Overview - Estate Intel · Economist of BancABC from 1999 to 2001. Chris was a senior manager in the global investments division of the Samsung Group of Companies in Seoul, South

Overview

Contents

Corporate Governance

Financial Statements

PEARL PROPERTIES (2006) LIMITED ANNUAL REPORT 2013 a member of FIRST MUTUAL HOLDINGS LIMITED

Corporate Information 2

Profile of Directors 4

Chairman’s Statement 6

Managing Director’s Report 8

Report of the Directors 13

Corporate Governance Report 14

Statement of Directors’ Responsibilities 18

Certificate of Compliance by Group Company Secretary 19

Independent Auditor’s Report 21

Consolidated Statement of Financial Position 22

Consolidated Income Statement 23

Consolidated Statement of Comprehensive Income 24

Consolidated Statement of Changes in Equity 25

Consolidated Statement of Cash Flows 26

Notes to the Consolidated Financial Statements 27

Company Statement of Financial Position 57

Top 20 Shareholders 60

Notice to Shareholders 61

VisionTo be the dominant and best performing real estate company in Africa

MissionTo preserve and maximise stakeholder value through innovative real estate solutions

Values

Responsibility

Entrepreneurship

Commitment

Respect

Innovation

PEARL PROPERTIES (2006) LIMITED ANNUAL REPORT 2013 1 a member of FIRST MUTUAL HOLDINGS LIMITED

2PEARL PROPERTIES (2006) LIMITED ANNUAL REPORT 2013

a member of FIRST MUTUAL HOLDINGS LIMITED

Registered O!ce and Head O!ceGround Floor, First Mutual Park, 100 Borrowdale Road, Borrowdale, Harare, Zimbabwe.Tel: +263 4 886 121 - 4, Tel: +263 772 134 112 - 20 or +263 772 516 392 - 4, Fax: +263 4 885 081Email: [email protected]; Website: www.pearlproperties.co.zw

Postal AddressP.O. Box MP373, Mount Pleasant, Harare, Zimbabwe.

Incorporation and ActivitiesPearl Properties (2006) Limited (“Pearl Properties” or “the Company”) is incorporated in Zimbabwe, and its principal activities are property investment, development and management. Pearl Properties (2006) Limited listed on the Zimbabwe Stock Exchange in August 2007. The Pearl Properties group of companies is hereinafter referred to as “the Group”.

Reporting Period and CurrencyThe current reporting period is from 1 January 2013 to 31 December 2013. The comparative reporting period for the Company is the calendar year ended 31 December 2012. The reporting and functional currency is the United States dollar.

Company SecretarySheila Frances Lorimer (Mrs)

Legal AdvisorsAtherstone & Cook Legal Practitioners Gill, Godlonton & GerransGeorge Silundika House, 7th Floor, Beverley Court,George Silundika Avenue, 100 Nelson Mandela Avenue,Harare. Harare.

Takundwa & Company Legal Practitioners5th Floor Tanganyika House,No. 23, 3rd Street / Kwame Nkrumah Avenue,Harare.

AuditorsErnst & Young Chartered Accountants (Zimbabwe)Angwa City Building,Corner Julius Nyerere Way / Kwame Nkrumah Avenue,Harare.

Transfer SecretariesCorpserve Secretaries (Private) Limited4th Floor, ZB Centre,1st Street/Kwame Nkrumah Avenue,Harare.

Principal Property ValuerKnight Frank ZimbabweP.O. Box 35261st Floor, Finsure House,Harare

BankersBarclays Bank of Zimbabwe Limited, FCDA Branch, Harare.Afrasia Bank Zimbabwe Limited, First Street, Harare.Stanbic Bank Limited, Nelson Mandela Branch, Harare.Standard Chartered Bank Limited, Sam Levy Branch, Borrowdale, Harare.

DirectorateElisha K. Moyo Chairman Francis Nyambiri* Managing DirectorDouglas Hoto Director Andreas Mlalazi Director (resigned 31 December 2013)James K. Gibbons DirectorNangisai J. Mugabe (Mrs.) Director John P. Travlos DirectorRuth B. Ncube (Ms.) Director Christopher U. Hokonya Director Munyaradzi J-R. Dube Director (appointed 5 March 2013) *Executive Director

Corporate Information

3PEARL PROPERTIES (2006) LIMITED ANNUAL REPORT 2013 a member of FIRST MUTUAL HOLDINGS LIMITED



Pro"le of Directors

Francis NyambiriElisha K. Moyo

James K. Gibbons

Mrs Nangisai J. Mugabe

Dr. Christopher U. Hokonya

Douglas Hoto

Ms. Ruth B. Ncube

Munyaradzi J-R. Dube John P. Travlos

1.

4. 6.

10.

2.

7.

3.

5.

8. 9.


9. Mr. Douglas Hoto is an accomplished business leader and currently holds the reins at First Mutual Holdings Limited as Group Chief Executive O!cer. He holds a Bachelor of Science Honours Degree in Mathematics (UZ), is a qualified Actuary with more than 22 years’ experience. He is a Fellow of the Institute and Faculty of Actuaries of the United Kingdom 1999 (FIFA), and is also a Fellow of the Actuarial Society of South Africa (FASSA). Douglas was instrumental in setting up First Mutual Reinsurance Company (FMRE Property & Casualty), Tristar Insurance Company and African Actuarial Consultants from a Division of First Mutual Life Assurance Society. His career has seen him at the helm of Altfin Holdings, First Mutual Limited and he has held various senior positions at Old Mutual South Africa as well as Old Mutual Zimbabwe. Douglas is currently a consulting actuary for African Actuarial Consultants, a division of First Mutual Holdings Limited. In addition to his business achievements, Douglas is involved in community transformation initiatives focusing on education. He works closely with national development organizations and is the past chairman for Zimbabwe National Statistics Agency (ZIMSTATS). He serves on a number of boards and is the immediate past chairman of the Actuarial Society of Zimbabwe.

2. As the Managing Director of Pearl Properties (2006) Limited, Mr. Francis Nyambiri is responsible for charting the strategic direction of the business. He has over 20 years of experience in the property industry and is an active member and former President of the Real Estate Institute of Zimbabwe. Mr. Nyambiri previously worked at Zimre Property Investments Limited as General Manager and at Knight Frank where he was an Associate Partner. He also worked as a valuations and property manager at Intermarket Building Society. He holds a Bachelor of Science Rural & Urban Planning Honours degree and a Master of Business Administration degree both from the University of Zimbabwe. In addition he holds a diploma in Surveying from the College of Estate Management in the United Kingdom. Mr. Nyambiri is a professional member of the Royal Institution of Chartered Surveyors (RICS) and a Registered Estate Agent.

4. Mr. James Gibbons, a Fellow of the Royal Institution of Chartered Surveyors (FRICS), has many years of experience in the property sector in Zimbabwe. He is a past Chairman of the Royal Institution of Chartered Surveyors (RICS), Zimbabwe Group and Past President of the Real Estate Institute of Zimbabwe. Having been a director of Robert Root & Company (Estate Agents), Mr. Gibbons subsequently held the position of Managing Director of Sagit Real Estate (Private) Limited until Sagit was taken over by Knight Frank, London. Mr. Gibbons was then appointed as an equity partner of Knight Frank Zimbabwe and later became senior partner of the firm, a position that he held for 16 years.

3. Mrs. Nangisai Mugabe is a development specialist with town planning, real estate, project planning and management background. She holds a Bachelor of Arts (Honours) degree in Town & Country Planning from the University of Manchester and a Master of Science in Town Planning from the University of Wales. She presently holds the position of Consultant Town Planner with Prostruct Consulting Engineers. Previously, Mrs. Mugabe was a Lead Consultant for PricewaterHouseCoopers on a $140 million USAID/Government of Zimbabwe National Housing Delivery contract. She also worked for the City of Harare’s Department of Works as a Principal Planner after having launched her professional career with the Government of Zimbabwe.

5. Dr. Christopher Hokonya has significant global exposure with a wealth of experience in investment deal structuring across a spectrum of projects including mining, telecommunications, construction and financial services. He was the Chief Executive O!cer of the Chamber of Mines of Zimbabwe from 2009 to 2011. Prior to that, he was the Managing Director of Alpha Asset Management from 2002 to 2009 and the Chief Economist of BancABC from 1999 to 2001. Chris was a senior manager in the global investments division of the Samsung Group of Companies in Seoul, South Korea from 1994 to 1998. He holds a PhD in Applied Economics and an MBA in Banking and Finance. Chris sits on the boards of NSSA, ZB Bank, Global Technology Central Africa, ZUPCO, and previously sat on the boards of Clarion Insurance, Alpha Asset Management, and was a council member of the Institute of Directors of Zimbabwe.

1. Mr. Elisha Moyo is a lawyer by profession and currently practises law in the law firm Moyo and Partners Legal Practitioners, which he founded in October 2011. His speciality is corporate law. In August 2012, Elisha was appointed as Chairman of Pearl Properties (2006) Limited, and as a non-executive director of First Mutual Holdings Limited and TristarInsurance Company Limited. In addition, he also sits on several other boards, including Afrosoft Holdings Limited, having previously served on the boards of Zimnat Life Assurance Company Limited and Sable Chemical Industries (Private) Limited. He has served as the General Counsel for TA Holdings, and as Managing Director of Zimnat Lion Insurance Company Limited for a period of five years. He is a past president of the Insurance Institute of Zimbabwe and a past Chairman of the Insurance Council of Zimbabwe. Prior to that, Mr. Moyo performed company secretarial roles for Southampton Assurance Company and its subsidiaries and Intermarket Holdings Limited. He is a current PhD student in Business Administration and he holds a Master’s degree in Business Administration from the University of Zimbabwe, a Bachelor of Laws degree and a Bachelor of Law Honours degree from the same institution.

8. Mr. John Travlos is a lawyer by profession and has considerable experience in the petroleum, lubricants and petrochemicals industry and in property development and administration. He is a director of many companies, including Ximex Holdings (Private) Limited and Zimbabwe Oil Investments (Private) Limited. Currently, he is the Chief Executive O!cer of the Ximex Group, the family property group of companies. He was a Legal Practitioner with the firm Byron Venturas & Partners for 22 years after which he retired as a senior partner. He holds a BA (Law) degree (University of Cape Town) and LLB degree (University of London). He is a member of the Law Society of Zimbabwe and a Fellow of the Institute of Directors. He is a member of the National Property Association and a director and founder of the Harare Inner City Partnership. He is a trustee of Pleasant Ways Retirement Village Trust. He has served as a Rotarian for 32 years.

6. Ms. Ruth Ncube is the Managing Director for First Mutual Life Assurance Company (Private) Limited. Prior to this appointment, she was seconded to First Mutual Life Assurance Company in 2009 responsible for marketing and client relationship management. She joined First Mutual Holdings Limited as the Group Corporate A"airs Executive in 2002, responsible for the marketing and communication strategy for the group companies. Ruth holds an MBA degree with Nottingham Trent University (UK). She is a graduate with the Institute of Marketing Management (RSA), a member of the Chartered Institute of Marketing (UK) and holds several diplomas in sales and marketing from the United Kingdom. She is currently the President of the Marketers Association of Zimbabwe. She has more than 15 years leadership experience, having worked in various managerial capacities in the retail, hospitality, banking and insurance industries.

7. Mr. Munyaradzi Dube is the Finance Director of Zimbabwe Alloys Limited. He has worked for Anglo American Corporation, Africa Resources Group and Lonrho Plc operations in Zimbabwe and Mozambique as Finance Director. He is a former director of Air Zimbabwe Limited and Zimbabwe Express Airlines Private Limited where he headed the Audit Committees. He is a Chartered Accountant with experience in audit and accounting . He is a past president of the Institute of Chartered Accountants of Zimbabwe having served as chairman of the Accounting Procedures Committee and the Public Relations Committee of the same Institute. He did his articles at Deloitte & Touche Chartered Accountants and spent 2 years on secondment to the London o!ce. Mr. Dube holds a Master’s degree in Business Administration from the Midlands State University and a Bachelor of Accountancy (Honours) degree from the University of Zimbabwe.



Financial Performance HighlightsRevenue 2.18% Property Expenses 3.38%Net Property Income (“NPI”) 1.91% Administration Expenses 5.56% NPI After Administration Expenses 1.00% Investment Properties 6.55% Profit After Tax 8.80% Shareholders’ Equity 8.41%

The EconomyThe business environment was characterised by liquidity challenges, high unemployment and general economic decline across most sectors of the economy. The economy continues to shrink as evidenced by low and declining capacity utilisation across the productive sectors and an increase in incidences of companies being liquidated or going into judicial management. Against a backdrop of a shrinking economy and tight liquidity, companies generally require recapitalisation. In the instances where the financial sector could advance loans to the productive sector, the interest rate was prohibitively high. These constraints remain major factors inhibiting meaningful economic growth.

The Property MarketThe general economic decline characterised by liquidity challenges, limited mortgage finance and high unemployment will curtail any meaningful activity in the real estate sector. The property market continues to face challenges with nominal property transactions being recorded especially in the lower end of the market. Some limited property developments were undertaken during the year, especially in low income residential housing development schemes and other self-financing, cooperative-type residential developments.

In the absence of significant economic upturn, and in light of increasing costs of occupancy such as municipal rates, electricity and other property service charges, sustaining current rental rates and occupancy levels is going to be tough going forward. A number of companies continue to face viability challenges due to unfavourable business conditions characterised by high input costs such as labour, service charges and old equipment. Incidences of credit losses on tenant rental and operating cost balances are increasing while the slow legal process has hampered e"orts to accelerate the collection measures. As a result, the business continues to face rising property expenses and stagnating occupancy levels.

Financial ResultsRevenue for the year ended 31 December 2013 increased by 2.18% to $9.022 million (2012: $8.830 million) as a result of increases in rental income and other income from property services rendered to third parties. Rental income increased by 2.06% to $9.012 million (2012: $8.830 million) driven by an increase in the contribution of turnover-based rental income. The average rental per square metre increased by 1.22% to $8.28 (2012: $8.18) as planned rental reviews were deferred. Rental yield eased to 7.80% (2012: 8.60%) as a result of the slower growth in rental income relative to the increase in values of investment properties.

Property expenses grew by 3.38% to $1.683 million (2012: $1.628 million) due to higher property maintenance costs, specific and general provision for credit losses and landlord’s expenses on vacant space.

Net property income before administration costs increased by 1.91% to $7.339 million (2012: $7.202 million) while the 5.56% increase in administration expenses resulted in a 1.00% decline in net property income after administration expenses to $3.975 million (2012: $4.015 million).

Administration expenses increased to $3.364 million (2012: $3.187 million) due to increases in sta" costs and group shared services.

The Group will continue to explore opportunities to enhance internal e!ciencies and accelerate cost containment in order to improve operating margins.

Operating profit before tax and fair value adjustment declined by 1.42% to $4.684 million (2012: $4.751 million) due to slower growth in fair value of investments properties.

Chairman’s Statement

Elisha K. MoyoChairman

“The Group will continue to explore opportunities

to enhance internal e!ciencies and accelerate

cost containment in order to improve operating margins.”


The market value of investment properties grew by 6.55% to $128.142 million (2012: $120.266 million) underpinned by improving quality of the refurbished space and rezoning to commercial of land previously zoned for residential use.

Property ManagementThe occupancy level declined by 3.30% to 76.30% (2012: 78.90%) due to voluntary tenant space surrenders and evictions.

Rent and operating cost arrears grew to 14.56% (2012: 9.06%) reflecting operational challenges some tenants are facing. Collection e"orts aimed at reducing arrears to sustainable levels continue through tenant engagement for negotiated payment plans, eviction of defaulting tenants and rightsizing of space held to ensure sustainable rental levels. The Group also expects higher levels of rent default in view of the tight liquidity in the economy and the general economic downturn. During the year, the Group committed a total of $0.309 million (2012: $0.204 million) towards property maintenance. Property maintenance is aimed at improving the quality of lettable space in order to retain existing tenants and also attract new tenants to improve occupancy levels.

