Cresta Marakanelo Limited 2014 annual report

2014 Cresta Annual Report

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Cresta Marakanelo Ltd is the operating company for the eleven Cresta Hotels in Botswana and Zambia. The company was established in 1987, when Cresta Hospitality was awarded the Management contract for the Marakanelo Hotels in Botswana by the Botswana Development Corporation. From an initial portfolio of less than 100 rooms under management, the group now manages close to 928 rooms in Botswana. The Group boasts with beautiful properties such as Cresta Lodge (Gaborone) and the Group’s flagship Mowana Safari Lodge which were acquired in 1993 and 1994 respectively.

Cresta Marakanelo was jointly owned by the Botswana Government, through the Botswana Development Company, and TA Botswana prior to 2010. It was floated to the public in June 2010 resulting in BDC owning 26% while TA Botswana owns 40%.

Established in 1970, the Botswana Development Corporation (BDC) is the investment arm of the Botswana Government. BDC’s main aim is to be the country’s main agency for commercial and industrial development. The Government of Botswana owns 100 percent of the issued share capital of the Corporation. BDC has interests in industry, property development and management, agribusiness and services. For more information on BDC visit www.bdc.bw.

TA Botswana is ultimately owned by TA Holdings Limited, a company listed on the Zimbabwe Stock Exchange, with an investment portfolio that extends from Zimbabwe to Botswana, South Africa and Uganda. The Group’s portfolio spans the Hospitality, Insurance, Investment Management and Agrochemical sectors. Its hospitality arm, Cresta Hospitality Holdings, is one of Southern Africa’s largest hotel management companies, managing or operating 16 hotels in Zimbabwe, Botswana and Zambia. For more information on TA Holdings visit www.ta-holdings.com .

Cresta started hotel operations as far back as 1958, when it began running the Jameson Hotel in Harare. Cresta Hospitality Holdings is a hotel management company registered in Jersey.

About Us

OUR HISTORY


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Contents //

Vision and Mission 5

General Information 6

Financial Highlights 8

Board Members 10

Details of Directors 11

Chairman’s Statement 12

Executive Management 14

Managing Director’s Statement 16

Corporate Governance 18

Sustainability Reporting 25

Corporate Social Responsibility 28

Statement of Directors’ Responsibility 34

Auditor’s Report 35

Financial Statements 36

Top 20 Shareholders 88

Proxy Form 89

Notice of AGM 91


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To ensure optimum execution of the group strategy, Cresta Marakanelo Ltd is structured and managed in an environment with the necessary financial and administrative capacity, driven...

2014 Cresta Annual Report Vision & Mission //

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Vision & Mission //Vision Statement

To create memorable hospitality experiences.

Mission Statement

To offer excellent service,filled with African heart and soul

Group Values

We value:• Our people and believe in their right to• respect, dignity and empowerment.• Our integrity and will always conduct our• business honestly.• Our passion and will consistently create an• enjoyable environment for all our stakeholders.

Overall Strategic Intent

With the intention to improve our product offering, there is also emphasis to optimise and deliver on employment equity, skills development, in line with good corporate governance practices which all forms part of the Cresta Marakanelo Ltd strategy.

The Group’s Overall Strategy

To ensure optimum execution of the group strategy, Cresta Marakanelo Ltd is structured and managed in an environment with the necessary financial and administrative capacity, driven by a fully motivated workforce that fits an adaptive culture. The Group maintains a governance structure with specific targets, regularly motivating progress towardsachieving these targets.

Cresta Marakanelo Ltd stands for:• Great value for money• Opportunity to expand the business• Opportunity for employees to participate in the• business• Diverse service offering in the leisure/tourism• industry• Experienced management team• Return to shareholders• Strategically placed to take advantage of the• growing tourism industry

Vision & Mission // 2014 Cresta Annual Report

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General Information //COMPANY REGISTRATION NO1974/556

BUSINESSThe Group operates hotels in Botswana and Zambia and is engaged in other related businesses.

