CIRCULAR TO SHAREHOLDERS 2012 - Harare Hotels · publication of abridged Circular to shareholders Friday, 30 november 2012 Circular to shareholders mailed Friday, ... 4 February 2013

CIRCULAR TO SHAREHOLDERS2012

Rainbow TouRism GRoup | CiRCulaR To shaReholdeRs 1

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTIONno person has been authorised to give any information, or make any representations in connection with the Transaction, or the Company other than as contained in this document and, if given or made, such information or representation must not be relied upon as having been authorised by the Company, its directors, or its advisors. The advisors are acting as advisors to the Company only, in connection with the Transaction, and will not be responsible to any other person for providing the protection offered to their clients.

if you are in any doubt as to the action you should take in relation to this document you should immediately consult with your banker, attorney, stockbroker, accountant or other professional advisor.

if you have disposed of all your ordinary shares in Rainbow Tourism Group limited (“RTG”), this document should be sent to the stockbroker, banker or agent through whom you disposed of such shares, for onward delivery to the purchaser of your shares.

(Registration number 4880/91)

CIRCULAR TO SHAREHOLDERS

Regarding

A RENOUNCEABLE RIGHTS OFFERof approximately 225,000,000 (two hundred and twenty five million) ordinary shares of a nominal value of US$0.0001 each in the issued share capital of Rainbow Tourism Group Limited, at US$0.02 per ordinary share to existing shareholders in the ratio of 13.6737 new ordinary shares for every 100 ordinary shares held in the issued share capital of Rainbow Tourism Group limited as at the Record date.

incorporating

A NOTICE CONVENING AN EXTRAORDINARY GENERAL MEETING

Financial Advisors Reporting Accountants Sponsoring Brokers

Transfer Secretaries Underwriter

Legal Practitioners 10 Selous Avenue

Harare

Legal Practitioners10 Selous Avenue

Harare

Legal Advisors

This Document does not purport to be a Circular or an offer to sell, or the solicitation of an offer to buy shares in any country other than Zimbabwe. The distribution of this document outside Zimbabwe may constitute the violation of the laws of other countries. This Document contains an offer to the existing shareholders of Rainbow Tourism Group Limited to purchase additional shares in Rainbow Tourism Group limited that shall in all respects rank pari passu with, and be uniform to shares already in issue. The terms and conditions of the Transaction are set out herein.

Document Issue Date: 30 November 2012

Rainbow TouRism GRoup | CiRCulaR To shaReholdeRs2

CORPORATE DIRECTORY 5IMPORTANT DATES 6DEFINITIONS 7

PART ONE: SALIENT FEATURES 91.1 Details of the Offer 91.2 summary of the Financial information 91.3 share Capital of RTG before and after the Transaction 91.4 Rationale for the Transaction 9

PART TWO: THE CHAIRMAN’S LETTER 102.1 background 102.2 Rationale for the Transaction 112.3 The Proposed Rights Offer 112.4 application of proceeds from the Transaction 112.5 Costs of the Rights Offer 112.6 Conditions precedent 122.7 underwriting and Commitments 122.8 working Capital adequacy statement 122.9 Regulatory issues 122.10 information on RTG 122.10.1 background 122.10.2 Group structure 122.10.3 Recent disposals 122.10.4 Product offering 132.10.5 shareholding 132.11 Effects of the Transaction on Share Capital 142.12 Financial Effect of the Transaction 142.13 directors and management 152.14 Consequences of not raising additional Capital 152.15 prospects 152.16 dividends 152.17 Corporate Governance 152.18 directors’ Responsibility statement 162.19 documents available for inspection 162.20 directors’ opinions and Recommendations 16

PART THREE: PERFORMANCE OVERVIEW 173.1 performance analysis 173.1.1 working Capital 173.1.2 operating Costs 173.2 Turnaround strategies 183.2.1 aggressive marketing 183.2.2 Cost management 18

TABLE OF CONTENTS


3.2.3 Group Restructuring 183.2.4 product positioning and service management 193.2.5 organisational Culture 19

PART FOUR: STATUTORY INFORMATION 204.1 details of directors 204.2 senior management 214.3 directors’ interest in shares 224.4 other directors’ interests 224.5 directors’ service Contracts 234.6 Corporate Governance 234.7 directors’ declarations 244.8 legal information 244.9 Listing of Rights Offer shares on ZSE 254.10 experts’ Consent 25

PART FIVE: DIRECTORS’ RESPONSIBILITY STATEMENT 26

PART SIX: DETAILS, TERMS AND CONDITIONS OF THE OFFER 276.1 Terms of the Rights Offer 276.2 Date of Opening and Closing of Rights Offer 276.3 Courses of action 276.4 payment 276.5 exchange Control 276.6 Listing, Dividends and Ranking of Rights Offer Shares 286.7 Rights Offer Share Certificates 28

PART SEVEN: ANNEXURES 297.1 Group Financial information 297.2 Reporting accountant’s Report 327.3 share price performance 377.4 underwriter details 387.5 Table of entitlements for RTG shareholders 387.6 notice of an extraordinary General meeting 397.7 Form of proxy eGm 407.8 letter of allocation (“la”) sample 41


whether or not you plan to attend the extraordinary General meeting, please CompleTe and siGn The FoRm oF pRoXY and return it as soon as possible or in any event so as to be received by no later than 48 hours before the meeting.

it is important that at the extraordinary General meeting, as many as possible votes are cast, so that there is a fair and reasonable representation of the opinion of the holders of Rainbow Tourism Group limited shares. You are therefore strongly urged to sign and return your Form of proxy as soon as possible. The completion and return of the Form of proxy will not preclude you from attending and voting in person at the extraordinary General meeting.

Helpline if you have any questions relating to this Circular or the completion of the Form of proxy, please contact the Company secretary, stephen nyabadza on +263 4 772 587-8 or [email protected]

IMPORTANT INFORMATION


Directors dr Joseph Kanyekanye – Non Executive ChairmanTendai macGerald madziwanyika – Chief Executivepaschal Changunda - Finance Director Rosa dube – Non Executive Directorshingirayi norman Chibanguza - Non Executive DirectorJohn mafungei Chikura – Non Executive Directordouglas hoto – Non Executive Directorian Chamunorwa haruperi – Non Executive Directorshadreck Chamunorwa Vera – Non Executive Directordouglas mavhembu – Non Executive Director

Company Secretary and registered office stephen nyabadzaRainbow Tourism Group limited1 pennefather avenue, samora machel avenue westp.o. box 10029harare, Zimbabwe

Sponsoring Broker bethel equities (private) limited1 ainsilie houseCorner 4th street & Josiah Tongogara avenuep. o. box 425 harare, Zimbabwe

Legal Advisor Kantor and immerman legal practitionersmcdonald house10 selous avenue harare, Zimbabwe

Auditors & Reporting Accountants bdo Zimbabwe Chartered accountantsno. 3 baines avenuep.o. box 334harare, Zimbabwe

Transfer Secretaries First Transfer secretaries (private) limited1 armagh avenueeastleap. o. box 11harare, Zimbabwe

Underwriter national social security authority10th Floor nssa houseCorner sam nujoma & selous avenueharare

Financial Advisors Capital bank Corporation limited13th Floor social security CentreJulius nyerere/sam nujomaharare, Zimbabwe

Receiving Bank CbZ bank limitedselous avenue branchharare

CORPORATE DIRECTORY


Event Date

notice of eGm published Friday, 30 november 2012

publication of abridged Circular to shareholders Friday, 30 november 2012

Circular to shareholders mailed Friday, 30 november 2012

last day of lodging Forms of proxy for the eGm at 1000 hours at least 48 hours before the eGm Friday , 21 december 2012

Register closes for voting at eGm at 1600 hours Friday , 21 december 2012

eGm at 1000 hours monday, 24 december 2012

Record date and register closes at 1600 hours monday, 24 december 2012

share Register Re-opens Thursday, 27 december 2012

letters of allocation mailed to shareholders monday, 31 december 2012

Rights Offer opens at 0900 hours monday, 31 december 2012

dealing in letters of allocation opens monday, 31 december 2012

last day for dealing in letters of allocation wednesday, 23 January 2013

last day for splitting letters of allocation Thursday, 24 January 2013

Rights Offer closes at 1630 hours Friday, 25 January 2013

Last day of receipt of postal acceptances of the Rights Offer wednesday, 30 January 2013

Allocation of Rights Offer shares monday, 4 February 2013

Expected date of registering Rights Offer Shares wednesday, 6 February 2013

Results of the Rights Offer published wednesday, 6 February 2013

Rights Offer Share Certificates mailed Thursday, 14 February 2013

IMPORTANT DATES


DEFINITIONS

“articles of association” The articles of association of Rainbow Tourism Group limited;

“adR” average daily Rate;

“board”, “board of directors” or “directors” The board of directors of Rainbow Tourism Group limited;

“Capital bank” Capital bank Corporation limited, a registered accepting house in Zimbabwe and financial advisor to RTG;

“Circular” or “document” This document which sets out the terms and conditions of the proposed Rights Offer by Rainbow Tourism Group Limited;

“Closing date” The date on which the Rights Offer closes, being Friday, 25 January 2013

“Companies act” The Companies act [Chapter 24:03] of Zimbabwe, as amended;

“Conditions precedent” The conditions precedent to the Transaction set out in section 2.6 of this Circular;

“eGm” or “the meeting” The extraordinary General meeting of the Company which shall be held at 10:00 am on monday, 24 december 2012, at 1 pennefather avenue, samora machel avenue west, harare, to approve the resolutions and give effect to the Transaction;

“Form of proxy”, or “proxy Form” The form, included in this Circular, which enables Rainbow Tourism Group limited shareholders to appoint a proxy to attend and vote on their behalf and on the Resolutions;

“letter of allocation”, or “las” The renounceable letter of allocation to be posted to RTG shareholders from monday, 31 december 2012, setting out the entitlement of the persons to whom this Circular is addressed;

“legal advisor” legal advisor on the proposed Transaction, namely Kantor and immerman legal practitioners;

“liboR” The London Inter-Bank Offered Rate;

“listing Rules” The listing Requirements of the Zimbabwe stock exchange, being the rules regulating listing on the Zimbabwe stock exchange;

“naV” net asset Value;

“nssa” The national social security authority, the underwriters of this Rights Offer;

“opening date” The date the Rights Offer opens, being Monday, 31 December 2012;

“Record date” The date on which the Rainbow Tourism Group limited share register will be closed for purposes of determining the eligibility of Shareholders to participate in the Rights Offer which date is the close of business on monday, 24 december 2012;

“ReVpaR” Revenue per available room;

“Rights Offer”, The offer to the shareholders of the Company of Rights Offer Shares pro rata to their existing shareholdings on a ratio of 13.6737 Rights Offer Shares for 100 ordinary shares already held, at a price of US$0.02 each payable in full in United States Dollars on acceptance;

“Rights Offer Shares” The offer, by way of a Rights Issue to all Shareholders, of approximately 225,000,000 ordinary shares at a subscription price of US$0.02 in the ratio of 13.6737 Rights Offer Shares for every 100 ordinary shares held;

“Resolutions” The ordinary resolutions contained in the Notice giving effect to the proposed Transaction upon approval by the Rainbow Tourism Group limited shareholders at the extraordinary General meeting to be held on monday, 24 december 2012;

“RTG” , “the Company” or “the Group” Rainbow Tourism Group limited, comprising the Rainbow hotels division and Rainbow Towers hotel and international Conference Centre.