The Mabvuku Supermarket commenced trading on the 27th of November 2013 with OK Zimbabwe as the tenant.

Property DevelopmentThe number of units at the Kamfinsa cluster housing scheme that are at roof level stand at thirteen. Focus is on bringing the remaining 25 units to slab level in order to pave way for external works. This housing project is expected to be completed by the first quarter of 2015.

Property RefurbishmentThe Group embarked on the refurbishment of the air conditioning system at 99 Jason Moyo at a total cost of $0.700 million with commissioning scheduled for the first quarter of 2014.

Property InvestmentThe Group acquired holiday cottages and land located in Nyanga at a total cost of $0.285 million, and a property in the Harare Central business district for $0.220 million.

Acquisition of the Remainder of Lot 57, Mount Pleasant landIn December 2013, the Group concluded negotiations for the acquisition of the remainder of Lot 57, Mount Pleasant land measuring 24.0664 hectares (approximately 59.47 acres) for a purchase price of $9.600 million.The acquisition was funded through a combination of internal resources and external borrowings. The current planned use of the land is for the development of housing units, a shopping complex and medical facilities. The acquisition is expected to form a major part of the Group’s property development initiatives in the medium term.

Human Capital DevelopmentThe Group embarked on an organisational transformation exercise aimed at realigning its human capital to revised operating structures to enhance operational e"ectiveness and e!ciency. The Group continues to support permanent sta" members pursuing relevant academic and professional studies with a"ordable study loans. Continued investment in human capital development is premised on the need to improve employee productivity.

DividendYour Board has deemed it prudent not to declare a dividend for the year ended 31 December 2013 in light of the significant cash outlay associated with the acquisition of the remainder of Lot 57, Mount Pleasant land as previously described. There is also need to allocate cash for the completion of the Kamfinsa housing project.

DirectorateMr Munyaradzi Dube was appointed to the Board on the 5th of March 2013 while Mr Andreas Mlalazi resigned from the Board with e"ect from the 31st of December 2013.

OutlookYour Board remains optimistic about Zimbabwe’s long term economic outlook. We believe that the economic challenges currently prevailing in the country are of a short term nature or at most, they should resolve in the medium term. We hope that all stakeholders will commit to the recent policy pronouncements made by the government aimed at tackling the macroeconomic framework. The successful implementation of the macroeconomic blue print is expected to create opportunities for the productive sectors of the economy, including the real estate industry.

AcknowledgementsOn behalf of your Board, I appreciate the invaluable support received from stakeholders including our tenants, employees and service providers.

God Bless,

E.K. MoyoChairman24 March 2014



IntroductionThe year was characterised by economic stagnation and macroeconomic uncertainty and this had an adverse impact on the financial performance of the business. The negotiation of rentals, payment plans for outstanding rentals and operating costs and filing voids in the portfolio become increasingly di!cult. The high cost operating environment and slower progress on the implementation of key macroeconomic policy interventions required to stimulate meaningful economic activities remain the catalyst for failing businesses.

Capacity utilisation across most key productive sectors of the economy remained low, while the widespread closure of some business presented challenges in negotiating rental reviews, executing debtor’s collection plans and the reduction of void levels.

Operations OverviewSome tenants faced severe economic challenges characterised by rising operating costs and constrained working capital, resulting in some entities being placed under liquidation or judicial management. Defaulting tenants without agreed payment plans were referred to lawyers for collection and eviction. Consequently, the key performance indicators average rental rates, rental yield, occupancy and arrears experience limited growth while in some cases, remained static. Limited growth in the rental income and property values were achieved while the rental yield eased on the back of slower growth in rental income relative to property values.

Performance Review

Revenue $9.02 million (2012: $8.83 million)Relative to the comparative period in 2012, revenue increased by 2.18% to $9.02 million (2012: $8.83 million). Revenue consists of rental income from the in-house property portfolio and property services income generated from property services o"ered to third parties.

Rental Income $9.01 million (2012: $8.83 million)Rental income grew by 2.06% to $9.01 million (2012: $8.83 million) driven by higher of turnover rentals achieved in the suburban retailers. Rental yield eased to 7.80% (2012: 8.60%) on the back of slower rental growth compared to increases in investment property values.

The average rental per square metre for the property portfolio increased by 1.22% to $8.28 (2012: $8.18) in response to the re-letting of vacant space and increased contribution of turnover based rentals.

While the macroeconomic challenges persisted, ensuing average rental rates remained under pressure as sitting tenants continued to be faced with operational challenges resulting in the downsizing and or closures of businesses.

Rental Arrears: 14.56% (2012: 9.06%)Rental arrears for the property portfolio grew by 60.71% to 14.56% (2012: 9.06%) reflecting the economic conditions that have adversely a"ected tenants’ ability to meet lease obligations.

Arrears increased with some substantial tenants facing challenges in sustaining their lease obligations especially in the second half of 2013 as liquidity worsened.

Managing Director’s Report

Francis NyambiriManaging Director

“Improvements to revenue through increased occupancy,

enhancement in collection of outstanding debts, cost management and tenant retention will remain key

strategic focus areas.”


Occupancy Level: 76.30% (2012: 78.90%)The occupancy rate declined to 76.30% (2012: 78.90%) as new lettings of vacant space were o"set by new voids created through voluntary space surrenders and the evictions of defaulting tenants. Limited new lettings were achieved in the year while stringent tenant vetting and a"ordability testing meant fewer prospective tenants qualified for space o"ers. The high charges by utility service providers adversely impacted on tenants’ total cost of occupancy. Property Expenses: $1.68 million (2012: $1.63 million)Property expenses grew by 3.38% to $1.68 million (2012: $1.63 million) largely as a result of higher general provision for credit losses and property maintenance costs. The Group continues to commit financial resources towards value adding property repairs and maintenance works as its ongoing strategy to improve the quality of lettable space.

Below is an analysis of the property expenses for the year ended 31 December 2013:

Property Expenses

Net Property Income: $7.34 million (2012: $7.20 million)Net property income increased by 1.91% (2012: 4.20%) to $7.34 million (2012: $7.20 million) driven by a 2.18% growth in rental income.

Administration Expenses: $3.36 million (2012: $3.19 million)Administration expenses grew by 5.56% (2012: 5.85%) to $3.36 million (2012: $3.19 million) following increases in general o!ce costs, fees and other charges, depreciation expense, employment costs, property services, advertising expenses and group shared services.

Below is an analysis of administration expenses for the year ended 31 December 2013:

Administration Costs

Auditors’ fees [2.29%]

IC

Sta

Depreciation [6.87%]

O ce costs [11.11%]

Group shared services [19.09%]

Other administration costs[7.95%]

Unallocated operating costs [24.82%]

Maintenance costs [18.34%]

Specific write-o [30.43%]

Provision for credit losses [13.14%]

Operating costs recoveries [5.22%]

Other property costs [8.06%]

her administration costs[7.95%]

related costs Costs [51.22%]

T Expenses [1.47%] T Expenses [1.47%] T Expenses [1.47%]

[8.05%]



Managing Director’s Report (continued)

Net Property Income after Administration Expenses: $3.97 million (2012: $4.01 million)NPI after administration expenses dropped by 1.00% to $3.97 million (2012: $4.01 million). The decline in NPI after administration expenses resulted from the a slower growth in rental income relative to the increase in the property and administration expenses.

Operating Pro"t: $4.68 million (2012: $4.75 million)Operating profit declined by 1.42% to $4.68 million (2012: $4.75 million) due to a fall in investment income following a deferral of the disposal of investment assets.

Pro"t for the Year: $9.82 million (2012:$ 9.03 million)The Group’s profit after tax grew by 8.80% to $9.82 million (2012: $9.03 million) following a 2.18% growth in rental income.

Property expenses increased on the back of higher levels of specific and general provision for credit losses against tenant balances deemed uncollectable and higher landlord’s cost on vacant space.

Property Portifolio Performance Review Investment PropertiesAt 31 December 2013, Knight Frank Zimbabwe carried out an independent valuation of the investment properties and placed a fair value of $128.14 million (2012: $120.27 million), representing a 6.55% increase.

Set out below is an analysis of the investment property values by sector:

Sector Market value Market value Growth

2013 (USD) 2012 (USD) %Central Business District (“CBD”) Retail 10 740 000 10 590 000 1.42%

CBD O!ces 38 340 000 37 780 000 1.48%

O!ce Parks 46 150 000 46 140 000 0.02%

Suburban Retail 9 800 000 9 800 000 -

Industrial 12 210 000 11 130 000 9.70%

Residential 160 000 160 000 -

Land 10 742 000 4 666 000 130.22%

Total 128 142 000 120 266 000 6.55%

The increase in property investment values was mainly attributable to the fair value gains on the remainder of Lot 23 of Mount Pleasant Township that was re-zoned to o!ce park from residential use. The re-zoning of the land was e"ected under the Arundel Local Development Plan.

Excluding the fair value gains due to the land re-zoning, the property portfolio value increased by 2.52% reflecting the performance of the property portfolio with 4.03% attributable to the impact of the re-zoning of land by the local authority.

LandAt 31 December 2013, the Group held land stock of 402 366m# valued at $10.74 million (2012: $4.67 million) for future residential and commercial property development. The 130.22% growth in the land follows a change in use to commercial for the Arundel land previously zoned for residential use.

Property Development and RefurbishmentsThe Group’s incurred capital expenditure of $0.28 million related to the acquisition of equipment for the air-conditioning refurbishment works being carried out at 99 Jason Moyo in the CBD O!ce sector. The refurbishment works were substantially complete at the reporting date and the total cost of the project is $0.70 million.

At 31 December 2013, an additional 13 cluster houses at the Kamfinsa cluster housing development site, had been built to roof level.

Property AcquisitionsThe Group concluded negotiations for the acquisition of the remainder of Lot 57, Mount Pleasant land measuring 240 664m2 for a purchase price of $9.60 million. As a requirement of the sale agreement, a part payment of $4.10 million was made on the 30th of December 2013, with the transaction being completed in 2014. A combination of internal operating cash flows and external borrowings from a local financial institution was used to fund the acquisition. The planned use of the land, based on the approved Golden Stairs Shopping Center [Local Subject Plan 40], is for a mixed use development comprising a shopping centre, o!ce park, medical centre and cluster housing units.


The Group also acquired a holiday cottage in Juliusdale, Nyanga on land measuring 24 900m2 and land located in Brackenhill, Nyanga measuring 61 000m2 at a total cost of $0.285 million.

The Group also acquired an old townhouse on the periphery of the old Harare CBD measuring 1 200m2 for $0.220 million. This is premised on the expansion of the Harare CBD by the local authority to allow for further development of the Harare metropolitan area. The Group views this acquisition as a strategic move in benefiting from the expansion of the Harare CBD.

Property Portfolio Sector ReviewThe property portfolio comprises 57 properties across the major cities and towns of Zimbabwe, with 43 properties being income generating.

CBD RetailYear ended 31 December 2013 2012 Change

Rental rate per square metre (USD) 9.25 7.27 27.24%Arrears 14.49% 18.50% (21.68%)Occupancy rate 95.14% 98.40% (3.31%)

CBD retail contributed 29.46% to rental income for the year. The rental per square metre increased by 27.24% to $9.25 (2012: $7.27), due to strong demand of high street space.

The planned relocation of retail tenants from CBD buildings resulted in a 3.31% decline in the occupancy rate of CBD retail space to 95.14% (2012: 98.40%). Arrears declined by 21.68% to 14.49% (2012: 18.50%) as a result of operational challenges facing some tenants, especially in the smaller towns, where economic activity has substantially declined.

CBD O!cesYear ended 31 December 2013 2012 Change

Rental rate per square metre (USD) 9.87 9.86 0.10%Arrears 14.42% 11.40% 26.49%Occupancy rate 54.81% 71.80% (23.66%)

CBD o!ces contributed 20.96% to rental income for the year. The average rental per square metre remained under pressure largely due to weak demand attributed to the relocation of some tenants to suburban areas while other tenants are downsizing their space holding as they rationalise operations.

The occupancy level declined by 23.66% to 54.81% (2012: 71.80%), as tenants downsized operations or relocated to o!ce park properties.

Arrears increased by 26.49% to 14.42% (2012: 11.40%) as tenants continue to face liquidity challenges.

O!ce ParksYear ended 31 December 2013 2012 Change

Rental rate per square metre (USD) 9.35 12.19 (23.30%)Arrears 5.16% 0.70% 637.14%Occupancy rate 91.42% 78.80% 16.02%

O!ce parks contributed 28.81% to rental income for the year. Demand for o!ce park space was largely driven by tenants preferring a tranquil o!ce environment.

The rental per square metre dropped by 23.30% to $9.35 (2012: $12.19) as tenants that prepay their rentals were o"ered discounts. O!ce park property values grew by 0.02% to $46.15 million (2012: $46.14 million) reflecting the slow growth in rentals.

Arrears increased by 637.14% to 5.16% (2012: 0.70%) as some tenants’ occupying significant space faced operational challenges in the second half of the year. The occupying rate increased by 16.02% to 91.42% (2012: 78.80%) as o!ce parks continued to attract new tenants of relatively good quality.



Suburban RetailYear ended 31 December 2013 2012 Change

Rental rate per square metre (USD) 9.03 7.17 25.94%Arrears 4.76% 2.50% 90.40%Occupancy rate 98.49% 72.40% 36.04%

Suburban retail contributed 7.71% towards rental income for the year. The rental per square metre increased by 25.94% to $9.03 (2012: $7.17) as a result of higher turnover rental contribution from George Square Shopping Mall. The occupancy rate increased by 36.04% to 98.49% (2012: 72.40%) reflecting the impact of scape occupied at the Mabvuku Supermarket.

Arrears increased by 90.40% to 4.76% (2012: 2.50%) as some tenants faced operational challenges. IndustrialYear ended 31 December 2013 2012 Change

Rental rate per square metre (USD) 4.48 3.46 29.48%Arrears 33.68% 14.80% 127.57%Occupancy rate 65.12% 81.70% (20.29%)

The Group’s industrial properties contributed 13.06% towards rental income for the year. The rental per square metre grew by 29.48% to $4.48 (2012: $3.46).

In spite of the declining performance of industrial properties across the market, the overall favourable performance of the Group’s industrial properties was underpinned by increasing demand for retail warehousing space. The relatively strong demand for industrial properties is attributable to their favourable size and location.

The occupancy rate declined by 20.29% to 65.12% (2012: 81.70%) due to down sizing of a major tenant. Arrears increased by 127.57% to 33.68% (2012: 14.80%) as some tenants struggled to meet their lease obligations due to high operating costs.

Performance OutlookThe Group will focus on investing in the development of land in order to expand revenue streams. The Group will also scout for opportunities to invest in the acquisition of properties for refurbishment and re-letting at a higher return.

The on-going transformation exercise is reviewing internal structures, processes and procedures in order to re-align the business strategies with a view to enhancing e!ciency and e"ectiveness while containing costs.

The Group will continue to focus on preserving and enhancing value of the property portfolio through the improvement in quality of space through refurbishment. Improvements to revenue through increased occupancy, enhancement in collection of outstanding debtors, cost management and tenant retention will remain key strategic focus areas.

God Bless,

F. NyambiriManaging Director

Managing Director’s Report (continued)


1. Share Capital The authorised and issued share capital of the Company is as follows:

The share capital at the reporting date is $1 238 157 and share premium nil in United States of America Dollars.

2. Group Results The Group’s financial results for the year are shown as part of the financial statements on pages 22 to 56. All figures are stated in United

States of America Dollars.

3. Dividend While the Group continues to be profitable, your Board deems it prudent not to declare a dividend for the year ended 31 December

2013 in light of significant property acquisitions that were done during the year. No dividend was paid from the profit for the year ended 31 December 2012.

4. Directorate Mr Munyaradzi Dube was appointed to the Board on 5 March 2013 and Mr Andreas Mlalazi resigned from the Board e"ective 31

December 2013. We are grateful for the outgoing director’s contribution during his tenure and welcome the new director, Mr Dube.