DIRECTORSM Nthebolan (Chairman) B G Mmualefhe B P Nyajeka J Y Stevens E M Dewah P Molefe G Sainsbury T MakayaJ Dube

SECRETARYV Mganga

TRANSFER SECRETARIESDPS Consulting Services (Pty) Ltd

REGISTERED OFFICEMarula House, Prime PlazaPlot 745382nd FloorGaborone

INDEPENDENT AUDITORSPricewaterhouseCoopers

BANKERSBarclays Bank of Botswana Limited Barclays Bank Zambia PlcAfrican Banking Corporation of Botswana LimitedAfrican Banking Corporation Zambia Limited First National Bank of Botswana Limited STANLIB Investment Management Services (Pty) Ltd Stanbic Bank Botswana Limited

CURRENCYBotswana Pula

2014 Cresta Annual Report General Information //

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General Information // 2014 Cresta Annual Report

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2014 Cresta Annual Report Financial Highlights //

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Financial Highlights //

GROUP REVENUES EBIDTA

2010 2011 2012 2013 2014

36,778

49,206

45,043

53,440

59,104

Year

2010 2011 2012 2013 2014

171,477

290,538

242,289

281,124

303,195

Year

BWP 000’s BWP 000’s


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Financial Highlights // 2014 Cresta Annual Report

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SEGMENTAL REVENUE BY GATEWAY

2010 2011 2012 2013 2014

53,904

95,933

92,71992,360

96,299

Year

BWP 000’s

BWP 000’s

BWP 000’s BWP 000’s

BWP 000’s

2010 2011 2012 2013 2014

32,999

46,469

37,505

48,470

52,011

Year

2010 2011 2012 2013 2014

52,244

85,906

63,766

64,919

68,294

Year

2010 2011 2012 2013 2014

31,228

60,842

47,235

73,339

85,385

Year

2010 2011 2012 2013 2014

1,1021,388 1,064

2,0361,206

Year

Oasis African Heartbeat African Roots African

African Fingerprint Unit Control


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Board Members //

2014 Cresta Annual Report Board Members //

1. Nyajeka, Bothwell PatrickNon-Executive Director

3. Sainsbury, GavinNon-Executive Director

5. Dewah, EliasNon-Executive Director

7. Nthebolan, Maria MmasoloNon-Executive Chairman

2. Makaya, TawandaExecutive Director

4. Mmualefhe, BatlangNon-Executive Director

6. Molefe, Pius KomaneNon-Executive Director

Dube, JenniferNon-Executive Director

Stevens, John YendellNon-Executive Director

FROM LEFT TO RIGHT:

SEATED:

NOT IN PICTURE:

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Nthebolan, Maria Mmasolo (7)Non-Executive Chairman

Maria holds a Master of Arts in Finance and Economics from the University of Botswana and was the Managing Director - Botswana Development Corporation (BDC) until early 2013. She joined BDC in 1995 as the Senior Operations Officer in the Industry Divisions and rose through the ranks to her current position.

Prior to joining BDC she was with the Ministry of Finance & Development Planning as an Economist. She holds various directorships with both public and private sector corporates.

Sainsbury, Gavin (3)Non-Executive Director

Gavin is the Chief Executive Officer of TA Holdings, a company listed on the Zimbabwe Stock Exchange. Before joining TA Holdings, he worked for Deloitte & Touche from 1981 to 1998. He was appointed a Partner at Deloitte & Touche in 1989.

When he left Deloitte & Touche, he joined Colcom Holdings as a Finance Director and was appointed the Managing Director in 2000. He is a qualified Chartered Accountant and obtained his qualification in 1981 in Zimbabwe.

Makaya, Tawanda (2)Executive Director

Tawanda is a Chartered Accountant by profession and holds an MBL from the University of South Africa. He completed his articles of clerkship with Deloitte & Touche Zimbabwe and qualified in 1991. He was a recipient of a bursary from Astra Holdings while at the University of Zimbabwe for being the best accounting student. Tawanda joined Astra Holdings in 192 as Group Internal Auditor in June 1992 after which he joined TA Holdings in 1994 as the Group Finance Executive.

In 1996 he was transferred to Cresta as the Group Financial Controller and rose through the ranks to become the Chief Financial Officer(CFO) and eventually Managing Director in 2007. He is an Associate member of the Botswana Institute of Chartered Accountants.

