements in compliance with IFRSs requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group’s accounting policies. The areas where significant judgements and estimates have been made in preparing the financial statements and their effect are disclosed in note 3 to these financial statements.

2.2 Changes in accounting policies The following new standards, amendments and interpretations are effective for the first time but none have a material effect

on the Group’s financial statements:

• Classification of Rights Issues (Amendment to IAS 32).• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments.• Amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards.• Amendments to IAS 24 Related Party Disclosures.• Amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement.• Improvements to IFRSs (May 2010).

a) Standards, amendments and interpretations to existing standards that are not effective and have not been early adopted by the Group.

The following new standards, amendments and interpretations to existing standards have been published by the IASB but are not yet effective and have not been early adopted by the Group:

• IFRS 9 Financial instruments, effective 1 January 2013.• IFRS 10 Consolidated financial statements, effective 1 January 2013.• IFRS 11 Joint arrangements, effective 1 January 2013.• IFRS 12 Disclosure of interest in other entities, effective 1 January 2013.• IFRS 13 Fair value measurement, effective 1 January 2013.• IAS 19 Employee benefits (Revised), effective 1 January 2013.• IAS 27 Separate financial statements (Revised), effective 1 January 2013.• IAS 28 Investments in associates and joint ventures (Revised), effective 1 January 2013.

Management anticipates that all of the relevant pronouncements will be adopted in the Group’s accounting policies for the first period beginning after the effective date of the pronouncement. Adoption of the pronouncements is not expected to have a material impact on the financial statements.

Notes to the Consolidated Financial StatementsFor the year ended 31 December 2012

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2.3 Basis of consolidation Where the company has the power, either directly or indirectly, to govern the financial and operating policies of another entity

or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the company and its subsidiaries (“the Group”) as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

2.4 Business combination The consolidated financial statements incorporate the results of business combinations using the purchase method. In the

statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are not consolidated from the date control ceases.

2.5 Revenue Rendering of services Revenue arises from the rendering of services by the Group. It is measured at the fair value of the consideration received or

receivable net of taxes.

Interest income Interest income is accrued on a time basis, by reference to the principal amount outstanding and effective interest rate

applicable.

2.6 Operating expenses Operating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin.

2.7 Inventories Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises

all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Weighted average cost is used to determine the cost of ordinarily interchangeable items.

2.8 property and equipment Items of property and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable

costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is recognised within provisions.

Subsequent costs are included in the assets’ carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably. All other repairs and maintenance costs are charged to the statement of comprehensive income during the period in which they are incurred. The assets’ useful lives and residual values are reviewed, and adjusted if appropriate, at each statement of financial position date.

Land and capital work-in-progress are not depreciated. Depreciation on assets under construction does not commence until they are complete and available for use. Depreciation is provided on all other items of property and equipment so as to write off their carrying value over their expected useful economic lives. It is provided on a straight line basis over the remaining useful lives at the following rates:

· Buildings 2-4% · Leasehold improvements 5-20% · Furniture & equipment 10-15% · Motor vehicles 25-33%

Land and buildings are revalued after every three years by an independent appraiser based on market evidence of the most recent prices achieved in arms length transactions of similar properties. The surplus arising from the revaluation is recognised directly into equity.

Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2012

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Impairment of property and equipment The carrying amount of property and equipment is reviewed at each statement of financial position date to determine whether

there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. Impairment loss is recognised directly through the statement of comprehensive income when the carrying amounts of the assets exceed the fair values of the respective assets.

Derecognition of property and equipment An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from

use or disposal.

2.9 Investment property Investment properties consist of properties acquired to earn rental income for the long term and for capital appreciation.

Properties are stated initially at cost on acquisition, which comprises the purchase price and directly attributable expenditure.

Subsequent to initial recognition, investment properties are measured at their fair value. Fair value is determined annually based on the open market value basis, using either the discounted cash flow method or the capitalisation of net income method. Gains or losses arising from changes in fair value are included in profit or loss for the period in which they arise.

2.10 Externally acquired intangible assets Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over

their useful economic lives.

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques.

The useful economic life of the Group’s intangible assets is as follows: Microsoft user rights 8 years

2.11 Post-employment benefits-Defined contribution schemes Contributions to defined contribution pension schemes are charged to the consolidated statement of comprehensive income

in the year to which they relate.

2.12 Leases Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group

(a “finance lease”), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair value of the leased property and the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the consolidated statement of comprehensive income over the period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the balance owed to the lessor. Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an “operating lease”), the total rentals payable under the lease are charged to the consolidated statement of comprehensive income on a straight-line basis over the lease term. Associated cost such as maintenance and insurance, are expensed as incurred.

The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis.

2.13 Non-current assets held for sale and disposal groups Non-current assets and disposal groups are classified as held for sale when: • they are available for immediate sale; • management is committed to a plan to sell; • it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn; • an active programme to locate a buyer has been initiated; • the asset or disposal group is being marketed at a reasonable price in relation to its fair value; and • a sale is expected to complete within 12 months from the date of classification.

Notes to the Consolidated Financial Statements (continued)

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Non-current assets and disposal groups classified as held for sale are measured at the lower of: • their carrying amount immediately prior to being classified as held for sale in accordance with the Group’s accounting policy;

and • fair value less costs to sell.

Following their classification as held for sale, non-current assets (including those in a disposal group) are not depreciated.

The results of operations disposed during the year are included in the consolidated statement of comprehensive income up to the date of disposal.

A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale, that has been disposed of, has been abandoned or that meets the criteria to be classified as held for sale.

Discontinued operations are presented in the consolidated statement of comprehensive income as a single line which comprises the post-tax profit or loss of the discontinued operation along with the post-tax gain or loss recognised on the re-measurement to fair value less costs to sell or on disposal of the assets or disposal groups constituting discontinued operations.

2.14 provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events and reliable

estimate of the obligation can be made. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the statement of financial position date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

2.15 Borrowing costs Interest incurred on borrowings used to fund the refurbishment of hotels is capitalised as part of the cost of the hotels, net of

interest received on cash drawn down yet to be expended. The Group does not incur any other interest costs that qualify for capitalisation.

2.16 Foreign currency transactions Transactions in foreign currencies are initially recorded in the functional currency at the exchange rate ruling at the date of

transaction. At each statement of financial position date, monetary assets and liabilities denominated in foreign currencies are translated at the functional currency exchange rate ruling at the statement of financial position date. Non-monetary assets and liabilities are carried at fair value denominated in foreign currencies and are translated at rates prevailing at the date when the fair value was determined. All gains and losses arising on exchange rate are included in the statement of comprehensive income for the period, except for exchange differences arising on non-monetary assets and liabilities where the changes in the fair value are recognized directly in reserves.

2.17 Share capital Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a

financial liability or financial asset.

The Group’s ordinary shares are classified as equity instruments. 2.18 Earnings per share Earnings per share is calculated by dividing profit/(loss) after tax by the weighted average number of shares in issue throughout

the year.

Notes to the Consolidated Financial Statements (continued)

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2.19 Financial instruments

2.19.1 Financial assets The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the

asset was acquired.

