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Annual Report 20 14 “Developers and investors in prime properties, contributing to the development of the quality of life in developing countries” RDC Properties Limited

Transcript of RDC Properties Limited 20 Annual Report 14 - rdcbw.comrdcbw.com/sites/default/files/Investor...

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Annual Report

2014

“Developers and investors in prime properties, contributing to the development of the quality of life in developing countries”

RDC Propert ies L imited

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RDC Propert ies L imited

Corporate Profile

Incorporation Information Company Number 96/592Date of incorporation 18/04/1996

Market capitalisationThe ordinary share price of RDC Properties Limited (“RDCP” or the “company”) at close of business on 31 December 2012 was P6.95, giving a market capitalisation at that date of P245,734,535.

Investor relationsRegistered Office Investors requiring further information on the group are invited to contact:

Mr. J. PariRDC Properties Limited, Plot 5624, Lejara RoadBroadhurst Industrial Gaborone, Botswana

T: (+267) 3901654 F: (+267) 3973441E: [email protected]

WebsiteFurther information on RDCP is available at: www.rdcpbotswana.com

Annual General MeetingThe Annual General Meeting (“AGM”) of the company will take place at the RDC Offices - Realestate Office Park, Lejara Road, on Thursday 12 September 2013 at 14.30 hrs. The notice of meeting is set out on pages 45 to 47.

Electronic communicationsUnit holders are informed that RDCP has received formal approval by the Botswana Stock Exchange to distribute all shareholder communication electronically except where documents are specifically requested in written form.

Contents01 Highlights of the Year 2012 & Five Year Overview

03 Chairman’s Statement

06 Operating and Financial Review

10 Board of Directors

11 Audit and Risk Committee & Management Team

12 Directors’ Report

15 Corporate Governance Statement

17 Directors’ Responsibility Statement and Approval of Annual Financial Statements

18 Independent Auditor’s Report to the Members of RDC Properties Limited

19 Statements of Comprehensive Income

20 Statements of Financial Position

21 Statements of Changes in Equity

22 Statements of Cash Flows

23 Significant Accounting Policies

31 Notes to the Financial Statements

46 Notice of Meeting

47 Form of Proxy

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Masa Centre CBD, built in partnership with Lavica (Proprietary) Limited, Shakawe (Proprietary) Limited and Keboife Holdings (Proprietary) Limited.

Corporate ProfileIncorporation Information Company Number 96/592Date of incorporation 18/04/1996

Market capitalisationThe ordinary share price of RDC Properties Limited (“RDCP” or the “company”) at close of business on 31 December 2014 was P2.03, giving a market capitalisation of P447,300,125.

Investor relationsRegistered Office Investors requiring further information on the group are invited to contact:Mr. G. MoriRDC Properties Limited, Plot 5624, Lejara RoadBroadhurst Industrial Gaborone, BotswanaT: (+267) 3901654 F: (+267) 3973441E: [email protected]

WebsiteFurther information on RDCP is available at: www.rdcpbotswana.com

Annual General MeetingThe Annual General Meeting (“AGM”) of the company will take place at the RDC Offices - Realestate Office Park, Lejara Road, on Thursday 21 May 2015 at 14.30 hrs. The notice of meeting is being sent along with this Annual Report.

Electronic communicationsUnit holders are informed that RDCP has received formal approval by the Botswana Stock Exchange to distribute all shareholder communication electronically except where documents are specifically requested in written form.

Overview

Corporate Profile 1

Highlights of the Year 2014 and Five Year Overview 2

Executive Reports

Chairman’s Statement 3

Operating and Financial Review 6

Corporate Governance

Board of Directors 11

Audit and Risk Committee and Management Team 12

Directors’ Report 13

Corporate Governance Statement 17

Annual Financial Statements

Directors’ Responsibility Statement and Approval of Annual Financial Statements 21

Independent Auditor’s Report to the Membersof RDC Properties Limited 22

Statements of Comprehensive Income 23

Statements of Financial Position 24

Statements of Changes in Equity 25

Statements of Cash Flows 26

Significant Accounting Policies 27

Notes to the Financial Statements 34

Contents

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Top 10 Unit Holders Linked Units %

REALESTATE FINANCIERE SA 99,746,970 44.89%

CHOBE FINANCIAL CORPORATION 54,792,354 24.66%

ASPERA HOLDINGS LIMITED 11,826,000 5.32%

MOTOR VEHICLE ACCIDENT FUND 8,226,105 3.70%

FNB NOMINEES (PTY)LTD RE:SIMS BPOPF 10001009 6,879,890 3.10%

FNB NOMS BW(PTY) LTD RE:BIFM BPOPF ACTIVE 10001025 6,530,755 2.94%

STANBIC NOMINEES BOTSWANA RE: BNY10000099 5,823,934 2.62%

STANBIC NOMINEES RE: BIFM 4,315,490 1.94%

SHAKAWE (PTY) LTD 3,883,240 1.75%

FNB BW NOMS(PTY) LTD RE: IAM BPOPFP 10001031 2,855,221 1.29%

Linked unit band Linked Units % Holders %

0-1999 170,781 0.08% 242 49.59%

2000-4999 158,804 0.07% 54 11.07%

5000-9999 337,445 0.15% 57 11.68%

10000-49999 1,516,434 0.68% 76 15.57%

50000-99999 903,141 0.41% 13 2.66%

100000-499999 5,811,491 2.62% 26 5.33%

500000 and above 213,283,959 96.00% 20 4.10%

TOTALS 222,182,055 100.00% 488 100.00%

2014 2013 2012 2011 2010 P’000 P’000 P’000 P’000 P’000

Portfolio value 950,328 858,842 764,992 626,409 469,513

Increase 91,486 93,850 150,216 156,896 103,654

Increase in value % 10.65% 12.27% 24.43% 33.42% 28.33%

Income yield % 8.22% 8.34% 6.02% 5.20% 6.22%

Financial position

Net asset value (P million) 549,046 473,624 354,331 293,199 191,018

Net asset value (NAV) / linked unit 2.47 2.15 2.00 8.49 5.70

NAV adjusted for deferred taxation 2.67 2.31 2.15 8.79 5.98

Debt-long term 212,602 222,851 232,153 228,335 187,724

Equity 685,974 591,667 484,194 376,140 261,054

Ratio-debt to portfolio value 22.37% 25.95% 30.35% 38.11% 39.98%

2014 2013 2012 2011 2010 P’000 P’000 P’000 P’000 P’000

Statement of comprehensive income

Gross revenue (contractual rental income

and hotel revenue) 81,057 71,620 46,025 31,956 29,196

Profit from operations (before fair value adjustments) 58,264 54,039 29,544 18,805 23,584Profit after fair value adjustment from operations 136,188 117,292 136,856 130,845 45,799Profit before tax 115,379 96,987 122,929 127,508 42,093Profit -attributable to owners 86,344 74,137 71,661 116,419 33,282Linked units (average in issue) 221,273,994 179,675,052 174,469,140 34,148,322 33,262,917

Earnings per linked unit 39.02 41.26 41.07 340.92 100.06

Share price at year-end 2.03 1.80 1.39 7.24 6.30

Market capitalisation year-end 447,300,125 396,620,801 245,734,535 250,098,770 209,556,377

Distribution yield 4.32% 4.38% 5.51% 6.01% 9.21%

 -­‐          100,000      200,000      300,000      400,000      500,000      600,000      700,000      800,000      900,000    

 1,000,000    

2010   2011   2012   2013   2014  

Por$olio  indica,on  

Por1olio  indica8on  

Portfolio Value

0

 -­‐          10,000      20,000      30,000      40,000      50,000      60,000      70,000      80,000      90,000    

2010   2011   2012   2013   2014  

Contractual  lease  rental  revenue  indica0on  

Contractual  lease  rental  revenue  indica<on  

Contractual lease rental revenue indication

Portfolio growth analysis - based at 100

0

0

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Highlights of the Year 2014 and Five Year Overview

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Mebala House, Gaborone Main Mall, built in partnership with Mr. Loo

Dear Unit Holders,

I have the pleasure of presenting to you the Annual Report and Financial Statements of the Company to the 31 December 2014.

Sadly, I have to inform you that our founding Chairman Mr. M. A. Giachetti passed way on the 17 August 2014. We will forever be grateful to him for having laid the foundations of the Group. His outstanding leadership, integrity, vision and advice have contributed to the growth of the Company from the listing to date - we shall miss him.

Over the years we have built a robust, income producing, diversified investment portfolio, underpinned by an attractive lease expiration profile and strong tenancies. Our revenue base and our relatively conservative debt profile will enable us to deal with the future growth of the company. The Company Management remains committed to preserving our asset base and enhancing revenue by generating new developments, refurbishing our properties, and investigating diversification both across the industry spectrum and the region.

We have continued to progress with our strategic plans, despite the complex financial environment in the Country. It is pleasing that there are signs of a global recovery and this is positive for the diamond industry. We are concerned with the lack of

support to the wider Botswana economy from the local banks and with the lack of confidence that permeates among the financial services sector.

The property market is under fair pressure and we shall be mindful of the size of the market before venturing in new projects. As we anticipated, the increase in supply of properties in the office sector continues. Many landlords were forced to carry out development within a short time frame in the new CBD and this is putting further pressure on rentals.

The retail space in Gaborone is now experiencing pressure with many new malls. The location will become even more important during this cycle.

The industrial sector remains fairly stable and we remain confident that rentals will be reasonable from mini factory units / warehouses.

Our diversified portfolio includes a well-balanced mix of hospitality, grade A offices, retail units, small industrial units, which include very special properties – Masa Centre and Chobe Marina Lodge. The lease profile and quality of the properties enables us to be relatively sheltered from the over supply in the property sector. The Masa Centre continues to play a vital role in the heart of the Gaborone CBD, creating

We are…Developers and investors in prime properties, contributing to the improvement of the quality of life in developing countries, we grow our business by creating partnerships with customers and land owners, …

“We create ..Long term value by

creating partnerships with customers and

land owners”

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Chairman’s Statement

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a unique and important entertainment destination for all Gaborone inhabitants and visitors from overseas. Lansmore Masa Square Hotel, is also a success story as it continues to be one of the most sought after business hotels in the City of Gaborone.

The company is developing 14 industrial mini factory units and the project is on time and within budget. The marketing of the units will start in Q2 2015.

By end of March 2015, the planning authorities had approved our plan to convert approximately 2,000 m2 of offices of the Masa Centre to long stay suites that will be operated by the Lansmore Hotel.

The board has approved the acquisition of a residential property portfolio well located and with substantial re-development opportunities. The Board is confident that because of the location of the property this acquisition will add value to the present portfolio.

We are pleased to have supported many charities during the years and during 2014 we supported Mother Pontsho Foundation from Mmopane, Anne Stine from Molepolole and Holy Cross Hospice from Gaborone, through a program carried out at the Masa Centre in collaboration with all our tenants and other key stakeholders.

As long-term investors, it is vital that we continue to engage fully with the communities who sustain and support our business. We continue supporting the Ngwapa Primary School with our contributions. We provide funding for continuous improvements at the school.

Also, during the 2014 Christmas festivities, we took initiative towards improving the lives of the Sefhare Primary Hospital patients. The Group donated some money and other items towards a Christmas party for the in-patients of the hospital to show

love and hope to the hospitalized during the festive season.

I am pleased that the audited financial results for the year ended 31 December 2014 again reflect solid growth in the contractual lease rental revenues, up 23% to P81.1 million (2013: P66.2 million) before the straight line rental adjustment. Profit before tax is up 19% to P115.4 million (2013: P97.0 million). The investment and property portfolio is up 11% to P950.3 million (2013: P858.8 million).

Chobe Marina Lodge rental income contributed significantly to the full year adding P7.5 million of revenue to the portfolio.

The board has decided to increase the frequency of independent valuations of the property portfolio to a 3 year cycle.

Adjusted Net Asset Value (NAV) per linked unit is up 16% to P2.67 (2013: P2.31), this indicates that there is still some catching up to do by our share price which at the end of the year was at P2.03. The overall rate of vacancy has decreased to 5.22% due to the effect of the offices of Masa Centre and few new tenancies.

The audit and risk committee, under the able Chairmanship of Mr. R. Matthews continues to provide the necessary independent review of the financial management controls and risks. Mrs. Kate Maphage was appointed to the committee in November 2014.

We are complying with our banking facilities and the directors do not expect this position to alter in the forthcoming twelve months. The directors have considered our forecast cash flows, the Group’s low gearing, significant portfolio of unencumbered properties and the maturity profile of our borrowings and can confirm

“True to our beliefs, we continue

improving the quality of life where we

operate”

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Chairman’s Statement (continued)

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that the Company has adequate resources to continue for the foreseeable future.

I am pleased to inform you that Dr. Keith Jefferies joined the Board in March 2014 and his contributions to the deliberations of the Board are already highly appreciated. The Board has appointed Mr. Lesang Magang as Lead Independent Non-executive Director and I appreciate his advice and guidance on issues were I might be conflicted.

I commend the work done by the staff and management of Property Asset Management Limited (PAM) under the able direction of Mr. Jacopo Pari who manages the portfolio with a personal attention to detail on behalf of all our linked-unit holders.

I thank the Board of directors, Botswana Stock Exchange and all those who have contributed to the continued growth of the group during the year 2014.

The Board remains focused on seeking to maximise rental income, completing the diversification of the portfolio both locally and regionally and exploring alternative avenues of growth.

G. R. GiachettiExecutive Chairman

Holy Cross Hospice choir singing carols at Masa Centre

Children of Holy Cross Hospice preparing for carols by candle light

In-patients at Sefhare Primary Hospital being given Christmas gifts donated by RDC Properties - December 2014

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Chairman’s Statement (continued)

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Roots Tower built in partnership with Mr. J.P. Fella

Botswana is known for its good democratic practices, which have created a stable and secure economic climate for businesses to thrive. This has attracted foreign investors and the country is known to be in good standing amongst the world’s emerging and frontier property markets.

The economy was resilient in the year 2014 and is now faced with some growth opportunities and developments to encourage cross border transactions, for example, the Kazungula bridge project.

The tourism and mining industries still remain one of the strong holds of the economy with the natural wildlife experience contributing to the strong attraction witnessed in the tourism sector.

The recently concluded elections have equally gone a long way to reinforce investors’ confidence in the country, who now hope to experience more opportunities in the near future.

Market

The Gaborone Metropolis has continued to witness increased number of developments especially in the Central Business District (CBD). However, some of the new developments around the CBD are office complexes, which will be an addition to the already existing surplus office space currently available in the market.