Dewah, Elias (5)Non-Executive Director

Elias holds a Master of Business Administration from the Research Institute for Management Science at the Universityof Netherlands. Currently he is a Private Consultant in the field of Management of Business Organization, Public- Private Dialogue, Democracy and Governance. Prior to that Elias has served in the Government of Botswana for 24 years in various capacities in the Ministry of

Agriculture and the Ministry of Trade, Commerce and Industry.

For 17 years he served as an Executive Director of Botswana Confederation of Commerce, Industry and Manpower (BOCCIM) and prior to that he was the operations Manager of Shell Oil (Botswana).

Mmualefhe, Batlang (4)Non-Executive Director

Batlang is currently the Manager for Risk Management at BDC and has held this position since 2004. He has also held thepositions of Manager for Corporate Communications and Senior Research Officer in the same Institution.

Mr Mmualefe previously worked for Bank of Botswana and Ministry of Finance and Development Planning in varying positions. He holds Master of Arts Degree in Economics from Williams College in USA and a Bachelor of Arts Degree in Economics and Statistics from the University of Botswana. He holds various certificates for attending professional programs on a wide scope of business areas including risk management, project management, and international financial management, corporate communication, management development programs, among others. Mr Mmualefe is a member of GARP (Global Association for Risk Professionals).

Nyajeka, Bothwell Patrick (1)Non-Executive Director

Bothwell is an executive director of TA Holdings in charge of finance. He is a Chartered Accountant and holds a Bachelor of Accountancy (Honours) degree from the University of Zimbabwe and a Masters degree in Business Leadership from the University of South Africa.

He has extensive financial management and company secretarial experience in the private sector. Before joining TA Holdings, Bothwell worked for the Anglo American Corporation Group in Zimbabwe.

Stevens, John Yendell (NIP)Non-Executive Director

John qualified as a Chartered Accountant in 1980. He joined Deloitte & Touche in Durban in 1974 and was with the Company for 27 years, serving as a partner resident in Botswana of Deloitte & Touche for 8 years and being elected to the Board of Deloitte & Touche Southern Africa in 2004. John also headed up Deloitte & Touche insolvency and reorganisation division in Botswana and has completed 50 insolvent estates in the past years.

John retired from Deloitte & Touche in 2007 and has taken up the challenge of private consultancy. Over the past 27 years John has gained extensive experience in many spheres of business in Botswana and the many clients that John has served.

Molefe, Pius Komane (6)Non-Executive Director

Molefe is a Chief Executive Officer of Botswana Building Society. He holds a Post Graduate Diploma in Economics from the University of Sussex in the United Kingdom. Mr Molefe previously worked for Barclays Bank of Botswana and Ministry of Finance among others. At the Ministry of Finance, he was involved in the handling of all development projects.

He was further involved in the development of policies regulating the financial services sector. He was involved in the establishment of the Botswana Stock Exchange and also served as a member in the exchange.

Dube, Jennifer (NIP)Non-Executive Director

A lawyer by profession, admitted in the High Court of Botswana, Ms Jennifer Dube is currently Head, Legal and Company Secretary at Botswana Development Corporation. She was Manager Legal at Botswana Development Corporation from August 2010 to October 2014 prior to the reorganisation of the Corporation. Previously she was Company Secretary at Botswana Telecommunications Corporation, and before that Head of Legal and Regulatory at Orange Botswana (Pty) Ltd.

Ms Dube’s professional experience spans to over 17 years of legal experience, five of which were as a practicing attorney, Conveyancer and Notary Public, over 13 years as an in-house commercial lawyer. Ms Dube has a strong telecommunications and banking or financial institution background, specialising in the areas of corporate and commercial law, regulatory and compliance, legal risk, company secretarial and corporate governance.

Ms Dube holds a Bachelor of Laws (LLB -UB) degree from the University of Botswana, and has various & extensive management and legal short courses that include a Certificate in Senior Management Development Programme from the University of Stellenbosch Business School, contract management, finance for non-financial managers, debt collection, detecting fraud in the workplace, etc.

Ms Dube serves on the boards of Cresta Marakanelo Limited, Botswana National Productivity Centre, and Kwena Rocla (Pty) Ltd.