Other than financial assets in a qualifying hedging relationship, the Group’s accounting policy for each category is as follows:

2.19.2 Fair value through profit or loss This category comprises only in-the-money derivatives (see Financial liabilities section for out of- money derivatives). They are

carried in the statement of financial position at fair value with changes in fair value recognised in the consolidated statement of comprehensive income in the finance income or expense line. Other than derivative financial instruments which are not designated as hedging instruments, the Group does not have any assets held for trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss.

2.19.3 Loans and receivables These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

They arise principally through the provision of services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary assets. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable.

For trade receivables, which are reported net; such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously had a good trading history. Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts owed and, in consequence, the new expected cash flows are discounted at the original effective interest rate and any resulting difference to the carrying value is recognised in the consolidated statement of comprehensive income (operating profit).

The Group’s loans and receivables comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position. Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and – for the purpose of the statement of cash flows - bank overdrafts. Bank overdrafts are shown within loans and borrowings in current liabilities on the consolidated statement of financial position.

2.19.4 Available-for-sale Non-derivative financial assets not included in the above categories are classified as available for- sale and comprise principally

the Group’s strategic investments in entities not qualifying as subsidiaries, associates or jointly controlled entities. They are carried at fair value with changes in fair value, other than those arising due to exchange rate fluctuations and interest calculated using the effective interest rate, recognised in other comprehensive income and accumulated in the available-for-sale reserve. Exchange differences on investments denominated in a foreign currency and interest calculated using the effective interest rate method is recognised in profit or loss.

Where there is a significant or prolonged decline in the fair value of an available for sale financial asset (which constitutes objective evidence of impairment), the full amount of the impairment, including any amount previously recognised in other comprehensive income, is recognised in profit or loss. Purchases and sales of available for sale financial assets are recognised on settlement date with any change in fair value between trade date and settlement date being recognised in the available-for-sale reserve. On sale, the cumulative gain or loss recognised in other comprehensive income is reclassified from the available-for-sale reserve to profit or loss.

Notes to the Consolidated Financial Statements (continued)

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2.19.5 Financial liabilities The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was

acquired. Other than financial liabilities in a qualifying hedging relationship (see below), the Group’s accounting policy for each category is as follows:

2.19.6 Fair value through profit or loss This category comprises only out-of-the-money derivatives (see Financial assets for in the money derivatives). They are

carried in the consolidated statement of financial position at fair value with changes in fair value recognised in the consolidated statement of comprehensive income. The Group does not hold or issue derivative instruments for speculative purposes, but for hedging purposes. Other than these derivative financial instruments, the Group does not have any liabilities held for trading nor has it designated any financial liabilities as being at fair value through profit or loss.

2.19.7 Other financial liabilities Other financial liabilities include the following items:

Bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the consolidated statement of financial position. Interest expense in this context includes initial transaction costs and other payable on maturity, as well as any interest or coupon payable while the liability is outstanding.

Liability components of convertible loan notes are measured as described further below. Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

2.19.8 Fair value measurement hierarchy IFRS 7 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair

value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement. The fair value hierarchy has the following levels:

(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); (b) inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as

prices) or indirectly (i.e. derived from prices) (Level 2); and (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3). The level in the fair value hierarchy within which the financial asset or financial liability is categorised is determined on the basis

of the lowest level input that is significant to the fair value measurement. 2.19.9 Impairment of non-financial assets Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the

financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest Group of assets to which it belongs for which there are separately identifiable cash flows; its cash generating units (CGUs’). Goodwill is allocated on initial recognition to each of the Group’s CGUs that are expected to benefit from the synergies of the combination giving rise to the goodwill.

Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in other comprehensive income. An impairment loss recognised for goodwill is not reversed.

Notes to the Consolidated Financial Statements (continued)

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2.19.10 Cash and cash equivalents For the purpose of cash flow statement, cash and cash equivalents comprise of bank balances and amounts due from other

banks and dealing securities.

2.20 Cost of sales Cost of sales includes the cost of materials and production of food costs.

2.21 Services stocks Service stocks relates to linen, cutlery and cookery. These are recognized as stocks in the statement of financial position.

2.22 Income tax Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered

from or paid to the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Deferred tax Deferred income tax is provided using the liability method on temporary differences at the statement of financial position date

between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

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 an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither the accounting profit nor taxable profit or loss; and in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures where the timing of the reversal of the temporary differences can be controlled and it is probable that reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized except: “where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither the accounting profit nor taxable profit or loss; and in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures. Deferred tax assets are recognised only to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets at each statement of financial position 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 statement of financial position 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

Notes to the Consolidated Financial Statements (continued)

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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.

3. SIGNIFICANT JUDGEMENTS IN AppLYING THE GROUp’S ACCOUNTING pOLICIES

In preparing the financial statements, management is required to make estimates and assumptions that affect the amounts presented in the financial statements and related disclosures. Use of available information and the application of judgment is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the financial statements. Significant judgements include:

3.1 Trade receivables The Group assesses its trade receivables for impairment at each statement of financial position date. In determining whether

an impairment loss should be recorded in the statement of comprehensive income, the Group makes judgement as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset.

3.2 Impairment testing The Group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying

amount may not be recoverable.

Notes to the Consolidated Financial Statements (continued)

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7. pROpERTY AND EQUIpMENT Land and Leasehold Capital work Furniture and Motor buildings improvements in progress equipment vehicles Total Group USD USD USD USD USD USD Carrying amount 01/01/2010 22,434,887 260,484 4,936,709 2,205,795 854,310 30,692,185 Cost /valuation 22,947,973 263,425 4,936,709 2,577,459 1,517,468 32,423,034 Accumulated depreciation ( 513,086) ( 2,941) - ( 371,664) ( 663,158) (1,550,849) Additions 139,909 696,222 4,866,767 1,026,941 47,651 6,777,490 Transfers 3,655,503 - (6,301,399) 2,645,896 - - Carrying amount of disposed assets ( 339,891) ( 28,185) - ( 140,711) ( 263,264) ( 402,926) Cost /valuation ( 354,909) ( 34,962) - ( 165,106) ( 328,556) ( 491,289) Accumulated depreciation 15,018 6,777 - 24,395 65,292 88,363 Loss on translation of foreign subsidiary - - - 2 552 - 2 552 Depreciation charge ( 549,854) ( 36,210) - ( 476,667) ( 130,939) (1,193,670) Carrying amount of non current assets held for sale (1,525,052) ( 104,666) - ( 234,955) 256,020 (2,120,693) Cost /valuation (1,565,293) ( 108,255) - ( 311,592) ( 569,166) (2,554,307) Accumulated depreciation 40,241 3,589 - 76,637 313,146 433,614 Carrying amount 31/12/2011 23,815,502 787,645 3,502,077 5,028,851 251,738 33,385,813 Cost /valuation 24,823,183 816,430 3,502,077 5,776,150 667,396 35,585,236 Accumulated depreciation (1,007,681) ( 28,785) - ( 747,299) ( 415,658) (2,199,423) Additions - 88,054 2,956,411 817,767 74,397 3,936,629 Carrying amount of disposed assets - - - 13,394 45,995 59,389 Cost /valuation - - - 20,331 112,421 132,752 Accumulated depreciation - - - ( 6,937) ( 66,426) ( 73,363) Depreciation charge for the year ( 607,955) ( 28,120) - ( 748,886) ( 151,926) (1 536,887) Revaluation surplus 199,486 - - - - 199,486 Carrying amount of non current assets held for sale - - - 21,873 - 21,873 Cost /valuation - - - 27,710 - 27,710 Accumulated depreciation - - - ( 5,837) - ( 5,837) Carrying amount 31/12/2012 23,008,061 847,579 6,458,488 5,146,873 353,056 35,814,057 Cost /valuation 24,623,697 904,484 6,458,488 6,641,958 854,214 39,482,841 Accumulated depreciation (1,615,636) ( 56,905) - (1,495,085) ( 501,158) (3,668,784)

Some of the land and buildings were pledged as security for borrowings as more fully disclosed in note 16.3.