“seCZ” securities Commission of Zimbabwe;

“shareholder” or “RTG shareholder” a holder of Rainbow Tourism Group limited ordinary shares registered in the Rainbow Tourism Group limited share register as at the Record date;

“shares”, “ordinary shares” or “RTG shares” The ordinary shares of Rainbow Tourism Group limited in the issued and/or authorized share capital of Rainbow Tourism Group limited;


“sponsoring broker” sponsoring broker on the proposed Transaction, namely bethel equities (private) limited;

“subscription price” The amount of US$0.02 per Rights Offer Share payable in full in united states dollars on acceptance;

“Transaction” Collectively, the offer to registered holders of ordinary shares in Rainbow Tourism Group limited of approximately 225,000,000 Rights Offer shares for an aggregate amount of approximately US$4,500,000 pro-rata to their existing shareholding, in United States Dollars at a price of US$0.02 per share on the basis of 13.6737 rights offer shares for every 100 ordinary shares already held, and to issue and allot such shares pursuant to the Transaction;

“Transfer secretaries” First Transfer secretaries (private) limited, being the transfer secretaries of Rainbow Tourism Group limited;

“Turnaround strategies” The turnaround strategies, which were approved by the RTG board, for the purposes of improving performance of the business of RTG post the Transaction;

“underwriter” underwriter on the proposed Transaction, namely nssa;

“US$”, “USD” or “$” The united states dollar, the lawful currency of the united states of america;

“Zse” Zimbabwe stock exchange;

“ZTa” Zimbabwe Tourism authority;

DEFINITIONS


1.1 Details of the Offer

authorised ordinary shares 2,500,000,000

authorised ordinary share Capital 250,000

Issued Ordinary shares of US$0.0001 nominal value each in issue as at 30 June 2012 1,645,495,543

New Ordinary shares to be issued under the Rights Offer (approximately) 225,000,000

Ratio of new shares offered for existing ordinary shares 13.6737 for 100

ordinary shares in issue after this Rights issue 1,870,495,543

net asset Value per ordinary share as at 30 June 2012 US$0.0076

Profoma Net Asset Value per ordinary share after the Rights Offer US$0.009

Gross Rights Offer Proceeds (approximately) US$4,500,000

Transaction Costs US$252,500

Net Rights Offer Proceeds US$4,247,500

1.2 Summary of the Financial Information

Period 30 June 2012(reviewed)

US$

30 Dec. 2011(audited)

US$


US$


US$

Revenue 13,292,006 27,320,901 20,740,166 17,505,716

operating expenses (13,381,646) (21,120,130) (18,456,197) (14,086,244)

net Finance Costs (1,597,942) (1,650,315) (1,397,334) (321,666)

Comprehensive income (4,542,208) (391,475) (1,027,104) 1,263,215

Total assets 50,195,099 52,025,313 44,273,215 33,387,820

shareholder equity 12,472,240 17,014,447 17,403,922 18,595,036

1.3 Share Capital of RTG Before and After the Transaction The shares to be issued pursuant to the transaction shall rank pari passu in all respects with the other shares of

the Company already in issue. The effects of the Transaction on the authorised and issued share capital of RTG are shown in the table below.

Before Rights Offer After

Authorised share capital

authorised ordinary shares 2, 500, 000, 000 - 2,500,000,000

Nominal value per share (US$) 0.0001 - 0.0001

nominal value 250,000 - 250,000

Issued share capital

Total number of ordinary shares 1,645,495,543 225,000,000 1,870,495,543

nominal value per share 0.0001 0.0001 0.0001

nominal value 164,550 22,500 187,050

Authorised but unissued shares

ordinary shares 854,454,087 - 629,454,087

1.4 Rationale for the Transaction in the absence of recapitalisation post dollarisation of the economy, RTG management had to resort to expensive

short-term loans borrowed from local banks to finance critical capital requirements and working capital. The short-term borrowings exerted pressure on the cash flows such that the Company could not repay the loans on time leading to lenders charging them penalty rates. The proposed recapitalisation, through a Rights Offer of approximately US$4.5 million, is designed to address the Group’s working capital requirements by retiring part of the US$12.6 million short-term expensive loans and the balance shall be restructured through a US$10 million loan secured under favourable borrowing terms. The recapitalisation will therefore free up working capital, currently being channelled towards interest payment, to finance generation of more revenue for the Company.

PART ONE: SALIENT FEATURES


PART TWO: THE CHAIRMAN’S LETTER

30 November 2012 Dear Shareholder

RAINBOW TOURISM GROUP LIMITED RIGHTS OFFER FOR SUBSCRIPTION FOR APPROXIMATELY 225,000,000 ORDINARY SHARES OF US$0.0001 NOMINAL VALUE EACH AT A SUBSCRIPTION PRICE OF US$0.02 PER SHARE

2.1 Background Rainbow Tourism Group limited (RTG) reconstituted its board of directors on the 11th of July 2012 following the

resignation of the majority of Directors on the previous Board. Pursuant to an analysis of the financial position of RTG and various related documents, it is the board’s view that the Group should urgently address the short term borrowings which stood at $12.6 million as at 30 June 2012. At a meeting held on the 19th of September 2012, the RTG board of directors resolved that, subject to the approval of shareholders, the Company be authorized to immediately proceed to raise funds amounting to US$14.5 million with an intention of reducing and restructuring the short-term expensive debt. The funds raised shall be split into a US$10 million loan secured under favourable terms and a Rights Offer of approximately US$4.5 million to existing shareholders.

Regarding the Rights Issue, the Board has resolved to raise approximately US$4.5 million through an offer to the shareholders of the Company, registered as such at the close of business on monday, 24 december 2012 being the Record Date, approximately 225,000,000 Rights Offer Shares for subscription at a ratio of 13.6737 new Shares for every 100 ordinary shares already held, at a price of US$0.02 each.

shareholders shall be requested to follow their Rights to enable the recapitalisation of the Company. if RTG does not receive payment from a shareholder by the due date as set out in this Document, the offer to that shareholder shall be deemed to have been declined and will automatically lapse. The Rights Offer is fully underwritten by the national social security authority, in terms of an underwriting agreement signed on 26 november 2012. Full details of the underwriter are set out in section 7.4. The purpose of this Circular is to furnish RTG shareholders with the requisite statutory and regulatory information relating to the Rights Offer and to detail the action that can be taken by each shareholder.

2.2 Rationale for the Transaction in the absence of recapitalisation post dollarisation of the economy, RTG management had to resort to expensive

short-term loans borrowed from local banks to finance critical capital expenditure and working capital. The short-term borrowings exerted pressure on the cash flows such that the Company could not repay the loans on time leading to lenders charging them penalty rates. The proposed recapitalisation, through a Rights Offer of approximately US$4.5 million, is designed to address the Group’s working capital requirements by retiring part of the US$12.6 million short-term expensive loans and the balance shall be financed through a US$10 million loan secured under favourable borrowing terms. The recapitalisation will therefore free up working capital, currently being channelled towards interest payments, to finance generation of more revenue for the Company.

The short-term borrowings which the Group accessed from various local financial institutions were utilized as follows:

Utilisation Amount (US$) Other Information

a’ Zambezi River lodge project 2,442,113.00 amount borrowed to partly fund a’ Zambezi refurbishment project. it includes loan and bond registration fees.

Restructuring of matetsi debt 1,615,000.00 Restructuring of a surety liability in connection with matetsi.

Rainbow Towers project 235,000.00 amount borrowed to pay contractors during the time Renaissance merchant bank limited was under curatorship.

divisional Capital expenditure 2,877,387.00 Critical capital expenditure since 2009 for some of the operating divisions.

Touch The wild (private) limited (“TTw”) Refurbishment

300,000.00 loan accessed from FbC bank for sikumi refurbishment and working capital for TTw.

working Capital 4,020,500.00 working capital since 2009.

Total Principal Borrowings 11,490,000


The Rights Offer together with the US$10 million loan is expected to address the following; - fully retire the short term expensive debt; - reduce the impact of the finance cost in the Group’s Statement of Comprehensive Income; - eliminate the risk of default on loan repayment; - improve the Group’s working capital position; and - enhancing the Group’s cash flows by completing a number of capital projects that the Group is currently

undertaking.

2.3 The Proposed Rights Offer The Board of Directors has resolved to undertake a renounceable Rights Offer to the Shareholders of the Company,

registered as such at the close of business on monday, 24 december 2012, being the Record date, approximately 225,000,000 Rights Offer Shares for subscription at a ratio of 13.6737 Rights Offer Shares for every 100 shares already held, in United States Dollars, at a price of US$0.02 each for an aggregate amount of approximately US$4,500,000 RTG to all the Existing Shareholders, and to issue and allot such shares pursuant to the Transaction.

Letters of Allocation in respect of the Rights Offer will be posted to RTG Shareholders as from Monday, 31 December 2012. The Rights Offer Shares are scheduled for listing and trading on the ZSE with effect from Wednesday, 6 February 2013. If a shareholder decides not to follow his/her rights, the Rights Offer may be renounced in favour of a third party. if RTG does not receive payment from the shareholder or the third party by the due date as set out in this document, the offer shall be deemed to have been declined and will automatically lapse and the shares available to that shareholder shall be taken up by the underwriter.

2.4 Application of Proceeds from the Transaction The application of the proceeds of the Transaction is set out below.

ITEM DESCRIPTION AMOUNT (US$) PROPORTION (%)

part Retirement of short Term borrowings and increasing working Capital 4,247,500 94.4

Rights Offer Expenses 252,500 5.6

TOTAL 4,500,000 100

Since the proceeds of the Rights Offer can only partly retire the expensive short term debt, the Company has secured a loan amounting to US$10 million, which shall be used to restructure the remaining short-term debt.

2.5 Costs of the Rights Offer The costs of the Rights Offer shall be borne by RTG out of the proceeds of the Rights Offer and include the specific

legal, underwriting and other services which are estimated to be US$252,500. details are as follows:

Description Amount (US$)

professional Fees 152,500

printing and publication 50,000

underwriting fees 50, 000

Total 252,500

2.6 Conditions Precedent The proposed Rights Offer is conditional and subject to the following:

- approval by shareholders of RTG of the resolutions at the eGm to be held on monday, 24 december 2012 in terms of the eGm notice incorporated herein;

- approval by the Zse’s listings Committee of the listing of the new RTG ordinary shares to be issued to members who meet the terms of the Rights Offer as outlined in this Circular; and

- The underwriting agreement entered between nssa and RTG remaining in full force.


2.7 Underwriting and Commitments The Rights Offer is fully underwritten by the National Social Security Authority (“NSSA”) in terms of an

Underwriting Agreement dated 26 November 2012. The underwriting of the Rights Offer by NSSA will result in dilution of shareholders who decide not to follow their rights. Copies of the underwriting agreement are available for inspection at the registered offices of RTG, 1 Pennefather Avenue, Samora Machel Avenue West, Harare.

2.8 Working Capital Adequacy Statement For the half year ended 30 June 2012, the Company had a negative working capital of US$8,438,202, which is an

unfavourable position for the Group. The directors are of the opinion that the financial resources to be made available to RTG post the proposed rights offer will significantly reduce the negative working capital position.

2.9 Regulatory Issues The listing Committee of the Zse has granted a primary listing and permission to deal in all renounceable letters

of Allocation, relating to the Rights Offer Shares to be listed on the ZSE.

application has been made to the listing Committee of the Zse, which has granted approval, in principle, for the Rights Offer Shares offered in terms of the Rights Offer to be listed on the ZSE.

2.10 Information on RTG 2.10.1 Background Rainbow Tourism Group limited (“RTG”) was formed in 1992 as part of Government’s commercialization

programme. having been incorporated in 1991 as Zimbabwe Tourism investments Company (private) limited (ZTiC), a parastatal then responsible for the promotion of tourism in the country, the Company rose within six years from three hotel units and a tour operator company in 1992 to become Zimbabwe’s second largest hospitality chain by 1998.

in 1994, ZTiC was renamed Rainbow Tourism Group (private) limited, and the entity was converted to a public company and listed on the ZSE on 01 November 1999 after the Government offered 70% shareholding to institutional investors, employees and members of the public. Today, RTG owns quality business units, establishing itself as the fastest growing hotel group in Zimbabwe’s tourism industry. it has successfully positioned itself as a leader in offering Zimbabwean cultural hospitality. In order to remain competitive, the Group has adopted a branding strategy so as to ensure a close and sustainable relationship between the brand and its customers.