The demand for residential properties remains positive with major industry stakeholders investigating the needs and practical opportunities of embarking on

residential housing projects. However, the current challenges facing the financial institutions are expected to affect the purchasing and development prospects due to the corresponding effect on availability of funds to prospective buyers and developers for executing projects. The above stated issues however recently led the Bank of Botswana to reduce the Primary Reserve Ratio (PRR) for commercial banks from 10% to 5% so as to release funds (approximately P2.3 billion) into the market for commercial banks utilization.

The industrial sector is still not showing any signs of decline in demands with various opportunities of outright purchase and rental still being observed in the market. The retail sector is now being decentralized to other areas outside the capital city of Gaborone considering the market saturation.

Finally, the market still presents some opportunities to be exploited as the nation’s property market remains in good standing in line with the trends of emerging markets. The primary factors such as cost, quality and location, influencing the end user’s decision of property acquisitions and investment needs.

Strategy The Group is committed towards carrying out selective developments after carefully conducting market research so as to respond positively to the market needs. Hence, investigations are currently ongoing to determine the possibility of carrying out redevelopment of existing properties and new affordable housing schemes.

The Groupis committed to carrying out selective developments after carefully conducting market research so as to respond positively to the market needs.

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Operating and Financial Review

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We have also embarked on the development of 14 new warehousing units measuring a net total of 3,234 sqm. This is expected to be completed in July 2015 and will contribute to the existing industrial portfolio.

The Board has approved the acquisition of an existing residential property portfolio in an excellent location and currently undergoing various regulatory approval processes necessary to conclude the transaction.

The Group is also exploring regional opportunities within the SADC region in order to grow and diversify the portfolio.

The hospitality sector has proven to deliver good returns as a result of the stable economic climate and the scenic beauty of Botswana. The contribution of Chobe Marina Lodge and Masa Centre goes a long way to confirm this.

Marketing drives are key to the growth of the Group. We will continue maintaining good tenant relationships to boost the customer satisfaction results within the portfolio. This will help keep vacancy results to the barest minimum where reasonably possible.

Investment / Property Portfolio Property PortfolioThe investment and property portfolio, independently valued, grew 11% to P950.3 million. The largest contributors to the growth in the portfolio value relate to two of our hospitality properties, namely Masa Centre and Chobe Marina Lodge, which each increased by P28 million in value in line with their growth in rental income and their uniqueness. Included in investment properties is capital work in progress of P7.3 million relating to the extension of the Gaborone West Warehouses.

We are now investigating other growth opportunities both nationally and regionally to strengthen the asset base of the Group.

We attract and train citizens to deliver efficient services to our client base so as to contribute to the achievement of growth results in the organization.

Masa CentreMasa Centre contributed P37.2 million to the rental income (up 15% from prior year) while contributing substantially to the 23% growth in revenue and the 22% increase in profit for the year.

The centre is the destination of choice for most business visitors, tourists and citizens as it provides improved lifestyle offerings by virtue of the property being a functional mixed use development. Lansmore Masa Square Hotel, being the anchor tenant, has constantly achieved outstanding performance results by keeping up with good services, which makes it one of the most sought after hotels in the Gaborone Metropolis. Some of the other prestigious offerings are the cinema, the restaurants in the piazza and the mix of good brands in the retail gallery.

Owing to the success of the hospitality sector, and with the comfort of very high occupancy rates achieved, we have now decided to convert 2000 sqm of office space to long stay suites. This offering will be managed by the hotel and will strengthen our hospitality exposure while mitigating the risk of our office exposure. Chobe Marina LodgeChobe Marina Lodge recorded solid results in the just concluded 2014 financial year and has been one of the preferred destinations for tourists within the Chobe region. Acquired in September 2013, it has contributed P9.5 million in revenue in the current year (up P7.5 million from prior year).

With 66 chalets it caters for various classes of holiday makers; corporate organisations seeking good quality team building destinations, private and government establishments engaging in conferences, workshop activities etc. and most of international and local individuals seeking to experience the unique beauty of the Chobe region and its wildlife.

The peaceful environment offered by the country coupled with the wildlife scenery and increased development activity in the area will continuously attract both foreign and local patrons and shall guarantee solid results from Chobe Marina Lodge in the coming years.

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Operating and Financial Review (continued)

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Isalo Rock Lodge, MadagascarIsalo Rock Lodge is owned by HMS1 Société Anonyme (HMS1), a company registered in Madagascar. HMS1 is a 50% joint venture investment of the Company. The Company equity accounts for 50% of its share in the profits of the joint venture.

The Lodge opened in July 2010 during the worst political uncertainty of the country for the past decade. Despite this it managed to establish itself as a prime property. Thus, it is recognised as one of the best lodges in the whole of southern Madagascar and guest feedback across all available media confirms it to be a genuine 4* International Standard Accommodation.

The newly elected Government has been slow in moving towards stabilising the country’s political and economic climate. This again has not helped the tourism industry. As a result the desired occupancy levels at the Lodge were not achieved. Despite this, tour operators are optimistic of increasing the number of visitors to the Lodge during 2015.

At the beginning of the current year HMS1 transferred the operations of the Lodge to a company outside of the Group. HMS1 retained the ownership of the physical property and classified the property as investment property in terms of the Group’s accounting policies. This restructure resulted in HMS1 contributing P4.1 million to the Group as a share of its profits in the joint venture

Gaborone West WarehousesThe Group commenced the development of 14 new warehousing units in the Gaborone West Industrial area. This was in response to the market needs in relation to good prospects / demands of industrial units.

The units measuring approximately 231 sqm each are expected to be completed in July 2015 and designed with the flexibility of adapting the development to different business needs to attract more clients. The development once completed shall be integrated into the existing portfolio to contribute approximately 3,234 sqm to the industrial segment of the portfolio.

Financing and Cash Flow At the end of December 2014, the Group’s borrowings and available facilities consisted of:- An overdraft facility of P15 million,

guarantees for P16.3 million and forex pre-settlement of P0.5 million from First National Bank of Botswana

- Bank overdraft of P5 million from Barclays Bank of Botswana Limited

- Long term borrowings amounting to P212.6 million.

As at the date of this annual report the Group had P211 million worth of bonds against a portfolio and investment value of in excess of P950 million providing significant capacity to raise additional finance. International Financial Reporting StandardsThe Group’s underlying financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”). The principal accounting policies are consistent in all material respects with those adopted in the previous year.

Financial Results and HighlightsThe Group has once again produced a solid set of results in a tough economic environment. Our diversified and unique portfolio offering assists the Group in achieving these results despite the economic conditions.

RevenueContractual lease rental revenue increased by 23% to P81.1 million (2013: P66.2 million). This was boosted by Masa Centre, which contributed P37.2 million to revenue (up 15% from prior year), and rental income received from Chobe Marina Lodge, which was included in the portfolio for a full year after the acquisition of the Lodge at the end of September 2013 (up P6.9 million from prior year).

Operating and Finance CostsOperating and finance costs have also increased by 10% (P4.3 million), in line with growth in rental income. However, finance costs reduced by P46k in connection with the reduction in prime interest rates and the new BIFM facility interest rates, the full effect which will be felt in 2015. The provision for

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Operating and Financial Review (continued)

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doubtful debts has increased by P2.4 million, which is P0.9 million more than the prior year provision raised.

TaxationThe tax for the year was P14.3 million (2013: P14.0 million).

Earnings Per Linked UnitEarnings attributable to the owners of the Company increased by 16%. The average number of linked units in issue increased from 2013 by 23%.

Debenture Interest/DividendsThe total distribution per linked unit is calculated on the number of linked units in use at date of distribution. The distribution ratio between dividends to interest on the linked units is 1:50. The dividend and debenture interest expense increased by 31% to P19.5 million (2013: P14.9 million).

Investment and Property PortfolioThe investment and property portfolio increased by 11% to P950.3 million (2013: P858.8 million)

Shareholders’ FundsShareholders’ funds at 31 December 2014 amounted to P549.0 million (2013: P473.6 million), an increase of 16%, resulting in Adjusted Net Asset Value per linked unit of P2.67 (2013: P2.31), an increase of 16%.

Net BorrowingsThe Group’s net borrowings at 31 December 2014 amounted to P212.6 million (2013: P222.9 million), giving a net debt to gross property and investments assets ratio of 22% (2013: 26%).

Jacopo Pari Chief Executive Officer

RDC Portfolio Segmental Spread(by Rental Income)

RDC Portfolio Geographical Spread(by Rental Income)

Maun  1%  

Kasane  10%  

Serowe  2%  Jwaneng  2%  

Palapye  2%  

Gaborone  78%  

Madagascar  5%  

RDC Lease Expiry Profile(by Rental Income)

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Operating and Financial Review (continued)

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Property Name Form of Lease

Title Deed Number Location of Property Sector Lettable

Area Valuation

Masa Centre50 Year State

LeaseholdMA367/2008 Lot 54353, Gaborone

Offices, Retail & Hospitality

26,961 450,000,000

Standard House Freehold 133/97Lots 1124 to 1130 in

Gaborone Ext. 3Offices 6,430 135,000,000

Tholo A & B and Phase II50 Year State

Leasehold1695/96/2000

Lots 50668/69 & 50369

GaboroneOffices 4,612 57,839,140

European Delegation Freehold 1841/2003 Lot 758 Gaborone Offices 1,496 31,600,000

Real Estate Office Park 50 Year State

Leasehold432/80 Lot 5624 in Gaborone Offices 1,147 12,232,131

Mebala House Freehold 48/70Lots 1116/17 & 1840 in

Gaborone Ext. 3Retail 1,330 22,800,000

Gaborone West

Warehouses

50 Year State

Leasehold2434/2000 Lots 22017/18 Gaborone Industrial 4,041 25,900,000

Diamond Centre50 Year State

Leasehold

514/95

661/95

185/95

Lot 3761 JwanengLot 5422 JwanengLot 5423 Jwaneng

Retail 2,322 13,890,000

Lotsane Complex 50 Year Tribal

LeaseMA 62/95 Lot 1707 Palapye Retail 3,878 16,700,000

Broadhurst Business Centre50 Year State

LeaseholdMA 15/97

Lease area 234KO on Lot

10211 in GaboroneOffices 1, 804 12,500,000

Phakalane Warehouses Freehold 1448/99 Lot 21306 Phakalane Industrial 2,376 10,990,000

Boswa Centre 50 Year Tribal

Lease75/95

Lot 680 & 692 Serowe Agreement of Lease No.

258/96 of 18/7/96

Retail &

Offices 1,441 6,384,429

Roots Tower 50 Year Tribal

Lease13/97

Lot 208 Maun Notarial

Deed of Lease 72/81 of

14/3/96

Retail &

Offices 1,069 6,160,000

Chobe Commercial Centre 50 Year State

Leasehold158/88

Lot 914 Kasane in Chobe

Admin District

Retail &

Offices 1,144 7,750,000

Standard Bank Serowe 50 Year Tribal

Lease92/95 Lot 679 Serowe Retail &

Offices 855 4,850,000

Tsodilo Centre 50 Year State

Leasehold105/95 Lot 194, Maun Retail 492 4,230,000

Pep House 50 Year Tribal

LeaseMA 75/97 Lot 443 Serowe Retail 471 3,390,000

Chobe Marina Lodge Leasehold 512/2001 Lease Area No. 4-AO,

KasaneHospitality

66

Rooms 102,286,922

Isalo Rock Lodge99 Year

Lease02/MCT/SG

Lot 480-AU Region

d’lhrombe, MadagascarHospitality 53,514,815

Mole Mall50 Year Tribal

LeaseMA 4/97 Lot 617 Molepolole Undeveloped

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Operating and Financial Review (continued)

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G.R. GiachettiExecutive Chairman

K. JeffriesNon-executive Independent

J. PariExecutive

K.C. MaphageN o n - e x e c u t i v e Independent

C. TiboneN o n - e x e c u t i v e Independent

G.G. GiachettiNon-executive

L. MagangLead Non-executive Independent

Post graduate certificate in International Economics, International Law and International Relations at Oxford University (UK). Member of Parliament for Tati West from 2004 to 2014. Has extensive experience in the Botswana Public Service including as a diplomat at Botswana Missions in Washington DC and London. Was Permanent Secretary for 18 years. He holds numerous directorships in Botswana and has in the past served as Chairman of Barclays Bank of Botswana as well as Deputy Chairman of Debswana.

Aged 70, Civil Engineer (Masters degree). On site experience in construction since 1968. In 1970 started investing in Botswana and developed properties, some of which are now part of the RDC Properties portfolio.

He is a Director of many companies in Botswana and internationally.

Aged 43, Lesang holds a Law Degree from the University of Birmingham. Lesang was appointed as Lead Independent Non-executive Director during 2014. He is the Managing Director of Phakalane Estates, a major property development company and one of the largest privately-owned township developers in Botswana involved in residential, commercial and industrial developments.

Involved in community projects and former patron of Botswana Scouts Association and University of Botswana Debating Society. A speaker on youth development and entrepreneurship and former World University debating semi-finalist.

Aged 41 Civil Engineer (Masters degree); his career started in Accenture, the Strategy and Management Consulting firm. This engagement enabled him to get wide exposure to large and complex corporate environments both in EU and US. Few years later he joined the family construction company in Italy. This work experience, both technical and managerial, was conducive to his appointment as Group General Manager for the Realestate Group of Companies in 2009. He has been involved in Construction, Property Development and Investment in Botswana since then. He was appointed as the Chief Executive Officer of the Realestate Group Botswana operations in February 2015.

Development macroeconomist and financial sector specialist. He is Managing Director of Econsult Botswana (Pty) Ltd, and is a former Deputy Governor of the Bank of Botswana.

He has consulted for international organisations such as the World Bank, the African Development Bank, USAID, SADC, UNIDO, UNDP; governments and central banks in various African countries; and a variety of banks and other private sector firms in Botswana. He was appointed as a Director in March 2014.

Aged 52, Civil Engineer, Masters in Business Management and Transport, AMP (Harvard Business School), IEP (INSEAD), Alumni Association (EPFL, INSEAD, HBS). As Chief Executive Officer of the Realestate Group, he has been involved in property development and investments for over 24 years.

He is the Honorary Consul of Italy and Spain in Botswana and actively involved in community works as a Paul Harris Fellow.