Notes to the Consolidated Financial Statements (continued)

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Notes to the Consolidated Financial Statements (continued)

Land and Leasehold Capital work Furniture and Motor buildings improvements in progress equipment vehicles TotalCompany USD USD USD USD USD USD Carrying amount 01/01/2010 21,377,290 86,039 4,936,709 1,405,706 414,525 28,220,269 Cost /valuation 21,876,652 86,039 4,936,709 1,599,094 673,097 29,171,591 Accumulated depreciation ( 499,362) - - ( 193,388) ( 258,572) ( 951,322) Additions - 522,066 4,866,767 748,457 29,730 6,617,020Transfers 3,655,503 - (6,301,399) 2,645,896 - - Carrying amount of disposed assets - ( 28,185) - ( 140,711) ( 234,030) ( 402,926)Cost /valuation - ( 34,962) - ( 165,106) ( 291,221) ( 491,289)Accumulated depreciation - 6,777 - 24,395 57,191 88,363 Depreciation charge ( 508,612) ( 31,438) - ( 390,890) ( 12,100) ( 943,040) Carrying amount 31/12/2011 24,524,182 548,481 3,502,077 4,268,458 198,125 33,041,323 Cost /valuation 25,532,155 573,143 3,502,077 4,828,341 411,606 34,847,322 Accumulated depreciation (1,007,973) ( 24,662) - ( 559,883) ( 213,481) (1,805,999) Additions - 88,054 2,463,497 589,135 50,611 3,191,297 Carrying amount of disposed assets - - - 13,394 45,995 59,389 Cost /valuation - - - 20,331 112,421 132,752 Accumulated depreciation - - - ( 6,937) ( 66,426) ( 73,363) Depreciation charge for the year ( 607,954) ( 21,530) - ( 660,396) ( 148,222) (1,438,102) Revaluation surplus 199,486 - - - - 199,486 Carrying amount 31/12/2012 24,115,714 615,005 5,965,574 4,203,654 80,083 34,980,030 Cost /valuation 25,731,641 661,197 5,965,574 5,430,870 508,212 38,297,494 Accumulated depreciation (1,615,927) ( 46,192) - (1,227,216) ( 428,129) (3,317,464)

Some of the land and buildings were pledged as security for borrowings as more fully disclosed in note 16.3.

8. INVESTMENT pROpERTY Group Company 2012 2011 2012 2011 USD USD USD USD

Balance at 1 January 450,000 - 450,000 - Additions - 450,000 - 450,000 Fair value adjustments 130,000 - 130,000 - Disposals (580,000) - (580,000) - Balance at 31 December - 450,000 - 450,000 The investment property is a piece of land which was in Victoria Falls and held for capital appreciation purposes.The investment

property was sold for USD580 000 during the course of the year.

7. pROpERTY AND EQUIpMENT (continued)

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Group Company 2012 2011 2012 20119. INTANGIBLE ASSETS USD USD USD USD

Carrying amount 31/12/2011 235,932 235,932 235,932 235,932 Cost / valuation 235,932 235,932 235,932 235,932 Accumulated amortisation - - - - Amortisation (29,491) - (29,491) - Carrying amount 31/12/2012 206,441 235,932 206,441 235,932 Cost / valuation 235,932 235,932 235,932 235,932 Accumulated amortisation (29,491) - (29,491) - The Group has a right to use certain Microsoft products indefinitely, however, considering the changes in technology, it is unlikely

that the Group will continue to benefit for a period which is more than 8 years. The intangible assets are therefore being amortised over 8 years.

10. INVESTMENTS 10.1 Investment in subsidiaries Aggregate investment in subsidiaries Balance at 1 January - - 1,926,024 1,826,024 Additions - - - 100,000 Disposals - - (166,438) - Balance at 31 December - - 1,759,586 1,926,024 Analysed as follows: Rainbow Tourism Group (Zambia) Limited - - 1,000 1,000 Hathanay Investments (Private) Limited - - 1,649,586 1,651,814 Rainbow Hotel Mozambique Limited - - 109,000 109,000 Imal Caterers (Private) Limited T/A Rainbow Hospitality Business School - - - 100 Touch The Wild (Private) Limited - - - 164,110 - - 1,759,586 1,926,024 All the above investments in subsidiaries are unlisted and are measured at cost. Rainbow Tourism Group Limited has 100% voting

power and control of all the subsidiaries. 10.2 Held to maturity investment The Group invested in preference shares (900,000 USD1.00 preference shares @12% per annum) in Savoy Hotel (Zambia) on 1

June 2009 and the shares were redeemed on 30 September 2012 . Current assets - 900,000 - - - 900,000 - - 10.3 Held for trading investments Quoted shares Balance at 1 January 18,335 24,994 18,335 24,994 Fair value gain/(loss) 6,953 (6,659) 6,953 (6,659) Balance at 31 December 25,288 18,335 25,288 18,335 11. INVENTORIES Food and beverages 442,721 727,391 384,173 637,948 Service stocks 758,149 467,213 609,973 520,756 Other stocks 766,554 523,935 919,655 394,898 1,967,424 1,718,539 1,913,801 1,553,602

Notes to the Consolidated Financial Statements (continued)

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Group Company 2012 2011 2012 201112. ACCOUNTS RECEIVABLE USD USD USD USD Trade 3,926,842 4,379,139 2,527,406 3,146,495 Less: Allowance for credit losses (2,806,285) (438,105) (1,276,209) (396,412) 1,120,557 3,941,034 1,251,197 2,750,083 Other receivables 4,568,239 2,735,211 4,235,213 4,627,911 5,688,796 6,676,245 5,486,410 7,377,994 The fair value of trade and other receivables classified as loans and receivables are as follows: Trade 1,120,557 3,941,034 1,251,197 2,750,083 Other 4,568,239 2,735,211 4,235,213 4,627,911 5,688,796 6,676,245 5,486,410 7,377,994 As at 31 December 2012 the Group’s trade receivables of USD4,245,152 (2011 : USD2,641,034) were past due but not impaired.