4.1. At 31 December 2013, the following were the Directors and Secretary of the Group:Elisha K. Moyo Chairman Francis Nyambiri* Managing Director Douglas Hoto Director Andreas Mlalazi Director (resigned 31 December 2013)James K. Gibbons DirectorNangisai J. Mugabe (Mrs.) Director John P. Travlos Director Ruth B. Ncube (Ms.) Director Christopher U. Hokonya Director Munyaradzi J-R. Dube Director (appointed 5 March 2013)Sheila F. Lorimer (Mrs.) Group Company Secretary

* Executive Director

5. Directors’ Interest in Shares At 31 December 2013, the Directors held the following direct and indirect beneficial interests in the ordinary shares of Pearl Properties

(2006) Limited:

DirectorsDirect interest

(shares)Indirect Interest

(shares)Share Options

Elisha K. Moyo - *** -Francis Nyambiri 11 903 - -Douglas Hoto - *** -Ruth B. Ncube 500 *** -Andreas Mlalazi - - -James K. Gibbons - - -Nangisai J. Mugabe (Mrs.) John P. Travlos - - -Christopher U. Hokonya - *** -Munyaradzi J-R. Dube 20 000 - -

*** These direcors have an indirect interest through their shareholding in First Mutual Holdings Limited.

6. AuditorsThe auditors of the Group, Messrs Ernst & Young Chartered Accountants (Zimbabwe), hold o!ce until the conclusion of the Annual General Meeting at which shareholders will be requested to approve the appointment of auditors for the ensuing year and to also approve their remuneration for the year ended 31 December 2013.

7. Annual General MeetingThe seventh Annual General Meeting of members will be held on Tuesday, 27 May 2014 at 1400hrs at Ground Floor, First Mutual Park, 100 Borrowdale Road, Borrowdale, Harare.

By Order of the Board

E. K. Moyo S. F. Lorimer (Mrs)Chairman Group Company Secretary

Report of the DirectorsFor the year ended 31 December 2013



Corporate Governance Report

The Directors recognise the need to conduct the business of Pearl Properties (2006) Limited with integrity and in accordance with generally accepted corporate practices in order to safeguard stakeholders’ interests. Detailed policies and procedures are in place covering the regulation and reporting of transactions in securities of the Group by Directors and O!cers. A Group Corporate Governance Committee was established in 2013 to take a leadership role in shaping the corporate governance of the Group.

StakeholdersPearl Properties has a formal stakeholder philosophy and corporate governance structures to manage its relationship with various stakeholders. Code of Corporate Practices and ConductThe Group is committed to promoting the highest standards of ethical behaviour amongst all its employees. All employees are required to maintain the highest ethical standards in ensuring that the Group’s business practices are conducted in a manner which in all reasonable circumstances is above reproach. Furthermore, all employees are required to observe the Group’s Code of Ethics. The Group is a subscriber to an independently managed fraud hotline system.

In line with the Zimbabwe Stock Exchange Listing requirements, the Group operates a “closed period” prior to the publication of its interim and year-end financial results during which period the Directors and Sta" of the Group may not deal directly or indirectly in the shares of the Group.

Board Composition and AppointmentThe Board of Directors is chaired by a Non-Executive Director and comprises seven other Non-Executive Directors and one Executive Director, the latter being the Managing Director. The Board enjoys a strong mix of skills and experience. The Board is the primary governance organ. The role of the Board is to determine overall policies, plans and strategies of the Group and to ensure that these are implemented in an ethical and professional manner.

The Board meets regularly, at least quarterly, and guides corporate strategy, risk management practices, annual budgets and business plans. Special Board meetings may be convened on an ad-hoc basis when necessary to consider issues requiring urgent attention or decision. The Secretary maintains an attendance register of Directors for all scheduled meetings during the year through which Directors can assess their devotion of su!cient time to the Group.

The Board has overall responsibility for ensuring the integrity of the Group’s accounting and financial reporting systems including the independent audit, and that appropriate systems of control, risk management and compliance with laws are in place.

To ensure e"ectiveness, Board members have unfettered access to information regarding the Group’s operations which is available through Board meetings, Board and Management Committees as well as Strategic Planning workshops organised by the Group. Directors may, at the Group’s expense, seek independent professional advice concerning the Group’s a"airs.

A third of the Directors are required to retire on a rotational basis each year along with any Director(s) appointed to the Board during the year. Executive Directors are employed under performance driven service contracts setting out responsibilities of their particular o!ce, which are only renewed upon meeting the set performance targets.

Directors’ Interests As provided by the Companies Act (Chapter 24:03) and the Company’s Articles of Association, the Directors are required to declare at any time during the year, in writing, whether they have any material interest in any contract of significance with the Group which could give rise to conflict of interest. No conflicts were reported during the year.

Board Accountability and Delegated FunctionsThe Board is supported by various Committees in executing its responsibilities. The main Committees meet at least quarterly to assess and review the Group’s performance and to provide guidance to management on both operational and policy issues. The Group from time to time reviews the number of Committees as necessitated by the prevailing environment.

Each Committee acts within certain written terms of reference under which certain functions of the Board are delegated with clearly defined objectives. The terms of reference and composition of the Committees are determined and approved by the Board and have been adopted by the Board on an annual basis. The Board may take independent professional advice at the Group’s expense where necessary. The Board monitors the e"ectiveness of controls through reviews by the Combined Audit & Actuarial Committee and independent assessment by the External Auditors.

Governance ProceduresThe Board of Directors and Committees meet at least once every quarter or more often as the circumstances may require. The meetings of the Committees precede each quarterly Board meeting.


The Company’s shareholders meet at least once every year at the Annual General Meeting. The External Auditors deliver their Report at each Annual General Meeting. In appropriate circumstances, the Directors may seek advice from relevant professionals on particular matters.

Board CommitteesIn order to more e"ectively discharge its duties and responsibilities, standing Committees are in place to deal with specific issues. Various changes were made to the composition of the standing committees and sub Committees in 2013 and the position as at 31 December 2013 is outlined below.

i. Pearl Properties Audit Committee

M J-R Dube (Chairperson), C U Hokonya, J P Travlos and P A Kadzere

In 2013, Pearl Properties (2006) Limited established its own Audit Committee. Previously this function had been carried out by a Sub-Committee of the First Mutual Holdings Limited Board. However, it was considered necessary for the Group to have its own Audit Committee, focusing exclusively on issues pertaining to Pearl Properties. This Committee comprises four (4) Non-Executive Directors, one of whom is the Chairperson.

The Pearl Properties Audit Committee has written terms of reference and is tasked with ensuring financial discipline within the Group, sound corporate values and financial procedures. This Committee is further tasked with reviewing and approving the interim and annual financial statements of the Group and considering any accounting practice changes.

The Committee deliberates on the reports and findings of the internal and external auditors and also recommends the appointment of the external auditors and reviews their fees. The auditors have unlimited access to the Committee as well as to the Board. The Senior Audit Partner in Charge of the external Audit is invited to attend all meetings. Both the internal and external auditors have unrestricted access to the Audit Committee to ensure their independence and objectivity.

The Combined Audit and Actuarial Committee, comprising four (4) Non-Executive Directors of companies from the First Mutual Group, plays a similar role for the First Mutual Group as a whole.

ii. Human Resources Development And Remuneration Committee

M S Manyumwa (Chairperson), S V Rushwaya, J M Matiza and O Mtasa

This Committee comprises four (4) Non-Executive Directors of companies from the First Mutual Group, one of whom is the Chairperson. This Committee is mandated to deal with sta" development and formulate remuneration policies for the entire First Mutual Group, as well as to approve remuneration packages for executive directors and senior executives. The Committee is responsible for reviewing the supporting organizational structure in line with the Strategy and makes recommendations to the Board. The Committee reviews recruitment procedures and strives to ensure that sta" remuneration packages remain competitive.

The Committee seeks to ensure that the Group is geared to compete at the highest levels by attracting and retaining high calibre individuals who will contribute fully to the success of the business. A performance related profit share is o"ered in addition to a basic salary package. The Committee draws on external market survey data from independent advisors to ensure that the remuneration policy is appropriate.

The Committee also recommends remuneration of Non-Executive Directors to the Board.

iii. Investments Committee

J M Matiza (Chairperson), J M Chikura, O Mtasa and Dr C U Hokonya

This Committee comprises four (4) Non-Executive Directors of First Mutual Holdings Limited, one of whom is the Chairperson. The Committee formulates investments strategy and policy as well as reviewing the performance of financial, equity and property investments within the First Mutual Group. The Committee assists the Board in implementation of its investment policies and ensures that portfolio management is conducted in accordance with the Group’s policies.



iv. Corporate Governance Committee

E K Moyo (Chairperson), J M Chikura, T Khumalo, O Mtasa, J M Matiza, Dr C U Hokonya, M S Manyumwa

The newly formed Corporate Governance Committee has assumed the responsibilities of the Related Party Transactions Committee. This Committee comprises seven (7) Non-Executive Directors of First Mutual Holdings Limited (one of whom is the Chairperson). The Committee is responsible for all corporate governance issues across the First Mutual Group. As part of its overall responsibilities, the Committee ensures that formal and transparent procedures for dealing with potential related party issues are adhered to. The Committee considers the circumstances in which the Group may enter into a related party transaction and prescribes the manner in which the Group may conduct such a transaction.

Board and Committee Meetings Attendance

Details of attendance by the Directors at Board and Committee meetings during the year are set out below:

Pearl Properties Board

Board Member Number of Meetings Meetings Attended

Elisha K. Moyo 5 5

Francis Nyambiri* 5 5

Douglas Hoto 5 5

Andreas Mlalazi (resigned 31 December 2013) 5 0

James K. Gibbons 5 4

Nangisai J. Mugabe (Mrs.) 5 5

John P. Travlos 5 5

Ruth B. Ncube (Ms.) 5 4

Christopher U. Hokonya 5 4

Munyaradzi J-R. Dube (appointed 5 March 2013) 4 4

* Executive Director

Pearl Properties Audit Committee Board Member Number of Meetings Meetings Attended

Munyaradzi J-R. Dube 3 3

John P. Travols 3 2

Dr. Christopher U. Hokonya 3 3

Peter Kadzere 3 3

Human Resources Development and Remuneration CommitteeBoard Member Number of Meetings Meetings Attended

Misheck S. Manyumwa 6 6

Samuel Rushwaya (appointed 8 October 2013) 2 2

James M. Matiza 6 6

Oliver Mtasa 6 6

Innocent Chagonda (resigned 4 June 2013) 3 3

Investments CommitteeBoard Member Number of Meetings Meetings Attended

James M. Matiza 5 5

Innocent Chagonda (resigned 4 June 2013) 2 2

Dr Christopher U. Hokonya 5 4

Oliver Mtasa 5 5

John M. Chikura 2 2

Corporate Governance Report (continued)


Works Council The Group holds Works Council meetings every quarter. The Council provides a forum for employees to participate in the decision making process and discuss employees’ concerns with management.

Internal ControlManagement constantly checks and reviews the systems which are designed to provide maximum accountability at all levels. This includes measures to detect any irregularities or fraudulent activities, monitoring loss prevention and the systems of internal controls.

The internal audit and risk management function plays an independent appraisal role which examines and evaluates the Group’s activities. Its objective is to assist the Board and executive management in the e"ective discharge of their responsibilities. The scope of the internal audit function is to review the reliability and integrity of financial and operations information, the systems of internal control, the means of safeguarding assets, the e!cient management of the Group’s resources and the e"ective conduct of operations. The review mechanism is supported by IT generated data, procedural, operational and policy manuals which are periodically updated in line with changes to operational as well as commercial risks within the Group’s principal activities.

The head of Internal Audit has unrestricted access to the Chairperson of the Pearl Properties Audit Committee. A report is furnished to directors on a quarterly basis, but any items considered to be of a serious nature are communicated immediately.

Financial ControlThe Group’s internal financial controls are set out in the relevant procedures manuals which also set the required standards and key control activities. Adequate segregation of duties is in place to enhance the e"ectiveness of these controls. The accounting policies are reviewed periodically by the Pearl Properties Audit Committee as well as the external auditors.

Risk ManagementThe emphasis of the Group’s Risk Management policies is the identification, measurement and monitoring of all the risks associated with the Group’s operations. The key objective is to curtail the risks within the Group in order to protect assets and earnings against financial losses and legal liabilities. Operational risks are managed through formalised procedures and controls, well trained personnel and, where appropriate, back-up facilities.

The Group manages risks of all forms especially operational market liquidity, credit risks and project risks. These risks are identified and monitored through various channels and mechanisms. Emphasis is placed on continuous improvement of systems and ways of working through business process re-engineering as well as internal and external audits.

The Pearl Properties Audit Committee ensures that risk is minimised and through the internal audit function, assesses the adequacy of the internal controls and makes the necessary recommendations to the Board

Social ResponsibilityThe Group recognizes its responsibility to the society in which it operates. Pursuant to this, the Group is involved in various charitable endeavours including educational assistance to underprivileged children.

E.K. Moyo M. J-R. Dube Chairman Audit Committee Chairperson



Directors’ ResponsibilitiesThe Directors of the Group are responsible for maintaining adequate accounting records and for the preparation of financial statements that present fair and accurate information.

These financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS). The Group’s external auditors, Ernst & Young Chartered Accountants (Zimbabwe) have audited the financial statements and their report is set out on page 21. In discharging this responsibility, the Group maintains a system of internal controls designed to provide reasonable assurance that the assets are safeguarded and that transactions are executed and recorded in accordance with Group policies and with International Financial Reporting Standards.

The Directors have satisfied themselves that the Group is in a sound financial position and has adequate resources to continue in operational existence for the foreseeable future. Accordingly they are satisfied that it is appropriate to adopt the going concern basis in preparing the financial statements.

E. K. Moyo F. NyambiriChairman Managing Director

Statement of Directors’ Responsibilities


In my capacity as Group Company Secretary of Pearl Properties (2006) Limited and its Subsidiary Companies, I confirm that, in terms of the Companies Act (Chapter 24:03), the Group lodged with the Registrar of Companies all such returns as are required of a public quoted Group in terms of this Act, and that all such returns are true, correct and up to date.