2.10.2 Group Structure The Group’s structure is as shown below;

RTG operates three divisions as represented on the organogram. The Group’s hotel division comprises bulawayo Rainbow hotel, a’ Zambezi River lodge, Victoria Falls Rainbow hotel, new ambassador hotel, Kadoma hotel & Conference Centre, hotel edingurgh Kitwe (Zambia), Rainbow hotel (beira-mocambique) and savoy hotel ndola (Zambia – management Contract).

2.10.3 Recent Disposals The Company has thus far raised US$945,000 from the disposal of non-core assets namely; Touch The Wild (Private)

limited and Zimbabwe mauritius Tours and Travel (private) limited t/a Tourism services Zimbabwe. This amount was utilised to settle part of the short term debt and settling disposal costs. The sale of matetsi water lodge will raise US$1.6 million which shall be channelled towards costs associated with the business and its disposal. The balance of the proceeds will be channelled towards the beitbridge hotel project which is expected to open in the first half of 2013. The Group’s target closing date for the disposal is the 30 November 2012.

RAINBOW TOURISM GROUP LIMITED

Rainbow Hotel Division Rainbow Hospitality Business School

Rainbow Towers Hotel & Conference Centre


2.10.4 Product offering The Rainbow Towers hotel and international Conference Centre (“Rainbow Towers”)

Rainbow Towers is a leading five star hotel and conference centre located in Zimbabwe’s capital city, Harare. It is located 17km from the harare international airport and a walking distance from the city centre. Rainbow Towers is situated in a spectacular garden setting, with fully secured and spacious parking. The hotel houses a therapeutic health massage parlour, jewellery shop, hair and beauty salon and a gift shop. outdoor facilities include a gym and sauna health club, swimming pool and a floodlit tennis court.

Rainbow Hotels Division This division comprises three to four star business and leisure hotels. These include: - new ambassador hotel (Central harare); - Rainbow Kadoma hotel & Conference Centre; - Rainbow bulawayo hotel; - Rainbow Victoria Falls hotel; - a’ Zambezi River lodge; - Rainbow hotel mozambique; - edinburgh hotel (Kitwe); and - The savoy hotel (management Contract).

Rainbow hospitality business school (“Rhbs” or “the school”)

RHBS is a hotel and tourism training institution. It was established in October 2007 and offers graduates the City & Guilds as well as Higher Education Examination Council Diplomas and Certificate programs.

The school taps into the development of hospitality talent for both the local and regional markets. The school is a ready source for trained and qualified labour force. The School is playing a significant role in providing trained personnel for the local and regional hospitality industry.

2.10.5 Shareholding The top twenty shareholders of the Company on the record date are as follows:

Shareholder Number Of Shares %

national social security authority 452,521,114 27.50

hamilton & hamilton Trustees ltd 300,200,782 18.24

Zimcor limited 217,889,317 13.24

First mutual life - policy holders 134,958,449 8.20

ministry of environment & Tourism 83,402,508 5.07

Tristar insurance Company limited 73,428,208 4.46

laaiCo - FCa non-Res 60,000,000 3.65

First mutual life - shareholders 48,028,088 2.92

pearl properties (2006) limited 42,915,563 2.61

FmRe property & Casualty - shareholders 26,643,635 1.62

First mutual life - managed Fund 21,806,875 1.32

hamilton, nicholas Rhodes - nnR 16,695,788 1.01

pinnacle investments (private) limited 15,521,167 0.94

hamilton, maximilian Rhett 13,996,703 0.85

meikles pension Fund 10,084,672 0.61

FmRe property & Casualty-policyholders 10,267,278 0.62

hamilton, orrie lincoln 10,000,000 0.61

hamilton, Richmond louis 10,000,000 0.61

hamilton, alexander sethi 10,000,000 0.61

eugenie britannia, hamilton 9,990,000 0.61

1,568,350,147 96.01

TOTAL NUMBER OF SHARES IN ISSUE 1,645,495,543


Assuming all Shareholders follow their Rights in the Rights Offer as set out in this document, the proportion of shareholding will not change across the board. if a shareholder elects not to follow his/her rights, his/her percentage shareholding in RTG shall be diluted. if the Company has not received payment from any shareholder by the due date, the offer to that Shareholder shall automatically lapse, and the Shares shall be taken up by underwriters. The issue will be done on the basis of 13.6737 new shares for every 100 ordinary shares already held resulting in a 12.02 % dilution if any shareholder decides not to follow his/her rights in the Rights Offer.

part seven subsection 7.5 of this document contains an illustrative table of entitlements for RTG shareholders with respect to the Rights Offer on the basis of full subscription.

2.11 Effects of the Transaction on Share Capital

Before Rights Offer After

Authorised share capital

authorised ordinary shares 2, 500, 000, 000 - 2, 500, 000, 000

Nominal value per share (US$) 0.0001 - 0.0001

nominal value 250,000 - 250,000

Issued share capital

Total number of ordinary shares 1,645,495,543 225,000,000 1,870,495,543

nominal value per share 0.0001 0.0001 0.0001

nominal value 164,550 22,500 187,050

Authorised but unissued shares

ordinary shares 854,454,087 629,454,087

2.12 Financial Effect of the Transaction set out below are the abridged statements of Financial positions of RTG as at 30 June 2012 assuming the Rights

Offer had been effective on 30 June 2012. There are no direct financial effects on the Statement of Comprehensive Income arising from the Rights Offer.

Actual (“USD”)30 June 2012

Pro-forma (“USD”)30 June 2012

ASSETS

Total non-current assets 34,405,985 34,405,985

Total current assets 14,141,213 14,141,213

assets in disposal group held for sale 1,647,901 1,647,901

TOTAL ASSETS 50,195,099 50,195,099

EQUITY AND LIABILITIES

SHAREHOLDERS’ EQUITY

share Capital 164,550 187,050

share premium - 4,477,500

non distributable reserves 16,884,995 16,884,995

Revaluation reserve 1, 108, 995 1,108,995

Foreign currency translation reserve 16,285 16,285

Retained (loss) / earnings (5,702,586) (5,955,086)

Total equity 12,472,240 16,719,739

Total Liabilities 37,722,860 33,475,360

TOTAL EQUITY AND LIABILITIES 50,195,099 50,195,099


2.13 Directors and Management The Transaction will have no material impact on the composition of the board of directors and the management

team. The directors believe that the proposed Transaction is in the best interests of RTG and its shareholders.

2.14 Consequences of not raising Additional Capital In the event that the proposed Rights Offer is not implemented; - the Company will be unable to retire the expensive short term debt and will continue to be burdened by high

finance charges; - the short-term facilities are overdue and are attracting penalty interest rates thus exacerbating the burden of

finance costs; - the Company’s earnings will be subdued as a result of working capital constraints; and - relations with creditors will further deteriorate which may result in possible litigation.

2.15 Prospects The Group is pursuing a number of projects that will have a significant impact on its future prospects which include

among others;

Refurbishment of RTG’s hotels in Zimbabwe RTG is refurbishing and upgrading its properties in Zimbabwe, with a view to:

- Restore the hotels’ quality and ambience; - move in line with the international trends, particularly given the internationalization of the hospitality and

tourism business; and - protect and/or create direct and indirect employment for the local community.

Rainbow Towers Hotel The refurbishment of Rainbow Towers hotel resumed in april 2012, following the lifting of curatorship of

Renaissance merchant bank limited, now Capital bank. The board is optimistic that the Group will be more competitive after the completion of the refurbishment project. The completion of the project is the first half of 2013. The upward growth is also expected to be supported by improvements in the local and international economies and consumer average spending power. The average daily room rate is expected to increase by 30% from the current US$96 after completion of the refurbishment.

Rainbow Beitbridge Hotel Development This is a new hotel development by nssa. The Group will be responsible for the interior work whilst nssa is

responsible for the super structure and will own the hotel. in terms of the memorandum of agreement in place, RTG will lease the hotel from nssa. The construction of the hotel is on course and it is expected that the hotel will be complete by the fisrt half of 2013.

Rainbow Hotel Mozambique RTG has started work on the refurbishment of Rainbow hotel mozambique. The estimated completion time is end

of march 2013.

Other Properties The Group plans to undertake projects to upgrade and refashion the following properties; bulawayo Rainbow

hotel, Kadoma hotel and Conference Centre and Victoria Falls Rainbow hotel. The projects will be funded through internally generated resources.

2.16 Dividends no interim dividend was declared for the half year ended 30 June 2012.

2.17 Corporate Governance The board of directors of the Company currently comprises 10 (ten) directors of which two are executive directors.

The board of directors is ultimately responsible for the management of the Company. The information pertaining to the directors of RTG is set out in section 4.1.


2.18 Directors’ Responsibility Statement part Five of this Circular gives details of directors’ responsibilities.

2.19 Documents Available for Inspection The following documents or copies thereof will be available for inspection at the registered office of RTG during

normal business hours: - memorandum and articles of association of the RTG; - the Reviewed Financial statements of RTG for the six month to 30 June 2012; - the audited Financial statements of RTG for the year ended 31 december 2011; - The experts’ Consents referred to in section 4.10 of this Circular; - The underwriting agreement; - The original copy of the signed Circular to shareholders; - The eGm notice and Form of proxy; and - The Reporting accountants Report.

2.20 Directors’ Opinions and Recommendations The Directors have considered the terms and conditions of the proposed Rights Offer and are of the opinion that it

is in the best interest of the shareholders. accordingly, the directors recommend that shareholders vote in favour of the Transaction and follow their rights in the Rights Offer.

shareholders holding approximately 51 percent of RTG issued share capital have indicated their intention to follow their rights.

Yours faithfully, For and behalf of the board of directors of Rainbow Tourism Group limited

dr. Joseph Kanyekanye Chairman


3.1 Performance Analysis The information tabulated below show the abridged historical performance of the Group (refer to section 7.1 for

full financial statements) since the economy adopted the multi-currency system.

Period 30 June 2012(reviewed)

US$


US$


US$


US$

Revenue 13,292,006 27,320,901 20,740,166 17,505,716

Cost of sales (1,516,216) (3,389,479) (2,803,661) (2,752,341)

Gross Profit 11,775,790 23,931,422 17,936,505 14,753,375

other income 203,852 178,971 288,277 753,583


Operating (Loss)/Profit (2,159,003) 1,796,593 (1,323,847) 500,600

net Finance Costs (1,597,942) (1,650,315) (1,397,334) (321,666)

(Loss)/Profit Before Tax (3,756,945) 146,278 (2,721,181) 178,934

Taxation 27,062 417,235 1,677,954 (19,972)

(Loss)/Profit After Tax (3,729,883) 563,513 (1,043,227) 158,962

discontinued operations (820,444) (936,946) (109,660) -

Total Comprehensive income (4,542,208) (391,475) (1,027,104) 1,263,215

The Group’s revenue has been steadily growing since 2009 when the economy adopted the multi-currency system. However, there is a notable decline in the profitability of the Group from 2009 to the period ending 30 June 2012. The major causes of under-performance are as outlined below;

3.1.1 Working Capital working capital requirements were largely funded through short term expensive debt accounting for a

corresponding increase in finance costs since 2009 which rose from a low of US$321,666 (2009) to a high of US$1,650,315 (2011). The Group’s operations continue to be pressured by finance costs as indicated by the Interim Financial Statements as at 30 June 2012. The finance costs for the half year ended 30 June 2012 were US$1,597,942 increasing pressure on operating income. The continued dependence on short term expensive debt has had a negative impact on the operations of the Company and hence there is need to address this through the proposed capital raise.