Masters in Business Leadership (MBL) and Bachelor of Commerce. An entrepreneur who is involved in investments across a variety of sectors including property, engineering, energy, services and entertainment. She was a key founding member of the consortium which formed the mobile telecommunications company, Mascom Wireless (Pty) Ltd. She has held executive positions in the same company for a number of years. Kate serves on a number boards including KBL, Sechaba, FSG Limited, where she also serves as Chairman of the Remuneration Committee. She is chairman on the boards of Maemo Cell Insurance (Pty) Ltd, Mobility (Pty) Ltd, Kgalagadi Beverages Trust, which was set up by Breweries Group of Companies for their corporate social responsibility strategy implementation.

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The Board of Directors

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J. PariK.C.MaphageL. MagangR.N. Matthews

The Management Team

Professional Advisors

Robert N. Matthews: Chairman. Robert is a fellow of the Institute of Chartered Accountants in England and Wales and the Botswana Institute of Chartered Accountants. He is also qualified as a Certfied Public Accountant (USA). He serves as chairman on several audit committees of private and public companies, and acts as an independent non-executive board member. A retired partner of PricewaterhouseCoopers Gaborone, in charge of audit and business advisory services, he has gained extensive professional and commercial experience in audit, taxation and business services. He currently offers consulting and advisory services to various organisations.Lesang Magang : Lead Independent Non-executive Director – see profile under “Board of Directors”Kate Maphage – see profile under “Board of Directors”Jacopo Pari – see profile under “Board of Directors”

Thuso OthomileProperty Manager

Tshiamo SananeAccountant

Abigail Morokotso Property Manager

Amanda EvansTenant Relationship Manager

Pusetso RaseokamoAssistant Centre Manager

Bellinah FilottoSpecial Projects Supervisor

Karabo KgengwenyaneAccountant

Chiseki ChisekiSenior Accountant

Eranse MookiProperty Manager

Jacopo PariChief Executive Officer

France MabiletsaFinancial Manager

Uzoma AnugomChief Operating Officer

Grant MoriChief Financial Officer

Secretaries /Transfer Secretaries Pricewaterhouse Coopers (Pty) Ltd Plot 50371 Fairground Office Park P O Box 294, Gaborone, BotswanaIndependent Auditor Deloitte & Touche Plot 64518, Fairground Office Park PO Box 778, Gaborone, BotswanaFinancial Advisors Capital Management Botswana Plot 61920, 1st Floor Block C Letsema Office Park, P O Box 202548 Bontleng

Property Managers/Asset ManagersProperty and Asset Management LimitedP O Box 405391, Gaborone, Botswana

Stockbrokers Stockbrokers Botswana Limited Ground floor, Letshego Place, Khama Crescent, Gaborone Bankers

First National Bank of Botswana LimitedBarclays Bank of Botswana Limited

Property ValuersWilly Kathurima AssociatesP O Box 58Gaborone

Legal AdvisorsNeill ArmstrongCollins Newman & Co.P O Box 882, Gaborone

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Audit and Risk Committee

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The directors present their annual report to the shareholders, together with the audited financial statements, for the year ended 31 December 2014.

Principal Activities and Business Review

RDC Properties Limited (“RDCP”) is a variable rate loan stock company publicly quoted, incorporated in Botswana and quoted publicly on the Botswana Stock Exchange. RDCP is a regional property business focused on deriving its revenue from the rental of investment properties and identifying development opportunities.

A detailed business review and future developments is included in the operating and financial review on pages 6 to 10.

Results for The Year

Details of the results for the year ended 31 December 2014 are set out in the statements of comprehensive income of the financial statements on page 23.

Subsidiaries

The details of the Company’s interest in property owning subsidiaries are set out in Note 7 to the financial statements.

Stated Capital

The 2013 second interim distribution paid in 2014 was offered with an option for 50% capitalisation. 991 588 linked units were listed on the Botswana Stock Exchange (BSE) on 18 April 2014.

The 2013 final distribution paid in 2014 was offered with an option for 50% capitalisation. 845 577 linked units were listed on the BSE on 25 July 2014.

Following the issue of the new capitalisation units, the total units of the Company in issue as at 31 December 2014 was 222,182,055 units (2013: 220,344,890 units).

Distribution to Unit Holders and Distribution Policy

The interest entitlement on every debenture is fixed at 50 times that of the dividend component of any distribution. The distribution, made bi-annually, varies with the operating performance of the Group. Details on the distributions are included in the operating and financial review on pages 6 to 10.

Distribution to Unit holders (thebe)

Interest Dividend Total 2014 Interim 8.15 0.16 8.31 Final 0.44 0.01 0.45 8.59 0.17 8.76

2013 Interim 5.88 0.11 5.99 Final 1.85 0.04 1.89 7.73 0.15 7.88

Change 11% 13% 11%

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Directors’ Report

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Directors and Secretary

In accordance with the section 17 of the Constitution of the Company, L. Magang, J. Pari and M. C. Tibone retire by rotation, and being eligible, offer themselves for re-election at the Annual General Meeting

Interests of Directors and Secretary

The directors and secretary who held office at 31 December 2014 had no interests, other than those shown below, in the shares of the Company or Group companies.

Held Directly Held Indirectly

G. R. Giachetti - 33,248,990

G. Giachetti - 54,792,354

J. Pari 145,094 -

L. Magang 99,316 -

K. Jefferies - -

K. C. Maphage - -

C. Tibone

Substantial Holdings

The directors have been notified of the following significant interests in the ordinary share capital of the Company at 31 December 2014.

Table Of Substantial Holdings

Major linked unit holders Number of Linked Units %

Realestate Financière SA 99,746,970 44.89

Chobe Financial Corporation 54,792,354 24.66

Aspera Holdings Limited 11,826,000 5.32

Directors’ Interests in Contracts

The following directors, G.R. Giachetti and G. Giachetti, have a beneficial interest in a material contract to which the Company or a subsidiary was a party during the year. Details of which are disclosed in the Corporate Governance Statement.

The Company has a service contract with Property and Asset Management Limited (PAM), details of which are disclosed in the Chairman’s Statement and in the Corporate Governance report. G. R. Giachetti, G. Giachetti, L. Magang and J. Pari are directors of PAM.

One of the directors, G. Giachetti has an indirect interest in the Group’s investment in a joint venture company, HMS1 Société Anonyme (HMS1).

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Directors’ Report (continued)

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Key Performance Indicators (KPI’s)

The Group considers the following measures as being important indicators of the underlying performance of the business:

Net Asset ValueThe key long-term financial objective for the Group is growth in its net asset value per linked unit.

Net Debt to Gross Property AssetsA second important financial objective of the Group is to establish and maintain an appropriate balance sheet structure that provides it with adequate funding to fulfil its medium to long term objectives while at the same time maintaining a prudent ratio of net debt to gross property assets.

Returns from investment and development propertiesA third important financial objective is to optimise returns from the Group’s property portfolio. For investment properties, this is achieved by concentrated asset management and retention of tenants to maximise rental yields. For development properties, it is accomplished through yielding up potential tenancies for new developments and cost control.

Financial Risk Management

The Group’s activities expose it to a variety of financial risks including interest rate, foreign currency, funding and credit risks. These financial risks are managed by the Board and reviewed by the Audit and Risk Committee, as described in Note 26 to the financial statements.

Principal Risks and Uncertainties

The principal risks and uncertainties that the Group faces are:

Property value: The performance of the Group is determined principally by the values of its property assets, which, in turn, are dependent on a variety of factors applying in the markets in which RDCP operates, including:- local economic conditions, as affected by government policy, legislation, economic

growth, interest rates and inflation, and- supply of and demand for property, and their impact on rental levels.

The values of individual properties are determined by their specific usage and locations, the quality of their tenants and the rents paid by them and by their potential for alternative usage or redevelopment. The property portfolio is independently valued every 3 years.

The board mitigates these risks by the employment of an expert professional management team, by adopting appropriate strategic objectives to be pursued (including sectoral and geographic diversification).

General financing: The current global economic environment has resulted in constraints on the availability of credit. Such financial conditions may affect the Group’s ability to raise further finance on acceptable terms. However, this will not affect its ability to face future financial obligations, loan repayments and operating expenses when they fall due.

Expansion and related funding: The Group’s ability to realise its business strategy is dependent on management’s ability to source new profitable property opportunities, to exploit the development opportunities within its property portfolio and to fund these as required. The board has mitigated these risks by the indirect appointment of a suitably qualified management team employed by PAM and by continuing to source appropriate financing arrangements to fund its plans.

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Directors’ Report (continued)

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Liquidity: Property assets are relatively illiquid. Such illiquidity will not affect the Group’s ability to vary its portfolio as the location and quality of the portfolio would enable the Company to dispose of or liquidate part of its portfolio in a timely manner and at satisfactory prices.

Currency: The Group presents its financial information in Pula. A significant proportion of its property portfolio is located in the Botswana and, consequently, a significant part of its rental income and a significant proportion of its property assets are denominated in Pula. The board has mitigated the risk by making sure that there is no mis-match between financing and expected income currency on all new developments.

Going Concern

After making inquiries, the directors are confident that the Group has adequate resources to continue in operational existence for the foreseeable future. In particular, in making such enquiries, the board has had regard to its current financing arrangements and its planned activities for the next 12 months. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

Auditor

In accordance with relevant section of the Companies Act, the auditor, Deloitte & Touche, will continue in office.

Subsidiaries and Equity Accounted Investees

Information on the Group’s significant subsidiaries and equity accounted investees is set out in Note 7 to the financial statements.

Responsibility Statement

We confirm to the best of our knowledge:(a) the financial statements, prepared in accordance with the International Financial Reporting

Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole; and

(b) the Chairman’s statement, the Operating and Financial review, the Key risks and uncertainties and the Directors’ report include fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Annual General Meeting

Notice of the 2014 Annual General Meeting is being sent along with this Annual Report. A Form of Proxy for use at the AGM is being sent along with this Annual Report.

On behalf of the board

G. R. Giachetti L. MagangExecutive Chairman Lead Independent Non-executive Director

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Directors’ Report (continued)

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The directors of RDCP are committed to maintaining high standards of corporate governance and remain committed to the principles of transparency, accountability and integrity.

RDCP supports the principles and provisions of the Botswana Stock Exchange Code on Corporate Governance and has undertaken to apply these in so far as appropriate and practical for a Company of its size. The following statement describes how RDCP is applying the Code in the governance of its business.

The Board of Directors

The board comprises seven directors, two executive directors and five non-executive directors, of which four are independent. Biographical details of the directors are set out on page 11.

The conduct of the Company’s operations is delegated to the executive management team, which is employed by Property and Asset Management Limited, within predefined authority limits. The board is ultimately responsible for the leadership and control of the Company.

The board agrees a schedule of regular meetings to be held in each calendar year and also meets on other occasions as necessary. There is a schedule of matters specifically reserved for decision at board meetings, as follows:

project management and all major development contracts.

Operation of the Board

The board meets regularly throughout the year. The directors receive quarterly management accounts and full board papers are sent to each member on a timely basis prior to each board meeting to enable them to discharge their duties. These papers include the minutes of meetings of the board.

An induction process is in place to familiarise new board members with the operations of the Group and with the procedures of the board.

Effective governance is achieved by the separation of the roles of the executive Chairman and the management team, as this division of responsibilities ensures a balance of power and authority. The executive Chairman has overall responsibility for ensuring that the Group achieves a satisfactory return on investment for unit holders. He oversees the orderly operation of the board and ensures appropriate interaction between it, executive management and the Company’s unit holders. The executive Chairman consults with the Lead Independent Non-executive Director on all matters where he might be conflicted. The Chief Executive Officer is responsible for developing and delivering the Group’s strategy and is accountable for its overall performance and day to day management.

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Corporate Governance Statement

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Attendance at scheduled board and relevant committee meetings during the year ended 31 December 2014:

No. of meetings eligible to attend

Attended Fees Paid in 2014

G. R. Giachetti 4 4 P24,500.00M. A. Giachetti 3 1 P13,000.00 G. Giachetti 4 2 P13,000.00K. A. Jefferis 4 4 P12,000.00L. Magang 4 3 P19,000.00K. C. Maphage 4 3 P19,000.00M. C. Tibone 4 2 P13,000.00J. Pari 4 4 P22,000.00

* K. A. Jefferis was appointed to the board on 18th March 2014** M. A. Giachetti passed away on 17th August 2014.

Terms of Appointment

Non-executive directors have been invited to join the board for a three year period, subject to re-election by unit holders as provided for in the Company’s Constitution.

The Board does not believe that the number of years that a person serves as a Director should be limited. Directors that have served for an extended period are able to provide valuable knowledge, and experience necessary to lead the Company and be re-elected.

The appointment and removal of the company secretary is a matter for the board. All directors have access to the advice and services of the company secretary.

Independence of Directors

All the directors bring independent judgement to bear in the course of performance of their duties.

In particular, the Board reviewed the position of G. R. Giachetti as Executive Chairman and determined that, despite his executive role, it is confident that the effective separation of duties exists with the Management Team. The Board has appointed Mr. L. Magang as the Lead Independent Non-executive Director, to assist the Executive Chairman in this regard. The Chairman executed his powers in an independent manner throughout the financial year, discharges his duties in a consistently independent manner and constructively and appropriately challenges the executive management team and the board.

Board CommitteesThe Board has established a formal sub-committee.

Audit and Risk Committee The purpose of the Audit and Risk committee is to oversee the financial reporting processes, assurance and finance functions and external audit process of RDCP. The Audit and Risk committee, is composed of three members, the Chairman, who is not a director of the Company and is an independent advisor. He is assisted by three directors, one executive and two non-executive independent members of the Board. Ms. K. C. Maphage was appointed to the Audit and Risk committee during the year. The committee meets three times a year and reports are issued to the Board.

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Corporate Governance Statement (continued)

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Attendance at scheduled Audit and Risk committee meeting during the year ended 31 December 2014:

Attended Fees paid in 2014

R. N. Matthews 2 P25,000.00

L. Magang 2 P6,000.00

K. C. Maphage - -

J. Pari 2 -

Remuneration/Nominations CommitteeThe board plans for its own succession. In view of the current size of the Company, and the fact that no one is employed by the Company, the board has not established these committees.

Directorships, and where appropriate, senior management appointments are considered and recommended by the board.

AuditorThe auditor is permitted to provide non-audit services that are not in conflict with auditor independence where they are considered by the board to be the most appropriate to provide the services in the best interests of the Company.

The external auditors have full and unrestricted access to all information of the Company.

Internal ControlsThe board has overall responsibility for the Group’s system of internal control and for monitoring its effectiveness. The system of internal control applied by the Company is designed to allow reasonable but not absolute assurance against material misstatement or loss.

On a regular basis, the board receives reports on the key Issues affecting the business of the Company.