They relate to the clients with no default history. The aging analysis of these is as follows:

Up to 3 months 1,141,323 2,294,245 2,307,443 1,675,758 3 to 6 months 627,422 110,920 304,327 85,077 9 to 12 months 2,476,407 235,869 1,076,209 198,429 4,245,152 2,641,034 3,687,979 1,959,264 As at 31 December 2012 the Group’s trade receivables of USD2,806,285 (2011:USD438,105) were past due and impaired. The

analysis of these provisions is as follows: Up to 3 months 1,187,211 91,245 130,744 85,233 3 to 6 months 910,002 124,076 152,112 108,347 9 to 12 months 709,072 222,784 504,935 202,832 2,806,285 438,105 787,791 396,412 Movement on the Group provision for impairment of trade receivables is as follows: Balance at 1 January 438,105 353,058 396,412 308,565 Provision for the year 2,800,907 87,874 824,106 90,674 Receivables written off during the year as uncollectable (432,727) (2,827) (432,727) (2,827) 2,806,285 438,105 787,791 396,412 The movement on the provision for impaired receivables has been included in other operating expenses on the consolidated

statement of comprehensive income. Other classes of financial assets included within trade and other receivables do not contain impaired assets.

Notes to the Consolidated Financial Statements (continued)

Group Company 2012 2011 2012 201113. BANK AND CASH BALANCES USD USD USD USD For the purposes of the statement of cash flows, cash and cash equivalents comprise the following:

Bank and cash balances 2,961,923 6,113,206 2,879,205 5,497,824 Bank overdraft (4,161,270) (1,573,439) (4,161,270) (1,378,488) (1,199,347) 4,539,767 (1,282,065) 4,119,336

The bank overdrafts are unsecured. The interest rates range between 14% and 35%.

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14. ASSETS AND LIABILITIES IN DISpOSAL GROUp CLASSIFIED AS HELD FOR SALE The subsidiaries, Touch The Wild (Private) Limited (TTW) and Tourism Services Zimbabwe (Private) Limited (TSZ) owned 100% by

the Group were disposed of during 2012 following a board resolution passed in November 2011. Hathany Investments (Private) Limited t/a Matetsi Water Lodge disposal is pending and expected to be completed during 2013.The Group discontinued its operations in Kitwe, Zambia operated as Hotel Edinburgh pursuant to the expiry of the lease on 31 December 2012.There are no onerous lease liabilities as a result of the exit.

The following major classes of assets and liabilities relating to these operations, which are stated at the lower of carrying amounts

and fair values less costs to sell, have been classified as held for sale in the consolidated statement of financial position on 31 December 2012:

Matetsi Hotel Water Edinburgh Lodge Total 2012 2012 2012 USD USD USD Assets: Property and equipment 21,873 1,371,068 1,392,941 Inventories 99,188 64,780 163,968 Accounts receivable 101,917 29,877 131,794 Cash and bank 32,585 1,164 33,749 Total assets of a disposal group classified as held for sale 255,563 1,466,889 1,722,452 Liabilities: Accounts payable 167,052 1,431,603 1,598,655 Total liabilities of a disposal group classified as held for sale 167,052 1,431,603 1,598,655 There is no impairment loss recognised on the assets held for sale as the sale proceeds are likely to exceed the carrying amounts.

The assets and liabilities held for sale have been disclosed under the Zimbabwe operations segment.

In November 2011 the Board resolved to dispose of Touch The Wild (Private) Limited (TTW), Tourism Services of Zimbabwe (Private) Limited (TSZ) and Hathany Investments (Private) Limited t/a Matetsi Water Lodge in their entirety. These subsidiaries are 100% owned by the Group and are into lodges and destination management business. The operations have been generating losses for the past few years. The marketing of these assets began in November 2011 through a tender being conducted by an independent party. The sale transactions are expected to be completed by 30 June 2012.

The following major classes of assets and liabilities relating to these operations, which are stated at the lower of carrying amounts and fair value less costs to sell, have been classified as held for sale in the consolidated statement of financial position on 31 December 2011:

Matetsi TTW TSZ Water Lodge Total 2011 2011 2011 2011 USD USD USD USD Assets: Property and equipment 385 402 260 312 1 474 980 2 120 694 Inventories - 2 128 118 105 120 233 Accounts receivable - 86 922 52 464 139 386 Cash and bank - 12 201 5 047 17 248 Other assets - - 129 682 129 682 Total assets of a disposal group classified as held for sale 385 402 361 563 1 780 278 2 527 243 Liabilities: Accounts payable - 107 366 230 744 338 110 Other liabilities - 11 221 - 11 221 Total Liabilities of a disposal group classified as held for sale - 118 587 230 744 349 331 There is no impairment loss recognised on the assets held for sale as the sale proceeds are likely to exceed the carrying

amounts. The assets and liabilities held for sale have been disclosed under the Zimbabwe operations segment.

Notes to the Consolidated Financial Statements (continued)

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Group Company 2012 2011 2012 201115. CApITAL AND RESERVES USD USD USD USD 15.1 Share Capital Authorised 2 500 000 000 ordinary shares of USD0.0001 each 250,000 250,000 250,000 250,000 Issued 1 645 545 913 ordinary shares of USD0.0001 each 164,555 164,555 164,555 164,555 The unissued shares are under the control of the directors for an indefinite period but subject to the limitations imposed by the

Companies Act (Chapter 24:03), the Zimbabwe Stock Exchange and approval by members in a general meeting.

15.2 Non distributable reserves The non-distributable reserve is as a result of currency translation in 2009 from Zimbabwean dollar which was a functional

currency as well as presentation currency up to the 21st of January 2009. The assets and liabilities were translated to USD using the guidance issued by Public Accountants and Auditors Board and Zimbabwe Stock Exchange in 2009. Land and buildings were valued by BARD Real Estate agent, whilst the other non-current assets were valued by management.

16. BORROWINGS 16.1 Long term loans African Export-Import Bank-Afreximbank 7,125,000 7,500,000 7,125,000 7,500,000 PTA Bank 3,037,903 3,372,838 3,037,903 3,372,838 10,162,903 10,872,838 10,162,903 10,872,838

16.2 Short term loans NSSA loan 5,000,000 - 5,000,000 - FBC Bank Limited 909,028 2,100,000 909,028 2,100,000 Metbank Limited 790,000 500,000 790,000 500,000 CBZ Bank Limited - 5,000,000 - 5,000,000 Infrastructure Development Bank of Zimbabwe 3,507,196 2,990,000 3,507,196 2,990,000 Current portion of long term loans - 160,631 - 160,631 10,206,224 10,750,631 10,206,224 10,750,631 Total borrowings 20,369,127 21,623,469 20,369,127 21,623,469

16.3 Borrowings terms African Export-Import Bank-Afreximbank loan The loan, which is denominated in United States dollars, carries interest at LIBOR rate plus market premium determined by the

bank calculated as the variance between the bank’s cost of funding and relevant LIBOR rate plus 5.5% per annum. The loan has a tenor of six years with a capital repayment grace period of one year and is secured by a bank guarantee of USD7,500,000 from Capital Bank Corporation Limited. The Rainbow Towers hotel lease was used as security for the loan.