The Group is currently undertaking capital projects which entail the refurbishment of Rainbow Towers which resumed in april 2012 and is expected to be completed in January 2013, the construction of beitbridge hotel which is expected to be complete by the first half of 2013 and the refurbishment of Rainbow Hotel Mocambique. Upon completion of these projects, the Group is expected to realise more revenue and operating income.

Short term borrowings closed the period ending 30 June 2012 at US$12.6 million whilst long term borrowings were at US$10.7 million. The resultant interest rate burden and cash flow is affecting the overall performance of the Group.

3.1.2 Operating Costs The Group’s operating costs have been on the rise since 2009 in particular employment costs and utilities. increase

in revenues was not appropriately matched with increases in operating costs. The Group shall be embarking on a downsizing exercise to deal with employment costs. The exercise is expected to cost the Group US$420,000 which shall be paid from internally generated resources.

PART THREE: PERFORMANCE OVERVIEW


3.2 Turnaround Strategies The Group has identified key areas which need to be addressed as part of the turnaround strategy. These include; - aggressive marketing; - cost management; - restructuring of the Group; - organizational culture; and - product positioning and service management.

3.2.1 Aggressive Marketing The Group shall apply enterprise wide marketing management (ewmm) where marketing is no longer just a

department but what everyone does in the Group. marketing should be responsible for positioning the business in view of its competitors, develop innovative products and services. in addition the internal processes and systems should be fluid so that there are no bottlenecks in service delivery.

- Branding The Group requires a fresh look that will make it more competitive and attractive in the market. The current

status of the brand is dull and unappealing. This is further compounded by product issues and inconsistent service delivery. a new brand image will be developed and this will be complemented by continued product and service standard improvement.

- Centralisation of the sales function The Group will reorganise the sales department into a centralised sales function that will be able to drive efficiency

and choice for the customers.

3.2.2 Cost Management - Central Procurement The strategy will aim at resourcing the Group central procurement unit. This will eliminate middleman in the supply

chain in order to bring down cost of sales and other direct costs.

- Finance Costs The debt restructuring will free working capital leading to the improvement of the Group’s current ratio.

operations will have enough cash to deal with daily operational expenditure as well as planning for future capital expenditure, especially the refurbishments.

- Other Costs poor internal controls particularly in procurement have resulted in leakages in the system hence increasing costs

generally. The Group has already put in place robust procurement procedures which are monitored from time to time. TIPP – off anonymous will be revamped in order to access information which management might not observe.

3.2.3 Group Restructuring Touch the wild (private) limited, matetsi water lodge and Zimbabwe mauritius Tours and Travel (private) limited

t/a Tourism Services Zimbabwe were identified as non-core assets, and the Company resolved to dispose these businesses. Losses from the discontinued operations are projected to close at $1.9 million for the year. The finalization of these disposals will improve the Group’s performance since the profitability was being reduced by


the losses from these entities. The Company is considering disinvesting from Zambia operations in view of the poor performance of these businesses and non-remittance of fees to RTG.

3.2.4 Product Positioning and Service Management The Group will embark on refurbishment of all hotels. Rainbow Towers refurbishment is currently in progress and

is expected to be complete in the first half of 2013. It is anticipated that on completion, the occupancy will rise from current 55% to 60%; the average daily rate shall increase by 30% from the current $96 and annual revenues will grow to $15 million from $12 million. Bulawayo Rainbow, Kadoma Hotel, Victoria Falls Rainbow and Ambassador hotel will be refurbished using internal resources for a period ranging from 1 year to 2 years.

3.2.5 Organisational Culture There is need to have a culture that is anchored by the Company values which are, Respect, integrity, Commitment,

Teamwork, and passion. The leadership of the organization shall model these values so that there is consistency in the delivery of brand values throughout the whole Group. The Group has put in place an effective performance management system which is linked to consequence management. This shall instill a performance oriented organizational culture at all times.


4.1 Details of Directors The details of the RTG directors are shown below.

Name Position

dr. Joseph Kanyekanye non-executive Chairman

Tendai macGerald madziwanyika Chief executive

paschal Changunda Finance director

Rosa dube non-executive director

shingirayi norman Chibanguza non-executive director

John mafungei Chikura non-executive director

ian Chamunorwa haruperi non-executive director

douglas hoto non-executive director

douglas mavhembu non-executive director

shadreck Chamunorwa Vera non-executive director

The profiles of the Directors of RTG are detailed below.

Dr. Joseph Kanyekanye (45) - Non-Executive Chairman dr. Kanyekanye is presently the Group Chief executive for allied Timbers Zimbabwe. he is the past president of

the Confederation of Zimbabwe industries (CZi). dr. Kanyekanye holds a diploma in Forestry from the Zimbabwe College of Forestry, a bachelor of science (honours) in wood science from the university of wales (uK), a master of business administration from the university of Zimbabwe and doctorate in business administration from Calvary university (uK). he also sits on various boards including Capital bank, nssa and starafrica Corporation limited

Mr. Tendai MacGerald Madziwanyika (44) – Chief Executive Tendai Madziwanyika was appointed Chief Executive of the Company with effect from 5th November 2012. Tendai

has held senior positions in the FmCG and hospitality industries including, being the managing director of a listed hospitality group in Zimbabwe. he is the immediate past president of the Zimbabwe Council for Tourism. he holds a bachelor of accounting science (b Compt.) from the university of south africa and a master of business administration (with distinction) from hull university (united Kingdom).

Mr. Paschal Changunda (38) – Finance Director mr. Changunda holds a bachelor of accountancy honours degree from the university of Zimbabwe and is a

Chartered accountant. mr. Changunda is currently studying towards a master of business leadership degree with the university of south africa. he joined RTG in 2002 as Group Finance manager and was appointed to the RTG board as Group Finance director and Company secretary in July 2004. he served his articles with deloitte & Touché. prior to joining the Group he was divisional Finance manager for Cairns Foods limited.

Mrs. Rosa Dube (49) – Non-Executive Director mrs. dube is currently the operations director for design Technology business solutions, specializing in business

advisory services and public sector Financial Compliance and Corporate Governance. mrs. dube holds a bachelor of accountancy (honours) degree from the university of Zimbabwe and master of science in Finance and Financial Information Systems from the University of Greenwich UK. She is also a Certified SAP Financials Consultant. her other directorships include eloah Vires minerals, national social security authority and design Technology business solutions.

Mr. Shingirayi Norman Chibanguza (28) – Non-Executive Director mr. Chibanguza is currently the managing director for Farhigh Trading Transportation and property management,

Cladmont investments, property plus Realtors and haddon and sly properties. his other directorships include hwange Colliery Company limited, hamilton insurance, Central estates Farm and nyaya industries. mr. Chibanguza previously held senior positions at Chibanguza Group of hotels and Guy Chibanguza enterprises (pvt.) ltd (Retail supermarkets) between 2003 and 2007. he is currently studying towards a bachelor of Commerce in entrepreneurship (sa) from the university of south africa.

PART FOUR: STATUTORY INFORMATION


John Mafungei Chikura (56) – Non-Executive Director Mr. John Chikura is the Chief Executive Officer of the Deposit Protection Board and current Chairman of the Africa

Region, international association of deposit insurers (iadi) based in switzerland. he holds a master of business administration in Finance and banking (manchester university) and is a Fellow of the institute of Chartered secretaries and administrators (FCis). his vast experience at senior management levels includes the post of Finance and Administration Manager for Cluff Resources (now Ashanti Gold Mining) and Lonrho Zimbabwe as well as General manager – Finance and Company secretary for southern africa Reinsurance limited. he also sits on the board of directors of africa First Renaissance Corporation limited and certain of its subsidiaries.

Mr. Ian Chamunorwa Haruperi (33) – Non-Executive Director mr. haruperi is currently the managing director of Chardore holdings and has more than seven years’ experience

at the helm of an organization dealing in mining, properties, finance and investment. He is a former Director of mining procurement for memotek ltd (2001 to 2003). he is currently a non executive director at hwange Colliery Company limited. mr. haruperi holds a bachelor of science in economics from middlesex university, (uK).

Mr. Douglas Hoto (47) – Non-Executive Director Mr. Hoto is the Group Chief Executive Officer of Africa First ReNaissance Corporation Limited. He has previously

worked as Chief Executive Officer for Altfin Holdings Limited. Mr. Hoto has over 22 years’ experience as an Actuary and has worked in various roles in the insurance industry in Zimbabwe and the sadC region. he is the Chairman of the Zimbabwe national statistics agency (ZimsTaT), a board member of the insurance pension Commission (ipeC), the Chairman of the actuarial society of Zimbabwe and a Trustee of the s V muzenda Foundation. mr. hoto is a Fellow of the Faculty of actuaries of scotland and holds a bachelor of science honours degree in mathematics (uZ). mr. hoto is also a non-executive director of Capital bank.

Mr. Shadreck Chamunorwa Vera (42) – Non-Executive Director mr. Vera is the investments director at national social security authority (nssa). he holds a master of business

administration degree from the nottingham Trent university and a postgraduate diploma in management studies from the same university. he also holds an advanced diploma in Treasury management and Finance from Institute of Bankers South Africa and a Certificate in Management Information Systems (London). Mr. Vera is currently studying towards a doctorate in business administration with nottingham Trent university.

Mr. Douglas Mavhembu (39) – Non-Executive Director mr. mavhembu is the acting director - international Tourism directorate in the ministry of Tourism. he has worked

in various senior capacities within the ministry of Tourism and hospitality including being the deputy director (tourism) and acting under secretary (Tourism). mr. mavhembu is the Co-Chairperson for the Zimbabwe/Zambia Joint Technical Committee on the 2013 unwTo General assembly to be held in Victoria Falls, he holds a master of science degree in Tourism and hospitality management from the university of Zimbabwe, a bachelor of business Administration in Tourism Management degree from Azaliah University and various certificates in Tourism and hospitality management.

4.2 Senior Management Tendai MacGerald Madziwanyika (44) – Chief Executive Officer See profile under “Details of Directors” above

Paschal Changunda (38) – Finance Director See profile under “Details of Directors” above

Cyndrella Masimbe (44) – Human Resources Director mrs. masimbe joined RTG in 1999 as Training manager for the Rainbow hotels division. she then became human

Resources manager for the same division in 2000, before her appointment as Group human Resources director in 2002. prior to joining RTG, mrs. masimbe worked in various operations management positions at africa sun Limited (formerly Zimbabwe Sun Limited) for five years. She briefly lectured on undergraduate and postgraduate hotel management programs at the university of Zimbabwe. mrs. masimbe holds a bsc (honours) degree in economics (uZ), and an msc Tourism & hospitality management (uZ).


Godfrey Pasipanodya (45) – Commercial Director mr. pasipanodya has experience in sales, marketing and business operations for the hospitality sector, having

been a Regional director, marketing for Continental europe under the Zimbabwe Tourism authority. his directorships include air Zimbabwe limited. mr. pasipanodya holds a bachelor of business studies degree (uZ) and a master of business administration in international marketing (eslCa paris school of business).

Richard Nkomo (54) – General Manager Rainbow Towers mr. nkomo has over 25 years’ experience in general management positions within the hospitality industry in

Zimbabwe and the united states of america. he has inter alia worked as director of sales and marketing for Rainbow Towers hotel and Conference Centre (then called the sheraton hotel) and later as deputy General manager for the same hotel. in the united states he held various positions for hotels such as suburban hotel Complex and Courtyard by mariot and homewood hotel suites schaumburg. mr. nkomo holds a master of business administration degree from Tennessee state university, a bachelors in public administration degree from Middle Tennessee State University, and various certificates from Cornell University in Hotel Strategic Marketing.