The Company’s Annual General Meeting affords individual unit holders the opportunity to question the chairman and members of the board. Notice of the Annual General Meeting is sent to unit holders at least 21 calendar days before the meeting. At the meeting, after each resolution has been dealt with, details are given of the number of proxies lodged, together with details of votes cast for and against each resolution.

Fees for non-executive directors are determined by the board on an annual basis.

Service contracts and letters of appointment

The Company has a service contract with Property and Asset Management Limited (PAM), details of which are disclosed in the Chairman’s Statement and in the Directors reports.

G. R. Giachetti, G. Giachetti, L. Magang and J. Pari are directors of PAM, which is the company providing property management, accounting and secretarial services to RDCP. The appointment of PAM is reviewed by the Board on a regular basis and both competitiveness and quality of the services are openly discussed.

One of the directors, G. Giachetti has an indirect interest in the Group’s investment in a joint venture company, HMS1 SA.

G. R. Giachetti and G. Giachetti are directors of ICC, which is among the civil engineering companies providing construction services to the Group. The appointment of ICC, for any construction contracts, is reviewed by the Board on a case by case basis and generally after recommendation from an independently appointed consulting team managing the entire contractual process, who are in control of a negotiation, or a completely transparent tendering process.

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Corporate Governance Statement (continued)

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Directors’ Responsibility Statement and Approval of Annual Financial Statements31 December 2014

Directors’ responsibility statementThe directors are responsible for the preparation and fair presentation of the group annual financial statements and annual financial statements of RDC Properties Limited, which comprise the consolidated and separate statements of financial position as at 31 December 2014, and the consolidated and separate statements of comprehensive income, the consolidated and separate statements of changes in equity and consolidated and separate statements of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards (“IFRS”). The directors are required by the Companies Act of Botswana (Companies Act, 2003) to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is their responsibility to ensure that the company and group annual financial statements fairly present the state of affairs of the company and group as at the end of the financial year and the results of their operations and cash flows for the year then ended, in conformity with IFRS. The external auditors are engaged to express an independent opinion on the group annual financial statements and annual financial statements. The directors’ responsibility includes: designing, implementing and maintaining internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. The group annual financial statements and annual financial statements are prepared in accordance with IFRS and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The directors’ responsibility also includes maintaining adequate accounting records and an effective system of risk management as well as the preparation of the supplementary schedules included in the annual financial statements. The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the group and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the group and all employees are required to maintain the highest ethical standards in ensuring the group’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the group is on identifying, assessing, managing and monitoring all known forms of risk across the company. While operating risk cannot be fully eliminated, the group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The directors have made an assessment of the group’s ability to continue as a going concern and there is no reason to believe the business will not be a going concern in the year ahead. The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss. The external auditors are responsible for independently reviewing and reporting on the group’s annual financial statements and annual financial statements, which were examined by the external auditors and their unmodified report is presented on page 22. Approval of the annual financial statementsThe group annual financial statements and annual financial statements set out on pages 23 to 50 which have been prepared on the going concern basis, were approved by the board on 25 March 2015 and were signed on its behalf by:

Chairman Director

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Report on the Annual Financial StatementsWe have audited the accompanying group annual financial statements and annual financial statements of RDC Properties Limited, which comprise the consolidated and separate statements of financial position as at 31 December 2014, and the consolidated and separate statements of comprehensive income, the consolidated and separate statements of changes in equity and consolidated and separate statements of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 23 to 50.

Directors’ Responsibility for the Financial StatementsThe Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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 and separate financial statements give a true and fair view of the consolidated and separate financial position of RDC Properties Limited as at 31 December 2014, and its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards.

Deloitte & Touche GaboroneCertified Auditors 25 March 2015Practicing Member: M Bardopoulos (20090042)

Independent Auditor’s Report to the Members of RDC Properties Limited

Deloitte & ToucheAssurance & Advisory Ser-vicesCertified Public Accountants(Botswana)Deloitte & Touche HousePlot 64518Fairgrounds Office ParkGaboroneBotswana

Tel: +(267) 395 1611Fax: +(267) 397 3137www.deloitte.com

PO Box 778GaboroneBotswana

National Executive: LL Bam Chief Executive AE Swiegers Chief Operating Officer GM Pinnock AuditDL Kennedy Risk Advisory NB Kader Tax TP Pillay Consulting K Black Clients & IndustriesJK Mazzocco Talent & Transformation CR Beukman Finance M Jordan Strategy S Gwala Special ProjectsTJ Brown Chairman of the Board MJ Comber Deputy Chairman of the BoardResident Partners: M Marinelli Senior Partner FC Els P Naik CV Ramatlapeng M Bardopoulos

A full list of the partners and directors is available on request

Member of Deloitte Touche Tohmatsu Limited

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Group Company Notes 2014 2013 2014 2013 P’000 P’000 P’000 P’000 Revenue 78 130 71 620 41 558 28 033Contractual lease rental revenue 1 81 057 66 167 41 966 28 389Straight line rental adjustment (2 927 ) 5 453 (408 ) (356 )

Operating expenses (23 545 ) (19 204 ) (12 244 ) (9 989 )

Income arising from joint venture 2 416 1 152 - -Share of profit/(loss) in a joint venture 29 4 071 (2 726 ) - -Net foreign exchange (losses)/gains relating toamounts owing from the joint venture 2 (1 655 ) 3 878 - -

Other foreign exchange gains/(losses) 2 1 142 78 (3 ) 70

Other operating income 121 393 - 249Profit from operations before fair value adjustments 58 264 54 039 29 311 18 363Surplus arising on revaluation of properties 77 924 63 253 45 029 47 406Net valuation 74 997 68 706 44 621 47 050Adjusted for straight line rental adjustment 2 927 (5 453 ) 408 356

Profit from operations 2 136 188 117 292 74 340 65 769Investment income 3 1 460 2 010 1 962 2 593Finance costs 4 (22 269 ) (22 315 ) (10 130 ) (10 006 )

Profit before tax 115 379 96 987 66 172 58 356

Income tax expense 5 (14 334 ) (13 980 ) (10 045 ) (2 106 )

Profit for the year 101 045 83 007 56 127 56 250

Other comprehensive income

Items that may be subsequentlyclassified to profit or lossExchange differences on translation of foreignoperations 927 (1 518 ) - -Total comprehensive income for the year 101 972 81 489 56 127 56 250

Profit attributable to:

Owners of the company 82 142 70 930 56 127 56 250Non-controlling interests 18 903 12 077 - -

101 045 83 007 56 127 56 250

Total comprehensive income attributable to:

Owners of the company 83 069 69 412 56 127 56 250 Non-controlling interests 18 903 12 077 - -

101 972 81 489 56 127 56 250

Interest to dividend ratio 50:1 50:1 50:1 50:1

Number of linked units in issue at year end 222 182 055 220 344 889Average number of linked units in issue 221 273 994 179 675 052Earnings per linked unit (thebe) 39.02 41.26

Earnings per linked unit is calculated based onthe average number of linked units in issue and profitfor the year attributable to the owners of the Companyadjusted by the taxation on debenture interest creditedto statement of changes in equity of: 86 344 74 137

Distribution per linked unitDistribution per linked unit (thebe) 8.76 7.88Interest per linked unit (thebe) 8.59 7.73Dividend per linked unit (thebe) 0.17 0.15

Distribution per linked unit is calculated on the number of linked units in issue at date of distribution.

Statements of Comprehensive Income for the year ended 31 December 2014

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Group Company Notes 2014 2013 2014 2013 P’000 P’000 P’000 P’000

ASSETS

Non-current Assets

Property, plant and equipment 6 1 295 1 444 60 66Investments 7 - - 112 468 110 126Investment in a joint venture 29 22 548 16 145 - -Investment properties 8 925 485 840 253 463 622 411 413At fair value 8 931 908 849 603 465 208 413 407Rental receivable - straight line rental adjustment 8 (6 423 ) (9 350 ) (1 586 ) (1 994 ) Intangible asset 9 1 000 1 000 - -Trade and other receivables 10 7 373 - - -Rental receivable - straight line rental adjustment 8 6 251 8 788 1 414 1 550

963 952 867 630 577 564 523 155

Current Assets

Trade and other receivables 10 24 597 25 766 20 468 16 470Rental receivable - straight line adjustment 8 172 562 172 444Current tax assets 360 685 222 347Cash and cash equivalents 11 4 470 3 188 1 021 643 29 599 30 201 21 883 17 904

Total Assets 993 551 897 831 599 447 541 059

EQUITY AND LIABILITIES

Capital and ReservesStated capital 12 77 028 74 346 77 028 74 346Debentures 13 71 098 70 510 71 098 70 510Accumulated profits 14 390 153 323 295 307 491 266 648Debenture interest and dividend reserve 15 13 308 8 959 13 308 8 959Foreign currency translation reserve (2 541 ) (3 468 ) - -

Equity attributable to owners of the parent 549 046 473 642 468 925 420 463Non-controlling interests 16 136 928 118 025 - -

Total equity 685 974 591 667 468 925 420 463

Non-current LiabilitiesLong term borrowings 17 212 602 222 851 86 805 86 011Deferred tax liabilities 18 44 961 35 544 17 077 11 234

257 563 258 395 103 882 97 245

Current Liabilities Trade and other payables 19 18 524 18 746 10 584 9 478Bank overdraft 20 14 214 12 208 10 553 8 314Current portion of long term borrowings 17 16 767 16 355 5 503 5 559Current tax liabilities 509 460 - -

50 014 47 769 26 640 23 351

Total Equity and Liabilities 993 551 897 831 599 447 541 059

Statements of Financial Positionas at 31 December 2014

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Debenture Foreign interest and Non- currency Attributable Stated Accumulated dividend distributable translation to owners Non-controllingGroup Notes capital Debentures profits reserve reserve reserve of the parent interests Total P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000 P’000

Balance at 1 January 2013 8 944 66 750 272 923 7 623 41 (1 950 ) 354 331 129 863 484 194

Capitalisation issue of linked units 12 & 13 1 364 473 - - - - 1 837 - 1 837Transfer from non-distributable reserve - - 41 - (41 ) - - - -Effect of the amalgamation of Tholo Group 28 9 335 2 334 4 649 - - - 16 318 (22 411 ) (6 093 )Effect of the acquisition of the propertyLease No. Area 4-RO 28 44 525 11 131 (13 585 ) - - - 42 071 - 42 071Reorganisation of stated capital and debentures 28 10 178 (10 178 ) - - - - - - - 74 346 70 510 264 028 7 623 - (1 950 ) 414 557 107 452 522 009

Profit for the year - - 70 930 - - - 70 930 12 077 83 007Other comprehensive income for the year - - - - - (1 518 ) (1 518 ) - (1 518 )Total comprehensive income for the year - - 70 930 - - (1 518 ) 69 412 12 077 81 489

Debenture interest declared and proposed 15 - - (14 577 ) 14 577 - - - - -Taxation attributable to debenture interest 5 - - 3 207 - - - 3 207 - 3 207Debenture interest paid - - - (13 269 ) - - (13 269 ) - (13 269 )Dividends declared and proposed 15 - - (293 ) 293 - - - - -Dividends paid - - - (265 ) - - (265 ) - (265 )Dividends paid to non-controlling interests - - - - - - - (1 148 ) (1 148 )Net loans repaid to non-controlling interests - - - - - - - (356 ) (356 )Balance at 31 December 2013 74 346 70 510 323 295 8 959 - (3 468 ) 473 642 118 025 591 667

Capitalisation issue of linked units 12 & 13 2 682 588 - - - - 3 270 - 3 270 77 028 71 098 323 295 8 959 - (3 468 ) 476 912 118 025 594 937

Profit for the year - - 82 142 - - - 82 142 18 903 101 045Other comprehensive income for the year - - - - - 927 927 - 927Total comprehensive income for the year - - 82 142 - - 927 83 069 18 903 101 972

Debenture interest declared and proposed 15 - - (19 100 ) 19 100 - - - - -Taxation attributable to debenture interest 5 - - 4 202 - - - 4 202 - 4 202Debenture interest paid - - - (14 839 ) - - (14 839 ) - (14 839 )Dividends declared and proposed 15 - - (386 ) 386 - - - - -Dividends paid - - - (298 ) - - (298 ) - (298 )Balance at 31 December 2014 77 028 71 098 390 153 13 308 - (2 541 ) 549 046 136 928 685 974

COMPANYBalance at 1 January 2013 8 944 66 750 209 339 7 623 - - 292 656 - 292 656

Capitalisation issue of linked units 12 & 13 1 364 473 - - - - 1 837 - 1 837Effect of the amalgamation of Tholo Group 28 9 335 2 334 26 307 - - - 37 976 - 37 976Effect of the acquisition of the propertyLease No. Area 4-RO 28 44 525 11 131 (13 585 ) - - - 42 071 - 42 071Reorganisation of stated capital and debentures 28 10 178 (10 178 ) - - - - - - - 74 346 70 510 222 061 7 623 - - 374 540 - 374 540

Profit for the year - - 56 250 - - - 56 250 - 56 250Total comprehensive income for the year - - 56 250 - - - 56 250 - 56 250

Debenture interest declared and proposed 15 - - (14 577 ) 14 577 - - - - -Taxation attributable to debenture interest 5 - - 3 207 - - - 3 207 - 3 207Debenture interest paid - - - (13 269 ) - - (13 269 ) - (13 269 )Dividends declared and proposed 15 - - (293 ) 293 - - - - -Dividends paid - - - (265 ) - - (265 ) - (265 )Balance at 31 December 2013 74 346 70 510 266 648 8 959 - - 420 463 - 420 463

Capitalisation issue of linked units 12 & 13 2 682 588 - - - - 3 270 - 3 270 77 028 71 098 266 648 8 959 - - 423 733 - 423 733

Profit for the year - - 56 127 - - - 56 127 - 56 127Total comprehensive income for the year - - 56 127 - - - 56 127 - 56 127

Debenture interest declared and proposed 15 - - (19 100 ) 19 100 - - - - -Taxation attributable to debenture interest 5 - - 4 202 - - - 4 202 - 4 202Debenture interest paid - - - (14 839 ) - - (14 839 ) - (14 839 )Dividends declared and proposed 15 - - (386 ) 386 - - - - -Dividends paid - - - (298 ) - - (298 ) - (298 )Balance at 31 December 2014 77 028 71 098 307 491 13 308 - - 468 925 - 468 925

Statements of Changes in Equity for the year ended 31 December 2014

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Group Company Notes 2014 2013 2014 2013 P’000 P’000 P’000 P’000