The loan agreement has a cash trapping clause which does not permit payment of dividends if debt service coverage ratio defined

as gross revenue minus operating expenses divided by interest and principal payments falls below 150%. pTA bank loan The loan, which is denominated in United States dollars, carries interest of 3 months LIBOR rate plus 6% per annum during grace

period and 3 months LIBOR rate plus 5.5% per annum thereafter. The loan has a tenor of seven years with a principal repayment grace period of one year and is secured by a bond in favour of the bank over Victoria Falls Rainbow and A ‘Zambezi River Lodge with a net book value of USD11,044,220.

Short term loans These are bankers’ acceptances and short term borrowings with various financial institutions. The loans are unsecured except

for the NSSA facility which is secured by a bond over Bulawayo Rainbow Hotel with a net book value of USD10,446,395 and repayable within 30 to 120 days subject to being rolled over. Interest on bankers’ acceptances range between 14% and 42% per annum.

Notes to the Consolidated Financial Statements (continued)

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Group Company 2012 2011 2012 201117. DEFERRED TAx USD USD USD USD 17.1 Deferred tax asset Assessed losses 1,280,544 2,180,770 1,280,544 1,738,762 17.2 Deferred tax liability Accelerated wear and tear (3,576,342) (5,757,112) (3,690,817) (5,429,579) (2,295,798) (3,576,342) (2,410,273) (3,690,817) Reconciliation Balance at the beginning of year 3,576,342 4,377,746 3,690,817 4,325,427 Temporary differences on property and equipment (1,331,910) 575,055 (1,331,910) 487,820 Tax rate adjustment - on revalued assets 51,366 - 51,366 - Originating differences on assessed losses - (1,376,459) - (1,122,430) Balance at the end of year 2,295,798 3,576,342 2,410,273 3,690,817 18. ACCOUNTS pAYABLE Trade 6,686,157 4,968,223 5,244,587 3,797,446 Other 1,883,860 2,541,834 3,043,008 2,821,197 8,570,017 7,510,057 8,287,595 6,618,643 19. REVENUE Rooms revenue 12,365,613 12,499,253 11,211,311 10,311,181 Food and beverages 6,882,687 11,941,648 12,661,241 11,819,160 Transfers and activities 8,322,666 2,880,000 1,220,300 1,225,622 27,570,966 27,320,901 25,092,852 23,355,963 Revenue represents amounts invoiced for sales, less value added tax as appropriate.

20. NET FINANCE COST Finance income 220,827 383,599 220,827 383,599 Finance cost (3,874,790) (2,033,914) (3,874,790) (2,033,914) (3,653,963) (1,650,315) (3,653,963) (1,650,315) For the purposes of the statement of cash flows, net interest paid comprises the following: Finance expense from continuing operations (3,874,790) (2,033,914) (3,874,790) (2,033,914) Finance expense from discontinued operations (38,042) (102,183) - - (3,912,832) (2,136,097) (3,874,790) (2,033,914)

Notes to the Consolidated Financial Statements (continued)

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Group Company 2012 2011 2012 201121. pROFIT/(LOSS) BEFORE TAx USD USD USD USD

Profit/(Loss) before tax is arrived at after taking into account the following: Income Preference share dividend 108,000 104,473 - - Expenses Staff costs 13,894,833 10,393,657 11,054,646 8,165,395 Audit fees 130,000 139,603 130,000 81,587 Depreciation of property and equipment 1,536,887 1,193,670 1,438,102 943,040 Directors’ emoluments : For services as directors 47,735 46,810 47,735 46,810 For managerial services 308,904 548,509 308,904 477,723 Operating lease expenses 1,738,302 1,703,293 1,209,191 1,174,182 Exchange (loss)/gain (6,668) 18,267 54,931 (9) (Loss)/profit on disposal of equipment (276,991) 25,210 (298,489) 25,210 22. INCOME TAx CREDIT Current (171,741) (296,998) - - Deferred 1,331,910 714,233 1,331,910 734,600 1,160,169 417,235 1,331,910 734,600 Tax rate reconciliation Accounting profit/(loss) (4,576,466) 146,278 (4,956,007) (782,395) Tax at 25.75% (1,178,440) 37,667 (1,276,172) (201,467) Non-taxable differences 2,338,609 (454,902) 2,608,082 (533,133) 1,160,169 (417,235) 1,331,910 (734,600)

23. DISCONTINUED OpERATIONS Results of discontinued operations Revenue 1,927,089 2,779,675 - - Expenses other than finance costs (4,359,572) (3,696,416) - - Finance costs (38,042) (102,183) - - Income tax credit (86) 83,978 - - Loss for the year (2,470,611) (934,946) - - Statement of cashflows The statement of cash flows includes the following amounts relating to discontinued operations: Operating activities (2,386,690) 185,943 - - Investing activities (7,333) (104,133) - - Financing activities - (300,000) - - Net cash from discontinued operations (2,394,023) (218,190) - -

Notes to the Consolidated Financial Statements (continued)

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24. EARNINGS pER SHARE 2012 2011 2012 2011 USD USD USD USD 24.1 Basic (loss)/earnings per share (continuing operations)

Numerator (Loss)/profit attributable to shareholders (3,416,927) 563,513 (3,624,097) (47,795) Denominator 000s 000s 000s 000s Weighted average number of shares used in basic EPS 1,645,546 1,645,546 1,645,546 1,645,546 Basic (loss)/earnings per share (US cents) (0.208) 0.034 (0.220) (0.003)

24.2 Headline (loss)/earnings per share (continuing operations)

Numerator (Loss)/profit attributable to shareholders (3,416,927) 563,513 (3,624,097) (47,795) (Profit)/loss on sale of assets (276,991) 25,210 (298,489) 25,210 (3,693,288) 588,723 (3,922,586) (22,585) Denominator 000s 000s 000s 000s Weighted average number of shares used in headline EPS 1,645,546 1,645,546 1,645,546 1,645,546 Headline (loss)/earnings per share (US cents) (0.224) 0.036 (0.238) (0.001)

Group Company 2012 2011 2012 201125. CASH FLOW INFORMATION USD USD USD USD 25.1 Cash generated from operating activities Loss for the year (5,886,908) (371,433) (3,624,097) (47,795) Adjusted for: Depreciation of property and equipment 1,670,276 1,193,670 1,438,102 943,040 Impairment of property and equipment 22,015 - - - Provision for doubtful debts 900,000 - - - Preference share dividend and investment income (212,787) (104,473) (104,787) - Unrealised exchange (loss)/gain (6,668) 18,267 54,931 (9) Loss on disposal of equipment (276,991) 25,210 (298,489) 25,210 Finance costs 3,874,790 2,136,097 3,874,790 2,033,914 Income tax credit (1,160,169) (501,213) (1,331,910) (734,600) Finance income (220,827) (383,599) (220,827) (383,599) Operating (loss)/profit before working capital changes (1,297,269) 2,012,526 (212,287) 1,836,161 Increase in inventories (248,885) (305,320) (360,199) (446,346) Increase in accounts receivables 2,068,662 (1,341,822) 893,372 (1,584,834) Increase in accounts payables 1,059,960 3,615,821 1,668,952 3,470,434 1,582,468 3,981,205 1,989,838 3,275,415