Dumisani Mhlanga (41) – Operations Manager Rainbow Hotels mr. mhlanga has over 10 years of experience in operations management having worked in various capacities in

operations management for innscor africa, african sun and national Foods. prior to this appointment, he was the operations director for national Foods limited. dumisani holds a master of business administration degree from eastern & southern african institute of management (esami) and a bachelor of marketing management degree from institute of marketing management (south africa)

Stephen Nyabadza (32) – Company Secretary & Legal Advisor mr. nyabadza has over eight years experience in company secretarial and corporate law work. his experience

include being a Group Legal Officer for TA Holdings Limited and Corporate Lawyer with Clarity Mineral Services Zimbabwe. he has also previously worked as the Corporate & legal services executive for messrs bdo spencer steward botswana. mr. nyabadza holds a bachelor of laws (honours) degree (uZ), a master of laws (specialising in Corporate law) degree (unisa) and a master of business administration degree (esami business school). mr. nyabadza is a legal practitioner notary public and Conveyancer and is registered to practise law in Zimbabwe and botswana.

Samson Chitsato (42) – Risk and Internal Audit mr. Chitsato has over 13 years of experience in internal audit and risk management. he has worked for star africa

Corporation, oK Zimbabwe limited and meikles Retail Group at various management levels in internal audit. mr. Chitsato is a Certified Internal Auditor and also holds a Master of Audit Management and Consultancy degree from birmingham City university and is a member of the Chartered institute of secretaries and administrators Zimbabwe.

4.3 Directors’ Interest in Shares none

4.4 Other Directors’ Interests apart from the information disclosed in this document, neither the directors of RTG nor any member of their

immediate families nor any person acting in concert with the Company, controls or is interested, beneficially or otherwise, in any RTG shares.

4.5 Directors’ Service Contracts Service contracts of Directors will not be affected by the Transaction proposed.

4.6 Corporate Governance Board Committees The Board is responsible for providing effective leadership based on an ethical foundation. The roles of the

Chairman and the Chief Executive Officer are separate and distinct.


it is the policy of the board that the board should comprise of a balance of executives and non-executive directors, with the non-executive directors in the majority. The board ordinarily comprise of two executive directors and eight non-executive directors. The non-executive directors provide the necessary objectivity for the board’s effective functioning and carry sufficient weight in the board’s deliberations and resolutions. The Board composition reflects varying skills, knowledge and experience, all who are fully aware of their duties to ensure that the group maintains a high standard of corporate governance. Through its’ Remuneration and nominations committee, the board undertakes the role of selection and appointment of the new directors subject to the company’s constitutive documents.

in terms of the Company’s articles of association, directors appointed by the board during the course of the year, are subject to confirmation at the next Annual General Meeting. Dr. Joseph Kanyekanye, Mrs Rosa Dube, Messrs. shingirayi norman Chibanguza, ian Chamunorwa haruperi, douglas hoto and douglas mavhembu who were co-opted to the board during the course of the year will retire and being eligible for re-election at the forthcoming annual General meeting. in terms of the articles of association, at least one third of the directors are required to retire each year. The directors may make themselves available for re-election.

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

Audit and Risk Committee The Committee currently comprises three non-executive directors, and is chaired by a non-executive director.

The committee deals inter alia, with compliance, internal control and risk management. The external auditors attend meetings by invitation. The committee meets at least four times a year to consider compliance with financial reporting requirements, monitor the appropriateness of the accounting policies and the effectiveness of the systems of internal control and consider the findings of the internal and external auditors.

Finance Committee The committee comprises of three Non-Executive Directors. The Board has defined the Committee’s purpose as

assisting the board in its consideration for approval and on-going oversight of matters pertaining to: - Capital structure and funding; - Capital management planning and initiatives; and - due diligence on acquisitions and divestments including proposals which may have a material impact on the

Group’s capital position.

Human Resources and Corporate Governance Committee The committee currently comprises of three non-executive directors and is chaired by a non-executive director.

The primary functions of the committee are to assist the board by reviewing policies, relating to senior executives’ remuneration and monitoring the current industry practice with regards to executive remuneration. The committee also makes recommendations to the board on the composition of the board and the balance between executives and non executives. skills and diversity is also taken into account in this process. The Committee reviews and makes recommendations to the board of directors on the structure and membership of board Committees annually.

Marketing and Strategy Committee The committee currently comprises of three non-executive directors and is chaired by a non-executive director.

The functions of this committee includes; reviewing and advising on the Group’s marketing strategy and identifying and exploring new business opportunities for the Group.


4.7 Directors’ Declarations

Statement of indebtedness in terms of the Company’s articles of association, the directors of the Company are authorised, at their discretion,

without the previous sanction of an ordinary resolution of the Company in general meeting, to incur borrowings provided the aggregate principal amount of these borrowings shall not exceed twice the aggregate of:

- the nominal amount of the issued and paid share capital for the time being of the Company; and - the aggregate of amounts standing to credit of all capital and revenue reserve accounts, any share premium

account and profit and loss account as set out in the latest audited balance sheet of the Company, its holding company and its subsidiaries which has been drawn up to be laid before the shareholders of the Company in general meeting at the relevant time.

as at 30 June 2012 the Company had the following borrowings:

PTA Bank Loan The loan of US$3.2 million carries interest of 3 months Libor rate plus 6% per annum during the grace period and 3

months Libor rate plus 5.55% thereafter. The loan has a tenor of five years with principal repayment grace period of one year and is secured by a bond in favour of the bank over Victoria Falls Rainbow hotel and a’ Zambezi River Lodge Properties with a net book value of US$11,044,220. The loan is due for repayment in the second quarter of 2017.

Afreximbank Loan The loan of US$7.5 million carries interest of Libor rate plus market premium determined by the bank calculated

as the variance between the bank’s cost of funding and relevant Libor rate plus 5.5% per annum. The loan has a tenor of six years with one year capital repayment grace period of one year and is secured by a bank guarantee of US$7.5 million from Capital Bank and a mortgage bond over the notarial lease in respect of Rainbow Towers Hotel and Conference Centre. The loan is due for repayment in the 4th quarter of 2016.

Short Term Loans These are Bankers Acceptances with various financial institutions amounting to US$12.6 million. The loans were

unsecured except for the US$5 million facility with CBZ Bank Limited and repayable within 30 to 120 days subject to being rolled over. Interest on Bankers Acceptances ranged between 14% and 42% per annum.

4.8 Legal Information

Litigation The directors are not aware of any legal proceedings (including any such proceedings which are pending

or threatened), which would have a material adverse impact on the business, operations, assets, liabilities or materially affect the ability of the group to operate or conduct its business in the manner in which it is currently operated or conducted. while this is the case, at the time of drafting this document, the Company had the following litigation matters:

- messina investments limited (“the applicant”) v Rainbow Tourism Group limited and nine others hC 6391/06. in this case, the applicant seeks the review of an arbitral award wherein the applicant unsuccessfully sought an order directing that additional shares be issued to it, pursuant to the 2005 Rights Offer by the Company and or its directors.

- Africa Corporate Advisors Limited (“the Plaintiff”) v Rainbow Tourism Group Limited HC/2739/12. The Plaintiff claims an amount if US$310,000 from RTG in respect of advisory services it claims to have rendered to RTG at RTG’s specific instance and request for and in connection with raising funds for the construction of a hotel.

- employees of matetsi water lodge (“the applicant”) v matetsi Game lodge. The applicants are claiming US$216,000 from Matetsi in respect of unpaid wages and salaries which they claim are owed to them by Matetsi for the period december 2011 to June 2012.


Material Contracts at the time of drafting this document, the Company had the following material contracts:

Afreximbank Loan Facility Agreement in respect to US$7.5 million entered into between RTG as the Borrower, African Export –

import bank (the lender) & Capital bank (as the local agent).

PTA Loan Facility Agreement of about US$3.8 million entered into between RTG (as Borrower) and PTA (as the Lender).

US$10 million Loan The Group has finalised a US$10 million loan with a local lender at favourable terms to restructure part of the short

term borrowings.

Underwriting Agreement This agreement was signed between the Company and nssa on 26 november 2012 and is available for inspection

at the Company’ Corporate Offices.

Other Material Contracts There are no material contracts or proposed contracts, written or oral, relating to the remuneration of the

executive directors or management, secretarial and technical fees or restraint payments payable by the Company or any of its subsidiaries. Conditions of employment are governed by contracts of employment. other than contracts mentioned in this Rights Offer Circular, there are no material contracts entered into by the Company, either verbally or in writing that are or may be material and which have been entered into within the last two (2) years, otherwise than in the ordinary course of business. no contract entered into at any time contains an obligation or settlement that is material to RTG or its subsidiaries.

Material Changes Other than those mentioned in this Rights Offer Document, there have been no material changes in the financial

or trading position of RTG and its subsidiaries that has occurred since the end of the financial year and the date of this document.

4.9 Listing of Rights Offer shares on ZSE application has been made to the listing Committee of the Zse, which has granted approval, in principle, for the

Rights Offer Shares offered in terms of this Rights Offer to be listed on the ZSE from wednesday, 6 February 2013.

4.10 Experts’ Consent Capital bank, bdo Zimbabwe Chartered accountants, bethel equities, Kantor and immerman legal practitioners

and First Transfer Secretaries have given and not withdrawn their consent to the issue of this Rights Offer document with the inclusion of their names and reports in the form and context in which they appear.


The directors whose names are given below, collectively and individually accept full responsibility for the accuracy of the information given, and certify that to the best of their knowledge and belief there are no other facts the omission of which would make any statement false or misleading, and that they made all reasonable inquiries to ascertain such facts.

The Directors also confirm that this Circular includes all such information within their knowledge (or which it would be reasonable for them to obtain by making enquiries) that investors and their professional advisors would require and reasonably expect to find for the purposes of making an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of RTG and of the rights attaching to the securities to which the Circular relates.

Name of Director Signature

dr. Joseph Kanyekanye signed on original

Tendai macGerald madziwanyika signed on original

paschal Changunda signed on original

Rosa dube signed on original

shingirayi norman Chibanguza signed on original

John mafungei Chikura signed on original

ian Chamunorwa haruperi signed on original

douglas hoto signed on original

douglas mavhembu signed on original

shadreck Chamunorwa Vera signed on original

PART FIVE: DIRECTORS’ RESPONSIBILITY STATEMENT


6.1 Terms of the Rights Offer The Board of Directors has resolved to offer to the Shareholders of the Company, registered as such at the close of

business on Monday, 24 December 2012, being the Record Date, approximately 225,000,000 Rights Offer Shares for subscription at a ratio of 13.6737 Rights Offer Shares for every 100 ordinary shares already held, in United States Dollars, at a subscription price of US$0.02 each for an aggregate amount of approximately US$4,500,000 and in return the issue and allotment of approximately 225,000,000 ordinary shares in RTG to those shareholders and to issue and allot such shares pursuant to the Transaction.

6.2 Date of Opening and Closing of Rights Offer The Rights Offer will open at 0900hrs on Monday, 31 December 2012 and close at 1630 hours on Friday, 25 January

2013.

6.3 Courses of Action set out below are the options available to RTG shareholders with respect to their rights in terms of the Rights

Offer:

Acceptance – Subscribe for all the Rights Offer Shares The Shareholder who wishes to take up their rights in terms of the Rights Offer, is required to complete Part A

of the renounceable Letter of Allocation (“LA”) form and subscribe for the rights offer shares as set out in this Circular in accordance with the instructions contained and forward it to First Transfer secretaries (“FTs”) by no later than Thursday, 24 January 2013 with proof of payment. Kindly note that under no circumstances should cash be send to FTs.

Splitting a shareholder who wants to take up some but not all of their rights should complete part b of the la, and return

to FTs, 1 armagh avenue, eastlea, harare to be received by 3.00 p.m. on or before Friday, 25 January 2013.

The Rights Offer shares that the shareholder does not wish to follow will be taken up by the underwriters.