Cash flows from operating activities

Profit from operations 136 188 117 292 74 340 65 769Amortisation of other investments - 129 - 129Share of income in a joint venture, net of foreign exchange differences (2 416 ) (1 152 ) - -Depreciation 149 117 6 6Surplus arising on revaluation of investment properties (74 997 ) (68 706 ) (44 621 ) (47 050 )Operating income before working capital changes 58 924 47 680 29 725 18 854Changes in working capital: - Increase in trade and other receivables (6 617 ) (8 023 ) (3 998 ) (7 837 ) - (Decrease)/increase in trade and other payables (392 ) (2 902 ) 1 106 41Taxation (paid)/recovered (341 ) (969 ) 125 107Net cash generated from operating activities 51 574 35 786 26 958 11 165

Cash flows from investing activitiesEffect of amalgamation and acquisition 28 - - - 24Contributions to joint venture (2 342 ) (3 358 ) - -Purchase of property, plant and equipment - (49 ) - (49 )Investment property additions during the year (7 308 ) (12 103 ) (7 180 ) (11 884 )Proceeds from disposal of investment properties held as assets classified as held for sale - 26 400 - 26 400Interest income 3 1 460 1 403 1 042 1 312Investment income 3 - 607 - 607Movement in investments - - (2 342 ) (3 270 )Dividend income 3 - - 920 674Net cash (used in)/generated from investing activities (8 190 ) 12 900 (7 560 ) 13 814

Cash flows from financing activitiesDividends paid (298 ) (265 ) (298 ) (265 )Debenture interest paid (14 839 ) (13 269 ) (14 839 ) (13 269 )Finance costs (22 269 ) (22 315 ) (10 130 ) (10 006 )Long term loans raised 4 320 - 4 320 -Long term loans repaid (14 157 ) (11 487 ) (3 582 ) (1 449 )Issue of ordinary shares 2 682 1 364 2 682 1 364Issue of debentures 588 473 588 473Dividends paid to non-controlling interests 16 - (1 148 ) - -Amounts received from non-controlling interests 16 - 94 - -Amounts repaid to non-controlling interests 16 - (450 ) - -Net cash used in financing activities (43 973 ) (47 003 ) (21 259 ) (23 152 )

Net movement in cash and cash equivalents (589 ) 1 683 (1 861 ) 1 827Cash and cash equivalents at beginning of year (9 020 ) (10 639 ) (7 671 ) (9 498 )Effects of exchange rate on the cash held in foreigncurrencies (135 ) (64 ) - -Cash and cash equivalents at end of year (9 744 ) (9 020 ) (9 532 ) (7 671 )

Consisting of:Cash and bank balances 4 470 3 188 1 021 643Bank overdraft (14 214 ) (12 208 ) (10 553 ) (8 314 ) (9 744 ) (9 020 ) (9 532 ) (7 671 )

Statements of Cash Flowsas at 31 December 2014

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Presentation of financial statements These financial statements are presented in Pula (P) as that is the currency of Botswana and the functional currency of the Group’s operations.  Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).  Adoption of new and revised International Financial Reporting Standards In the current year, the Group has adopted the following revised Standards of the International Accounting Standards Board (the IASB) that

are relevant to its operations and effective for annual reporting periods beginning on or before 1 January 2014:

There have been no significant changes to the financial results of the Group arising from the adoption of the revised standards and new interpretations.

IFRS 10, 12 and IAS 27 - Amendments to IFRS 10, IFRS 12 and IAS 27: Investment Entities

IAS 32 - Amendment to IAS 32 Financial instruments: Presentation – offsetting financial instruments. The amendment clarified that the rights to offset must be legally enforceable during normal operations or in the event of default and must not be contingent on a future event.

IAS 36 - Amendment to IAS 36 Recoverable amount disclosures for non-financial assets. The amendment removes the requirement to disclose recoverable amounts for each cash generating unit or intangible assets with indefinite useful lives allocated to that unit which were significant when compared to the total carrying amount of goodwill and intangibles held by an entity. In addition, the fair value measurement for assets impaired whose recoverable amount is based on fair value less costs of disposal are now required to be disclosed, as well as discount rates used to determine fair value when a present value technique is used.

International Financial Reporting Standards in issue but not yet effective At the date of approval of these financial statements, the following applicable Standards were in issue but not yet effective:

- IFRS 3 Business Combinations (Amendments resulting from Annual Improvements Cycles 2010-2012 and 2011-2013) (effective for annual periods beginning on or after 1 July 2014);

- IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (Amendments resulting from September 2014 Annual Improvements to IFRSs) (effective for annual periods beginning on or after 1 January 2016);

- IFRS 7 Financial instruments: Disclosures (Amendments resulting from September 2014 Annual Improvements to IFRSs) (effective for annual periods beginning on or after 1 January 2016);

- IFRS 9 Financial instruments (New standard) (effective for annual periods beginning on or after 1 January 2018);

- IFRS 15 Revenue from Contracts with Customers (New standard) (effective for annual periods beginning on or after 1 January 2017);

- IAS 16 Property, Plant and Equipment (Amendments resulting from Annual Improvements 2010-2012 Cycle) (effective for annual periods beginning on or after 1 July 2014);

- IAS 24 Related Party Disclosures (Amendments resulting from Annual Improvements 2010-2012 Cycle (management entities)) (effective for annual periods beginning on or after 1 July 2014);

- IAS 34 Interim Financial Reporting (Amendments resulting from September 2014 Annual Improvements to IFRSs) (effective for annual periods beginning on or after 1 January 2016); and

- IAS 40 Investment Property (Amendments resulting from Annual Improvements 2011-2013 Cycle (interrelationship between IFRS 3 and IAS 40)) (effective for annual periods beginning on or after 1 July 2014).

The impact, if any, of the new and revised standards and interpretations in issue but not yet effective has not yet been evaluated.

Basis of accounting The financial statements have been prepared on the historical basis, except for the revaluation of investment properties and certain financial

instruments carried at fair value. The principal accounting policies, which have been consistently followed in all material respects, are set out below.

  Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities)

controlled by the Company and its subsidiaries. Control is achieved when the Company has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; potential voting rights held by the Company, other vote holders or other parties; rights arising from other contractual arrangements; and any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Significant Accounting Policies31 December 2014

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Significant Accounting Policies (Continued)31 December 2014

Basis of consolidation (continued) Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control

of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Changes in the Group’s ownership interests in existing subsidiaries Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted

for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between the aggregate of the fair value of the consideration received and the fair value of any retained interest and the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurement, when applicable, the cost on initial recognition of an investment in an associate or a joint venture.

  Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the group and the revenue can be reliably

measured. Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer credits, rebates and other similar allowances.

  Rental income Rental income from operating leases is recognised in the statements of comprehensive income on a straight line basis over the term of

relevant leases. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on the straight line basis over the lease term.

  The change in fair value of investment properties is offset against the rental straight line adjustment in the statements of comprehensive

income.

Other operating revenue Other operating revenue comprises utility expenses, service levies and other costs recovered from tenants.  Interest Interest is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable, which is the rate that

exactly discounts estimated future cash receipts through the expected life of the financial asset to the asset’s net carrying amount.

Investments in associates and joint ventures An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and

operating policy decision of the investee but is not control or joint control over these policy decisions.   A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint

arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

  The results and assets and liabilities of associates or joint venture are incorporated in the consolidated financial statements using the equity

method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, an investment in an associate or a joint venture is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associate or joint venture. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate or joint venture (which includes any long-term interest that, in substance, forms part of the Group’s net investment in the associate or joint venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payment on behalf of the associate or joint venture.

  An investment in an associate or joint venture is accounted for using the equity method from the date on which the investee becomes an

associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired.

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Significant Accounting Policies (Continued)31 December 2014

  Investments in associates and joint ventures (continued) The requirements of IAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s

investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less cost to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

  The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture, or

when the investment is classified as held for sale. When the Group retains an interest in the former associate or joint venture and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with IAS 39. The difference between the carrying amount of the associate or joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or joint venture is included in the determination of the gain or loss on the disposal of the associate or joint venture. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate or joint venture on the same basis as would be required if the associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued.

  The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment

in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests.  When the Group reduces its ownership interest in an associate or a joint venture but the Group continues to use the equity method, the Group

reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to the reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities.

  When a Group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the

associate or joint venture are recognised in the Group’s consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group.

  Interests in joint operations A joint venture operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and

obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

  When a group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its interest in a joint

operation: 

  The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the IFRSs

applicable to the particular assets, liabilities, revenues and expenses.  When a Group entity transacts with a joint operation in which a group entity is a joint operator (such a sale or contribution of assets), the

Group is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions are recognised in the Group’s consolidated financial statements only to the extent of other parties’ interests in the operation.

  When a Group entity transacts with a joint operation in which a group entity is a joint operation (such as a purchase of assets), the Group does

not recognise its share of the gains and losses until it resells those assets to a third party.

Non-current assets held for sale Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale

transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

Financial instruments Financial assets and financial liabilities are recognised on the statements of financial position when the Group and the Company become party

to the contractual provisions of the instrument.

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Significant Accounting Policies (Continued)31 December 2014

Financial instruments (continued) Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue

of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

  Financial assets  Loans and receivables Trade receivables, related company balances and other receivables that have fixed or determinable payments that are not quoted in an active

market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

  Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the

relevant period. The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected life of the financial asset, or, where appropriate, a shorter period.

Interest income is recognised on an effective interest basis for financial assets.

Cash and cash equivalents Cash and cash equivalents are defined as cash on hand, demand deposits and short term highly liquid investments readily convertible to

known amounts of cash and subject to insignificant risk of changes in value.

Impairment of financial assets Trade receivables are assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could

include the Group’s or Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

Before accepting any new tenant, the Group and Company assesses the potential credit quality, and obtains surety as a measure of protection against possible default in future payments.

  The management frequently reviews and identifies the receivables where recovery could be doubtful, based on factors such as past track

record and possibilities of recovery in future. Additional security is also obtained, and payment plans are put in place for debtors who are identified as untimely payers.

   Trade and other receivables, which generally have 30 to 90 day terms, are recognised and carried at original invoice amount less impairment

losses. Impairment losses are recognised in the statements of comprehensive income when collection of the full amount is no longer probable. Impairment losses are written off as incurred.

  Derecognition of financial assets The Group and the Company derecognise a financial asset only when the contractual rights to the cash flows from the asset expire; or it

transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group or Company neither transfer nor retain substantially all the risks and rewards of ownership and continue to control the transferred asset, they recognise their retained interest in the asset and an associated liability for amounts they may have to pay. If the Group or Company retain substantially all the risks and rewards of ownership of a transferred financial asset, they continue to recognise the financial asset and also recognise a collateralised borrowing for the proceeds received.

On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

  Financial liabilities The Group’s and the Company’s significant financial liabilities include interest bearing loans, related companies balances and trade and other

payables, which have been classified as other financial liabilities.  Interest bearing loans are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at

amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.  The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the

relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

  Equity and debt instruments, which comprise the stated capital and the variable rate unsecured debentures, are recorded at the proceeds

received net of direct issue costs.

Derecognition of financial liabilities The Group and the Company derecognise financial liabilities when, and only when, their obligations are discharged, cancelled or they expire.  Gains and losses on subsequent measurement of financial instruments Gains and losses arising from a change in the fair value of financial instruments are included in the statements of comprehensive income in

the period in which the change arises. 

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Significant Accounting Policies (Continued)31 December 2014

Financial liabilities (continued) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the statements of financial position when the Group and the

Company have a legally enforceable right to set off the recognised amounts, and intend either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Investments All current investments are reported at cost less accumulated impairment losses.   Debenture interest and dividends Debenture interest and dividends proposed after the financial position date are shown as a component of equity.  Investment properties Investment properties are held to earn rentals and for capital appreciation. Investment properties are initially measured at cost, including

transaction costs. Subsequent to initial recognition, investment properties are stated at their fair values at each statement of financial position date. Gains or losses arising in changes to fair value of investment properties are recognised in the statements of comprehensive income in the period in which they arise.

Property, plant and equipment Properties in the course of construction are reflected as capital work in progress and are carried at cost, less any recognised impairment loss.

Cost includes professional fees and, for qualifying assets, borrowing costs are capitalised in accordance with the Group’s and the Company’s accounting policies. Completed properties, plant and equipment (excluding investment properties) are stated in the statements of financial position at cost less accumulated depreciation and any impairment losses. The methods of depreciation, useful lives and residual values are reviewed annually.

  Depreciation is calculated on the straight line basis to write off the cost of each asset to its residual value over its estimated useful life as

follows:  Leasehold buildings 20 - 50 years Furniture and equipment 2 - 10 years  The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the

sales proceeds, and the carrying amount of the asset and is recognised in the statements of comprehensive income.  Intangible assets Intangible assets acquired separately are reported at cost less accumulated impairment losses. The intangible asset has been assessed as

having an indefinite useful life. As such, the intangible asset is not amortised. The estimated useful life is reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

Impairment of tangible and intangible assets other than goodwill At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there

is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Taxation Tax expense comprises current and deferred tax.

Current tax The charge for current tax is based on the results for the year as adjusted for items which are non assessable or disallowed. It is calculated

using tax rates that have been enacted or substantively enacted at the statements of financial position date. 

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Significant Accounting Policies (Continued)31 December 2014

Taxation (continued) Deferred tax Deferred tax is accounted for using the statement of financial position liability method in respect of temporary differences arising from

differences between the carrying amount of assets and liabilities in the financial statements and corresponding tax basis used for computation of taxable profit.

  Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that

it is probable that taxable profits will be available against which deductible temporary differences can be utilised.  Deferred tax is calculated at the rates that are expected to apply when the asset is realised or the liability settled. Deferred tax is charged or

recognised in the statements of comprehensive income. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis.

  The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no

longer probable that sufficient taxable profit will be available to allow all or a part of the asset to be recovered.

For the purposes of measuring deferred tax liabilities and deferred tax assets for investment properties that are measured using the fair value model under IAS 40 Investment Property, the carrying amounts of such properties are presumed to be recovered through sale, unless the presumption is rebutted. The presumption is rebutted when the investment property is depreciable and is held within a business model of the Group whose business objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale. If the presumption is rebutted, deferred tax liabilities and deferred tax assets for such investment properties are measured in accordance with the above general principles set out in IAS 12 Income Taxes (i.e. based on the expected manner as to how the properties will be recovered).

Current and deferred tax for the year Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income

or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Foreign currency Foreign currency transactions are accounted for at exchange rates prevailing at the date of the transaction. Gains and losses resulting from

the settlement of such transactions are recognised in the statements of comprehensive income.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the rates ruling on the statements of financial position date. Gains and losses arising on retranslation are dealt with in the statements of comprehensive income.