Board Members Credentials //

Board Members // 2014 Cresta Annual Report

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2014

2014

TOTAL ASSETS

EQUITY

2013

2013

P229million6.6% Increase

P145.1million11.5% Increase

P215million

P130.1million

On behalf of the Board of Directors of Cresta Marakanelo Ltd, I am delighted to present to you the Annual Report and Financial Statements of the Group for the year ended 31st December 2014.

During the year 2014, the Group faced challenging times on the business front due to a combination of factors, such as, the consequences of increased competition and the cut on spending by our traditional markets.

Maria Nthebolan - Chairperson


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Chairperson’s Statement //

Chairperson’s Statement // 2014 Cresta Annual Report

However, I am pleased to report that, notwithstanding the challenges, the Group managed to meet its financial commitments, maintain market share, maintain the assets in good condition so as to avoid compromising standards of product and service and has implemented efficiency measures to reduce general operating costs without sacrificing operating standards. Group revenue increased by 7.9% to P303.2 million. This year-on-year strong growth exceeded inflation rates in the primary economies in which we operate and bear testimony to the strength of our core business and value of the brand. Owing to strict cost controls and improved marginal contributions at key units, profit before tax increased by 10.1%, well in excess of the growth in revenue.

Botswana OperationsThe Botswana economy has remained sluggish during the period under review, with increased competition especially in urban areas such as Gaborone, Francistown and Palapye challenging our dominant market share. Consumers are becoming more price sensitive and are increasingly demanding more value for their spend. Against this backdrop, the 4.5% revenue growth achieved from units which were operating on a like-for-like during both financial years, is very satisfactory. Cresta Jwaneng, which has now operated for its first full year as a Cresta hotel, and Cresta Marang, which was subject to significant refurbishment during the 2013 financial year, contributed a further 4.8% to overall revenue growth for the company. The company’s operating profit of P36.4million reflects an operating margin of 13% (2012: 12%). This reflects strong cost control, the improved contribution to operating margins from Cresta Marang, where closure of rooms for refurbishment during 2013 resulted in negative margins and also a P2mn reduction in lease straight-lining charges under IAS17.

The company continues to innovate in order to attract and retain customers, with the rebranded Cresta Pride and Cresta Select loyalty schemes having 3,959 members at 31 December 2014 compared to 2,357 twelve months ago. The company is seeing an increasing trend in spend and redemptions by these loyalty members and will continue to evaluate the range of benefits and conditions attaching to these schemes in order to enhance guest experience and loyalty.

Zambian OperationsTrading conditions in Zambia continue to be challenging, with conferencing and related activities from international donor organisations and Government having declined markedly. The impact of this on Cresta Golfview has been exacerbated through increased competitor activity from regional and international hotel brands in Lusaka itself. The 3% year-on-year growth in revenue (in Kwacha terms) achieved by Cresta Golfview is thus very positive in light of these conditions. However, on the back of a strengthening of the Pula against the Kwacha, Cresta Golfview’s contribution to Group revenues decreased by P0.8m on 2014. The unit recorded a loss for the year of P4.5mn (2013:P0.51mn). Of this loss, approximately P3.0m is attributed to foreign exchange losses on the loan finance granted to the

subsidiary by the Group, an impairment of goodwill in the subsidiary and once-off impairment of certain debtors. During late 2014, Management implemented a specific strategy which is aimed at increasing revenues and eradicating losses at this unit. Based on results for the first quarter of 2015, this strategy is showing positive results and the Group is confident that the loss situation of the past can be reversed.

The P6.5mm decrease in the carrying value of property, plant and equipment over the financial year reflects from the disposal of assets with net book values of P1.72mn, depreciation P23.5mn and additions of P19.2mn. Most significant additions resulted from the refurbishment of the Cresta Rileys and Cresta Marang Gardens. With the exception of deferred revenue items of P1.4mn (2013:P1.2mn) recognised in respect of the Group’s Pride and Select customer loyalty schemes, net operating assets have increased in line with the growth in the number of operating units. The Group’s continues to operate an Employee Share Trust Scheme (“ESTS”) for the benefit of its employees. This scheme is consolidated into the Group results. The Group is currently exploring the possible restructuring of the ESTS in a manner which would allow for greater efficiency in the operation thereof, and improved rewards for and incentivisation of staff.The Group’s net cash generated from operations was P61.2million compared to P56.9million in the prior year, reflecting the increased cash contribution from most units.