Renunciation – ELECT not to follow rights The right to subscribe for the Rights Offer Shares in RTG, as detailed in this Document, may be renounced (nil paid)

in favour of a third party.

in the event that the Company does not receive a duly completed letter of allocation from a shareholder by Friday, 25 January 2013 it will be presumed that the particular shareholder has waived his rights and the Rights Offer Shares offered to that Shareholder will automatically lapse and they shall be taken up by the underwriter.

6.4 Payment The amount due on acceptance is payable in the currency of the united states of america. The cash, transfer,

cheque or bank draft shall be payable into the following account before the due date:

account name : Rainbow Tourism Group Rights issue bank : CbZ banK branch : selous avenue account number : 02123111380056

all deposiT slips musT beaR The leTTeR oF alloCaTion ReFeRenCe numbeR Found on The Top RiGhT CoRneR oF The FoRm. proof of deposit into the account and the completed letters of allocation should be lodged with the transfer secretaries, FTS at their registered office.

6.5 Exchange Control united states dollars are legal tender in Zimbabwe. The Transaction does not require exchange control approval.

non-resident shareholders of RTG are advised to consult their professional advisors or bankers regarding their individual exchange control position, in relation to their participation in the Rights Offer described in this Circular to shareholders.

PART SIX: DETAILS, TERMS AND CONDITIONS OF THE OFFER


6.6 Listing, Dividends and Ranking of Rights Offer Shares The listing Committee of the Zse has granted primary listing for, and permission to deal in, all Renouncable letters

of Allocation (nil paid) relating to the Rights offer shares, between Monday, 31 December 2012 and wednesday, 23 January 2013. Renouncable letters of allocation may be negotiated and sold, subject to exchange Control Regulations, the details of which are disclosed in this Circular. application was made to the Zse listing Committee to approve the listing of the Rights Offer shares on the ZSE from Wednesday, 6 February 2013. Persons becoming shareholders as a result of the Rights Offer will be placed in the share register of RTG. The Transfer Secretaries in respect of the Rights Offer Shares are First Transfer Secretaries, whose details are set out in the corporate information section at the beginning of this circular.

The Rights Offer Shares issued in accordance with the Rights Offer will be issued as fully paid and will rank pari passu from the date of issue with the other shares of the company.

6.7 Rights Offer Share Certificates The share certificates in respect of the Rights Offer will be distributed and allotted to Shareholders from Thursday,

14 February 2013.


7.1 Group Financial Information

7.1.1 RTG Consolidated Statement of Financial Position

Reviewed30.06.2012

US$

Audited31.12.2011

US$

Audited31.12.2010

US$

Audited31.12.2009

US$

ASSETS

Non-current assets

property and equipment 34,170,053 33,385,813 30,692,185 26,536,417

investment property - 450,000 - -

intangible asset 235,932 235,932 - -

held to maturity investment - - 900,000 900,000

34,405,985 34,071,745 31,592,185 27,436,417

Current assets

inventories 1,833,201 1,718,539 1,413,219 1,082,730

accounts receivable 7,858,125 6,676,245 5,334,423 4,528,238

held to maturity investment - 900,000 - -

held for trading investments 18,335 18,335 24,994 37,373

Cash and bank balances 4,431,552 6,113,206 5,908,394 303,062

14,141,213 15,426,325 12,681,030 5,951,403

Assets in disposal group classified as held for sale 1,647,901 2,527,243 -

Total assets 50,195,099 52,025,313 44,273,215 33,387,820

EQUITY AND LIABILITIES

Capital and reserves

share capital 164,550 164,550 164,550 -

non distributable reserve 16,884,995 17,174,043 17,174,043 17,338,593

Foreign currency translation reserve 16,285 8,166 26,208 (2,072)

Revaluation reserve 1,108,995 1,108,995 1,108,995 1,011,492

accumulated loss (5,702,585) (1,441,307) (1,069,874) 393,669

12,472,240 17,014,447 17,403,922 18,741,682

non -controlling interest - - - (146,646)

12,472,240 17,014,447 17,403,922 18,595,036

Non-current liabilities

long term loans 10,740,838 10,872,838 9,669,657 427,350

deferred tax 3,549,274 3,576,342 4,377,746 6,489,432

14,290,112 14,449,180 14,047,403 6,916,782

Current liabilities

short term loans 7,708,806 10,750,631 6,370,212 1,081,759

accounts payable 9,791,840 7,510,057 3,894,234 5,475,293

Tax payable 183,050 378,228 124,866 57,303

bank overdraft 4,895,719 1,573,439 2,432,578 1,261,647

22,579,415 20,212,355 12,821,890 7,876,002

liabilities directly associated with assets in disposal group classified as held for sale

853,332 349,331 - -

Total liabilities 37,722,859 35,010,866 26,869,293 14,792,784

Total equity and liabilities 50,195,099 52,025,313 44,273,215 33,387,820

PART SEVEN: ANNEXURES


7.1.2 RTG Consolidated Statement of Comprehensive Income

REVIEWED30.06.2012

US$

AUDITED31.12.2011

US$

AUDITED31.12.2010

US$

AUDITED31.12.2009

US$

Revenue 13,292,006 27,320,901 20,740,166 17,505,716

Cost of sales (1,516,216) (3,389,479) (2,803,661) (2,752,341)

Gross profit 11,775,790 23,931,422 17,936,505 14,753,375

other operating income 46,162 74,498 75,222 683,616


investment income 157,690 104,473 213,055 69,967

Earnings before interest, tax, depreciation and amortisation (1,402,004) 2,990,263 (231,415) 1,420,714

depreciation (756,998) (1,193,670) (1,092,432) (920,114)

(Loss) / profit from operations (2,159,003) 1,796,593 (1,323,847) 500,600

Finance expense (1,597,942) (1,650,315) (1,397,334) (321,666)

(Loss) / profit before tax (3,756,945) 146,278 (2,721,181) 178,934

income tax 27,062 417,235 1,677,954 (19,972)

(Loss) / profit after tax from continuing operations (3,729,883) 563,513 (1,043,227) 158,962

loss from discontinuing operations, net of tax (820,444) (936,946) (109,660) -

(Loss)/profit for the period (4,550,327) (373,433) (1,152,887) 158,962

Other comprehensive income net of tax

Gain on property revaluation net of tax - - 97,503 1,106,325

exchange (loss) / gain arising on translation 8,119 (18,042) 28,280 (2,072)

Total other comprehensive income 8,119 (18,042) 125,783 1,104,253

Total comprehensive income for the period (4,542,208) (391,475) (1,027,104) 1,263,215


7.1.3 RTG Consolidated Statement of Cash Flows

REVIEWED30.06.2012

US$

AUDITED31.12.2011

US$

AUDITED31.12.2010

US$

AUDITED31.12.2009

US$

CASHFLOWS FROM OPERATING ACTIVITIES

Cash generated from operations (1,531,298) 3,981,205 (3,675,641) 1,955,097

interest received 45,676 383,599 226,715 16,782

investment income 203,348 104,473 213,055 -

interest paid (1,681,809) (2,136,097) (1,626,382) (338,448)

income tax paid (195,178) (124,866) (59,867) -

exchange losses on translation of foreign operations (26,758) (18,042) (23,066) -

Net cash (outflow) / inflow from operating activities (3,186,019) 2,190,272 (4,945,186) 1,633,431

CASHFLOWS FROM INVESTING ACTIVITIES

purchase of property and equipment (985,541) (6,777,490) (5,299,013) (2,574,720)

proceeds on sale of property and equipment 211,453 746,842 135,463 117,700

proceeds from sale of subsidiaries 650,000 - - -

purchase of intangible asset - (235,932) - -

decrease/(increase) in held for trading investments - 6,659 12,378 (37,373)

decrease/(increase) in held to maturity investment 900,000 - - (900,000)

disposal /(purchase) of investment property 580,000 (450,000) - -

Net cash inflow /(outflow) from investing activities 1,355,912 (6,709,921) (5,151,172) (3,394,393)

CASHFLOWS FROM FINANCING ACTIVITIES

decrease /(increase) in borrowings (3,173,827) 5,583,600 14,530,759 499,342

Net cash (outflow) / inflow from financing activities (3,173,827) 5,583,600 14,530,759 499,342

net (decrease)/increase in cash and cash equivalents (5,003,934) 1,063,951 4,434,401 (1,261,620)

Cash and Cash eQuiValenTs aT beGinninG oF peRiod

4,539,767 3,475,816 (958,585) 303,035

CASH AND CASH EQUIVALENTS AT END OF PERIOD (464,167) 4,539,767 3,475,816 (958,585)


7.2 Reporting Accountant’s Report

17 october 2012

The directors Rainbow Tourism Group limited 1 pennefather Road haRaRe

dear messrs,

independenT RepoRTinG aCCounTanTs’ RepoRT on The ConsolidaTed FinanCial inFoRmaTion oF Rainbow TouRism GRoup limiTed and iTs subsidiaRies (RTG)

1. REVIEW REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2012

1.1 Introduction at your request for the purpose of the terms and objectives of the engagement set out in our engagement letter

dated October 1, 2012, issued in connection with the proposed transaction involving a renunceable rights offer of shares in Rainbow Tourism Group Limited, we present our report on the reviewed financial information of the group in respect of the half year ended 30 June 2012, being the date to which the latest audited and reviewed financial statements have been prepared in compliance with the Zimbabwe Stock Exchange “ZSE” listing requirements.

1.2 Directors’ responsibility for the financial statements We have reviewed the accompanying consolidated statement of financial position of Rainbow Tourism Group

limited (“RTG” or “the Group”) as of June 30, 2012 and the related consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated cash flows for the six-month period then ended. The Group’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with international Financial Reporting standards(“iFRs”) and in the manner required by the Companies Act (Chapter 24:03). Our responsibility is to issue a report on the financial statements based on our review.

1.3 Scope of review we conducted our review in accordance with international standard on Review engagements 2410, (Review of

Interim Financial Information Performed by the Independent Auditor of the Entity). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. a review is substantially less in scope than an audit conducted in accordance with international standards on auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly we do not express an opinion.

1.4 Review report for the period ended 30 June 2012 based on our review, nothing has come to our attention that causes us to believe that the accompanying interim

financial statements do not present fairly, in all material respects, the financial position of the Group as at 30 June 2012 in accordance with international Financial Reporting standards and in the manner required by the Companies act (Chapter 24:03).

1.5 Emphasis of matter Without qualifying our review opinion, we draw attention to Note 6 to the financial statements which indicates

that the Group incurred a loss before tax of $3,463,697 for the six months ended 30 June 2012 (31 December 2011: profit of $146,697) and as of that date the Group’s current liabilities exceeded its current assets by $8,136,135 (31 December 2011: $4,786,030). These conditions along indicate the existence of a material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern.

Tel: +263 4 703 876 /7/8 Fax: +263 4 703 876/7/8 www.bdo.co.zw

Kudenga House 3 Baines Avenue

P.O Box 334 Harare Zimbabwe

BDO Zimbabwe Chartered Accountants


2. PRIOR YEARS’ AUDITED CONSOLIDATED FINANCIAL STATEMENTS AUDIT OPINIONS we have been auditors of Rainbow Tourism Group and its subsidiaries throughout the period covered in this

report.

2.1 Financial year ended 31 December 2011

2.1.1 Unqualified opinion on the consolidated statement of financial position at 31 December 2011 The consolidated statement of financial position, in all material respects, gave a true and fair view of the financial

position of the Group as at 31 december 2011 in accordance with international Financial Reporting standards and in the manner required by the Companies act (Chapter 24:03).

2.2 Financial year ended 31 December 2010

2.2.1 Transition to full compliance with International Financial Reporting Standards (“IFRSs”) The Group resumed presentation of IFRS financial statements after the Group issued financial statements in the

prior reporting period ended 31 december 2009 which did not include an explicit and unreserved statement of compliance with IFRS due to the effects of severe hyperinflation. The Group early adopted the amendment to IFRS 1 and therefore applied that standard in returning to compliance with iFRs. The Group’s functional currency for the period before 1 January 2009, the Zimbabwe dollar (“ZWD”), was subjected to severe hyperinflation because it had both of the following characteristics:

(a) a reliable general price index was not available to all entities with transactions and balances in the ZW$; and (b) exchangeability between the ZW$ and a relatively stable foreign currency did not exist.