S. F. Lorimer (Mrs.)Group Company Secretary24 March 2014

Certi"cate of Compliance by Group Company Secretary






Consolidated Statement of Financial Position At 31 December 2013

All "gures in USD Note 2013 2012

ASSETS

Non-current assets

Investment properties 6 128 142 000 120 266 000

Vehicles and equipment 7 461 770 649 321

Financial assets available-for-sale 8 415 460 622 759

Financial assets at fair value through profit or loss 9 299 644 342 577

Total non-current assets 129 318 874 121 880 657

Current assets

Financial assets held-to-maturity 10 - -

Loans and other receivables 11 1 355 742 1 937 598

Inventory 12 1 328 193 162 860

Tax receivable 24.2 554 846 162 466

Trade and other receivables 13 6 888 638 1 360 142

Cash and cash equivalents 14 317 581 2 250 495

Total current assets 10 445 000 5 873 561

TOTAL ASSETS 139 763 874 127 754 218

EQUITY AND LIABILITIES

Equity attributable to equity holders of the parent

Ordinary share capital 15 1 238 157 1 238 157

Available-for-sale reserves 8.1 (68 679) 136 548

Retained earnings 122 788 877 112 965 289

Total Shareholders’ Equity 123 958 355 114 339 994

LIABILITIES

Non-current liabilities

Deferred tax 16 14 969 274 12 964 786

Total Non-current liabilities 14 969 274 12 964 786

Current liabilities

Tax payable 24.2 33 171 63 541

Trade and other payables 17 738 208 311 934

Provisions 18 64 866 73 963

Total current liabilities 836 245 449 438

TOTAL EQUITY AND LIABILITIES 139 763 874 127 754 218


24 March 2014


Consolidated Income StatementFor the year ended 31 December 2013


Revenue 9 022 322 8 830 138

Rental income 9 012 479 8 830 138

Property services income 9 843 -

Property expenses 19 (1 683 164) (1 628 197)

Net property income 7 339 158 7 201 941

Administration expenses 20 (3 364 339) (3 187 110)

Net property income after administration expenses 3 974 819 4 014 831

Investment income 21 - 230 806

Dividend and other income 22 56 344 55 582

Finance income 23 652 641 449 989

Operating pro"t before tax and fair value adjustments 4 683 804 4 751 208

Fair value adjustments 8 018 754 8 917 304

- Investment properties 6 8 061 687 9 022 536

- Financial Assets at fair value through profit or loss 9 (42 933) (105 232)

Pro"t before tax 12 702 558 13 668 512

Tax 24 (2 878 970) (4 639 675)

Current tax expense (872 408) (856 703)

Deferred tax expense (2 006 562) (3 782 972)

Pro"t for the year 9 823 588 9 028 837

Pro"t attributable to:

Equity holders of the parent 9 823 588 9 021 284

Non-controlling interest - 7 553

Pro"t for the year 9 823 588 9 028 837

Basic and diluted earnings per share (US cents) 0.793 0.729

Weighted average number of shares in issue 1 238 157 310 1 238 157 310



Consolidated Statement of Comprehensive Income For the year ended 31 December 2013


Pro"t for the year 9 823 588 9 028 837 Other comprehensive income – items to subsequently be reclassi"ed to pro"t or lossFair value adjustments on available-for-sale equities 8.1 (207 299) (310 607) Available-for-sale reserve reclassified to profit or loss 8.1 - (205 114)Deferred tax e"ect 8.1 2 072 5 585 Other comprehensive loss for the year, net of tax (205 227) (510 136) Total comprehensive income for the year, net of tax 9 618 361 8 518 701 Total comprehensive income attributable to:Equity holders of the parent 9 618 361 8 511 148 Non-controlling interest - 7 553 Total comprehensive income 9 618 361 8 518 701


All "gures in USD

OrdinaryShare

Capital

Available-for -Sale

ReserveRetainedEarnings

Shareholders

Equity

Non-Controlling

InterestTotal

Equity

At 1 January 2012 1 238 157 646 684 104 639 639 106 524 480 1 047 299 107 571 779

Profit for the year - - 9 021 284 9 021 284 7 553 9 028 837

Other comprehensive loss - (510 136) - (510 136) - (510 136)

Acquisition of non-controlling interest 156 218 156 218 (1 054 852) (898 634)

Dividend - - (851 852) (851 852) - (851 852)

At 31 December 2012 1 238 157 136 548 112 965 289 114 339 994 - 114 339 994

Profit for the year - - 9 823 588 9 823 588 - 9 823 588

Other comprehensive loss - (205 227) - (205 227) - (205 227)

At 31 December 2013 1 238 157 (68 679) 122 788 877 123 958 355 - 123 958 355

Consolidated Statement of Changes in Equity For the year ended 31 December 2013



Consolidated Statement of Cash FlowsFor the year ended 31 December 2013


Pro"t before tax 12 702 558 13 668 512

Adjustment for non-cash items

Fair value adjustments 6 & 9 (8 018 754) (8 917 304)

Finance income (652 641) (449 989)

Impairment of trade receivables 221 149 107 538

Depreciation 7 231 017 213 326

Provision for leave pay (9 097) 45 031

Dividend received and other income (2 697) (11 783)

Investment income 21 - (230 806)

Loss on disposal of property, plant and equipment (3 269) 1 967

Cash #ows from operating activities before working capital adjustments 4 468 266 4 426 492

Working capital adjustments

(Increase)/decrease in trade and other receivables (5 464 644) 710 941

(Increase)/decrease in loans and other receivables 491 644 -

(Increase)/decrease in inventory (685 333) 8 945

Increase/(decrease) in trade and other payables 426 273 (458 653)

Tax paid 24.2 (1 295 158) (857 485)

Net cash #ows from operating activities (2 058 952) 3 830 240

INVESTING ACTIVITIES

Improvements to existing properties 6 (294 313) (243 497)

Additions to properties under development 6 - (1 262 452)

Purchase of vehicles and equipment 7 (45 753) (281 252)

Purchase of equity stocks 9 - (3 008)

Finance income received 23 457 853 221 300

Proceeds from sale of investments - 934 716

Proceeds on disposal of property, plant and equipment 5 554 5 627

Dividend received 22 2 697 11 783

Net cash #ows generated/(used) in investing activities 126 038 (616 783)

FINANCING ACTIVITIES

Purchase of non-controlling interest - (898 634)

Dividend paid - (851 852)

Net cash #ows from "nancing activities - (1 750 486)

Net increase/(decrease) in cash and cash equivalents (1 932 914) 1 462 971

Cash and cash equivalents at 1 January 14 2 250 495 787 524

Cash and cash equivalents at 31 December 14 317 581 2 250 495

Made up of:

Bank and cash on hand 127 932 1 849 707

Short-term investments 189 649 400 788

Cash and cash equivalents at 31 December 14 317 581 2 250 495


1 Corporate Information Pearl Properties (2006) Limited is a public Company

incorporated and domiciled in Zimbabwe and its shares are publicly traded on the Zimbabwe Stock Exchange. The principal activities of the Group are property investment, development and management. The consolidated financial statements of the Group for the year ended 31 December 2013 were authorised for issue in accordance with a resolution of the directors at a meeting held on 4 March 2014.

The registered o!ce is located at Ground Floor, First

Mutual Park, 100 Borrowdale Road, Borrowdale, Harare, Zimbabwe.

2 Basis of Preparation and Presentation

2.1 Basis of Preparation The consolidated financial statements of the Group have

been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The financial statements are based on statutory records that are maintained under the historical cost convention except for investment properties, available-for-sale financial assets and financial assets at fair value through profit or loss that have been measured at fair value. The financial statements have been prepared in compliance with the Companies Act [Chapter 24:03].

The financial statements are presented in the United States dollars being the functional and reporting currency of the primary economic environment in which the Group operates.

2.2 Going Concern Assumption The Directors have assessed the ability of the Group to

continue operating as a going concern and believe that the preparation of these financial statements on a going concern basis is appropriate.

2.3 Basis of Consolidation The consolidated financial statements comprise the

financial statements of Pearl Properties (2006) Limited and its subsidiaries as at 31 December 2013. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to a"ect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

give it the current ability to direct the relevant activities of the investee)

involvement with the investee; and

a"ect its returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

holders of the investee;

arrangements; and

rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the Group’s results from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

If the Group loses control over the subsidiary, it:

liabilities of the subsidiary;

controlling interest;

di"erences recorded in equity;

received;

retained;

and

previously recognized in other comprehensive income to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities.

2.4 New and Amended Standards and Interpretations During the year, several standards and amendments

to standards became e"ective, most of them with an e"ective date of 1 January 2013. Below is a discussion of the nature and impact of those standards or amendments that the Group considers to be relevant.

Notes to the Consolidated Financial StatementsFor the year ended 31 December 2013

Notes to the Consolidated Financial Statements (continued)For the year ended 31 December 2013



IFRS 10 Consolidated Financial Statements and IAS 27 Separate Financial Statements

IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 require management to exercise significant judgement to determine which entities are controlled and therefore are required to be consolidated by a parent, compared with the requirements that were in IAS 27. Based on the analyses performed, IFRS 10 did not have any impact on the currently held investments of the Group.

IFRS 12 Disclosure of Interests in Other Entities IFRS 12 sets out the requirements for disclosures relating

to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. The requirements in IFRS 12 are more comprehensive than the previously existing disclosure requirements for subsidiaries. For example, where a subsidiary is controlled with less than a majority of voting rights. The Group has no subsidiaries with non-controlling interests and does not have unconsolidated structured entities. IFRS 12 disclosures where required have been disclosed in the notes to the financial statements – refer to Note 33.

IFRS 13 Fair Value Measurement IFRS 13 establishes a single source of guidance under

IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS. IFRS 13 defines fair value as an exit price. As a result of the guidance in IFRS 13, the Group re-assessed its policies for measuring fair values, in particular, its valuation inputs such as non-performance risk for fair value measurement of liabilities. IFRS 13 also requires additional disclosures.

Application of IFRS 13 has not materially impacted the fair value measurements of the Group apart from the change explained in Note 9. Additional disclosures where required, are provided in the individual notes relating to the assets and liabilities whose fair values were determined. The fair value hierarchy is provided in Note 6.1.

IAS 1 Presentation of Items of Other Comprehensive Income – Amendments to IAS 1

The amendments to IAS 1 introduce a grouping of items presented in OCI. Items that will be reclassified (‘recycled’) to profit or loss at a future point in time (e.g., net loss or gain on AFS financial assets) have to be presented separately from items that will not be reclassified (e.g., revaluation of land and buildings). The amendments a"ect presentation only and have no impact on the Group’s financial position or performance.

IAS 1 Clari"cation of the Requirement for Comparative Information (Amendment)

These amendments clarify the di"erence between

voluntary additional comparative information and the minimum required comparative information. An entity must include comparative information in the related notes to the financial statements when it voluntarily provides comparative information beyond the minimum required comparative period.

The amendments clarify that the opening statement of financial position (as at 1 January 2012 in the case of the Group), presented as a result of retrospective restatement or reclassification of items in financial statements does not have to be accompanied by comparative information in the related notes. The Group has not presented an opening statement of financial position as at 1 January 2012. The amendment will a"ect future periods if an opening statement of financial position is provided.

IAS 19 (Revised) Employee Bene"ts IAS 19 (Revised 2011) changes, amongst other things,

the accounting for defined benefit plans. Some of the key changes that are applicable to the Group include the following:

earlier of when the o"er of termination cannot be withdrawn, or when the related restructuring costs are recognised under IAS 37 – Provisions, Contingent Liabilities and Contigent Assets.

long-term employee benefits will be based on expected timing of settlement rather than the employee’s entitlement to the benefits.

None of the above changes a"ected the measurement of assets or liabilities of the Group.

Amendments Resulting from Annual Improvements 2010-2012 Cycle (short-term Receivables and Payables)

The IASB clarified in the Basis for Conclusions that short-term receivables and payables with no stated interest rates can be held at invoice amounts when the e"ect of discounting is immaterial. This amendment was included in the assessment of the IFRS 13 adoption.

2.4.1 New and Revised IFRS in Issue but not yet E$ective At the date of authorisation of these consolidated

financial statements, the following standards and interpretation were in issue but not yet e"ective nor applied by the Group:

IFRS 9 Financial Instruments IFRS 9, as issued, reflects the first phases of the IASB’s

work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39 as well as hedge accounting. The standard was initially e"ective for annual periods beginning on or after 1 January 2013, but Amendments to IFRS 9 Mandatory E"ective Date of IFRS


9 and Transition Disclosures, issued in December 2011, moved the mandatory e"ective date to 1 January 2015 after which the e"ective date was removed completely. In subsequent phases, the IASB is addressing impairment of financial assets. The adoption of the first phase of IFRS 9 will have an e"ect on the classification and measurement of the Group’s financial assets, but will not have an impact on classification and measurements of the Group’s financial liabilities. The Group will quantify the e"ect in conjunction with the other phases, when the final standard including all phases is issued.

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)

These amendments are e"ective for annual periods beginning on or after 1 January 2014 provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. It is not expected that this amendment would be relevant to the Group, since none of the entities in the Group would qualify to be an investment entity under IFRS 10.

IAS 32 O$setting Financial Assets and Financial Liabilities - Amendments to IAS 32

These amendments clarify the meaning of “currently has a legally enforceable right to set-o"” and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for o"setting. These are e"ective for annual periods beginning on or after 1 January 2014. These amendments are not expected to be relevant to the Group as no such o"setting agreements are in place.

IFRIC Interpretation 21 Levies (IFRIC 21) IFRIC 21 clarifies that an entity recognises a liability

for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached. IFRIC 21 is e"ective for annual periods beginning on or after 1 January 2014. The Group does not expect that IFRIC 21 will have a material financial impact in future financial statements.

IAS 39 Novation of Derivatives and Continuation of Hedge Accounting – Amendments to IAS 39

These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. These amendments are e"ective for annual periods beginning on or after 1 January 2014. The Group had no derivatives during the current period and does not apply hedge accounting.

IAS 36 - Impairment of Assets (Amendment) - Disclosure Requirements for the Recoverable Amount of Impaired Assets

The amendments clarify the disclosure requirements about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. The amendments clarify the IASB’s original intention: that the scope of these disclosures is limited to the recoverable amount of impaired assets that is based on fair value less costs of disposal.

These improvements are e"ective for annual periods beginning on or after 1 January 2014 and their impact depends on the results of the Group’s impairment assessment and testing in the year in which the amendment is e"ective.

Amendments Resulting from Annual Improvements 2010-2012 Cycle

Amendments Resulting from Annual Improvements 2010-2012 Cycle (Vesting Conditions)

The IASB amended the definitions relating to vesting conditions. Performance condition and service condition are defined in order to clarify various issues, including the following: (a) A performance condition must contain a service condition (b) A performance target must be met while the counterparty is rendering service (c) A performance target may relate to the operations or activities of an entity, or to those of another entity in the same group (d) A performance condition may be a market or non-market condition (e) If the counterparty, regardless of the reason, ceases to provide service during the vesting period, the service condition is not satisfied.

The amendment implies that the period of the performance target must not extend beyond the end of the service period, but may start earlier if the service period is not ‘substantially before the commencement of the service period’, e.g., a performance target for an entity-wide scheme could be set prior to the counterparty becoming an employee. If an employee does not meet a service condition for any reason, no amount is recognised for the services received and any cumulative expense is reversed. This does not apply when there is full or partial vesting of an award on cessation of employment. The amendment is e"ective prospectively for year ends beginning on or after 1 July 2014 and will have no impact on the Group as it is not party to any share-based payments.

Amendments Resulting from Annual Improvements 2010-2012 Cycle (Accounting for Contingent Consideration)

The IASB clarified that contingent consideration in a business acquisition that is not classified as equity is subsequently measured at fair value through profit or loss whether or not it falls within the scope of IFRS 9 Financial Instruments. Contingent consideration cannot




be measured at fair value through other comprehensive income. The amendment is e"ective prospectively for business combinations for year ends beginning on or after 1 July 2014 and will impact future business combinations involving contingent consideration.

Amendments Resulting from Annual Improvements 2011-2013 Cycle (Scope Exception for Joint Ventures)

The amendment clarifies that joint arrangements are outside the scope of IFRS 3, not just joint ventures. The scope exception applies only to the accounting in the financial statements of the joint arrangement itself. The amendment is e"ective prospectively for year ends beginning on or after 1 July 2014 and will have no impact on the Group as it is not party to any joint arrangements.

Amendments Resulting from Annual Improvements 2010-2012 Cycle (IFRS 8 – Operating Segments -Aggregation of Segments, Reconciliation of Segment Assets)

Aggregation of operating segments: Operating segments may be combined/aggregated if they are consistent with the core principle of the standard, if the segments have similar economic characteristics and if they are similar in other qualitative respects. If they are combined, the entity must disclose the economic characteristics (e.g., sales and gross margins) used to assess whether the segments are ‘similar’. The level of detail the Group need to disclose in the financial statements will increase and is still being assessed by the Group. Specifically, the similar economic characteristics used to aggregate operating segments will need to be disclosed. The amendment is e"ective retrospectively for year ends beginning on or after 1 July 2014.

Reconciliation of the total of the reportable segment assets to the entity’s total assets: The reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief operating decision maker, similar to the required disclosure for segment liabilities. The amendment is e"ective 1 July 2014 and will have no impact on the Group as the reconciliation is already provided.

Amendments Resulting from Annual Improvements 2010-2012 Cycle (IAS 24 – Related Party Disclosures -Management Entities)

The amendment clarifies that a management entity – an entity that provides key management personnel services – is a related party subject to the related party disclosures. In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services. The amendment is e"ective retrospectively for annual periods beginning on or after 1 July 2014. Even though an entity incurs key management personnel expenses, detailed key management personnel compensation disclosures (IAS 24.17) do not apply if the individual is part of a separate management entity. Less information on the individual’s

remuneration is required. No impact is expected in the current reporting period as the Group does not make any payments to management entities for management services. However this will impact future periods following the setting up of the agency business within the Group.