Notes to the Consolidated Financial Statements (continued)

Group Company

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2012 2011 Ordinary Ordinary Shares Shares26.6 Directors’ shareholding Mrs Chipo Mtasa - 1,474,221 Mr Elliot Nyoni - 5,000 - 1,479,221 26.7 Group structure The Group comprises the following companies: Shareholding Name Business Location 2012 2011 Touch The Wild (Private) Limited Lodge and tour operator Zimbabwe 100% 100% Rainbow Tourism Group (Zambia) Limited Hotelier Zambia 100% 100% Imal Caterers (Private) Limited Hotel school Zimbabwe 100% 100% Hathanay Investments (Private) Limited Lodge operator Zimbabwe 100% 100% Rainbow Hotel Mozambique Limited Hotelier Mozambique 100% 100%

26. RELATED pARTY INFORMATION Volume of transactions with related parties The aggregate amount brought to account in respect of the following types of transactions and each class of related party

involved were: Group Company 2012 2011 2012 2011 USD USD USD USD26.1 Management fees from related parties Touch The Wild (Private) Limited - - - 99,282 Imal Caterers (Private) Limited t/a Rainbow Hospitality Business School - - 28,701 28,506 Rainbow Hotel Mozambique Limited - - 415,786 455,786 - - 444,487 583,574

26.2 Compensation to key management Short term benefits 308,904 477,723 308,904 477,723 External management - 70,786 - - 308,904 548,509 308,904 477,723 26.3 Non - executive directors Fees 47,735 46,810 47,735 46,810 The non - executive directors do not receive pension entitlements from the Group. 26.4 Related party receivables Touch The Wild (Private) Limited - - - 105,221 Hathanay Investments (Private) Limited - - 266,192 52,464 Rainbow Tourism Group (Zambia) Limited - - 1,143,361 1,669,250 - - 1,970,893 2,388,275 26.5 Loans to key management Loans 120,493 321,801 120,493 321,801 The loans include motor vehicle and housing loans. The loans attracts interest which ranges between 6% and 9% per annum. Key management personnel are those persons having the authority and responsibility for planning, directing, and controlling

activities of the Group. They include the Chief Executive, Finance Director and senior management of the Group.

Notes to the Consolidated Financial Statements (continued)

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27. COMMITMENTS 27.1 Lease commitments (a) Operating lease terms The Group maintains a portfolio of six leased properties in Zimbabwe and outside Zimbabwe under fixed operating lease agreements

and two leased properties under variable operating lease agreements. The terms are between 3 to 10 years for properties under fixed terms and 3 to 25 years for properties under variable terms. All the lease agreements are renewable at the end of the lease period for a further period agreed by both parties at market rates. The lease agreements do not impose any restrictions. Future minimum lease payments for variable agreements are based on the current contingent rent as at the reporting date.

(b) The total future value of minimum lease payments is due as follows: 2012 2011 period Type USD USD Not later than one year -fixed 481,775 489,627 -variable 1,256,527 1,153,211 Later than one year and not later than five years -fixed 1,445,328 1,927,103 -variable 3,769,583 5,026,110 Later than five years -fixed 734,355 734,355 -variable 32,886,092 32,886,092 Total operating lease commitments 40,573,660 42,216,498

27.2 Capital expenditure commitments Contracted 7,500,000 7,500,000 Authorized but not contracted 3,498,390 3,498,390 10,998,390 10,998,390 The contracted USD7,500,000 capital expenditure relates to Rainbow Towers Hotel and Conference Centre refurbishment to be

funded through loans. All projects will be carried out subject to availability of funds. 28. RETIREMENT BENEFITS 28.1 Catering Industry pension Fund (NEC) - Zimbabwe 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. Contribution for the year 152,197 104,012 28.2 National Social Security Authority Scheme (NSSA) - Zimbabwe 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 3% of pensionable earnings limited to USD200 per month per employee.

Contribution for the year 106,466 56,857 28.3 National pension Scheme Authority (NpSA) - Zambia This is a defined contribution scheme which was promulgated under the National Pension Scheme Authority (NAPSA) Act.

Contributions by both the company and employees amount to 5% of pensionable emoluments each. Contributions for the year 20,559 13,617 28.4 Instituto Nacional Seguransa Social (INSS) - Mozambique This is a defined contribution scheme which was promulgated under the Mozambican Labour Act. Contributions by both the

company and employees amount to 4% and 3% of basic salary respectively for all employees. Contributions for the year 7,850 5,311 28.5 AON pENSION-Non-NEC-Zimbabwe This is a defined contribution scheme which covers supervisory and managerial employees. Contributions by both the company

and employees amount to 5% and 10% of basic salary respectively for all employees. Contributions for the year 238,878 -

Notes to the Consolidated Financial Statements (continued)

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29 FINANCIAL RISK MANAGEMENT The main risks facing the Group are treasury risk, credit risk, liquidity, exchange rate and cash flow risk. In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note

describes the Group’s objectives, policies and processes for managing those risks and methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and

processes for managing those risks or the methods used to measure them from the previous periods unless otherwise stated in this note.

Principal financial instruments The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows: a) Accounts receivable b) Cash at bank c) Borrowings d) Accounts payable General objectives, policies and processes The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, whilst

retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group’s finance function.

29.1 Treasury 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.

29.2 Liquidity risk The Group has a borrowing capacity of USD34,807,844 of which 41% was unutilised as at 31 December 2012. 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.

29.3 Credit risk 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.

Notes to the Consolidated Financial Statements (continued)

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Fair value through Loans and Held to profit or loss receivables maturity 2011 2011 2011 USD USD USD Group Bank and cash balances - 6,113,206 - Trade and other receivables - 6,676,245 - Quoted shares 12,910 - - Redeemable preference shares - - 900,000 12,910 12,789,451 900,000 Company Bank and cash balances - 5,497,824 - Trade and other receivables - 7,377,994 - Quoted shares 12,910 - - 12,910 12,875,818 -

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

contractual. 29.5 Exchange risk 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: Financial assets Fair value through Loans and Held to profit or loss receivables maturity 2012 2012 2012 USD USD USD Group Bank and cash balances 2,961,923 2,961,923 - Trade and other receivables 5,688,796 5,688,796 - Quoted shares 25,288 - - Redeemable preference shares - - 900,000 8,676,007 8,650,719 900,000 Company Bank and cash balances 2,879,205 2,879,205 - Trade and other receivables 3,687,979 5,486,410 - Quoted shares 25,288 - - 6,592,472 8,365,615 -

Notes to the Consolidated Financial Statements (continued)

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Financial Liabilities Fair value Fair value through profit through profit Amortised Amortised or loss or loss cost cost 2012 2011 2012 2011 USD USD USD USD Group Trade and other payables - - 8,570,017 7,510,057 Borrowings - - 20,913,534 21,181,426 Bank overdrafts - - 4,161,270 1,573,439 - - 33,644,821 30,264,922 Company Trade and other payables - - 8,287,595 6,618,643 Borrowings - - 20,913,534 21,623,469 Bank overdrafts - - 4,161,270 1,378,488 - - 33,362,399 29,620,600 Credit risk Credit risk is the risk of financial loss to the Group if a customer or a counterparty to a financial instrument fails to meet its

contractual obligations. Financial assets which potentially subject the Group to concentrations of credit risk consist primarily of cash and trade receivables. The Group’s cash and cash equivalents are placed with high quality financial institutions. The credit risk with respect to trade receivables is limited as a result of the spread of balances owing to varoius customers who are in different sectors of the economy.