The Group’s functional currency ceased to be subject to severe hyperinflation from 1 January 2009 because the Group changed its functional and presentation currency from ZW$ to the United States dollar (US$) with effect from 1 January 2009.

2.2.2 Audit opinion for the year ended 31 December 2010

2.2.2.1 Unqualified audit opinion The consolidated statement of financial position, in all material respects, gave a true and fair view of the financial

position of the group as at 31 december 2010 in accordance with international Financial Reporting standards.

2.2.2.2 Emphasis of matter Without qualifying our opinion, we drew the attention of the users of the financial statements to the following

matters:-

Going concern of a significant subsidiary A significant subsidiary, Touch The Wild (Private) Limited, which had been consolidated, was facing going concern

problems. There was no certainty whether Sikumi Tree Lodge which contributed 24% of the subsidiary’s revenue would remain under the control of the subsidiary due to an ownership dispute. The ability of the subsidiary to continue operating as a going concern was therefore dependent on a return to profitable operations, satisfactory resolution of the ownership dispute of sikumi Tree lodge and continued support from the bankers, creditors and the holding company.

2.3 Financial year ended 31 December 2009 A multi-currency framework was introduced in January 2009 and the financial statements for the year ended 31

December 2009 were stated in United States Dollars. The financial statements for years prior to 31 December 2009 were stated in Zimbabwe Dollars. The financial statements for comparative purposes beyond 31 December 2009 have not been included in the Circular by the directors as they believe they will be misleading. due to the prevailing economic environment in the previous years it is not possible to convert these financial statements into United States Dollars in a manner consistent with IAS 21 (The Effects of Changes in Foreign Exchange Rates) and IAS 29 (Financial Reporting in Hyperinflationary Economies).


The audit report for the consolidated financial statements for the year ended 31 December 2009 covered the following:-

2.3.1 Non-compliance with International Accounting Standard (“IAS”) 29 (Financial Reporting in Hyperinflationary Economies) and International Accounting Standard (“IAS”) 21 (The Effects of Changes in Foreign Exchange Rates)

The Group operated under a hyperinflationary economy in the year ended 31 December 2008. The Group changed its functional currency to United States Dollars with effect from January 2009. All monetary comparative information, the statement of comprehensive income, and the statement of cash flows were not prepared in conformity with international Financial Reporting standards in that the requirements of ias 29 and ias 21 were not complied with in converting the financial information during the period of hyperinflation into an applicable measurement base at the date of reporting for the following reasons:-

- the inability to reliably measure inflation because of the interaction of multiple economic factors which were pervasive to the Zimbabwean economic environment; and

- the inability to adjust items that were recorded in Zimbabwe dollars into united states dollars at the date of change of functional currency.

2.3.2 Non-compliance with IAS 1: Presentation of financial statements The directors did not present any comparative information as required by ias 1 because they believed the

information would be misleading.

in line with (i) and (ii) above, the split audit opinion was thus:-

2.3.2.1 adverse opinion on non-compliance with international Financial Reporting standards on all comparative information, the statement of comprehensive income and the statement of cash flows.

Because of the significance of non-compliance with IFRSs, the comparative information, the statement of comprehensive income and the statement of cash flows did not give a true and fair view of the results of the Group’s operations and cash flows for the year ended 31 December 2009 in accordance with International Financial Reporting standards.

2.3.2.2 Unqualified audit opinion on the statement of financial position as at ended 31 December 2009 The consolidated statement of financial position, in all material respects, gave a true and fair view of the financial

position of the group as at 31 december 2009 in accordance with international Financial Reporting standards.

2.3.2.3 Emphasis of matter Without further qualifying our opinion, we drew the attention of the users of the financial statements to the

following matters:-

a) Going concern of a significant subsidiary A significant subsidiary, TOUCH THE WILD (PRIVATE) LIMITED which had been consolidated, was facing going

concern problems. There was also no certainty whether Sikumi Tree Lodge which contributed 24% of the subsidiary’s revenue would remain under the control of the subsidiary due to an ownership dispute. The ability of the subsidiary to continue operating as a going concern was dependent on a return to profitable operations, satisfactory resolution of the ownership dispute of sikumi Tree lodge and continued support from the bankers, creditors and the holding company.

b) Fair value determination for transactions, assets and liabilities The determination of fair values of land and buildings presented in the financial statements was affected by

the prevailing economic environment and therefore could have been distorted. This could result in significant variations in fair values, depending on factors and assumptions used in the determination of the fair values.


3. REVIEW REPORT ON UNAUDITED PROFORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2012

3.1 Introduction Section 2.12 of this Circular contains the pro-forma consolidated statement of financial position of Rainbow

Tourism Group limited (“the Group”) as at 30 June 2012 in accordance with the policies and assumptions which form part of the financial information. The purpose of the pro-forma consolidated statement of financial position is to incorporate the effect of the raising of approximately US$4,500,000.00 equity by way of a rights offer (“the Transaction”), that is the subject of this Circular to shareholders of Rainbow Tourism Group limited subsequent to 30 June 2012 as if it had occurred on that date.

3.2 Scope of the review We have performed a review of the pro-forma consolidated statement of financial position of the group as at 30

June 2012 as set out in section 2.12 in order to state whether on the basis of the procedures described, anything has come to our attention that would indicate that the pro-forma consolidated statement of financial position is not presented fairly in accordance with the measurement requirements of applicable international Financial Reporting standards to the extent to which they are relevant to the information presented.

our review has been conducted in accordance with international auditing standards applicable to review engagements and has been limited to inquiries with the Group’s personnel, analytical procedures applied to the financial data, a reading of contracts and other relevant documents, a reading of minutes of Directors’ meetings, ensuring consistency in application of accounting standards and policies and certain limited verifications supporting the amounts and other disclosures in the financial information. We have also determined whether the pro-forma transactions form a reasonable basis for the preparation of the pro-forma statement of financial position.

These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than that given in an audit. we have not performed an audit and, accordingly, we do not express an audit opinion.

3.3 Our Review Opinion Based on our review of the pro-forma consolidated statement of financial position nothing has come to our

attention to indicate that it has not been compiled in accordance with the policies and assumptions so as to present fairly the relevant pro-forma financial position of Rainbow Tourism Group Limited as at 30 June 2012 in accordance with the measurement requirements of applicable international Financial Reporting standards as if the proposed transactions had occurred on that date.

4. SUBSEQUENT EVENTS other than the matters dealt with in this report, to the best of our knowledge and belief, we are not aware of any

material items, transactions or events subsequent to 30 June 2012 which require comment or adjustment to the information contained in this report or which would cause such information to be misleading.

5. DISCLOSURE bdo Zimbabwe Chartered accountants does not have any pecuniary interests that could reasonably be regarded

as being capable of affecting its ability to give an unbiased opinion in this matter. BDO Zimbabwe Chartered accountants does not provide any other service which includes taxation, due diligence and other advisory services to Rainbow Tourism Group limited. bdo Zimbabwe Chartered accountants is the appointed auditor of Rainbow Tourism Group limited and will receive a professional fee for the preparation of this report.

The directors have agreed to indemnify and hold harmless bdo Zimbabwe Chartered accountants and its employees from any claims arising out of misstatement or omission in any material or information supplied by the directors.


6. APPENDED FINANCIAL INFORMATION As the purpose of the appended financial information differs from the purpose of financial statements prepared

for the members, the appended financial information is not intended to comply fully with the full presentation and disclosure requirements of the Companies act (Chapter 24:03) and international Financial Reporting standards.

7. CONSENT we consent to the inclusion of this report, which will form part of this Circular to the shareholders, to be issued on

or about 30 november 2012, in the form and context in which it will appear.

Yours faithfully,

bdo Zimbabwe harare Chartered accountants 17 october, 2012


7.3 Share Price Performance The following table shows the share price history and the volumes of RTG shares traded on the Zse for the last

dealing day of each month from January 2012 to september 2012 and closing price on each day in the month leading to Wednesday,31 October 2012 [being the last practicable date prior to the finalisation of this Circular].

Date Bid PriceUS$

Offer PriceUS$

Sale PriceUS$

Volume of Shares Traded

Data for each month ended:

31 January 2012 0.020 0.020 0.020 4,781.000

29 February 2012 0.015 0.015 0.015 566.000

30 march 2012 0.020 0.020 0.020 10,754.000

30 april 2012 0.022 0.022 0.022 4,228.000

31 may 2012 0.020 0.020 0.020 3,835.000

29 June 2012 0.025 - - -

31 July 2012 0.015 - - -

31 august 2012 0.021 0.030 - -

28 september 2012 0.025 0.028 0.026 76,000.000

Data for each day ended

01 october 2012 - 0.028 - -

02 october 2012 0.023 0.026 - -

03 october 2012 0.023 0.028 0.023 59,271.000

04 october 2012 - 0.028 - -

05 october 2012 - 0.028 - -

08 october 2012 - 0.028 - -

09 october 2012 - 0.025 - -

10 october 2012 - 0.023 - -

11 october 2012 0.018 0.025 - -

12 october 2012 0.018 0.023 - -

15 october 2012 0.015 0.020 0.023 34,096.000

16 october 2012 0.002 0.020 0.020 1,000.000

17 october 2012 0.018 0.022 0.020 33,110.000

18 october 2012 0.018 - 0.020 5,593.000

19 october 2012 0.018 - - -

22 october 2012 0.018 0.022 - -

23 october 2012 0.018 - 0.018 29,134.000

24 october 2012 0.018 0.020 0.018 1,845.000

25 october 2012 0.018 - - -

26 october 2012 0.018 - - -

29 october 2012 0.018 0.022 0.020 57,869.000

30 october 2012 0.019 0.022 0.020 101,661.000

31 october 2012 0.019 - 0.020 200,000.000

The Group’s share price has been oscillating between a high of US$0.033 and a low of US$0.012 from January 2010 to october 2012.


The weighted share prices (cut off date 31 October 2012) are as follows:

US$

90 day weighted average price 0.0211



7.4 Underwriter Details The national social security authority (nssa) was constituted and established in terms of the nssa act of 1989

(Chapter 17:04) as a statutory corporate body tasked by the Government of Zimbabwe to provide social security. The provision of social security can be defined as instituting public policy measures intended to protect an individual in life situations or conditions in which his/her livelihood and well being may be threatened, such as those engendered by sickness, workplace injuries, unemployment, invalidity, old age, retirement and death. it is based on the principle of social solidarity and pooling of resources and risks, involving drawing of savings from periods of employment, earnings and good health to provide for periods of unemployment, old age, invalidity and death. At the moment NSSA is administering two schemes: Pension and Other Benefits Scheme and ‘Accident Prevention and workers Compensation scheme, although, in an endeavour to provide a more comprehensive social security package for the Zimbabwean society, groundwork for the introduction of more schemes is underway.

31 December 2011 30 December 2010

ToTal asseTs 592,222,107 456,690,679

Total Reserves 587,349,743 451,739,924

Total liabilities 4,872,364 4,950,756

ToTal eQuiTY and liabiliTies 592,222,107 456,690,679

more information on the underwriter can be found on www.nssa.org.

7.5 Table of Entitlements for RTG Shareholders Set out below is the table of entitlement of RTG Shareholders to Rights Offer Shares, based on a ratio of 13.6737

new Rights Offer shares for every 100 ordinary shares already held on the Record Date. Fractional entitlements to be rounded off.