Amendments Resulting from Annual Improvements 2011-2013 Cycle (interrelationship between IFRS 3 and IAS 40)

The IASB clarified the interrelationship of IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property. The description of ancillary services in IAS 40 di"erentiates between investment property and owner occupied property. IFRS 3 is used to determine if the transaction is the purchase of an asset or a business combination. The amendment does not help to di"erentiate if an acquisition is a purchase of a business or purchase of an asset. Judgement is still needed to make this distinction. The amendment is e"ective prospectively.

The amendment is e"ective for annual periods beginning on or after 1 July 2014 and the Group will consider the amendment as and when it enters into the related transactions. Amendment will not a"ect current transactions.

IFRS 13 Fair Value Measurement - Amendments resulting from Annual Improvements 2011-2013 Cycle (Scope of the Portfolio Exception in Paragraph 52)

The amendment clarifies that the portfolio exception in IFRS 13 can be applied to financial assets, financial liabilities and other contracts. When measuring fair value, the portfolio exception can therefore be applied to contracts within IAS 39 Financial Instruments: Recognition and Measurement or IFRS 9 (e.g., commodity derivative contracts) not just to those contracts that meet the definition of financial assets or financial liabilities. The amendment is e"ective prospectively for year ends beginning on or after 1 July 2014.The Group will consider the amendment when it measures and provides disclosures relating to its portfolio of listed investments.

3 Signi"cant Accounting Judgements, Estimates

and Assumptions The preparation of the Group’s consolidated financial

statements requires management to make judgements, estimates and assumptions that a"ect the reported amounts of revenue, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amounts of assets or liabilities a"ected in future periods.


3.1 Judgements other than Estimates In the process of applying the Group’s accounting policies,

management has made the following judgements, which have the most significant e"ect on the amounts recognised in the consolidated financial statements:

3.1.1 Classi"cation of Property The Group determines whether a property is classified as

investment property or inventory:

buildings (principally o!ce, industrial and retail property) which are not occupied substantially for use by, or in the operations of, the Group, nor for sale in the ordinary course of business, but are held primarily to earn rental income and capital appreciation.

in the ordinary course of business. Principally, this is residential property that the Group acquires or develops and intends to sell before or on completion of construction. As at year end a property valued $1.29 million (2012 – $0.14 million) met the criteria to be recognized as inventory.

The distinction between investment property and inventory is not always clear, management will make judgement on the classification of the property as investment property or inventory.

3.1.2 Sales of Property Under Development Where property is under development and agreement

has been reached to sell such property when construction is complete, the directors consider whether the contract comprises:

Where a contract is judged to be for the construction of a property, revenue is recognised using the percentage-of-completion method as construction progresses.

Where the contract is judged to be for the sale of a completed property, revenue is recognised when the significant risks and rewards of ownership of the real estate have been transferred to the buyer. If, however, the legal terms of the contract are such that the construction represents the continuous transfer of work in progress to the purchaser, the percentage-of-completion method of revenue recognition is applied and revenue is recognised as work progresses.

3.1.3 Operating Lease Commitments – The Group as Lessor

The Group has entered into commercial property leases on its investment properties. The Group has determined, based on an evaluation of the terms and conditions of the lease arrangements, that it retains all the significant risks and rewards of ownership of these properties and so accounts for the contracts as operating leases. This involves the analysis of likelihood of exercising extention options, lease term analysis, etc.

3.1.4 Impairment of Financial Assets

Available-for-Sale Financial Investments When assessing Available-for-sale investments for

impairment, management considers if there has been a significant or prolonged decline in the fair value of the investment below cost. A fair value loss of 30% below cost is considered as significant and a decline in fair value below cost over a period of 12 months is considered prolonged. Based on these judgements, management has evaluated that the decline of the fair value of its available-for-sale investments below its cost is not prolonged or significant and as a result, no impairement loss has been recorgnised.

3.2 Estimates and Assumptions The key assumptions concerning the future and other

key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its estimates and assumptions on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

3.2.1 Fair Value of Financial Instruments When the fair value of financial assets and financial

liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. The judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could a"ect the reported fair value of financial instruments.

3.2.2 Valuation of Investment Properties The Group carries its investment properties at fair value,

with changes in fair value being recognised in the income statement. The Yield Method converts anticipated future cash flow benefits in the form of rental income into present value. This approach requires careful estimation of future benefits and the application of investor yield or return requirements. One approach to value properties on this basis is to capitalise net rental income on the basis of an Initial Yield, generally referred to as the ‘All Risks Yield’ approach or ‘Net Initial Yield’ approach.

The Discounted Cash Flow Method involves the projection of a series of periodic cash flows either to an operating property or a development property.




To this projected cash flow series, an appropriate, market-derived discount rate is applied to establish an indication of the present value of the income stream associated with the property. The calculated periodic cash flow is typically estimated as gross income less vacancy and collection losses and less operating expenses/outgoings. A series of periodic net operating income, along with an estimate of the reversion/terminal/exit value (which uses the traditional valuation approach) anticipated at the end of the projection period, are discounted to present value. The aggregate of the net present values equals the market value of the property.

The determined fair value of the investment properties is most sensitive to the estimated yield as well as the long-term vacancy rate.

Valuation Approach The valuations have been undertaken in an environment

of poor liquidity conditions and limited transaction evidence.

In undertaking the valuations for commercial, industrial and retail properties, reliance has been placed on rental market evidence, void rates and arrears currently applying to the individual properties in the portfolio. The achieved rents for the property portfolio are generally in line, and in some instances, higher than the rental rates being achieved in the market.

With regards to the residential properties, various properties were identified that were sold or which are on sale and situated in comparable low density residential suburbs. In analysing the comparable properties, the Main Space Equivalent (MSE) principle was applied. The total MSE of the comparable was then used to determine the value per square metre of MSE. The objective is to arrive at a common basis of comparison. After adjustments for quality, location and size, the rates per MSE reflected by the comparable were then applied to the subject residential properties.

The yields have been obtained from the limited concluded transactions and have also been assessed taking into account asking prices and o"ers that may have been received for properties currently on the market, formally or otherwise, although the transactions may not have been concluded.

3.2.3 Estimation of Net Realisable Value for Inventory Property

Inventory property is stated at the lower of cost and net realisable value (NRV). NRV for completed inventory property is assessed by reference to market conditions and prices existing at the reporting date and is determined by the Group, based on comparable transactions identified by the Group for properties in the same geographical market serving the same real estate segment. NRV in respect of inventory property under construction is assessed with reference to market prices

at the reporting date for similar completed property, less estimated costs to complete construction and an estimate of the time value of money to the date of completion.

3.2.4 Taxes Uncertainties exist with respect to the interpretation of

complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, di"erences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded.

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profit together with future tax planning strategies.

3.2.5 Impairment of Non-Financial Assets The Group assesses at each reporting date whether

there is an indication that an asset may be impaired. If any such indicators exist, the Group estimates the recoverable amount of the asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash generating unit to which the asset belongs is determined. If recoverable amount is based on fair value loss cost of disposal, the determination of fair value involves estimation of comparable prices where there is not an active market or the use of valuation techniques. Where recoverable amount is based on value in use, the calculation of the value in use involves the estimation of future cash flows and the discount rate.

3.2.6 Doubtful Debt Allowances The Group assesses its doubtful debt allowances at

each reporting date. Key assumptions applied in this calculation are the estimated debt recovery rates within the Group’s debtors’ book, as well as an estimation or view on current and future market conditions that could a"ect the debt recovery rates. (Refer to note 13 for further details.)

4 Summary of Signi"cant Accounting Policies

4.1 Foreign Currency Translation The consolidated financial statements are presented in

United States dollars, which is also the parent Group and its subsidiaries’ functional currency.


4.1.1 Transactions and Balances Transactions in foreign currencies (currencies other than

the United States dollar) are initially recorded by the Group entities at their respective functional currency rates prevailing at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange at the reporting date.

All di"erences arising on settlement or translation of monetary items are taken to the income statement.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items is treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation di"erences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively).

4.2 Investment Properties Investment property comprises completed property

and property under construction or re-development that is held to earn rentals or for capital appreciation or both. Property held under a lease is classified as investment property when it is held to earn rentals or for capital appreciation or both, rather than for sale in the ordinary course of business or for use in production or administrative functions.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the period in which they arise. Fair values are evaluated annually by an accredited external independent valuer, applying valuation models recommended by the International Valuation Standards Committee.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The di"erence between the net disposal proceeds and the carrying amount of the asset is recognised in the income statement in the period of derecognition.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under vehicles and equipment up to the date of change in use. The di"erence between the cost-based measurement and fair value is treated as a revaluation adjustment.

4.3 Vehicles and Equipment Vehicles and equipment are stated at cost, net of

accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the cost of replacing part of the vehicles and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of vehicles and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the vehicles and equipment as a replacement if the recognition criteria are satisfied. All other repairs and maintenance costs are recognised in the income statement as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.

Depreciation is calculated on a straight-line basis over the estimated useful lives of the asset as follows:

The depreciable amount of an asset is determined after deducting its residual value. An item of vehicles and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the di"erence between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised. The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end, and adjusted prospectively, if appropriate.

The residual value and the useful life of an asset is reviewed annually and if expectations di"er from the previous estimates the Group account for it as a change in estimate.




4.4 Revenue Recognition Revenue is recognised to the extent that it is probable

that the economic benefits will flow to the Group and the revenue can be reliably measured regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The specific recognition criteria described below must also be met before revenue is recognised:

4.4.1 Rental Income The Group is the lessor in operating leases. Rental income

arising from operating leases on investment property is accounted for on a straight-line basis over the lease terms and is included in revenue in the income statement due to its operating nature, except for contingent rental income which is recognised when it arises.

Initial direct costs incurred in negotiating and arranging

an operating lease are included in the carrying amount of the underlying asset and recognised as an expense over the lease term on the same basis as the lease income.

Tenant lease incentives are recognised as a reduction of rental revenue on a straight-line basis over the term of the lease. The lease term is the non-cancellable period of the lease together with any further term for which the tenant has the option to continue the lease, where, at the inception of the lease, the directors are reasonably certain that the tenant will exercise that option.

Amounts received from tenants to terminate leases or to compensate for dilapidations are recognised in the income statement when the right to receive them arises.

4.4.2 Property Services Income Property services income comprises of income received

from property-related services to other parties. The income is recognised when the related services have been provided. Property services income will be generated from the following services;

4.4.3 Sale of Completed Property A property is regarded as sold when the significant risks

and returns have been transferred to the buyer, which is normally on unconditional exchange of contracts. For conditional exchanges, sales are recognised only when all the significant conditions are satisfied.

4.4.4 Sale of Property under Development Where property is under development and agreement

has been reached to sell such property when construction is complete, the directors consider whether the contract comprises:

Where a contract is judged to be for the construction of a property, revenue is recognised using the percentage-of-completion method as construction progresses.

Where the contract is judged to be for the sale of a completed property, revenue is recognised when the significant risks and rewards of ownership of the real estate have been transferred to the buyer. If, however, the legal terms of the contract are such that the construction represents the continuous transfer of work in progress to the purchaser, the percentage-of-completion method of revenue recognition is applied and revenue is recognised as work progresses. Continuous transfer of work in progress is applied when:

when the land on which the development takes place is owned by the final customer; and

of the work in progress in its present state are transferred to the buyer as construction progresses, typically, when buyer cannot put the incomplete property back to the Group.

In such situations, the percentage of work completed is

measured based on the cost incurred to date.

4.4.5 Finance Income For all financial instruments measured at amortised cost

and interest bearing financial assets classified as available-for-sale, interest income or expense is recorded using the E"ective Interest Rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income or expense is included in the income statement.

4.4.6 Dividend Income Revenue is recognised when the Group’s right to receive

the payment is established.

4.5 Taxes

4.5.1 Current Income Tax Income tax assets and liabilities for the current period

are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Group operates and generates taxable income.


Income tax relating to items recognised directly in other comprehensive income or equity is recognised in other comprehensive income or equity and not in the income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

4.5.2 Deferred Tax Deferred tax is provided using the liability method on

temporary di"erences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognised for all taxable temporary di"erences, except:

initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, a"ects neither the accounting profit nor taxable profit or loss; and

associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary di"erences can be controlled and it is probable that the temporary di"erences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary di"erences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary di"erences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:

deductible temporary di"erence arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, a"ects neither the accounting profit nor taxable profit or loss; and

associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary di"erences will reverse in the foreseeable future and taxable profit will be available against which the temporary di"erences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that su!cient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are o"set if a legally enforceable right exists to set o" current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, would be recognised subsequently if new information about facts and circumstances changed. The adjustment would either be treated as a reduction to goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period.

4.5.3 Value Added Tax Revenues, expenses and assets are recognised net of the

amount of value added tax, except:

of assets or services is not recoverable from the taxation authority, in which case the value added tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

amount of value added tax included.

The net amount of value added tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

4.6 Pensions and other Post-Employment Bene"ts The Group operates one defined contribution pension

plan, which requires contributions to be made to the fund. The pension plan is funded by payments from employees and the Group. The Group’s contribution to the defined contribution pension plan is charged to the income statement in the period to which the contributions relate.

Retirement benefits are also provided for the Group’s employees through the National Social Security Authority (NSSA) Scheme. The cost of retirement benefits applicable to the NSSA Scheme is determined by the systematic recognition of legislated contributions.




4.7 Financial Instruments – Initial Recognition and Subsequent Measurement

4.7.1 Financial Assets

Initial Recognition and Measurement Financial assets within the scope of IAS 39 are classified

as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments or as available-for-sale financial assets. The Group determines the classification of its financial assets at initial recognition.

All financial assets are recognised initially at fair value plus

transaction costs, except in the case of financial assets recorded at fair value through profit or loss.

Purchases or sales of financial assets that require delivery of assets within a timeframe established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset. The Group’s financial assets include cash and cash equivalents, trade and other receivables, loans and other receivables and quoted and unquoted financial instruments.

Subsequent Measurement The subsequent measurement of financial assets

depends on their classification as described below:

Financial Assets at Fair Value through Pro"t or Loss Financial assets at fair value through profit or loss

include financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term.

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the income statement.

Financial assets designated upon initial recognition at fair value through profit or loss are designated at their initial recognition date and only if the criteria under IAS 39 are satisfied.

The Group evaluates its financial assets held for trading to determine whether the intention to sell them in the near term is still appropriate.

Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in the income statement. Reassessment only

occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.

Trade and Other Receivables Trade and other receivables are recognised initially at

the fair value of the consideration receivable. Where the time value of money is material, adjustments are made to ensure that receivables are carried at amortised cost. A provision for credit losses is made when there is objective evidence that the Group will not be able to recover balances in full. Balances are written o" when the probability of recovery is assessed as being remote. Trade and other receivables are classified as loans and receivables – refer to the separate policy below.

Cash and Cash Equivalents Cash and cash equivalents in the statement of financial

position comprise cash at bank and on hand and short-term deposits with an original maturity of three months or less. For the purposes of the statement of cash flows, cash and cash equivalents comprise of bank and cash balances and short term deposits as defined above, net of outstanding bank overdrafts. Cash and cash equivalents are classified as loans and receivables – refer to the separate policy below.

Loans and Receivables Loans and receivables are non-derivative financial assets

with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the e"ective interest rate (‘EIR’) method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the income statement. The losses arising from impairment or derecognition are recognised in the income statement.

Available-for-Sale Financial Investments Available-for-sale financial investments comprise equity

investments. Equity investments classified as available-for-sale are those that are neither classified as held for trading nor designated at fair value through profit or loss. After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the available-for-sale reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or the investment is determined to be impaired, when the cumulative loss is reclassified from the available-for-sale reserve to the income statement.

4.7.2 Derecognition of Financial Assets A financial asset (or, where applicable a part of a financial

asset or part of a Group of similar financial assets) is derecognised when:


have expired; or

cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and

all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash

flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

4.8 Impairment of Financial Assets The Group assesses, at each reporting date, whether

there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial di!culty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and when observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

4.8.1 Financial Assets carried at Amortised Cost For financial assets carried at amortised cost, the Group

first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets

with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the di"erence between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original e"ective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the income statement. Loans together with the associated allowance are written o" when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-o" is later recovered, the recovery is credited to the income statement.