  On consolidation, the assets and liabilities of the group’s overseas operations are translated at exchange rates prevailing at the statements of

financial position date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the group’s foreign currency translation reserve. Such translation differences are recognised in the group statement of comprehensive income in the period in which the operation is disposed of.

Provisions Provisions are recognised when the group and the company have a present legal or constructive obligation as a result of past events and it

is probable that an outflow of economic benefits will be required to settle the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When 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 (where the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Borrowing costs Borrowing costs directly attributable to the acquisition or construction of qualifying assets, which are assets that necessarily take asubstantial

period of time to get ready for their intended use or sale, are capitalised as part of the cost of that asset until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowings costs eligible for capitalisation.

Other borrowing costs are recognised as an expense in the period in which they are incurred. 

Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the

lessee. All other leases are classified as operating leases.   The group as lessor Amounts due from lessees under finance leases are recorded as receivables at the amount of the group’s net investment in the leases.

Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the company’s net investment outstanding in respect of the leases.

 

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Significant Accounting Policies (Continued)31 December 2014

Leasing (continued) The group as lessor (continued) Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in

negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

  The group as lessee Assets held under finance leases are initially recognised as assets of the group and the company at their fair value at the inception of the

lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statements of financial position as a finance lease obligation.

Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the statements of comprehensive income. Contingent rentals are recognised as expenses in the periods in which they are incurred.

  Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis

is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

  In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate

benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Critical accounting judgements and key sources of estimation uncertainty In the application of the group’s accounting policies management is required to make judgements, estimates and assumptions about the

carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

  The following are the key assumptions concerning the future and other sources of estimation uncertainty at the reporting date, that have a

significant risk of causing a material adjustment to the carrying amounts within the next financial year:  Fair value of investment properties The directors use their judgement in selecting an appropriate valuation technique for the investment properties. Investment properties are

valued using a discounted cash flow analysis based on assumptions supported, where possible, by observable market prices.

Deferred taxation on investment properties For the purposes of measuring deferred tax liablities or deferred tax assets from investment properties that are measured using the fair value

model in IAS 40, the directors have reviewed that the Group’s investment property portfolio and concluded that the Group’s investment properties are not held under a business model whose objective is to consume substantially all the economic benefits embodied in the investment properties over time, rather than through sale. Therefore, in determining the Group’s deferred taxation on investment properties, the directors have determined that the presumption set out in IAS 12 that investment properties measured using the fair value model are recovered through sale is not rebutted.

Impairment of investments and assets The directors have reviewed the investments and assets and considered if any impairment is necessary based on review of net asset value,

current market value and discounted cash flows.

Provision for doubtful debt The Group provides, as doubtful debt, for past due and impaired trade receivables based on estimated irrecoverable amounts determined by

reference to past track records and possibilities of recovery in future.

Useful lives and residual values of property, plant and equipment The Group reviews the estimated useful lives and residual values of property, plant and equipment at the end of each annual reporting period.   Recoverability of intangible asset The Group acquired an indefinite license to build and operate a hotel in the Central Business District in Gaborone, Botswana. The directors

have reviewed the intangible asset for impairment and have concluded that the asset is not impaired. 

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Notes to the Financial Statements31 December 2014

Group Company

2014 2013 2014 2013 P’000 P’000 P’000 P’000

1. Contractual lease rental revenue

Revenue comprises rental income and service charges recovered from tenants.

Rental income 73 848 60 112 40 035 27 285 Service charges recovered 7 209 6 055 1 931 1 104 81 057 66 167 41 966 28 389

2. Profit from operations

Profit from operations is stated after taking into account the following:

Auditor’s remuneration - audit fee 388 369 258 243 - other services 37 160 18 160 Amortisation of other investments - 129 - 129 Depreciation 149 117 6 6 Directors’ emoluments (note 21) - for services as directors 145 78 145 78 Management and administration fee paid to related company (note 21) 4 938 3 715 2 824 1 654 Lease renewal fees paid to related company (note 21) 268 129 122 129

Movement in provision for doubtful debt 2 360 1 508 513 1 202 Repairs and maintenance on investment properties 1 821 1 839 1 403 1 251 Service charges paid to related company (note 21) 2 210 1 381 2 210 1 381

Foreign exchange losses/(gains) - related to a loan and receivable 1 655 (3 878 ) - - owing from a joint venture - other (1 142 ) (78 ) 3 (70 ) 513 (3 956 ) 3 (70 )

3. Investment income

Interest income: - bank 8 330 1 10 - on overdue accounts 314 490 53 - - on non-current trade receivables 874 - - - - related parties and intercompany (note 21) 264 583 988 1 302 1 460 1 403 1 042 1 312 Share of the net income from Chobe Marina Lodge (Proprietary) Limited - 607 - 607 Dividends received - - 920 674 1 460 2 010 1 962 2 593

4. Finance costs

Interest payable - bank 1 565 815 1 067 599 - related parties (note 21) 281 217 - - - long term borrowings 20 423 21 283 9 063 9 407 22 269 22 315 10 130 10 006

5. Income tax expense

Normal taxation 715 1 218 - - Prior year under provision - 22 - - Total normal taxation 715 1 240 - - Deferred taxation -current year (excluding capital gains tax) 3 275 2 426 (345 ) (3 874 ) -capital gains deferred tax 9 342 7 491 6 188 2 773 -prior year over provision (3 200 ) (384 ) - - 10 132 10 773 5 843 (1 101 )

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Notes to the Financial Statements (Continued)31 December 2014

Group Company

2014 2013 2014 2013 P’000 P’000 P’000 P’000

5. Income tax expense (continued)

Income tax expense comprises:

Charged to statement of comprehensive income 14 334 13 980 10 045 2 106 Attributable to debenture interest credited to statement of changes in equity (4 202 ) (3 207 ) (4 202 ) (3 207 ) 10 132 10 773 5 843 (1 101 )

The charge for the year can be reconciled to the profit per income statement as follows: % % % % Tax reconciliation: Tax at current rate 22.00 22.00 22.00 22.00 Taxation on debenture interest (0.59 ) 0.52 (1.04 ) 0.86 Prior year over provision (2.77 ) (0.37 ) - - Deferred tax and current tax liabilities acquired on amalgamation - - - (6.03 ) Fair value adjustment on investment properties, net of deferred capital gains tax (6.20 ) (7.87 ) (5.48 ) (12.99 ) Share of (income)/loss in a joint venture (0.78 ) 0.62 - - Effect of tax rate differential in subsidiary (0.18 ) (0.22 ) - - Non-taxable expenses/(income) 0.94 (0.27 ) (0.30 ) (0.23 ) Effective tax rates 12.42 14.41 15.18 3.61

Leasehold Furniture & 6. Property plant and equipment buildings equipment Total P’000 P’000 P’000 Group

Cost At 1 January 2013 2 248 246 2 494 Additions during the year - 49 49 At 31 December 2013 2 248 295 2 543 Additions during the year - - - As at 31 December 2014 2 248 295 2 543

Accumulated depreciation At 1 January 2013 804 178 982 Charge for the year 111 6 117 At 31 December 2013 915 184 1 099 Charge for the year 130 19 149 As at 31 December 2014 1 045 203 1 248

Net book value at 31 December 2014 1 203 92 1 295

Net book value at 31 December 2013 1 333 111 1 444

Leasehold buildings comprise the following:

- A basement parking facility at portion of Lots 1204,1138 and 8897 in Main Mall area in Gaborone, Botswana, constructed on a plot of land leased from Gaborone City Council for a period of 20 years.

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Furniture & 6. Property, plant and equipment (continued) equipment Total Company P’000 P’000

Cost At 1 January 2013 201 201 Additions during the year 49 49 At 31 December 2013 250 250 Additions during the year - - At 31 December 2014 250 250

Accumulated depreciation At 1 January 2013 178 178 Charge for the year 6 6 At 31 December 2013 184 184 Charge for the year 6 6 At 31 December 2014 190 190 Net book value at 31 December 2014 60 60 Net book value at 31 December 2013 66 66

Group Company 7. Investments Country of Share 2014 2013 2014 2013 incorporation Holding P’000 P’000 P’000 P’000

At cost: Equity investments - Subsidiaries RDC Properties International (Proprietary) Limited Botswana 100% - - 1 588 1 588 Lotsane Complex (Proprietary) Limited Botswana 76.67% - - 1 692 1 692 Three Partners Resorts Limited Botswana 53.75% - - 82 281 82 281 - - 85 561 85 561

Long term loans - Investments through RDC Properties International (Pty) Limited Societe Immobiliere D’Ambodivona Sarl (SIA) Madagascar 50% - 68 68

HMS1 Société Anonyme (HMS1) Madagascar 50% - 24 652 22 310 - - 24 720 22 378

Other Propcorp (Proprietary) Limited Botswana 33% - 2 187 2 187 - - 2 187 2 187

- - 112 468 110 126

RDC Properties International (Proprietary) Limited is an International Financial Services Centre (IFSC) company registered in Botswana. The company owns 50% of Société Immobilere D’Ambodivona Sarl (SIA) and 50% of HMS1 Société Anonyme (HMS1) registered in Madagascar. The investment in SIA is recognised as a joint operation and that of HMS1 as a joint venture.

The long term loans to Societe Immobiliere D’ambodivona Sarl (SIA) and HMS1 Société Anonyme (HMS1) have no fixed terms of repayment and are interest free. The directors do not intend to request for repayment within the next twelve months.

Propcorp (Proprietary) Limited is a joint operation between RDC Properties Limited, Botswana Insurance Fund Management Limited (BIFM) and National Development Bank (NDB) for the development of the basement parking, in the area adjoining Standard House, BIFM House and NDB house in the Gaborone Main Mall area.

Notes to the Financial Statements (Continued)31 December 2014

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Notes to the Financial Statements (Continued)31 December 2014

7. Investments (continued)

Joint operations The following amounts are included in the group financial statements as a result of the proportionate consolidation of Société Immobilere D’Ambodivona Sarl (SIA) and Propcorp (Proprietary) Limited:

2014 2013 P’000 P’000

Non-current assets 1 203 1 333 Current assets 832 1 125 Current liabilities (711 ) ( 572)

Income 195 113 Expenses (279 ) (131 )

Group Company

2014 2013 2014 2013 P’000 P’000 P’000 P’0008. Investment properties

Freehold land and buildings at fair value 200 390 192 050 200 390 192 050 Leasehold land and buildings at fair value 731 518 657 553 264 818 221 357 931 908 849 603 465 208 413 407 Straight line rental adjustment (6 423 ) (9 350 ) (1 586 ) (1 994 ) 925 485 840 253 463 622 411 413

Reconciliation of fair value Opening value 840 253 720 974 411 413 255 486 At valuation 849 603 724 871 413 407 256 392 Straight line rental adjustment (9 350 ) (3 897 ) (1 994 ) ( 906 ) Additions during the year 7 308 12 103 7 180 11 884 Additions through Group restructuring (note 28) - 43 923 - 98 081 Net increase in fair value 74 997 68 706 44 621 47 050 Straight line rental adjustment - Tholo Group amalgamation (refer note 28) - - - (1 444 ) Straight line rental adjustment included in profit or loss 2 927 (5 453 ) 408 356 Closing balance 925 485 840 253 463 622 411 413

Investment properties are revalued annually by the Board of Directors based on a Discounted Cash Flow model. Each property is revalued by independent valuers at least every three years. In the current year, the whole portfolio, except Lots 50668/69 & 50369, Gaborone, Lot 5624, Gaborone, and Lease Area No. 4-RO, Kasane, was valued by an independent valuer.

Freehold land and buildings comprise the following: -Lots 1124 to 1130, Extension 3, Gaborone, which are encumbered by a fourth and fifth mortgage bond of P23 500 00 in favour of

First National Bank of Botswana Limited for banking facilities described in note 20, -Lot 21306 Phakalane, -Lots 1116, 1117 and 1840 Extension 3 Gaborone which are encumbered by first mortgage bond to First National Bank of Botswana Limited totalling P8 000 000 for a loan granted to RDC Properties Limited (note 17) and other banking facilities described in note 20, -Lot 758 Gaborone which is encumbered by a mortgage bond in favour of First National Bank of Botswana Limited totalling P5 000 000 (note 17).

Leasehold land and buildings comprise the following: -Lot 54353, Central Business District which is encumbered by a covering mortgage bond in favour of BIFM Capital Investment Fund One (Proprietary) Limited for P60 000 000 and Barclays Bank of Botswana Limited for P90 000 000 (note 17), -Lots 22017 and 22018 Gaborone, which are encumbered by a first covering mortgage bond in favour of African Banking Corporation of Botswana Limited for P12 200 000 (note 17), -Lot 443, Serowe, which is encumbered by a first mortgage bond in favour of Botswana Building Society for P216 800, -Lot 679 Serowe, -Lot 914 Kasane which is encumbered by a mortgage bond in favour of First National Bank of Botswana Limited for P1 500 000 (note 20), -Lot 208 Maun, -Lot 10211- 234-KO, Gaborone, -Lot 194, Maun, which is encumbered by a mortgage bond in favour of National Development Bank for P780 000, -Lots 680 and 292, Serowe, which are encumbered by a mortgage bond in favour of National Development Bank for P2 460 000, -Lots 3761, 5422 and 5423, Jwaneng, -Lot 617, Molepolole, -Lots 50668 and 50669, Faigrounds Gaborone, -Lots 50369 which is encumbered by a first mortgage bond in favour of First National Bank of Botswana Limited for P8 000 000 (note 17). -Lot 1707, Palapye. -Lease Area No. 4-AO, Kasane, and -Lot 5624, Extension 16, Gaborone.

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8. Investment properties (continued)

Mortgages with Bankers, against which no obligation existed as at 31 December 2014: Mortgages on the below mentioned properties where registered as security for loans over the years. As at the 31 December 2014, the loans were fully repaid and therefore the facilities could be cancelled:

Value of mortgages Property with no liability P Lot 443, Serowe 216 800 Lot 194, Maun 780 000 Lots 680 and 292, Serowe 2 460 000 3 456 800

Group Company

2014 2013 2014 2013 P’000 P’000 P’000 P’0009. Intangible asset

Licence allowing right of usage 1 000 1 000 - - The Group acquired an indefinite licence to build and operate a

hotel in the Central Business District in Gaborone, Botswana. The directors have reviewed the intangible asset for impairment and have concluded that the asset is not impaired.