Shares currently held by Shareholder

Rights Offer Entitlement Subscription Price

Ordinary Shares Rights Offer Shares At US$0,02 per Share

1,000 140 2.80

5,000 700 14.00

10,000 1,400 28.00

100,000 14,000 280.00

500,000 70,000 1,400.00

1,000,000 140,000 2,800.00

2,500,000 350,000 7,000.00

5,000,000 700,000 14,000.00

10,000,000 1,400,000 28,000.00

50,000,000 7,000,000 140,000.00

100,000,000 14,000,000 280,000.00


7.6 Notice of an Extraordinary General Meeting

NOTICE IS HEREBY GIVEN THAT an extraordinary General meeting (“eGm”) of the shareholders of Rainbow Tourism Group limited (“the Company”) will be held in the Jacaranda Rooms 2 and 3 at the Rainbow Towers and Conference Centre, 1 pennefather avenue, harare on monday, 24 december 2012, at 1000 hours (or immediately after the conclusion or adjournment of the annual General meeting of the Company (“aGm”), which has been convened to be held at the same place and on the same day) for the purpose of transacting the following business:

1. CONSTITUTION OF MEETING

1.1 To table valid forms of proxy. 1.2 To declare the meeting constituted.

2. RENOUNCEABLE RIGHTS OFFER

To resolve-

“THAT the Directors of the Company be and are hereby authorised to offer approximately 225,000,000 (two hundred and twenty five million) ordinary shares in the authorised share capital of the company, by way of rights issue, to its shareholders who appear in the members’ register at close of business on monday, 24 december 2012, in the ratio of 13.6737 (thirteen point six seven three seven) Rights Offer Shares for every 100 (one hundred)ordinary shares already held in the company, fractional entitlements to be rounded off, at an issue price of US$0.02 (Zero comma zero two united states dollars) per share, payable in full on acceptance, and to issue and allot the rights shares as may be subscribed pursuant to the rights offer.”

3. DIRECTORS AUTHORITY TO GIVE EFFECT TO THE ABOVE RESOLUTION

To resolve –

“That, the Directors be and are hereby authorized to take any and all steps necessary to give effect to the renounceable rights offer resolution above.”

PROXIES AND VOTES each member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to act in the

alternative and speak in his stead. a proxy need not be a member of the Company.

Proxy forms must be lodged at the registered office of the company not less than 48 hours before the time of holding the meeting.

by order of the board

STEPHEN NYABADZA COMPANY SECRETARY 1 pennefather avenue/ samora machel avenue harare, Zimbabwe

NOTICE OF AN EXTRAORDINARY GENERAL MEETING


7.7 Form of Proxy EGM The Company secretary Rainbow Tourism Group limited p.o. box 10029 haRaRe

i/we………………………………………………………….…of…………………………………………………being a member of Rainbow Tourism Group limited hereby appoint…………………………………………………..or failing him/her the Chairman of the meeting as my/our proxy to attend and speak for me/us on my/our behalf at the extraordinary General meeting of the Company to be held in the Jacaranda Rooms 2 & 3, Rainbow Towers hotel and Conference Centre, harare on monday, 24 december 2012 and at any adjournment thereof and to vote or abstain from voting as indicated below on the resolutions to be considered at the said meeting.

ORDINARY RESOLUTIONS FOR AGAINST ABSTAIN

1. To authorise the Directors of the Company to offer approximately 225,000,000 (two hundred and twenty five million) ordinary shares in the authorised share capital of the Company, by way of rights issue, to shareholders who appear in the members’ register at close on business on monday, 24 december 2012, in the ratio of 13.6737 (thirteen point six seven three seven) Rights Offer Shares for every 100 (one hundred) ordinary shares already held in the Company, fractional entitlements to be rounded off, at an issue price of US$ 0.02 (Zero comma zero two united states dollars) per share, payable in full on acceptance, and to issue and allot the rights shares as may be subscribed pursuant to the rights offer.

2. To give directors the authority to do any and all such things as may be generally required or necessary to give effect to the rights offer.

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

signed at…………………………………..this…………………....…………..day of…………………......…….2012

signature of member…………………………………………………….........………………………………………..

number of shares held by member………………………………………………………………………………………

NOTES 1. This proxy form should reach the registered office of the Company not later than 48 hours before the time of

the meeting. 2. a member entitled to attend and vote is entitled to appoint a proxy to attend and vote and speak in his stead.

a proxy need not be a member of the Company.


7.8 Letter of Allocation (“LA”) Sample RTG CoRpoRaTion limiTed (“RTG” or “Company”)

C. REGISTRATION APPLICATION FORM (To be completed by the person(s) / entity taking up the right, or his/her/their agent). (please print). First name(s) _________________________________________________________________________________ surname or name of corporate body______________________________________________________________

To: The directors RTG limiTed I/We the person(s) named above, confirm I/we have full legal capacity to contract and request you to allot the

Rights Offer Shares covered by this Letter in my/our name(s). I/We authorize you to place my/our name(s) on the register as members of the Company in respect of the shares so allocated, subject to the conditions set out overleaf and the memorandum and articles of association of the Company and enclose herewith my/our proof of payment.

please send The new CeRTiFiCaTe To me/us/The aGenT lodGinG This appliCaTion.

signature(s) ______________________________________ date__________________

B. FORM OF RENUNCIATION/SPLITTING (see paragraph 3 (three) “Courses of action” of the renounceable letter) (To be completed by the shareholder named above if the payment being made is to be part of the amount stated

above).

number of RTG ordinary shares registered in your name at close of business at 16:00 hrs monday, 24 december 2012

ACCEPTANCEiF You wish To subsCRibe FoR These new shaRes whiCh haVe been oFFeRed To You, You maY deposiT oR TRansFeR YouR moneY To The FollowinG banK aCCounT.

BANK: CBZ BANK LIMITEDACCOUNT NAME: RAINBOW TOURISM GROUP RIGHTS ISSUEACCOUNT NUMBER: 02123111380056BRANCH: SELOUS AVENUE

OR SIMPLY RETURN THIS FORM TOGETHER WITH YOUR PROOF OF PAYMENT, CHEQUE OR BANK DRAFT CROSSED ‘NOT neGoTiable’ and dRawn in FaVouR oF “RTG RIGHTS OFFER” TO ‘FIRST TRANSFER SECRETARIES (PRIVATE) LIMITED, 1 ARMAGH AVENUE CORNER McCHLERY & ARMAGH AVENUE, EASTLEA P.O. BOX 11, HARARE’ bY no laTeR Than 16:30 hRs FRidaY, 25 JanuaRY 2013. bY siGninG This FoRm You undeRsTand and aCCepT ThaT should suCh a CheQue be dishonouRed, You will FoRFeiT The RiGhT To TaKe up The RiGhTs oFFeR shaRes and You will haVe no FuRTheR Claim whaTsoeVeR and indemniFY RTG and FTs in This ReGaRd.

To: The directorsRTG limiTedI/We, the shareholder(s) named above, would like to take up $_________ worth of the shares to be allocated to the Rights Issue being offered. I/We hereby surrender the balance of my/our right to subscribe to the said Rights shares in favor of the underwriter(s).

signature(s) ____________________________date_____________________

details of split Required

split no. amount remitted

1

2

3

4

5

number of RTG ordinary shares whichmay be subscribed for US$0.02 per share

amounT paYableby 16:30 hrs on Friday, 25 January 2013

shareholder n0.____________


IMPORTANT RTG LIMITED (“RTG”) RENOUNCEABLE LETTER OF ALLOCATION (“LA”)

225,000,000 ordinary shares in the issued share capital of RTG are hereby offered to RTG shareholders, registered as at the close of business on monday, 24 december 2012, being the Record date, for subscription in cash at a price of US$0.02 (zero point zero two United States Dollarseach), payable in full on acceptance, in the ratio of two (2) new ordinary shares for every single (1) ordinary share held.

Fractions of Rights Offer Shares arising will be rounded to the nearest whole ordinary share.

This offer should be read in conjunction with the Circular to RTG Shareholders detailing the terms and conditions of the Rights Offer dated Friday, 30 November 2012 (“Circular”).

iF You haVe ReCenTlY sold all oR paRT oF YouR RTG shaRes, please siGn seCTion b oF This la oVeRleaF and deliVeR This doCumenT To The bRoKeR oR aGenT ThRouGh whom You sold YouR RTG shaRes.

1. General The la overleaf is a valuable document in that you can sell it via your stockbroker through the Zimbabwe stock

Exchange, even though you have not paid any money for the Rights Offer Shares being offered to you.

2. Allocation In terms of the Circular, RTG has offered you the right to subscribe at US$0.02 (zero point zero two United States

Dollars each) per Rights Offer Share for that number of Rights Offer Shares in RTG shown overleaf. The Rights Offer Shares you have been allocated are based on the number of ordinary shares registered in your name at the close of business on monday, 24 december 2012 in the ratio of 14 new ordinary shares for every 100 ordinary shares held.

3. Courses of Action3.1 Subscribe for all the shares offered (ACCEPTANCE) in this case you should return this document without endorsement to FiRsT TRansFeR seCReTaRies (pRiVaTe)

limiTed, harare, together with your proof of payment, cheque, bank draft, or RTGs copy for the amount shown in the relevant section.

Payment Details: banK CbZ banK limiTed aCCounT name Rainbow TouRism GRoup RiGhTs issue aCCounT numbeR 02123111380056 bRanCh selous aVenue

3.2 Sell your rights (RENUNCIATION) In this case, you renounce your right to accept the Rights Offer Shares offered to you and sell your rights, via

a stockbroker. This you can do by signing at the bottom of section b of the form overleaf and by sending it to your stockbroker with your instructions to “sell the rights”. neither the Company nor its agents shall be obliged to investigate whether the la has been properly signed. if the rights are subsequently sold, and the person purchasing the rights wishes to subscribe for the Rights Offer Shares shown overleaf, he, she or his or her agent must complete section C of the form overleaf and the provisions of paragraph 3.1 shall apply in the same way as it applies to the other sections.

3.3 Splitting your rights In this case, you accept a portion of the Rights Offer Shares and transfer your right to subscribe for the balance in

favour of a named or unnamed person, or simply take up a portion and not sell the other portion in which case the shares will be taken up by the underwriter.


4. Timetable Offer opens – 0900 hours Monday, 31 December 2012 last day for dealings in la’s – 1200hrs wednesday, 23 January 2013 latest time for splitting la’s – 1200hrs Thursday, 24 January 2013 Rights Offer closes – 1630hrs Friday, 25 January 2013 Allocation of Rights Offer Shares Monday, 4 February 2013 Expected Date of Registering Rights Offer Shares Wednesday, 6 February 2013 Results of the Rights Offer Published Wednesday, 6 February 2013

5. Signatures all alterations on/to sections b and C must be authenticated by a full signature of the shareholder and joint

renunciations must be signed by all the shareholders concerned.

6. New share certificates New share certificates will be posted from Thursday, 14 February 2013 to the appropriate address recorded

overleaf, unless specific instructions to the contrary are given in writing by the person(s) concerned.

7. Discrepancy If the payment you make is less than it should be, you will still be allocated that number of Rights Offer shares for

which the payment is sufficient. If your payment is more than the amount then you will not be given any additional shares, and the excess payment will be refunded. Kindly note that refunds below $1 will not be made.

8. Offshore/ Foreign Shareholders payments must be made through telegraphic transfer, cheque or bank draft, in favour of “RTG RiGhTs oFFeR”

drawn in the currency of the United States Dollars. Cheques or bank drafts should be crossed ‘not negotiable’ and must be accompanied with a letter of allocation. letters of allocation should be forwarded to FiRsT TRansFeR seCReTaRies (pRiVaTe) limiTed accompanied by proof of payment.


REGISTERED OFFICE

Rainbow Towers Hotel and Conference Centre

No.1 Pennefather Avenue

HARARE

E-mail: [email protected]

www.rtgafrica.com

: RTG Central reservations

: rtgreservations