4.8.2 Available-for-Sale Financial Investments For available-for-sale financial investments, the Group

assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.

In the case of equity investments classified as available-

for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. ‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost. When there is evidence of impairment, the cumulative loss – measured as the di"erence between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement – is removed from other comprehensive income and recognised in the income statement. Impairment losses on equity investments are not reversed through the income statement; increases in their fair value after impairment are recognised directly in other comprehensive income.




In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the di"erence between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement.

Future interest income continues to be accrued based

on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed through the income statement.

4.9 Financial Liabilities

4.9.1 Initial Recognition and Measurement Financial liabilities within the scope of IAS 39 are classified

as financial liabilities at fair value through profit or loss or loans and borrowings. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value plus, in the case of loans and borrowings, directly attributable transaction costs.

The Group’s financial liabilities comprise trade and other payables which are classified as loans and borrowings.

4.9.2 Subsequent Measurement The measurement of financial liabilities depends on their

classification described as follows:

Loans and Borrowings After initial recognition, loans and borrowings and

accounts payable balances are subsequently measured at amortised cost using the e"ective interest rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the e"ective interest rate method amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the e"ective interest rate. The e"ective interest rate amortisation is included in the income statement.

Derecognition of Financial Liabilities A financial liability is derecognised when the obligation

under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another

from the same lender on substantially di"erent terms, or the terms of an existing liability are substantially modified,

such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The di"erence in the respective carrying amounts is recognised in the income statement.

O$-setting of Financial Instruments Financial assets and financial liabilities are o"set and the

net amount reported in the consolidated statement of financial position if, and only if:

o"set the recognised amounts; and

or to realise the assets and settle the liabilities simultaneously.

4.10 Impairment of Non-Financial Assets The Group assesses, at each reporting date, whether

there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or Cash Generating Unit’s (CGU) fair value less costs of disposal and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years.

For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.

Impairment losses of continuing operations, including impairment on inventories, are recognised in the income statement in expense categories consistent with the function of the impaired asset.

For assets excluding goodwill, an assessment is made at each reporting date whether there is any indication that


previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement.

4.11 Inventories

Consumables Consumables are valued at the lower of cost (based on

invoice value) or estimated net realisable value using the First In First Out method.

Inventory property Property acquired or being constructed for sale in the

ordinary course of business, rather than to be held for rental or capital appreciation, is held as inventory property and is measured at the lower of cost and NRV based on the specific identification of the property.

Cost Includes:

of site preparation, professional fees for legal services, property transfer taxes, construction overheads and other related costs.

Non-refundable commissions paid to sales or marketing agents on the sale of real estate units are expensed when paid.

NRV is the estimated selling price in the ordinary course of the business, based on market prices at the reporting date and discounted for the time value of money if material, less costs to completion and the estimated costs of sale.

The cost of inventory property recognised in profit or loss on disposal is determined with reference to the specific costs incurred on the property sold and an allocation of any non-specific costs based on the relative size of the property sold.

4.12 Provisions Provisions are recognised when the Group has a

present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some

or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

4.13 Current versus Non-Current Classi"cation The Group presents assets and liabilities in statement

of financial position based on current/non-current classification. An asset is as current when it is:

consumed in normal operating cycle;

after the reporting period; or

being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current. A liability is current when:

cycle;

the reporting period; or

settlement of the liability for at least twelve months after the reporting period.

The Group classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-

current assets and liabilities.

4.14 Fair Value Measurement The Group measures financial instruments, such as equity

investments and non-financial assets such as investment properties, at fair value at reporting date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.




A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which su!cient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

active markets for identical assets or liabilities;

lowest level input that is significant to the fair value measurement is directly or indirectly observable; and

lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.


5 Segmental Reporting For investment properties that include o!ces, retail and industrial properties, financial information is provided to the board,

which is the chief operating decision maker for each of the segments in the property portfolio. The information provided includes net rentals being gross rent net of property expenses and valuation gains or losses. The individual properties are aggregated into segments with similar economic characteristics. The directors consider that this is best achieved by aggregating into retail, o!ce and industrial segments.

Consequently the Group is considered to have three reportable operating segments, namely: o!ces, retail and industrial properties.

O!ce Segment The o!ce segment acquires, develops and leases o!ces in the central business district and o!ce parks. O!ces comprise the high

rise central business district buildings and o!ce parks in Zimbabwe.

Retail Segment The retail segment acquires, develops and leases shops in the central business district and selected suburban locations throughout

Zimbabwe.

Industrial Segment The industrial segment comprises properties situated in designated industrial areas of Zimbabwe.

Group administration costs, profit or loss on disposals of investment properties, finance, revenue and income taxes are not reported to the board on a segment basis. There are no sales between segments.

Segment assets for the investment property segment represent investment property (including additions and improvements). Other assets (both current and non-current) are not allocated to segments and have been provided in the reconciliation of segment assets to assets disclosed in the statement of financial position.

Year ended 31 December 2013All "gures in USD O!ce Retail Industrial Adjustment TotalRevenue 4 446 236 3 425 981 1 125 412 24 693 9 022 322Property expenses (1 018 687) (318 552) (289 663) (56 262) (1 683 164)Segment results 3 427 549 3 107 429 835 749 (31 569) 7 339 158 Fair value adjustmentInvestment property 6 831 695 3 023 1 076 969 150 000 8 061 687 Segment pro"t 10 259 244 3 110 452 1 912 718 118 431 15 400 845 Administration expenses - - - (3 364 339) (3 364 339)Fair value through profit or loss - - - (42 933) (42 933)Dividend and other income - - - 56 344 56 344 Interest on overdue accounts - - - 199 951 199 951 Interest on short-term investments - - - 452 690 452 690 Pro"t before tax 10 259 244 3 110 452 1 912 718 (2 579 856) 12 702 558

Reconciliation of Segment Assets for 2013

All "gures in USD O!ce Retail Industrial Adjustment TotalAssetsInvestment property 93 862 000 19 230 000 12 210 000 2 840 000 128 142 000 Trade receivables 1 211 038 532 530 697 745 (217 312) 2 224 001 Segment assets 95 073 038 19 762 530 12 907 745 2 622 688 130 366 001

Other non-current assets 37 557 16 466 - 1 122 851 1 176 874 Other current assets - - - 8 220 999 8 220 999 Total asset 95 110 595 19 778 996 12 907 745 11 966 538 139 763 874 Liabilities 505 536 42 883 93 684 194 142 836 245

Capital expenditure 71 188 14 906 - 4 362 000 4 448 094




Year ended 31 December 2012All "gures in USD O!ce Retail Industrial Adjustment TotalRevenue 6 067 834 1 520 089 1 223 265 18 950 8 830 138Property expenses (997 501) (373 877) (146 212) (110 607) (1 628 197)Segment results 5 070 333 1 146 212 1 077 053 (91 657) 7 201 941Fair value adjustmentInvestment property 4 811 794 2 470 254 1 360 488 380 000 9 022 536Segment pro"t 9 882 127 3 616 466 2 437 541 288 343 16 224 477Administration expenses - - - (3 187 110) (3 187 110)Investment income - - - 230 806 230 806Fair value through profit or loss - - - (105 232) (105 232)Dividend and other income - - - 55 582 55 582Interest on overdue accounts - - - 159 307 159 307Interest on short-term investments - - - 290 682 290 682Pro"t before tax 9 882 127 3 616 466 2 437 541 (2 267 622) 13 668 512

Reconciliation of Segment Assets for 2012

All "gures in USD O!ce Retail Industrial Adjustment TotalAssetsInvestment property 83 920 000 20 390 000 11 130 000 4 826 000 120 266 000Trade receivables 895 612 339 381 356 609 2 693 1 594 295Segment assets 84 815 612 20 729 381 11 486 609 4 828 693 121 860 295Other non-current assets - - - 1 614 657 1 614 657Other current assets - - - 4 279 266 4 279 266Total asset 84 815 612 20 729 381 11 486 609 10 722 616 127 754 218

Liabilities 197 005 90 520 56 545 105 368 449 438

Capital expenditure 68 206 1 390 355 62 512 (15 124) 1 505 949

6 Investment PropertiesAll "gures in USD 2013 2012

At 1 January 120 266 000 109 737 515 Improvements to existing properties 294 313 243 497 Reclassification to Inventory (Note 12) (480 000) - Additions to properties under development - 1 262 452 Fair value adjustments 8 061 687 9 022 536 At 31 December 128 142 000 120 266 000

6.1 Fair Value Hierarchy The following table shows an analysis of the fair values of investment property recognised in the statement of financial position

by level of the fair value hierarchy;

All "gures in USD

31 December 2013 Level 1 Level 2 Level 3 Total

Total gain or (loss) in the period in the income statement

CBD Retail - - 10 740 000 10 740 000 150 000CBD O!ces - - 38 340 000 38 340 000 560 000O!ce Parks - - 46 150 000 46 150 000 (54 350)Suburban Retail - - 9 800 000 9 800 000 (146 977)Industrial - - 12 210 000 12 210 000 1 076 968Residential - - 160 000 160 000 -Land* - - 10 742 000 10 742 000 6 476 046Total - - 128 142 000 128 142 000 8 061 687

* This consists of land earmarked for future developments.


Gains and losses recorded in profit or loss for recurring fair value measurements categorised within level 3 of the fair value hierarchy amount to $8.062 million and are presented in the consolidated income statement in line items ‘Fair value adjustments – Investment Properties’.

All gains and losses recorded in profit or loss for recurring fair value measurements categorised within Level 3 of the fair value hierarchy are attributable to changes in unrealised gains or losses relating to completed investment property held at the end of the reporting period.

Valuation Techniques used to Derive Level 3 Fair Values The table below presents the following for each class of the investment property:

entirety;

building; and

measurement.

All "gures in USD

Class of Property

Fair Value 31 December

2013 Valuation TechniqueKey

unobservable inputsRange

(Weighted Average)

CBD Retail 10 830 000 Income Capitalisation

Rental per square metre $15.00-$30.00 ($23.00)Prime yield 7.00%-13.00% (10.00%)

Vacancy rate 0.00%-41.00% (7.00%)

CBD O!ces 38 340 000 Income Capitalisation


Vacancy rate 23.41%-50.19% (38.00%)

O!ce Parks 46 150 000 Income Capitalisation


Vacancy rate 0.00%-73.99% (37.00%)

Suburban Retail 9 800 000 Income Capitalisation


Vacancy rate 0.00%-2.67% (0.89%)

Industrial 12 210 000 Income Capitalisation


Vacancy rate 0.00%-64.69%(12.79%)Land 10 652 000 Market Comparable Rate per square metre $11.99 - $40.36 ($28.23)

Other** 160 000 Market ComparableComparable transacted

properties-

Total 128 142 000

** Other relates to residential property valued at $0.160 million which has been valued based on market comparable method (main space equivalent) Descriptions and De"nitions

The table above includes the following descriptions and definitions relating to valuation techniques and key unobservable inputs made in determining the fair values:

I. Income Capitalisation Method Under the income capitalisation method, a property’s fair value is estimated based on the normalised net operating income

generated by the property, which is divided by the capitalisation rate (discounted by the investor’s rate of return). Under the income capitalisation method, over (above market rent) and under-rent situations are separately capitalised (discounted).

ii. Market Comparable Method Under the market comparable method (or market comparable approach), a property’s fair value is estimated based on comparable

transactions. The unit of comparison applied by the Group is the price per square metre (sqm).




Iii. Rent Per Square Metre The rent at which space could be let in the market conditions prevailing at the date of valuation. The unit of comparision is the

rental rate per square metre.

Iv. Vacancy Rate The Group determines the vacancy rate which can be based on the percentage of estimated vacant space divided by the total

lettable area.

v. Prime Yield The prime yield is defined as the internal rate of return of the cash flow from the property, assuming a rise to Estimated Rental

Value (ERV) at the next review, but with no further rental growth.

Sensitivity analysis to significant changes in unobservable inputs within Level 3 of the hierarchy. The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of

the the Group’s portfolios of investment property are:

Significant increases/ (decreases) in the comparable transacted properties and rental per square metre in isolation would result in a significant higher/ (lower) fair value measurement. Significant increases/(decreases) in the long-term vacancy rate and prime yield in isolation would result in a significant lower/(higher) fair value measurement.

Lettable Space m2 % of portfolioSector Dec 2013 Dec 2012 Dec 2013 Dec 2012 Industrial 37 239 37 239 30.95% 30.95%CBD O!ces 39 277 39 277 32.64% 32.64%O!ce Parks 24 652 24 652 20.49% 20.49%Suburban Retail 7 683 7 683 6.39% 6.39%CBD Retail 11 468 11 468 9.53% 9.53%Total 120 319 120 319 100.00% 100.00%

Investment properties are stated at fair value, which is determined based on valuations performed by Knight Frank Zimbabwe, an accredited independent property valuer, at 31 December 2013. Investment properties are stated based on a full valuation at 31 December 2013 as opposed to the desktop valuations conducted in previous years. Knight Frank Zimbabwe is an industry specialist in valuing these types of investment properties. The fair values of some properties have not been determined with reference to transactions observable on the market because of the nature of the properties and the limited amount of comparable data. Instead, valuation models in accordance with those recommended by the International Valuation Standards Committee have been applied.

Valuation Process Management commitee that determines the Group’s valuation policies and procedures for property valuations comprises

the Managing Director, General Manager-Finance and Administration and General Manager – Developments. Each year, the management commitee decides, after advising the audit committee, which external valuer to appoint to be responsible for the external valuations of the Group’s property portfolio. The selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. Consideration is normally given to rotate external valuers every five years. In addition, the Managing Director is responsible for recruiting personnel in the Group’s internal valuation department. The Group’s internal valuation department comprises two employees, both of whom hold relevant internationally recorgnised professional qualifications and are experienced in valuing the types of properties in the applicable locations.

The management commitee decides, after discussions with the Group’s external valuers and the Group’s internal valuation department:

categorized within Level 3 of the fair value hierarchy are market comparables and the income capitalisation method); and

rental per square metre, rate per square metre, vacany rate and prime yield)


As at each year-end, all properties are valued by external valuers. At each reporting date, the internal valuation department analyses the movements in each property’s value. For this analysis, the internal valuation department verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts (for example rent amounts in lease agreements), market reports (for example market rent, capitalisation rates in property market reports) and other relevant documents. In addition, the accuracy of the computation is tested on a sample basis. For each property, the latest valuation is compared with the valuations of the preceding annual periods. If fair value changes (positive or negative) are abnormal, the changes are further analysed for example by having discussions with external valuers.

The internal valuation department also compares each property’s change in fair value with relevant external sources (e.g. the investment property database or other relevant benchmark) to determine whether the change is reasonable.

On an annual basis, after the management commitee has discussed the valuations with the internal valuation department, they present the valuation results with the Group’s external valuers to the audit committee and the Group’s independent auditors. This includes a discussion of the major assumptions used in the valuations, with an empahasiss on:

7 Vehicles and Equipment

All "gures in USDMotor

vehicles

ComputersO!ce

equipment Equipment &

machinery O!ce

furniture

TotalHISTORICAL COSTCost at 1 January 2012 634 024 54 680 65 729 140 345 33 422 928 200Additions 211 300 13 357 34 037 22 558 - 281 252Disposal (51 093) - - - - (51 093)At 31 December 2012 794 231 68 037 99 766 162 903 33 422 1 158 359Additions - 1 458 6 815 - 37 480 45 753Disposal (22 800) (4 638) (960) - (770) (29 168)At 31 December 2013 771 431 64 857 105 621 162 903 70 132 1 174 944

Depreciation Depreciation at 1 January 2012 (243 980) (25 846) (25 254) (36 595) (7 536) (339 211)Disposal 43 499 - - - - 43 499Charge for the year (150 337) (12 195) (17 771) (29 643) (3 380) (213 326)At 31 December 2012 (350 818) (38 041) (43 025) (66 238) (10 916) (509 038)Charge for the year (158 306) (13 775) (20 764) (32 573) (5 599) (231 017)Disposal 22 800 3 121 960 - - 26 881At 31 December 2013 (486 324) (48 695) (62 829) (98 811) (16 515) (713 174) Net book value at 31 December 2013 285 107 16 162 42 792 64 092 53 617 461 770 Net book value at 31 December 2012 443 413 29 996 56 741 96 665 22 506 649 321

8 Financial Assets Available-for-SaleAll "gures in USD 2013 2012

At 1 January 622 759 1 181 282 Disposals - (247 916)Fair value adjustment on available-for-sale investments (207 299) (310 607)At 31 December 415 460 622 759

The fair value of the quoted shares is determined by making reference to published price in an active market. The shares are listed on the Zimbabwe Stock Exchange.