Financial assets Carrying Carrying Maximum Maximum value value Exposure Exposure 2012 2011 2012 2011 USD USD USD USD Group Bank and cash balances 2,961,923 6,113,206 2,961,923 6,113,206 Trade and other receivables 5,688,796 6,676,245 5,688,796 5,334,423 Redeemable preference shares - 900,000 - 900,000 Qouted shares 25,288 12,910 25,288 12,910 8,676,007 13,702,361 8,676,007 12,360,539 Company Bank and cash balances 2,879,205 5,497,824 2,879,205 5,497,824 Trade and other receivables 5,486,410 7,377,994 5,486,410 7,377,994 Qouted shares 25,288 12,910 25,288 12,910 8,390,903 12,888,728 8,390,903 12,888,728

Notes to the Consolidated Financial Statements (continued)

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Financial instruments measured at fair value Level 1 Level 2 Level 3 2012 2011 2012 2011 2012 2011 USD USD USD USD USD USD Group Equity investments 25,288 18,335 - - - - Company Equity investments 25,288 18,335 - - - - Liquidity risk This is the risk of insufficient liquid funds being available to cover commitments. In order to mitigate any liquidity risk that the Group

faces, the Group’s policy has been throughout the year ended 31 December 2012, to maintain substantial unutilised facilities.

Between 3 Between 12 Up to 3 and 12 and 24 Over 2 months months months years Total 2012 2012 2012 2012 2012 USD USD USD USD USD Group Trade and other payables 8,570,017 - - - 8,570,017 Borrowings 10,549,635 1,030,233 1,373,644 7,415,615 20,369,127 Bank overdrafts 4,161,270 - - - 4,161,270 23,280,922 1,030,233 1,373,644 7,415,615 33,100,4134 Company Trade and other payables 8,287,595 - - - 8,287,595 Borrowings 10,549,635 1,030,233 1,373,644 7,415,615 20,369,127 Bank overdrafts 4,161,270 - - - 4,161,270 22,998,500 1,030,233 1,373,644 7,415,615 32,817,992 2011 2011 2011 2011 2011 USD USD USD USD USD Group Trade and other payables 7,510,057 - - - 7,510,057 Borrowings 11,536,085 1,030,233 1,373,644 7,683,507 21,623,469 Bank overdrafts 1,573,439 - - - 1,573,439 20,619,581 1,030,233 1,373,644 7,683,507 30,706,965 Company Trade and other payables 6,618,643 - - - 6,618,643 Borrowings 11,536,085 1,030,233 1,373,644 7,683,507 21,623,469 Bank overdrafts 1,378,488 - - - 1,378,488 19,533,216 1,030,233 1,373,644 7,683,507 29,620,600

Notes to the Consolidated Financial Statements (continued)

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30. MANAGEMENT OF CApITAL The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital

ratios in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. No changes were made in the objectives, policies or processes during the year ended 31 December 2012. The Group monitors its capital ratio using a gearing ratio which is net debt divided by total capital plus net debt. The Group

includes within its net debts, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents, excluding discontinued operations; capital includes equity attributable to the equity holders of the parent.

Group Group 2012 2011 USD USD Trade and other payables 8,570,017 7,510,057 Borrowings 20,369,127 21,623,469 Tax payables 122,524 378,228 Less: cash and cash equivalents (2,961,923) (2,837,951) Net debt 26,099,745 26,673,803 Total equity 11,268,990 17,014,447 Capital and net debt 37,368,735 43,688,250 Gearing ratio 70% 61%

31. GOING CONCERN The Group incurred a loss after tax of USD5,886,909 (2011: USD371,433) for the year ended 31 December 2012 and as of that

date its current liabilities exceeded its current assets by USD12,416,604 (2011: USD4,786,030). The gearing ratio stood at 64% (2011: 56%), with a significant part of the borrowings being short term and expensive.

The Group is pursuing a number of fund raising initiatives to enable it to retire its short term debt, thereby reducing the gearing

ratio to manageable levels. The initiatives include the disposal of Matetsi Water Lodge which is expected to be completed in 2013. Shareholders were also engaged and approved the rights issue in December 2012. The rights issue was successful and proceeds

will be used to retire the remaining part of the expensive short-term debt. The Group successfully obtained a USD10 million loan facility channelled towards restructuring expensive short-term debt.

The directors are positive that the initiatives undertaken so far have put the Group on a sound financial footing and the directors

are confident that the Group will grow the revenues while actively pursuing cost reduction measures across the business in addition to implementation of the turn-around strategies. It is on that basis that the consolidated financial statements have been prepared on a going concern basis.

Notes to the Consolidated Financial Statements (continued)

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32. SEGMENTAL pERFORMANCE 32.1 Basis of segmentation The Group has interests in Zimbabwe and outside Zimbabwe. The Group generates revenue from one principal business activity

which is tourism, safari, conferencing and hotelier. The types of services from which each operating segment derives its revenues are described below.

Rainbow Tourism Group has two main business segments: - Zimbabwe This division is involved in hotels, conferencing. The segment accounts for 88% (2011: 91%) of the revenue from parties outside

the Group . Outside Zimbabwe This division is made up of Mozambique and Zambia. It is involved in hotels and accounts for 12% (2011: 9%) of the Group’s

external revenue. Measurement of operating segment profit or loss, assets and liabilities Management has determined the operating segments based on the reports reviewed by the Chief Executive, who is responsible

for allocating resources to the reportable segments and assesses their performance. The chief operating decision-maker assesses the performance of the operating segments based on a measure of profit or loss.

The accounting policies of the operating segments are the same as those described in the summary of significant accounting

policies. The Group’s evaluation performance excludes the effect of non recurring expenditure from the operating segments such as restructuring costs and legal fees. The measure also excludes the effects of equity settled share-based payments and unrealised gains or losses on financial instruments.

Inter-segment sales are priced along the same lines as sales to external customers, with an appropriate discount being applied

to encourage use of Group resources at a rate acceptable to local tax authorities. This policy was applied consistently throughout the current and prior periods.