10. Trade and other receivables

Trade receivables 26 035 16 511 5 987 5 744 Allowance for doubtful debts (5 376 ) (3 016 ) (2 876 ) (2 363 ) 20 659 13 495 3 111 3 381 Value added tax - 401 - - Prepayment 1 320 1 821 160 103 Other receivables 1 605 1 334 1 006 211

Related parties: Shakawe (Proprietary) Limited - 4 698 - 4 698 Italtswana Construction Company (Proprietary) Limited 2 199 1 941 2 199 1 941 Chobe Marina Lodge (Pty) Limited 5 940 1 975 5 940 1 975 Property and Asset Management Limited 247 101 - 36 Three Partners Resorts Limited - - 8 052 4 125 31 970 25 766 20 468 16 470

Short-term portion 24 597 25 766 20 468 16 470 Long-term portion 7 373 - - - 31 970 25 766 20 468 16 470

The average credit period is 60 days for trade receivables. Interest was charged on a selective basis on overdue trade receivables (ranging from 3% per month on short-term receivables and prime plus 2% per annum for long-term receivables). The Group has provided for all past due and

impaired trade receivables based on estimated irrecoverable amounts determined by reference to past default experience. Included in trade receivables are amounts past due at the reporting date for which the Group has not provided as they are still considered recoverable.

Ageing of past due but not impaired 60 - 90 days 654 828 166 211 90 - 120 days 5 384 1 292 1 379 340 Total 6 038 2 120 1 545 551

Movement in the allowance for doubtful debts Balance at beginning of the year 3 016 1 508 2 363 1 161 Movement in provision 2 360 1 508 513 1 202 Balance at end of the year 5 376 3 016 2 876 2 363

Notes to the Financial Statements (Continued)31 December 2014

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Notes to the Financial Statements (Continued)31 December 2014

Group Company

2014 2013 2014 2013 P’000 P’000 P’000 P’000

10. Trade and other receivables (continued)

At the reporting date, 48% (2013: 35%) of the trade receivables are from customers in the hospitality industry. The remaining customer base is small and unrelated. Accordingly, the directors, believe that there is no further provision required in excess of the allowance for doubtful debts.

Ageing of impaired trade receivables 120+ days 5 376 3 016 2 876 2 363

11. Cash and cash equivalents

Bank balances 4 470 3 188 1 021 643

12. Stated capital

Issued and fully paid Opening balance 220 344 890 (2012: 35 357 487) ordinary shares 74 346 8 944 74 346 8 944 Capitalisation issue 1 837 165 (2013: 295 765 ) ordinary shares 2 682 1 364 2 682 1 364 Issued on acquisition of the property Lease Area No. 4-RO nil (2013: 6 957 108) ordinary shares (note 28) - 44 525 - 44 525 Issued on amalgamation of Tholo group nil (2013: 1 458 618) ordinary shares (note 28) - 9 335 - 9 335 Reorganisation of stated capital and debentures (note 28) - 10 178 - 10 178 Closing balance 222 182 055 (2013: 44 068 978) ordinary shares 77 028 74 346 77 028 74 346

After split of linked units in 2013 (note 28) Closing balance 222 182 055 (2013: 220 344 890) ordinary shares 77 028 74 346 77 028 74 346

13. Debentures

Opening balance 220 344 890 (2012: 35 357 487) debentures 70 510 66 750 70 510 66 750 Capitalisation issue 1 837 165 (2013: 295 765 ) debentures 588 473 588 473 Issued on acquisition of the property Lease Area No. 4-RO nil (2013: 6 957 108) debentures (note 28) - 11 131 - 11 131 Issued on amalgamation of Tholo group nil (2013: 1 458 618) debentures (note 28) - 2 334 - 2 334 Reorganisation of stated capital and debentures (note 28) - (10 178 ) - (10 178 ) Closing balance 222 182 055 (2013: 44 068 978) debentures 71 098 70 510 71 098 70 510

After split of linked units in 2013 (note 28) Closing balance 222 182 055 (2013: 220 344 890) debentures 71 098 70 510 71 098 70 510

14. Accumulated profits

Arising from operations - - 29 194 26 784 Arising from revaluation of investment properties 390 153 323 295 278 297 239 864 390 153 323 295 307 491 266 648

15. Debenture interest and dividend reserve

Debenture interest 12 064 8 782 12 064 8 782 Dividends 244 177 244 177 12 308 8 959 12 308 8 959

The interest entitlement on every debenture is fixed at 50 times that of the dividend component of any distribution. The distribution, made bi-annually, varies with the operating performance of the Group.

Debenture interest:

Interim paid - 2.72 (2013: 3.24) thebe 6 037 5 795 6 037 5 795 Interim declared - 5.43 (2013: 2.64) thebe 12 083 4 700 12 083 4 700 Final proposed - 0.44 (2013: 1.85) thebe 980 4 082 980 4 082 19 100 14 577 19 100 14 577

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Group Company 2014 2013 2014 2013 P’000 P’000 P’000 P’00015. Debenture interest and dividend reserve (continued)

Dividends: Interim paid - 0.05 (2013: 0.06) thebe 121 116 121 116 Interim declared - 0.11 (2013: 0.05) thebe 245 95 245 95 Final proposed - 0.01 (2013: 0.04) thebe 20 82 20 82 386 293 386 293

The 2013 second interim distribution paid in 2014 was offered with an option for 50% capitalisation. 991 588 linked units were listed on the Botswana Stock Exchange (BSE) on 18 April 2014.

The 2013 final distribution paid in 2014 was offered with an option for 50% capitalisation. 845 577 linked units were listed on the BSE on 25 July 2014.

On 19 December 2014, a second interim distribution was declared. The distribution is payable on 24 April 2015.

At the year end, the final debenture interest and dividends per linked unit have been proposed and will be submitted for formal approval at the forthcoming Annual General Meeting. The amounts are included in the debenture interest and dividend reserve.

16. Non-controlling interests

Opening balance 118 025 129 863 - - Share of profit for the year 18 903 12 077 - - Amounts received from non-controlling interests - 94 - - Dividends paid - (1 148 ) - - Amounts repaid to non-controlling interests - (450 ) - - Effect of Tholo group amalgamation (note 28) - (22 411 ) - - Closing balance 136 928 118 025 - -

17. Long term borrowings

African Banking Corporation of Botswana Limited 4 320 - 4 320 - Less: current portion - - - - 4 320 - 4 320 - The amount represents the portion of capital drawn down from the

loan facility of P12.2 million as at the reproting date, plus accrued interest. Interest accrues at prime minus 1.5%. Capital and interest will be repaid in 105 equal instalments commencing 31 January 2016. The loan is secured as indicated in note 8.

First National Bank of Botswana Limited 11 060 14 358 11 060 14 358 Less : current portion (3 575 ) (3 347 ) (3 575 ) (3 347 ) 7 485 11 011 7 485 11 011 The amounts represent a loan taken by RDC Properties Limited and

two loans assumed on amalgamation of the Tholo group (note 28). All the three loans bear interest at a rate of prime minus 1.50% and are repayable in monthly installments of P133 682, P121 951 and P101 426 per loan. They are secured as per note 8.

Barclays Bank of Botswana Limited 72 120 82 495 - - Less: current portion (9 753 ) (9 08 5) - - 62 367 73 410 - - The amount represents a loan taken by Three Partners Resorts

Limited. The loan bears interest at a rate of prime minus 2.75% and is repayable in 120 monthly instalments of P1 165 200. The loan is secured as indicated in note 8.

Notes to the Financial Statements (Continued)31 December 2014

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Group Company 2014 2013 2014 2013 P’000 P’000 P’000 P’00017. Long term borrowings (continued)

BIFM Capital Investment Fund One (Proprietary) Limited 141 869 142 353 76 928 77 212 Less : current portion (3 439 ) (3 923 ) (1 928 ) (2 212 ) 138 430 138 430 75 000 75 000

These loans represent subscription of Promissory Notes for RDC Properties Limited and

Three Partners Resort Limited at fixed interest rates of 10.20% (2013: 11.70%) and 9.45% (2013: 10.70%) respectively, compounded semi annually. Due dates of interest payments are the 31 March and 30 September of each year. The redemption dates are 30 September 2030 to 2034 (2013: 2021 to 2025) for RDC Properties Limited and 30 September 2025 to 2034 (2013: 2025 to 2034) for Three Partners Resorts Limited. The loan for RDC Properties Limited is unsecured while the one for Three Partners Resorts Limited is secured as per note 8. The terms of these loans were re-negotiated during 2014.

Long term portion of borrowings 212 602 222 851 86 805 86 011

Current portion of borrowings 16 767 16 355 5 503 5 559

18. Deferred tax liabilities

Temporary differences arising on:

Plant and equipment 33 28 42 28 Investment properties -capital allowances claimed to date 113 351 103 108 42 269 38 754 -capital gains tax on fair value 133 450 105 552 40 734 12 605 Tax losses (43 556 ) (47 124 ) (5 422 ) (324 ) Unrealised exchange differences 1 086 - - - 204 364 161 564 77 623 51 063

Tax value 44 961 35 544 17 077 11 234

Reconciliation of movement

Opening balance 35 544 26 011 11 234 7 820 Assumed on amalgamation of Tholo group (note 28) - - - 4 515 Charge to profit or loss - current year (excluding capital gains tax) 3 275 2 426 (345 ) (3 874 )

- capital gains tax on fair value of investment property 9 342 7 491 6 188 2 773 - prior year adjustment (3 200 ) (384 ) - - Closing balance 44 961 35 544 17 077 11 234

Tax losses

The tax losses, if unutilised, will fall away as follows: Group Company Financial year Tax year P’000 P’000 2 017 2 018 38 445 311 2 018 2 019 13 13 2 019 2 020 5 098 5 098 43 556 5 422

19. Trade and other payables

Trade payables 8 432 6 921 3 645 3 478 Advance rental received 3 616 4 278 3 435 4 116 VAT payable 1 126 202 382 202 Other payables 1 730 780 1 324 184

Related parties: Property and Asset Management Limited 3 232 2 956 741 73 Italtswana Construction Company (Proprietary) Limited 44 3 477 - 315 RDC Properties International (Proprietary) Limited - - 713 978 Chobe Financial Corporation 172 66 172 66 David & Dorcas Magang Family Trust 172 66 172 66 18 524 18 746 10 584 9 478

The average credit period is 30 days for trade payables. The payable to Property and Asset Management Limited attracts interest of prime less 2.5% per annum.

Notes to the Financial Statements (Continued)31 December 2014

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20. Bank facilities

In addition to the loans described in note 17, the group has the following banking facilities:

First National Bank of Botswana Limited A bank overdraft totalling P15 000 000, guarantees for P16 256 369 and

forex pre-settlement of P500 000. These are secured by a fourth and fifth mortage bond of P23 500 000 over Lots 1124 to 1130, part of the mortage bond of P 8 000 000 over lots 1116, 1117 and 1840 and a first covering mortgage bond of P1 500 000 over Plot 914, Kasane in favour of First National Bank of Botswana Limited. Refer to note 8.

Barclays Bank of Botswana Limited A bank overdraft totalling P5 000 000.

21. Related party transactions

All related parties in addition to those listed in note 7 and the directors of the company are companies with common shareholding and control, except for the David & Dorcas Magang Family Trust which is a related party through a director of the Company.

Receivables relating to related parties are disclosed in note 10

Payables relating to related parties are disclosed in note 19.

The following trading transactions were carried out with related parties. Group Company 2014 2013 2014 2013 P’000 P’000 P’000 P’000

Interest income (note 3) Tholo (Proprietary) Limited - - - (94 ) Shakawe (Proprietary) Limited (264 ) (583 ) (264 ) (583 ) Three Partners Resorts Limited - - (724 ) (625 ) (26 4) (583 ) (988 ) (1,302 )

Finance costs (note 4) Property and Asset Management Limited 281 217 - -

Property and Asset Management Limited - management and administration (note 2) 4 938 3 715 2 824 1 654 - lease renewal fees (note 2) 268 129 122 129 - service charges (note 2) 2 210 1 381 2 210 1 381

Management and administration fees are calculated on a fixed percentage of net rental income after taking bad debts into consideration.

Lease renewal fees are calculated on a commercial basis.

Service charges are calculated as a fixed percentage of the market capitalisation of the Group on the last trading day of the month.

Italtswana Construction Company (Proprietary) Limited - repairs and maintenance expenditure - 162 - 140

Shakawe (Proprietary) Limited - commission charged - (75 ) - (75 )

Directors’ emoluments - for services as directors (note 2) 145 78 145 78

Notes to the Financial Statements (Continued)31 December 2014

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Group Company 2014 2013 2014 201322. Operating lease arrangements P’000 P’000 P’000 P’000

Property rental income earned during the year is disclosed in note 1. At the statement of financial position date, the group had contracted

with tenants for the following future minimum future minimum lease payments:

Within one year 52 630 52 549 21 364 22 526 In the second to fifth years inclusive 141 087 134 329 29 503 29 777 After five years 173 900 181 495 12 962 12 639 367 617 368 373 63 829 64 942

23. Capital commitments

Authorised and contracted 8 737 - 8 737 - Authorised but not contracted 12 000 14 500 - 14 500 20 737 14 500 8 737 14 500

The capital commitments relate to the construction of warehouses situated at Lots 22017 & 22018, Gaborone West and for development at Masa Centre. A loan facility for the construction of the warehouses has been obtained as described in note 17 and secured as described in note 8. The development at Masa Centre will also be financed through bank loans.

24. Contingent liabilities

RDC Properties Limited has given bank guarantees for the bank loans availed to HMS1 Société Anonyme (HMS1) by commercial bankers based in Madagascar, as follows:

- An amount equivalent to P8 593 750 (Euro 715 000) by First National Bank of Botswana Limited, in favour of Emprunt CA BNI (BNI) for a 50% loan amount equivalent to P6 930 037 (Ariary 1 732 079 668) (refer to note 17); and

- An amount equivalent to P6 009 615 (Euro 500 000) by First National Bank of Botswana Limited in favour of Banque Malgache de L’Ocean Indien (BMOI) for an overdraft facility.

RDC Properties Limited has also given a corporate guarantee of P47 700 000 in favour of Barclays Bank of Botswana Limited and a Deed of Cession of Rentals dated 03 November 2010 over Plot 54353 Gaborone.

25. Segmental reporting

The Group’s business activities are concentrated in the segment of property rentals and more than 90% are provided within the geographical region of Botswana therefore segmental information based on business activities or geographical locations is not considered necessary.