The cash generated from operations was applied mainly to finance the Group’s continuing rolling refurbishment programme at Cresta Marang Gardens and Cresta Rileys Hotel and repayments of long term loans. Cash balances available at year-end standing at P45.8m (2013: P20.3m) will be utilised to finance the dividend distribution to shareholders and to finance the continuing refurbishment and investment activities of the Group. The Group welcomed a new Director Jennifer Dube to the Board in 2014. Apart from this appointment, there have been no changes in the directorate. The Board of Directors of Cresta Marakanelo Limited wishes to announce a declaration of a dividend at 6 thebe (2013:5 thebe) per share for all Shareholders registered as at the close of business on 8 May 2015 for payment on or before 22 May 2015. The Group continues to explore new markets in an endeavor to increase returns. The Group has entered into a 10 year lease agreement with a landlord Rainet Safaris (Pty) Ltd to lease their new 83 roomed hotel and conference centre to be built in Maun. This hotel is expected to be ready in 24 months. The lease agreement is also renewable for a further 10 years at the expiry of the initial lease term.

I would like to commend management, staff and my fellow directors for their continued commitment throughout the year

Maria Nthebolan - Chairperson


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2014 Cresta Annual Report Executive Management //

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Executive Management //

Executive Management // 2014 Cresta Annual Report

Valentine MgangaChief Financial Officer

Duncan MfolweGroup Projects Manager

Segomotso BandaGroup HR Manager

Jonathan CoxGroup Operations Manager

Patrick Chivese Group Sales and Marketing Manager

Tawanda MakayaManaging Director

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For a few years now, the Company successfully navigated through a rather challenging business landscape for the hotel industry in Botswana. It is worth noting though that further challenges exist in the form of increasing competition.

Tawanda Makaya - Managing Director


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Managing Director’s Statement //

Managing Director’s Statement // 2014 Cresta Annual Report

The achievement has been through implementing the well tested business model and focusing on the Company’s long-term prospects while maintaining a balanced risk management approach. This approach has seen the Group expand its operations geographically and position itself in strategic locations in the country, a situation which has resulted in the Company benefiting from cost and management synergies and economies of scale in a structured manner.

Despite a continuing degree of tough economic environment, I am delighted to note that the company has recorded satisfactory performance in the year 2014. Business forecast for the coming year to December 2015 is at healthy levels for both the safari and corporate/government market segments. Implementing the Company’s long-term strategy while maintaining a balanced risk management approach, the addition of Cresta Mahalapye hotel and Cresta Jwaneng in 2013 continued to strengthen the Performance of the Company.

The Company continues to undertake refurbishments in various hotels. The Company considers that in the current hotel trading environment it is vital to invest in our asset portfolio in order to enhance trading performance. Results from those hotels where we have completed significant renovations have generated higher room rates and RevPAR compared to their pre-renovation performance. Management expects that during year 2015, concentration will be on improving productivity and efficiency within existing hotels, invest in existing assets to ensure that the properties remain ahead of new competition and seek opportunities to invest in profitable ventures. During the year the Company continued to carry out Sales and Marketing campaigns, participated in trade fairs and promotional activities with special packages developed to increase occupancies from various source markets. A more creative and pro-active sales and marketing strategy in response to the rapid changes in the trends of customers’ preferences was implemented so as to pursue new business opportunities, enlist new source markets, increase the brand outreach and drive repeat and incremental business coupled with efficient yield management to ensure that the Company optimized on every opportunity. The Company also continued to diversify and make concerted efforts in the domestic market, by engaging in sales calls to local companies and government departments.

To avoid compromising the Company’s long-term competitiveness and market position, Management continues to recognize the importance of complementing the business strategies with appropriate Information & Communications Technology (ICT), Human Resources Management (HRM) and Corporate Social Responsibility (CSR) programs, thereby leading to improved guest experience and enhanced financial results. On the ICT front, Management continues to constantly review developments and adopt suitable technological solutions which complement its other business strategies thereby leading to operational efficiency, improved guest experience and enhanced top-line and bottomline results. The Company continued to invest in enhancing network security, upgrading

and consolidating its hardware to meet the abovementioned objectives. The enhanced Information Technology (IT) infrastructure in the region region covering both the undersea and terrestrial networks on core fiber, will boost internet speeds and indeed will serve as a catalyst to the Company’s successful electronic marketing and commerce strategies in the future.