Outside Zimbabwe Zimbabwe Total 2012 2012 2012 USD USD USD Revenue 25,936,920 1,634,046 27,570,966 Inter-segmental revenue - - - Total revenue from external customers 25,936,920 1,634,046 27,570,966 Discontinued operations (1,100,578) (1,370,033) (2,470,611) Group’s revenue per consolidated statement of comprehensive income 24,836,342 264,013 25,100,355 Depreciation on property and equipment 1,457,571 79,317 1,536,888 Segment profit (438,803) 493,021 54,218 Finance income 220,827 Finance expense (3,874,790) Segment profit included in discontinued operations (2,470,611) Group profit before tax and discontinued operations (6,070,356) Additions to non current assets 3,909,254 27,375 3,936,629 Reportable segment assets 45,051,088 3,335,293 48,386,381 Reportable segment liabilities 35,167,526 1,949,865 37,117,391

Notes to the Consolidated Financial Statements (continued)

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Outside Zimbabwe Zimbabwe Total 2011 2011 2011 USD USD USD Revenue 26,422,698 3,677,878 30,100,576 Inter-segmental revenue - - - Total revenue from external customers 26,422,698 3,677,878 30,100,576 Discontinued operations (2,779,675) - (2,779,675) Group’s revenue per consolidated statement of comprehensive income 23,643,023 3,677,878 27,320,901 Depreciation on property and equipment (1,156,987) (36,683) (1,193,670) Segment profit 1,733,397 480,431 2,213,828 Finance income 383,599 Finance expense (2,033,914) Segment profit included in discontinued operations (934,946) Group profit before tax and discontinued operations (371,433) Additions to non current assets 6,750,115 27,375 6,777,490 Reportable segment assets 48,872,971 3,152,342 52,025,313 Reportable segment liabilities 33,009,446 2,001,420 35,010,866

33. EVENTS AFTER THE REpORTING DATE33.1 Rights issue A rights issue of 225,000,000 shares at USD0.02 was approved by shareholders on the 27th of December 2012 to raise up to

USD4,500,000.The Rights issue had a subcription rate of 28.1% and the balance was exercised by the underwriter, NSSA. 33.2 Approval of the consolidated financial statements These consolidated financial statements were approved by the Board of Directors on the 13th of March 2013.

Notes to the Consolidated Financial Statements (continued)

32. SEGMENTAL pERFORMANCE (continued)

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Refreshing hotels...

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RANK ACCOUNT NAME SHARES % OF TOTAL

1 NATIONAL SOCIAL SECURITY AUTHORITY 451,903,124 27.46

2 HAMILTON & HAMILTON TRUSTEES LTD, 300,200,782 18.24

3 ZIMCOR LIMITED 217,784,465 13.24

4 FIRST MUTUAL LIFE - POLICY HOLDERS 134,819,549 8.19

5 MINISTRY OF ENVIRONMENT & TOURISM 83,402,508 5.07

6 TRISTAR INSURANCE COMPANY LIMITED, 73,428,208 4.46

7 LAAICO - FCA NON-RES 60,000,000 3.65

8 FIRST MUTUAL LIFE -MANAGED FUND 54,853,036 3.33

9 PEARL PROPERTIES (2006) LIMITED 42,915,563 2.61

10 FMRE PROPERTY & CASUALTY - SHAREHOLDERS, 26,643,635 1.62

11 HAMILTON, NICHOLAS RHODES- NNR 16,695,788 1.01

12 PINNACLE INVESTMENTS (PRIVATE) LIMITED 15,521,167 0.94

13 FIRST MUTUAL LIFE - SHAREHOLDERS 15,336,057 0.93

14 HAMILTON, MAXIMILIAN RHETT 13,996,703 0.85

15 FMRE PROPERTY & CASUALTY-POLICYHOLDERS, 10,267,278 0.62

16 FIRST MUTUAL LIFE - MANAGED FUND 10,090,750 0.61

17 HAMILTON, ORRIE LINCOLN 10,000,000 0.61

18 HAMILTON, RICHMOND LOUIS 10,000,000 0.61

19 HAMILTON, ALEXANDER SETHI 10,000,000 0.61

20 EUGENIE BRITANNIA, HAMILTON 9,990,000 0.61

TOTAL 1,567,848,613 95.27

Top Twenty Shareholdersas at 31 December 2012

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NOTICE IS HEREBY GIVEN THAT the 14th Annual General Meeting (“AGM”) of the Shareholders of Rainbow Tourism Group Limited (“the Company”) will be held in the Jacaranda Rooms 2 and 3 at the Rainbow Towers and Conference Centre, 1 Pennefather Avenue, Harare on Wednesday 12th June 2013, at 12:00 noon for the purpose of transacting the following business:

1. CONSTITUTION OF MEETING 1.1 To table forms of proxy 1.2 To declare the meeting constituted

AS ORDINARY BUSINESS:-2. FINANCIAL STATEMENTS AND THE REpORTS OF THE DIRECTORS AND AUDITORS To receive and adopt the financial statements and the reports of the directors and auditors for the year ended 31st December

2012.

3. DIRECTORS’ FEES To approve the payment of directors’ fees for the year ended 31st December 2012.

4. DIRECTORATE 4.1 To re-elect Mr. John Mafungei Chikura who retires by rotation and being eligible offers himself for re-election.

4.2 To elect Mrs. Tandiwe Thando Mlobane and Mr. Grant Gore who were co-opted as a director of the Company in terms of article 106 of the Company’s articles of association.

Brief profiles of these individuals will be included in the Annual Report.

5. AUDITORS To fix the remuneration for the auditors for the past audit and re-appoint Merssrs. Grant Thornton Camelsa Chartered Accountants

as auditors until the next Annual General Meeting.

pROxIES AND VOTESEach 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 must be lodged at registered office of the company not less than 48 hours before the time of holding the meeting.

By Order of the Board

Napoleon MtukwaACTING COMpANY SECRETARY

30th April 20131 pennefather Avenue/ Samora Machel Avenue Harare, Zimbabwe

Notice to shareholders

64

Rainbow

Tourism G

roup Limited

Annual R

eport 2012

The SecretaryRainbow Tourism Group LimitedP.O. Box 10029HARARE

I/We ……………………………………………… of ………………………………………………… being a member of Rainbow Tourism 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 &3, Rainbow Towers Hotel and Conference Centre, Harare on the 12th June 2013 and at any adjournment thereof and to vote or abstain from voting as indicated below on the resolution to be considered at the said meeting.

ORDINARY BUSINESS FOR AGAINST ABSTAIN

1. To receive and consider the financial statements, the reports of the directors and auditors for the year ended 31 December 2012.

2. To approve directors fees for the current financial year.

3. To elect Mr. John M. Chikura who retires by rotation and, being eligible offers himself for re-election.

4. To confirm the appointment of Mrs. Thandiwe T. Mlobane, who was coopted as a director of the company during the course of the year.

5. To confirm the appointment of Mr. Grant Gore, who was coopted as a director of the company during the course of the year.

6. To approve the remuneration of the auditors for the year ended 31 December 2012.

7. To appoint Messrs. Camelsa Grant Thornton Chartered Accountants as auditors for the ensuing financial year.

Please indicate with an 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 his/her discretion.Signed at …………………………….. this …………………………….day of ……………………………………… 2013Signature of member …………………………………………………………………………………………………………..Number of Shares ……………………………………………………………………………………………………………...

NOTES1. 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

Lyman Frank

Somewhere over the rainbow, skies are blue, and the dreams that you dare to dream really do come true.

Be inspired, experience

the Rainbow freshness.