All investments that were set aside for property development in accordance with the objectives of the Initial Public O"er of 2007 were designated as financial assets available-for-sale.




8.1 Fair Value Reconciliation: Available-for-Sale Reserve

All "gures in USD 2013 2012

At 1 January 136 548 646 684 Unrealised loss (207 299) (310 607)Reclassified to profit or loss - (205 114)Deferred tax (Note 16) 2 072 5 585 At 31 December (68 679) 136 548

9 Financial Assets at Fair Value through Pro"t and LossAt 1 January 342 577 1 105 908 Acquired during the year - 3 008 Disposals - (661 107)Fair value adjustment on financial assets at through profit and loss (42 933) (105 232)At 31 December 299 644 342 577

Fair Value Hierarchy for Financial Instruments measured at Fair Value at 31 December 2013:

Assets measured at Fair Value Date of Valuation Total

Quoted prices in active markets

(Level 1)

Quoted prices in active markets

(Level 1) All "gures in USD 2013 2012Financial assets available-for-sale 31 December 415 460 415 460 622 759Financial assets at fair value through profit and loss 31 December 299 644 299 644 342 577

715 104 715 104 965 336

Equity Investments Valuation The Group changed the valuation of all listed equities from use of the bid to closing prices. This change has been applied

prospectively with no restatement of prior year financial periods in accordance with the transitional provisions of IFRS 13. The change resulted in the fair value of marketable securities for the year increasing by $108 725. It is not possible to reliably estimate the impact of the change in estimate on future periods.

10 Financial Assets Held-to-MaturityAll "gures in USD 2013 2012

At 1 January - 1 708 909Purchased during the year - -Reclassified to loans and other receivables (Note 11) - (1 898 520)Accrued interest - 189 611At 31 December - -

The financial assets held-to-maturity related to money market placements made with First Mutual Holdings Limited, the ultimate parent Company, that were reclassified to loans and other receivables (Note 11).

11 Loans and Other Receivables At 1 January 1 937 598 - Reclassification from held-to-maturity financial assets (Note 10) - 1 898 520Reclassification from short-term investments 378 720 -Repayments in cash (870 364) - Repayments other (Note 27.1.2) (285 000) -Amortised interest 194 788 39 078 At 31 December 1 355 742 1 937 598

First Mutual Holdings Limited Loan 977 022 1 937 598Other Loans 378 720 -

1 355 742 1 937 598


An amount of $0.977 million relates to the loan placed with First Mutual Holdings Limited, the ultimate parent company. The loan is administered under the following terms:

The loan which was scheduled to be fully repaid by 30 September 2013 was renewed on the same terms until 30 September 2014, at a board meeting held on the 22 November 2013.

12 InventoryAll "gures in USD 2013 2012

Property held for trading 140 150 140 150 Work-in-Progress - Kam"nsa Cluster Houses 1 152 034 - Capitalised project costs 672 034 -Transfer from investment properties (Note 6) 480 000 -Consumables 36 009 22 710 At 31 December 1 328 193 162 860

13 Trade and Other ReceivablesTenant receivables 1 706 927 1 087 600Tenant operating cost recoveries 517 074 506 695Trade receivable 2 224 001 1 594 295Less: Provision for credit losses (986 926) (765 777)Net trade debtors 1 237 075 828 518Prepayments - land acquisition 4 100 000 -Prepayments - investment property 521 468 -Prepayments - other 593 217 109 667Other receivables 303 309 224 961Group companies 133 569 196 996Total trade and other receivables 6 888 638 1 360 142

Reconciliation of Provision for Credit Losses At 1 January 765 777 658 239 Add: Charge for the year 733 266 343 190 Less: Utilised through write-o"s of trade recievables (Note 19) (512 117) (235 652)At 31 December 986 926 765 777

At 31 December 2013, trade receivables of an initial value of $0.987 million (2012: $0.766 million) were impaired and fully provided for.

See below for the movements in the provision for impairment of receivables:

All "gures in USD Individually

impaired Collectively

impaired TotalAt 1 January - 658 239 658 239Charge for the year - 343 190 343 190Utilised through write-o"s of trade recievables (Note 19) - (235 652) (235 652)Unused amounts reversed - - -Discount rate adjustment - - -At 31 December 2012 - 765 777 765 777Charge for the year 561 522 171 744 733 266Utilised through write-o"s of trade recievables (Note 19) - (512 117) (512 117)At 31 December 2013 561 522 425 404 986 926




Analysis of Trade Receivables at 31 December The analysis of trade receivables that were past due but not impaired is set out below:

All "gures in USD Neither past due nor impaired Past due but not impaired

Total less than 30 days 31 to 60 days 61 to 90 days 91 to 120 days Over 120 days2013 1 237 075 387 714 274 465 128 373 68 299 378 2242012 828 518 216 221 120 488 57 131 30 171 404 507

The Group holds no collateral in respect of these trade receivables. Trade receivables that are past due, without credit payment plans and whose chances of recovery are rated remote are considered for specific write-o". An assessment of amounts that are neither past due nor impaired has been done based on the history of the tenant account and management is satisfied with the chances of recovery.

Trade receivables are normally on 30 day terms. Tenants will be charged 10% per annum as interest on overdue amounts that remain outstanding after 30 days. Refer to note 30.C for further information relating to credit risk management.

14 Cash and Cash EquivalentsAll "gures in USD 2013 2012

Short term investments 189 649 400 788 Bank and cash on hand 127 932 1 849 707 At 31 December 317 581 2 250 495

Cash at bank earns interest at floating rates based on daily bank deposit rates. Short term deposits are made of varying periods as between one day and three months depending on the immediate cash requirements of the Group and earn interest at the short-term deposit rates.

15 Ordinary Share CapitalAuthorised 2 000 000 000 ordinary shares at US$0.001 per share 2 000 000 2 000 000Issued1 238 157 310 ordinary shares at US$0.001 per share 1 238 157 1 238 157

16 Analysis of Deferred TaxAt 1 January 12 964 786 9 187 399 Recognised in the income statement:- Arising on vehicles and equipment 21 094 (7 009)- Arising on investment properties 2 100 857 3 797 615 - Arising on assessed losses (114 962) - - Arising on financial assets through profit or loss (429) (7 634)Recognised in other comprehensive income:- Arising on available for sale investments (Note 8.1) (2 072) (5 585)At 31 December 14 969 274 12 964 786

16.1 Deferred TaxArising on vehicles and equipment 86 377 65 283 Arising on investment properties 14 990 708 12 889 851 Arising on assessed losses (114 962) - Arising on financial assets through profit or loss 2 996 3 425 Arising on available-for-sale investments 4 155 6 227 At 31 December 14 969 274 12 964 786


17 Trade and Other Payables All "gures in USD 2013 2012

Tenant payables 56 577 25 570 Sundry creditors 277 404 167 878 Trade creditors 404 227 118 486 At 31 December 738 208 311 934

Trade and other payables are non-interest bearing and are normally on 30 day terms.

18 ProvisionsAt 1 January 73 963 28 932 Accrued leave days 48 150 182 561 Leave pay utilised (57 247) (137 530)At 31 December 64 866 73 963

19 Property ExpensesUnallocated operating costs 417 839 395 518 Maintenance costs 308 627 204 209 Write-o"s of trade receivables (Note 13) 512 117 235 652Provision for credit losses 221 149 107 538Valuation fees 460 21 657 Property security & utilities 135 133 146 773 Operating costs recoveries 87 839 516 850 1 683 164 1 628 197

Property expenses arising from investment property that generate rental income 1 548 031 1 481 424 Property expenses arising from investment property that did not generate rental income 135 133 146 773

1 683 164 1 628 197 20 Administration Expenses

Directors’ fees- For services as directors 49 800 29 841 Auditors’ fees**- Current year 21 070 10 750- Prior year 56 109 33 936Information and communication technology expenses 49 400 18 719 Sta" related costs 1 723 259 1 678 880Depreciation 231 017 213 326 Communication expenses 21 013 28 758 Fees and other charges 63 403 241 687 Investment fees 61 380 21 643 O!ce costs 373 868 377 066 Travel and entertainment 8 962 7 914 Group shared services 642 136 481 605 Advertising 62 922 42 985 3 364 339 3 187 110

** Audit fees for the financial year ended 31 December 2013 of $59 000 were approved by the Pearl Properties Audit Committee on the 14th of November 2013 with an interim billing of $21 070 paid in 2013.




21 Investment Income All "gures in USD 2013 2012

Profit on sale of available-for-sale investments - 205 114Profit on sale of financial assets at fair value through profit or loss - 25 692

- 230 806

22 Dividend and Other IncomeDividend income 2 697 11 783Other income 53 647 43 799 56 344 55 582

23 Finance IncomeInterest on overdue tenant accounts 199 951 159 307 Interest on short term loan 194 788 - Interest on investments 257 902 290 682 652 641 449 989

Finance income received 457 853 221 300Finance income accrued 194 788 228 689 652 641 449 989

24 TaxesCurrent tax 872 408 856 703 Deferred tax 2 006 562 3 782 972 2 878 970 4 639 675

24.1 Reconciliation of Tax ChargeStandard rate 25.75% 25.75%Fair value adjustment on investment properties at di"erent rate - (5.80%)Fair value of equities at di"erent rate 0.34% 0.15%Expenses disallowed for tax purposes (5.48%) 13.80%E"ect on non-taxable items 2.05% -E$ective tax rate 22.66% 33.90%

24.2 Reconciliation of Tax PaidTax asset at beginning of the year (162 466) (135 924)Tax liability at beginning of the year 63 541 37 781 Tax charge to profit or loss 872 408 856 703 Tax asset at end of the year 554 846 162 466 Tax liability at end of the year (33 171) (63 541) 1 295 158 857 485

25 Basic and Diluted Earnings per Share Basic earnings per share is calculated by dividing the profit for the year attributable to ordinary equity holders of the parent

by the weighted average number of ordinary shares outstanding during the year. As there are no dilutive equity instruments outstanding, basic and diluted earnings per share are identical. The following reflects the income and ordinary share data used in the computations of basic and diluted earnings per share:

Earnings attributed to ordinary equity holders of the parent for basic earnings per share 9 823 588 9 021 284 Weighted average number of ordinary shares in issue 1 238 157 310 1 238 157 310 Basic and diluted earnings per share (US cents) 0.793 0.729


26 Acquisition of additional Interest in Prisma Investments Company (Private) LimitedAll "gures in USD 2013 2012

Carrying value of additional interest acquired - 1 054 852Cash consideration - (898 634)Transferred to equity - 156 218

27 Related Party Disclosures The financial statements include transactions between Pearl Properties (2006) Limited Group with First Mutual Holdings Limited

and its subsidiaries.

27.1 Transactions and Balances with Related Companies

27.1.1 Ultimate Parent Company’s E$ective Shareholding First Mutual Holdings Limited owns 0.80% and controls 57.46% of the ordinary shares of Pearl Properties (2006) Limited through

a shareholding in the companies/funds listed below:


First Mutual Life Policyholders 39.27% 39.42%First Mutual Life Shareholders 11.50% 11.77%First Mutual Life Medical Savings Fund - 2.46%First Mutual Life Managed Fund 1.51% 1.20%TristarInsurance Company Limited 1.35% -FMRE Property and Casualty Shareholders 1.13% 1.13%FMRE Life and Health (Private) Limited 1.04% 1.04%First Mutual Holdings Limited 0.80% 0.05%FML – Econet Pension Fund 0.25% 0.17%FML Asset Management (Private) Limited 0.61% -

27.1.2 Summary of Related Party Transactions The following table provide the total amount of transactions that have been entered into with related parties during the year

ended 31 December 2013:

Related partyAll "gures in USD

Relationshipto Pearl

Properties (2006) Limited

Rentals charged

to related parties

Purchases from related

parties

Amount owed by related

parties

Amounts owed to

related parties

Group Shared

Services

First Mutual Holdings LimitedUltimate

Parent 298 232 285 000 977 022 56 855 642 136

First Mutual Assurance Company (Private) Limited Parent 743 559 - - 10 655 -

FMRE Property & Casualty (Private) Limited

Fellow Subsidiary 52 792 - - - -

FMRE Life & Health (Private) LimitedFellow

Subsidiary 29 360 - - - -

African Actuarial Consultancy (Private) Limited

Fellow Subsidiary 29 032 - 202 247 - -

TristarInsurance Company Limited Fellow

Subsidiary 80 980 - - 1 163 -




27.1.2 Summary of Related Party Transactions

The following table provide the amount of transactions that have been entered into with related parties during the year ended 31 December 2012:

Related partyAll "gures in USD

Relationshipto Pearl

Properties (2006) Limited

Rentals charged

to related parties

Purchases from related

parties

Amount owed by related

parties

Amounts owed to

related parties

Group Shared

Services

First Mutual Holdings LimitedUltimate

Parent 458 057

- 1 976 899 - 481 605

First Mutual Assurance Company (Private) Limited Parent 673 380 - 6 528 - -

FMRE Property & Casualty (Private) Limited

Fellow Subsidiary 72 353 - - - -

FMRE Life & Health (Private) LimitedFellow

Subsidiary 28 176 - - - -

African Actuarial Consultancy (Private) Limited

Fellow Subsidiary 37 635 - 151 167 - -

TristarInsurance Company (Private) Limited

Fellow Subsidiary 88 848 -

- - -

The sale and purchases from related parties are made at terms equivalent to those that prevail in arm’s length transactions. The amounts outstanding are unsecured and will be settled on normal terms. No expense has been recognised in the current or prior periods for bad or doubtful debts in respect of the amounts owed by related parties.

On 24 December 2013 the company obtained a vacation cottage and land located in Nyanga from First Mutual Holdings Limited at a cost of $0.285 million through a non-cash settlement which has seen the intercompany loan between the company and First Mutual Holdings Limited being reduced by the purchase price (Note 11). The valuation of the properties was performed by an external independent property valuer.

27.2 Terms and Conditions of Transactions with Related Parties Outstanding balances at the year-end are unsecured with agreed payment terms and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables.

28 Remuneration of Key Management Details of transactions with directors are set out in the directors’ report.

The following remuneration was paid to key management during the year:


Salaries 297 681 271 500Bonuses 49 558 71 228Contribution to defined contribution plan 38 763 15 222Other long term employee benefits 70 724 53 166 456 726 411 116

29 First Mutual Holdings Limited Group Pension Fund Pearl Properties (2006) Limited contributes to the First Mutual Holdings Limited Group Sta" Pension and Life Assurance Scheme which is a defined contribution scheme managed by First Mutual Life Assurance Company (Private) Limited.

All employees are members of the First Mutual Holdings Limited Group Sta" Pension and Life Assurance Scheme. The Group’s contributions to the defined contribution pension plan are charged to the income statement in the period to which they relate. All employees contribute to the pension fund at the same prescribed rate.


Total employer contributions amounted to: 122 721 97 773


National Social Security Authority SchemeThe Group and its employees contribute to the National Social Security Authority Scheme. This is a social security scheme which was set up under the National Social Security Act (Chapter 17.04). The Group’s obligations under the scheme are limited to specific contributions as legislated from time to time.