In 2014, the Company recorded an impressive growth in direct bookings as a result of continuous partnering with online booking platforms. On the electronic marketing front, during the period the Company embraced social media as a key marketing tool given the rapid changes in the customers’ media consumption preferences which increasingly favor social media.

The Company continues to believe that employees constitute a key determinant for the long-term sustainable success, growth and reputation of the Company. With the changing nature of guest expectations, Cresta continues to validate its belief that it is indeed the quality of service that will continue to determine the destination choices which customers make. In this connection and in line with the company’s strategy, substantial amounts of resources were invested in Staff/Management training, development and welfare programs, some of which include: the in-house Management Development Programme; soft and technical skills training; and culinary skills enhancement. Thus, the provision of rewarding careers, quality training and exposure as well as capacity building remains a strategic priority for the Cresta hotels. I would like to personally congratulate each member of the Cresta team for the continuous support and exemplary dedication they have shown to the company in 2014.

The Group’s CSR activities continue to focus on community development, helping the needy with various assistance programmes. For further details on the Group’s CSR activities, please refer to the section on Corporate Social Responsibility of this Annual Report. Finally, may I, on behalf of the Staff and Management, express our gratitude and sincere appreciation to the Board of Directors for their guidance, diligent and invaluable support and encouragement during the year 2014. I also wish to express my gratitude to the shareholders, customers and various stakeholders for their continued support in the years gone by. We at Cresta look forward to this continued support during the year 2015.

Tawanda Makaya - Managing Director


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Corporate Governance //

2014 Cresta Annual Report Corporate Governance //

Overall control of the Group is exercised by the Board, which has responsibility, among other things, for setting strategy and ensuring adequate resources are available and leadership is provided to achieve the Group’s strategy. The Board meets up four times a year and has a schedule of matters reserved for its attention. All Directors receive board papers prior to the meetings.

Executive management is responsible to the Board for the Group’s operational performance including: implementing Group strategy as determined by the Board; maintaining adequate internal control systems and risk management processes; monitoring operational performance against plans and targets and reporting to the Board any significant variances, maintaining an effective management team and succession planning.

The Board currently comprises the Chairperson, three independent non executive Directors, three non executive Directors, all of whom are appointees of major shareholders and finally an executive Director, who is the Managing Director of the Group. Each Director is expected to fulfill their duties for the benefit of all shareholders and it is believed that the independent non executive Directors provide strong independent judgement to the deliberations of the Board.

The Board has established agreed procedures for managing potential conflicts of interest. All Directors are required to disclose at each meeting their shareholding, additional directorships and any potential conflicts of interest to the Chairperson and the Company Secretary. These procedures are reviewed by the Board at least annually. The Board is satisfied that the procedures for managing potential conflicts remain effective.

Board CommitteesIn relation to certain matters, committees have been established with specific delegated authority. The standing committees of the Board are Audit and Human Resources Committees. Both of these committees have terms of references agreed by the Board.

Audit CommitteeThe Audit Committee consists of two independent non executive Directors and one non executive Director. Two of the Directors are believed to have the relevant financial experience as required.Mandate of the Committee;

• Assist the Board with the evaluation of adequacy and effectiveness of the internal control systems, accounting practices, information systems and auditing processes applied in business.

• Ongoing reviews of the Group’s risk management processes.

• Introduce such measures that would serve to enhance the credibility and objectivity of the financial statements.

• Monitoring and reviewing the effectiveness of the internal audit function.

• Agreement of detailed scope of the external audit prior to commencement of their audit; reviewing the scope and results of the audit and its cost effectiveness; and recommendation of the audit fee to the Board.

The Audit Committee is responsible for reviewing the independence and objectivity of the external auditor and has reported to the Board that it considers that the auditor’s independence and objectivity has been maintained. Audit independence and objectivity are safeguarded by the Audit Committee monitoring and approving, when appropriate, the nature of any non-audit work and levels of fees paid.