26. Financial risk management

Categories of financial instruments

Financial assets Fair value through profit and loss Investments - - 112 468 110 126 Loans and receivables Trade and other receivables 30 650 23 544 20 308 16 367

Cash and cash equivalents 4 470 3 188 1 021 643

Financial liabilities at amortised cost Long term borrowings - at floating interest rate 87 500 96 853 15 380 14 358 Long term borrowings - at fixed interest rate 141 869 142 353 76 928 77 212 Trade and other payables 13 782 14 266 6 767 5 160 Bank overdraft 14 214 12 208 10 553 8 314 257 365 265 680 109 628 105 044

Notes to the Financial Statements (Continued)31 December 2014

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26. Financial risk management (continued)

In the normal course of business the Group is exposed to currency, capital, credit, liquidity and interest rate risk. The Group manages their exposure by meeting on a regular basis to ensure the treasury activities are carried out in an orderly and efficient manner adhering to management procedures and policies.

Currency risk

The Group undertakes transactions denominated in foreign currencies, Euro and US dollar. Consequently, exposures to exchange rate fluctuations arise. Financial instruments that are sensitive to currency risks are mainly trade receivables, Group loans to foreign operations and cash and cash equivalents.

Foreign currency sensitivity analysis The following table details the Group’s sensitivity to a 10% increase and 10% decrease in the Pula against the relevant

foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to the board and represents the board’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. The sensitivity analysis includes loans to foreign operations within the group where the denomination of the loan is in a currency other than the functional currency of the borrower. A 10% strenthening of the Pula would decrease the profit and equity and a 10% weakening of the Pula would have an equal but opposite effect on the profit and equity.

Group Company 2014 2013 2014 2013 P’000 P’000 P’000 P’000

United States Dollar 1 237 367 - - Euro - 8 - - 1 237 375 - -

Capital risk

The Group manages its capital to ensure that entities in the group will be able to continue as going concerns while maximising the return to shareholders through the optimisation of the debt and equity balance.

The capital structure of the group consists of debt, which includes the long term borrowings disclosed in note 17, cash and cash equivalents and equity attributable to equity holders of the parent company comprising stated capital, debentures and accumulated profits as disclosed in notes 12, 13 and 14 respectively.

Credit risk

The Group’s credit risk is primarily attributable to its trade and other receivables. The amounts presented in the statements of financial position are net of allowances for bad debts estimated by management based on prior experience and the current economic environment.

The Group has no significant concentration of credit risk, with exposure spread over a large number of customers.

Liquidity risk

Ultimate responsibility for liquidity risk management rests with the Board of Directors. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, management of the Group aims to maintain flexibility in funding by keeping committed credit lines available.

Interest rate risk

Interest rate risk is the possible loss in the value resulting from an unexpected and adverse movement in interest rates. Entities in the Group are exposed to interest rate risk because they borrow funds at both the fixed and floating interest rates. The Group entities manage interest rate risk maintaining an appropriate mix between fixed and floating rate borrowings and by basing the interest rate on financial assets and liabilities around the prime lending rate.

Financial instruments that are sensitive to interest rate risks, comprise bank balances, loans and advances, related party balances and long term borrowings.

Notes to the Financial Statements (Continued)31 December 2014

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26. Financial risk management (continued)

Interest rate sensitivity analysis The sensitivity analyses below have been determined based on the exposure to interest rates for both financial assets and

liabilities at the end of the reporting period. For the floating interest rate financial assets and liabilities, the analysis is prepared assuming the amount of the asset or liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease is used by the Directors when reporting interest rate risk management, as it represents a reasonable possible change in the interest rates.

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the effect of the profit for the year for the Group and Company, would have been as follows:

Group Amount of Change in Increase/(decrease) asset/(liability) interest rate in profit before tax

31 December 2014 P’000 % P’000

Financial assets Related party receivables - 0.50 - Cash and cash equivalents 4 470 0.50 22

Financial liabilities Long term borrowings at floating interest rate (87 500 ) 0.50 (438 ) Bank overdraft (14 214 ) 0.50 (71 ) (487 ) 31 December 2013 Financial assets Related party receivables 4 698 0.50 23 Cash and cash equivalents 3 188 0.50 16

Financial liabilities Long term borrowings - at floating interest rate (96 853 ) 0.50 (484 ) Bank overdraft (12 208 ) 0.50 (61 ) (506 ) Company

31 December 2014 Financial assets Related party receivables 8 052 0.50 40 Cash and bank balances 1 021 0.50 5

Financial liabilities Long term borrowings - at floating interest rate (15 380 ) 0.50 (77 ) Bank overdraft (10 553 ) 0.50 (53 ) (85 ) 31 December 2013 Financial assets Related party receivables 8 823 0.50 44 Cash and bank balances 643 0.50 3

Financial liabilities Long term borrowings - at floating interest rate (14 358 ) 0.50 (72 ) Bank overdraft (8 314 ) 0.50 (42 ) (67 )

Fair values of financial instruments The fair values of financial instruments approximates their carrying values. There are no financial instruments that are measured subsequent to initial recognition at fair value.

Notes to the Financial Statements (Continued)31 December 2014

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27. Fair value measurement

Assets measured at fair value The investment properties of the Group measured at fair value at the end of the reporting period fall under Level 3 - Significant unobservable inputs. The valuation process for the Level 3 category is described below.

Group Company 2014 2013 2014 2013 P’000 P’000 P’000 P’000

Recurring measurement at the end of the reporting period Investment properties 925 485 840 253 463 622 411 413

Reconciliation of fair value measurements categorised within Level 3 of fair value hierarachy Investment properties Opening value 840 253 720 974 411 413 255 486 Total gains for the period included in profit or loss 77 924 63 253 45 029 47 406 Straight line rental adjustment - Tholo group amalgamation - - - (1 444 ) Additions and transfers 7 308 56 026 7 180 109 965 Closing balance 925 485 840 253 463 622 411 413 Gains and losses arising from the fair valuation of the investment properties are shown as a separate line in the statement of comprehensive income as follows:

Total gains for the period included in profit or loss 77 924 63 253 45 029 47 406

Quantative information about fair value measurements using significant unobservable inputs (Level 3)

Fair value at Valuation Unobservable Range 31 December 2014 technique input

Group Discounted Capitalisation Investment properties 925 485 cash flow rate 8%-12%

Company Discounted Capitalisation Investment properties 463 622 cash flow rate 8%-12%

Fair value at Valuation Unobservable Range 31 December 2013 technique input

Group Discounted Capitalisation Investment properties 840 253 cash flow rate 8%-12%

Company Discounted Capitalisation Investment properties 411 413 cash flow rate 8%-12%

Valuation process Investment properties are revalued annually by the Board of Directors based on a Discounted Cash Flow model. Each property is

revalued by independent valuers at least every three years. In the current year, the whole portfolio, except Lots 50668/69 & 50369, Gaborone, Lot 5624, Gaborone, and Lease Area No. 4-RO, Kasane, was valued by an independent valuer.

Information about the sensitivity to changes in unobservable inputs The significant unobservable inputs used in the fair value measurement of the investment properties are the capitalisation rates. Significant increases /(decreases) in the capitalisation rates would result in significantly lower/(higher) fair value measurement. The changes to capitalisation rates are dependant on various market factors including location of properties, interest rates, length of leases and quality of tenants.

Notes to the Financial Statements (Continued)31 December 2014

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28. Amalgamation of the Tholo group, acquisition of the property Lease Area No. 4-RO, Kasane and reorganisation of stated capital and debentures, linked unit split

In the prior year, the unit holders at the Annual General Meeting of the Company held on the 12th of September 2013 approved the following under Special Business:

-the acquisition from Italtswana Construction Company (Pty) Limited (ICC) of the property and letting enterprise conducted on the land Lease Area No. 4-RO, Kasane for a consideration discharged by the issue of linked units 6 957 108 at P8 per unit equivalent to P55 656 861 effective 1 October 2013;

-the amalgamation of Tholo (Pty) Limited and the settlement of 50% interest of Shakawe (Pty) Limited in Tholo (Pty) Limited for 1 458 618 linked units at P8 per unit and assumption of debt of P6 049 339 equivalent to P17 718 283 effective 1 October 2013;

-the increase in stated capital by P10 177 579 and a decrease of P10 177 579 in debenture capital, in order for the debentures to be valued at 32 thebe per debenture - supported by a Special Resolution; and

-that each linked unit in issue after the above transactions have been completed, be subdivided by 5, i.e. 5 new linked units be issued for each linked unit in issue - supported by a Special Resolution.

The effect of the above transactions on the equity of the Group and Company in the prior year was as follows:

Stated Accumulated Non controlling Capital Debentures Profits Interest Total P’000 P’000 P’000 P’000 P’000 GROUP

Acquisition of the property Lease Area No. 4-RO 44 525 11 131 (13 585 ) - 42 071 -Issue of 6 957 108 linked units equivalent to P55 656 861 44 525 11 131 - - 55 656 -Difference between purchase price and net assets acquired - - (13 585 ) - (13 585 )

Amalgamation of Tholo group 9 335 2 334 4 649 (22 411 ) (6 093 ) -Issue of 1 458 618 linked units equivalent to P11 668 944 9 335 2 334 - - 11 669 -Gain on amalgamation - - 4 649 - 4 649 -Write off of Tholo group minority interest - - - (22 411 ) (22 411 )

Reorganisation of stated capital and debentures 10 178 (10 178 ) - -

Total 64 038 3 287 (8 936 ) (22 411 ) 35 978

Stated Accumulated Non controlling Capital Debentures Profits Interest Total P’000 P’000 P’000 P’000 P’000COMPANY Acquisition of the property Lease Area No. 4-RO 44 525 11 131 (13 585 ) - 42 071 -Issue of 6 957 108 linked units equivalent to P55 656 861 44 525 11 131 - - 55 656 -Difference between purchase price and net assets acquired - - (13 585 ) - (13 585 )

Amalgamation of Tholo group 9 335 2,334 26 307 - 37 976 -Issue of 1 458 618 linked units equivalent to P11 668 944 9 335 2 334 - - 11 669 -Net assets assumed - - 30 822 - 30 822 -Deferred tax liability assumed - - (4 515 ) - (4 515 )

Reorganisation of stated capital and debentures 10 178 (10 178 ) - - -

Total 64 038 3 287 12 722 - 80 047

Notes to the Financial Statements (Continued)31 December 2014

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28. Amalgamation of the Tholo group, acquisition of the property Lease Area No. 4-RO, Kasane and reorganisation of stated capital and debentures, linked unit split (continued) Group 2014 2013 P’000 P’000 Net assets assumed in amalgamation and acquisition are as follows:

Investment properties - 43 923 Investment assumed - (1 851 ) Long term borrowings - (6 094 ) - 35 978 Net effect on accumulated profits - 8 936 - 44 914 Consideration

Shares issued - 64 038 Debentures issued - 3 287 - 67 325

Effect on non-controlling interest - 22 411

Company 2014 2013 P’000 P’000 Net assets assumed in amalgamation and acquisition are as follows: Investment properties - 98 081 Straightline rental adjustment - (1 444 ) Rental receivable - straight line rental adjustment - 1 444 Investments assumed - (2 501 ) Trade and other receivables - 498 Related party receivables assumed - (882 ) Current tax assets - 291 Long term borrowings - (9 840 ) Deferred tax liabilities - (4 515 ) Trade and other payables - (1 109 ) - 80 023 Net effect on accumulated profits - (12 722 ) - 67 301 Consideration Shares issued - 64 038 Debentures issued - 3 287 - 67 325

Net cash acquired on amalgamation and - 24 acquisition

Notes to the Financial Statements (Continued)31 December 2014

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29. Investment in a joint venture

Details of the Group’s investment in a joint venture at the end of the reporting period is as follows:

Name of joint venture Principal activity Place of incorporation and principal place of business

Proportion of ownership nterest and voting rights held by the Group

2014 2013

HMS1 Société Anonyme (HMS1)

Owner of a lodge known as Isalo Rock lodge

Madagascar 50% 50%

The above joint venture is accounted for using the equity method in these consolidated annual financial statements.

Summarised information in respect of the Group’s joint venture is set out below. The summarised financial information below represents amounts shown in the joint venture’s financial statements prepared in accordance with IFRS (adjusted by the Group for equity accounting purposes).

Summarised statement of financial position

2014 2013 P’000 P’000

Current Cash and cash equivalents 1 055 1 166 Financial assets (excluding cash) 2 842 523 Other current assets 4 502 5 755 Total current assets 8 399 7 444

Current portion of long term borrowings (10 296 ) (10 467 ) Other current liabilities (including trade and other payables) (6 466 ) (6 678 ) Total current liabilities (16 762 ) (17 145 )

Non-current Investment property 53 514 44 805 Deferred tax asset 3 682 6 270 Total assets 57 196 51 075

Long term borrowings (3 738 ) (9 084 ) Total financial liabilities (3 738 ) (9 084 )

Net assets 45 095 32 290

Summarised statement of comprehensive income

Revenue 3 276 3 194 Surplus arising on revaluation of investment property 12 524 - Operating costs (1 534 ) (6 254 ) Other operating income 103 - Net foreign exchange loss (2 538 ) (1 568 ) Profit/(loss) from operations 11 831 (4 628 )

Finance costs (1 634 ) (1 844 )

Profit/(loss) before taxation 10 197 (6 472 )

Income tax expense (2,056 ) 1 020

Profit/(loss) for the year 8 141 (5 452 )

Share of profit/(loss) in a joint venture (50%) 4 071 (2 726 )

At the beginning of the current year HMS1 transferred the operations of the Isalo Rock Lodge to a company outside of the Group. HMS1 retained the ownership of the physical property and classified the property as investment property in terms of the Group’s accounting policies. The Board of Directors valued the property based on a Discounted Cash Flow model in the current year.

Notes to the Financial Statements (Continued)31 December 2014

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Reconciliation of summarised financial information Reconciliation of the above summarised financial information to the carrying amount of the interest in joint venture recognised in the

consolidated financial statements:

29. Investment in a joint venture (continued) 2014 2013 P’000 P’000 Summarised financial information Opening net assets 32 290 26 251 Profit/(loss) for the period 8 141 (5 452) Contributions received 4 684 6 717 Foreign exchange differences (20) 4 774 Closing net assets 45 095 32 290 Interest in joint venture 50% 50% Carrying amount of the Group’s interest in the joint venture 22 548 16 145

30. Events after the reporting period

No adjusting events have occurred between the statement of financial position date and the date of approval of the financial statements, which would materially affect the financial statements.

Notes to the Financial Statements (Continued)31 December 2014

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P.O.Box 1415, Gaborone, BotswanaTel: +267 390 1654 Fax: +267 397 3441

E-mail: [email protected] www..rdcpbotswana.com

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