Total employer contributions amounted to: 69 998 31 859

30 Financial Risk Management Objectives and Policies The Group’s principal financial liabilities comprise trade payables which arise directly from the Group’s operations. The Group has various financial assets such as tenant debtors, cash and cash equivalents which arise directly from its operations. The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, credit risk and operational risk. Foreign currency risk has not been presented as the Group has no transactions denominated in foreign currencies.

The Group’s senior management oversees the management of these risks within the framework of the risk management matrix. As such, the Group’s senior management is supported by Group Audit and Risk Management Department that advises on financial risks and the appropriate financial risk governance framework for the Group. The Group Audit and Risk Management Department provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with Group policies on risk management.

These risks are managed as follows:

a. Interest Rate Risk The interest bearing money market investments and tenant receivables are for a short period of time of less than 30 days and the entity is not significantly exposed to changes in interest rates. The receivable from the holding company is at a fixed interest rate which is not significantly di"erent from market rates. As a result, no interest rate sensitivity analysis has been presented.

b. Operational Risk The Group has identified the following risks associated with the real estate portfolio:

who are experts in the specific planning requirements in the scheme’s location in order to reduce the risks that may arise in the planning process.

associated property (see also credit risk below). To reduce this risk, the Group reviews the financial status of all prospective tenants and decides on the appropriate level of security required through rental deposits or surety.

c. Credit Risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operations, investing and financing activities, including deposits with banks and other financial institutions. Credit risk is managed by requiring tenants to pay rentals in advance. The credit quality of the tenant is assessed based on a financial risk assessment at the time of entering into a lease agreement. Outstanding tenant receivables are regularly monitored. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial asset as disclosed in the Statement of Financial Position.

The credit rating of tenants is assessed according to the Group’s criteria prior to entering into lease arrangements.

Credit Risk Related to Financial Instruments and Cash DepositsCredit risk from balances with banks and financial institutions is managed in accordance with the Group’s policy as stipulated by the Group Investment Committee. Investment of surplus funds are made only with approved counterparties and within a credit limit assigned to each counterparty. Counterparty credit limits are reviewed by the Group Investment Committee on an annual basis, and may be updated throughout the year subject to the approval of the board. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through potential counterparty failure.

d. Liquidity Risk The Group monitors its risk to shortage of funds using a recurring liquidity planning tool. This tool involves daily, weekly and monthly cash flow forecasts and considers the maturity of both its financial investments and financial assets (tenant debtors, other financial assets). The Group’s objective is to maintain a balance between continuity of funding and flexibility through use of bank loans or borrowings from related parties within the Group.




At 31 December 2013, the Group was not exposed to any borrowings or bank loans. The Group’s trade and other payables are due within 30 days after the reporting date and are as follows:


Trade and other payables 738 208 311 934

Fair ValuesThe carrying amounts of financial assets and liabilities at 31 December 2013 approximate their fair values.

The following method and assumption was used to estimate fair values:

approximate their carrying amounts due to the short-term maturities of these instruments.

e. Equity Price Risk The Group’s listed and unlisted securities are susceptible to market price risk arising from uncertainties about the future values of the investments. The Group manages the equity price risk through diversification and by placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Group’s senior management on a regular basis.

At the reporting date, the exposure to listed equity securities at fair value was $715 104 (2012: $965 336). A decrease of 10% on the Zimbabwe Stock Exchange market index could have an impact of approximately $71 510 on the fair value gains or losses attributable to the Group, depending on whether or not the decline is significant or prolonged. An increase of 10% in the value of the listed securities would only impact fair value gains, but would not have an e"ect on profit or loss.

31 Capital Management Capital for the Group comprises equity and retained earnings. The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group adjusts the dividend payments to shareholders or issue new shares.

The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus debt. The Group includes within net debt interest bearing loans and borrowings, trade and other payables (Note 17) less cash and cash equivalents. No changes were made in the objective or processes for managing capital during the years ended 31 December 2013 and 31 December 2012. The Group does not have borrowings apart from trade and other payables which are in the ordinary course of business. The directors shall borrow an aggregate principal amount at any one time not exceeding 50% of the total shareholders equity as set out in the latest consolidated audited statement of financial position of the Group. At 31 December 2013, the group was not exposed to any external capital restrictions The table below sets out the Group’s capital position;


Net debtTrade and other payables 738 209 311 935 Less: Cash and cash equivalents (317 581) (2 250 495) 420 628 (1 938 560)CapitalOrdinary share capital 1 238 157 1 238 157 Available-for-sale reserve (68 679) 136 548 Retained earnings 122 788 877 112 965 289Total Capital 123 958 355 114 339 994


32 Events After the Reporting Date

32.1 Equity InvestmentsThe value of equities held by the Group has been a"ected by market fluctuations since year end. Set out below is an analysis of the changes in the carrying amount of quoted available-for-sale investments after year end:

Equity investments 25 Feb 2014 31 Dec 2013

Financial assets available-for-sale 389 823 415 460 Financial assets at fair value through profit or loss 128 669 299 644 Total equities 518 492 715 104

There was a sale of equities at a clean consideration value of $171 493 in the month of February 2014 to fund project costs.

32.2 Acquisition of LandOn the 9th of January 2014, the Group acquired land measuring 24.0664 hectares, being the remainder of Lot 57 of Mount Pleasant, situated in the District of Salisbury Deed of transfer number 3251/88 at a cost of $9.60 million excluding transfer fees. The acquisition was funded through a combination of internal cash flows and a loan facility secured from a local financial institution.

The acquisition costs of the land are broken down as follows:

Details Source of Funds All "gures in USD

30 December 2013 Internal Cash flows 4 100 000 9 January 2014 External Borrowing 5 500 000 Total Acqusition Price 9 600 000 Transfer fees [Including Rates] 519 246 Total Cost 10 119 246

The $4 100 000 from internal cash flows paid on the 30th of December 2013 was accounted for under prepayments [see Note 13]

The loan facility sourced from a local financial institution will be secured on the following terms;

Details Source of Funds

Facility Amount $5 500 000 Tenure 5 Years

Security

Immovable property, title 0004163/2007, being Stand 18259 Harare Township of Stand 14908 Salisbury Township called First Mutual Park in the name of First Mutual Park (Private) Limited registered and stamped to cover $6 500 000

Interest Rate Base Rate minus 3% per annum [Base Rate at drawdown – 13% per annum]

FeesCommitment fee of 1.00%Arrangement fee of 1.00%Management fee 0.5% per annum




33 Investment in Subsidiaries

The subsidiary companies comprise: 2013 2012

FML Properties (Private) Limited 100% 100%GS Investments (Private) Limited 100% 100%First Mutual Real Estate (Private) Limited 100% 100%Arundel O!ce Park (Private) Limited 100% 100%First Mutual Park (Private) Limited 100% 100%Prisma Investment Company (Private) Limited 100% 100%First Mutual Commercial Enterprises (Private) Limited 100% 100%First Mutual Investment Company (Private) Limited 100% 100%Wirerite Investments (Private) Limited 100% 100%Sticklip Enterprises (Private) Limited 100% 100%Radiowake Investments (Private) Limited 100% 100%



ASSETS

Non-current assets

Investment properties 34 2 840 000 2 690 000

Investments in subsidiaries 898 634 898 634

Vehicles and equipment 407 746 628 344

Available-for-sale investments 8 415 460 622 758

Financial assets at fair value through profit and loss 9 299 644 342 577

Total non-current assets 4 861 484 5 182 313

Current assets

Loans and receivables 11 1 355 742 1 937 598

Trade and other receivables 35 8 164 006 408 364

Tax asset 338 221 -

Inventory 176 159 162 860

Cash and cash equivalents 14 317 581 2 250 495

Total current assets 10 351 709 4 759 317

TOTAL ASSETS 15 213 193 9 941 630

EQUITY AND LIABILITIES

Ordinary share capital 15 1 238 157 1 238 157

Available for sale reserves (68 679) 136 548

Retained earnings 4 274 565 (2 625 987)

Total shareholders’ equity 5 444 043 (1 251 282)

Non-current liabilities

Deferred tax 36 97 754 37 351

Total non-current liabilities 97 754 37 351

Current liabilities

Trade and other payables 37 9 606 530 11 081 598

Provisions 18 64 866 73 963

Total current liabilities 9 671 396 11 155 561

TOTAL EQUITY AND LIABILITIES 15 213 193 9 941 630


24 March 2014

Company Statement of Financial Position At 31 December 2013

Notes to the Company Statement of Financial PositionFor the year ended 31 December 2013



34 Investment PropertiesAll "gures in USD 2013 2012

At 1 January 2 690 000 4 644 515Transfer to subsidiary company - (2 154 515)Fair value adjustment 150 000 200 000At 31 December 2 840 000 2 690 000

35 Trade and Other ReceivablesPrepayments 4 746 792 41 990 Tenant receivables 6 655 4 432 Group companies 3 034 581 -Other debtors 142 733 142 720 Accrued expenses 9 165 - Sta" debtors 224 080 219 222At 31 December 8 164 006 408 364

36 Analysis of Deferred TaxArising on property, plant and equipment 80 173 64 238 Arising on investment properties 101 184 (36 541)Arising on assessed losses (90 754) -Arising on financial assets through profit or loss 2 996 3 426 Arising on available-for-sale investments 4 155 6 228 At 31 December 97 754 37 351

37 Trade and Other PayablesSundry creditors 126 762 79 Group companies 9 479 768 11 081 519 At 31 December 9 606 530 11 081 598




Rank Name Country Total Shares %

1 FIRST MUTUAL LIFE - POLICYHOLDERS ZW 486 166 956 39.27%

2 STANBIC NOMINEES (PRIVATE) LTD-NNR ZW 192 529 174 15.55%

3 FIRST MUTUAL LIFE SHAREHOLDERS ZW 168 483 334 13.61%

4 E W CAPITAL HOLDINGS (PRIVATE) LIMITED ZW 61 907 866 5.00%

5 STANDARD CHARTERED NOMINEES ZW 51 288 631 4.14%

6 ECONET WIRELESS HOLDINGS LIMITED ZW 49 006 892 3.96%

7 FIRST MUTUAL LIFE MANAGED FUND ZW 18 671 120 1.51%

8 NATIONAL SOCIAL SECURITY AUTHORITY ZW 17 180 446 1.39%

9 DATVEST NOMINEES ( PRIVATE ) LTD ZW 16 883 040 1.36%

10 FMRE PROPERTY AND CASUALTY POLICYHOLDERS ZW 13 991 670 1.13%

11 FMRE LIFE AND HEALTH SHAREHOLDERS ZW 12 863 577 1.04%

12 STANBIC NOMINEES (PRIVATE) LTD ZW 12 192 409 0.98%

13 ZW 10 324 038 0.83%

14 STANDARD CHARTERED BANK ZIMBABWE ZW 9 895 540 0.80%

15 FML ASSET MANAGEMENT (PRIVATE) LIMTED ZW 7 518 797 0.61%

16 WORLDOVER FUND LTD -NNR ZW 6 754 113 0.55%

17 HAYES NOEL ZW 5 995 170 0.48%

18 ZW 5 701 527 0.46%

19 TRIANGLE MONEY PLAN PENSION FUND ZW 3 655 916 0.30%

20 MEIKLES PENSION FUND ZW 3 606 670 0.29%

SHARES SELECTED 1 154 616 886 93.25%SHARES NOT SELLECTED 83 540 424 6.75%TOTAL SHARES 1 238 157 310 100.00%

Top 20 ShareholdersAt 31 December 2013


Notice to shareholders

Notice is hereby given that the seventh Annual General Meeting of the shareholders of PEARL PROPERTIES (2006) LIMITED will be held at First Mutual Park, 100 Borrowdale Road, Borrowdale, Harare on Tuesday 27 May 2014 at 1430 hours for the purpose of transacting the following business:

ORDINARY BUSINESS1. To receive, consider and adopt the Audited Financial Statements and Report of the Directors and Auditors for the financial year ended

31 December 2013.

2. To elect directors:2.1 Mr J K Gibbons, Mrs N J Mugabe and Mr J P Travlos retire as directors of the Group in terms of Article 106 of the Articles

of Association. Being eligible, they all o"er themselves for re-election.2.2 To note the resignation of Mr A Mlalazi with e"ect from 31 December 2013.

3. To fix the remuneration of the Directors.4. To confirm the remuneration of the Auditors for the past audit and to appoint Auditors of the Group until the conclusion of the next

Annual General Meeting.

5. SPECIAL BUSINESS

5.1 General Authority to Buy Back Shares

AS AN ORDINARY RESOLUTION THAT the Company authorises in advance, in terms of section 79 of the Companies Act [Chapter 24:03] and the Zimbabwe Stock

Exchange Listing Requirements the purchase by the Company of its own shares subject to the following terms and conditions: a. The authority in terms of this resolution shall expire on the date of the Company’s next Annual General Meeting; andb. Acquisitions shall be of ordinary shares which, in the aggregate in any one financial year shall not exceed 10% of the Company’s

issued ordinary share capital; andc. The maximum and minimum prices, respectively, at which such ordinary shares may be acquired will be the weighted average

of the market price at which such ordinary shares are traded on the Zimbabwe Stock Exchange, as determined over the five business days immediately preceding the day of purchase of such ordinary share of the Company and shall not be less than the nominal value of the company’s shares; and

d. All shares purchased pursuant to this resolution shall be utilised for treasury purposes.e. If the maximum number of shares that can be purchased pursuant to the authority is purchased, the Directors believe that:

i) the Company will be able, in the ordinary course of business, pay its debts for a period of twelve months after the date of this notice;

ii) the assets of the Company will be in excess of the liabilities of the Company and the Group;iii) there will be adequate ordinary capital and reserves in the Company for a period of 12 months after the date of this notice;

andiv) there will be adequate working capital in the Company for a period of 12 months after the date of this notice.

f. A press announcement will be published as soon as the Company has acquired ordinary shares constituting, on a cumulative basis in the period between annual general meetings, 3% of the number of ordinary shares in issue prior to the acquisition.

Note: In terms of this resolution, the Directors are seeking authority to allow use of the Company’s available cash resources to purchase its own shares in the market in terms of the Companies Act and the regulations of the Zimbabwe Stock Exchange for treasury purposes. The Directors will only exercise the authority if they believe that to do so would be in the best interests of shareholders generally. In exercising this authority, the Directors will duly take into account following such repurchase, the ability of the Company to pay its debts in the ordinary course of business, the maintenance of an excess of assets over liabilities, and for the Company and the Group, the adequacy of ordinary capital and reserves as well as working capital.

5.2 Loans to Directors

AS AN ORDINARY RESOLUTION

THAT the Company be and is hereby authorised to make any loan to any Executive Director or to enter into any guarantee or provide any security in connection with a loan to such Executive Director for the purpose of enabling him to properly perform his duty as an o!cer of the Company as may be determined by the Group Human Resources Development, Remuneration and Nominations Committee, provided that the amount of the loan or the extent of the guarantee or security shall not exceed the annual remuneration of that Director. Any such loans, securities or guarantees made or provided during the six months preceding this Annual General Meeting are hereby ratified.



6. ANY OTHER BUSINESS To transact any other business competent to be dealt with at a general meeting.

Note:i) In terms of the Companies Act (Chapter 24:03) a member entitled to attend and vote at a meeting is entitled to appoint a proxy

to attend and vote on a poll and speak in his stead. A proxy need not be a member of the Group. Proxy forms must be lodged at the registered o!ce of the Group not less than forty-eight hours before the time for holding the

meeting.ii) The registration of members attending the meeting will commence at 1400 hours on 27 May 2014, at First Mutual Park, 100

Borrowdale Road, Borrowdale, Harare.

BY ORDER OF THE BOARD

S. F. Lorimer (Mrs.)Group Company SecretaryHARARE

Registered O!ceGround FloorFirst Mutual Park100 Borrowdale RoadBorrowdaleP O Box MP 373Mount PleasantHARARE

Notice to shareholders (continued)


Notes



Notes

Documents

Overview - Estate Intel · Economist of BancABC from 1999 to 2001. Chris was a senior manager in the global investments division of the Samsung Group of Companies in Seoul, South