The Board is committed to ensuring that good practice in corporate governance is observed throughout the Group, and remains the responsibility of the whole Board. The Board is committed to maintaining high standards of business integrity and professionalism in all its activities, and continues to support the highest standards in corporate governance.


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Corporate Governance // 2014 Cresta Annual Report

“ The Audit Committee is responsible for reviewing the independence and objectivity of the external auditor and has reported to the Board that it considers that the auditor’s independence and objectivity has been maintained.”

John Y Stevens - Chair


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2014 Cresta Annual Report Corporate Governance //

“ The Board is responsible for the Group’s system of internal control, including the Group’s financial reporting process and the Group’s process for preparation of consolidated accounts, and for monitoring its effectiveness.”

Elias Dewah - Chair


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Human Resource Committee // 2014 Cresta Annual Report

Corporate Governance // (cont.)The Human Resources Committee consists of one independent non-executive Director and one non-executive Director. It is responsible for considering and making recommendations to the Board, within agreed terms of reference, on the Group’s remuneration policies, determining the remuneration packages of executive management and the operation of the Group’s employee share trust scheme. The Group’s Managing Director would normally be invited to attend meetings, if appropriate, but would not be present when his own remuneration is discussed. The Committee takes independent advice as deemed necessary. Other functions of the Committee include; a review of the performance conditions used for long term incentive plan, review of short term bonus arrangements and targets.

Board and Committee MeetingsFigures in the brackets represent the maximum number of Board or Committee meetings held whilst the individual concerned is a Board member or member of the relevant Committee. Board Audit Committee Human ResourcesDirectors Meetings Meetings Committee Meetings

Maria Nthebolan 3 (4) - -

John Stevens 3 (4) 4 (3) -

Elias Dewah 4 (4) - 2 (2)

Gavin Sainsbury 3 (4) - -

Bothwell Nyajeka 3 (4) 4 (4) -

Pius Molefe 3 (4) 3 (4) -

Jeniffer Dube 2 (4) - -

Tawanda Makaya 4 (4) - 1 (2)

Internal Control SystemsThe Board is responsible for the Group’s system of internal control, including the Group’s financial reporting process and the Group’s process for preparation of consolidated accounts, and for monitoring its effectiveness. In establishing this system, the Directors have considered the nature of the Group’s business, with regard to the risks to which the business is exposed to, the likelihood of such risks occurring, their potential impact and the costs of protecting against them. However, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement.

The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group. This process is reviewed by the Audit Committee on behalf of the Board and has been in place for the year under review, and up to the date of the approval of the annual report. Primary responsibility for the operation of the system of internal controls is delegated to executive management. The effectiveness of the operation of internal control system is reviewed by the internal audit function and, where appropriate, by the Group’s external auditor, who report to management and to the Audit Committee. In addition, responsibility delegated to executive management to monitor the effectiveness of the systems of control in managing identified risks as established by the Board. The internal audit function reviews the effectiveness of key internal controls as part of its standard work programme, and individual reports are issued to appropriate senior management. These reports are summarized and distributed to the Audit Committee, The Managing Director, senior management of the group. They are subsequently reviewed by the Audit Committee, which ensures that, where necessary, recommendations on appropriate corrective action are drawn to the attention of the full Board.


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2014 Cresta Annual Report Communication with Stakeholders //

Corporate Governance // (cont.)The Group holds Annual General Meetings. At these meetings, there is an opportunity for all shareholders to question the Chairperson and other Directors (including Chairmen of the Audit Committee and Human Resources Committee). The Group prepares separate resolutions on each substantive issue put to shareholders and does not combine resolutions together inappropriately. A schedule of proxy votes cast is made available for inspection at the conclusion of the proceedings and the annual report is laid before the shareholders at the Annual General Meeting. Notice of the annual general meeting and related papers are sent to shareholders at least 21 working days prior to the date of the meeting, and the Group encourages all shareholders to make positive use of the annual general meeting for communication with the Board.

Further, the group has made available an investor relations page on the Group’s website; www.crestamarakanelo.com. All information about the group and activities can be found on this page. Comments and questions can be channeled to management through this page.

Closed PeriodThe closed period for the trading in the Group’s shares by Directors and employees is from the beginning of the months of both the interim and the year end, up to the date of publication of the interim and final results in the print media. Directors and employees are prohibited from dealing in the Group’s shares during such periods in which they are privy to unpublished price sensitive information.

M M Nthebolan T MakayaChairperson Managing Director


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Sustainability Reporting // 2014 Cresta Annual Report

Sustainability Reporting // Our approach to sustainability reporting is one that is in line with the Cresta Marakanelo Ltd values: respect, dignity, intergrity, honesty and passion. The board is accountable for the sustainability of the business and believe that the existence of the business and its continued success is dependent on relationships that prevail with its stakeholders. The Group recognises the importance of balancing its long term business sustainability requirements with short term focus and goals. Strategies and policies that contribute to the sustainable development of the Group to ensure that both the financial and non financial aspects of the business are appropriately evaluated and managed, have been adopted. Our stakeholders are represented by our people and customers, suppliers and communities we serve in.

PeopleOur people play a critical role in the success of the business and the following are relevant in this regard;

•DevelopmentofHumanCapital

Human capital is a key component of Cresta Marakanelo Ltd. The Group values its employees and endeavous to recruit and retain the best skills in the market. The focus for developing human capital is based on training, continuous reviews for compensation and benets.

•StaffWelfareandDevelopment

In the quest of the Group’s drive to improve productivity for the employees; sports was identied as one of the the elements that play an important part. Participating across the hotels, the Group has various sporting codes being played, soccer, volleyball, netball,etc. The Group also promotes country sporting competitions between the Cresta in Botswana and Cresta in Zimbabwe. The interaction between these groups is believed to impact positively on employee motivation.

•Remuneration

Management in conjuction with the Human Resources Committee, continuously reviews incentive schemes for the employees. The Group has got a Performance Appraisal System that is used to reward employees. The results of the appraisal system are also used as inputs for training the employees on various areas.

•Employeeengagement

General employee engagement at various levels of the organisation has yielded positive results for the Group. This has led to an improved customer focus. Our employees are allowed to associate themselves with a recognised hospitality Union which will negotiate for better living conditions on their behalf. In the Committee of the Union, there are staff representatives sitting in the meetings to participate in the negotiations for the rest of the staff members.


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2014 Cresta Annual Report Sustainability Reporting //

Sustainability Reporting // (cont.)CustomersThe Group has continued to benchmark itself against the leading brands and the standards required to be customer focused, quality conscious, innovative and being responsible for its actions. The Group continues to be the market leader in the hospitality sector in the country. Attention has been paid to the following;

•Pricing

The hotels’ tariffs are regularly published in the hotels for custmers to see. Further there are different discount levels for our customers. Customers get dierent discount levels after a careful assessment of the customer and the business levels the customer brings to the entity. The Group also has a loyalty programme where cardholders get various discounts depending on the product they want.

•CustomerComplaints

These are normally received at every hotel and the ultimate responsibility to resolve these lies with the General Managers of each hotel. There is an escalation that could be done in the event the customer is not satised with the complaint resolution at the hotel. The complaints are further escalated to the Group’s Operations Manager who is based at the Group’s headquarters in Gaborone.

•CustomerInformationSharing

The Group has various means of sharing information with its stakeholders. One of the mediums is through the frequently updated website where new developments or new products will feature. Further, the Group has got an inhouse magazine called Cresta Calling where information is relayed to the stakeholders.

Regulatory Authorities The Group maintains sound working relationships with all the regualtory bodies and ensures compliance with all legislation in order to ensure good governance. This enables the Group to operate in a stable environment, which is conducive for the successful operation of the business.

CommunitiesThe Group operates in a number of areas and therefore places a lot of importance on contributing to the upliftment of the communites it operates in. The Group executes its Corporate Social Responsibility in these areas depending on the need of the community after a need assessment has been carried out.


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28

2014 Cresta Annual Report Corporate Social Responsibility //


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Corporate Social Responsibility // 2014 Cresta Annual Report

We continue to be sensitive towards monitoring the interests of the local population; particularly with regard to safeguarding of their traditions, culture and future development.

We will practise a responsible attitude towards energy conservation in terms of the reduction and recycling of waste; the control of sewage disposal, air-emissions and pollutants; the reduction in use of such unfriendly products as CFSs, pesticides and other toxic substances; and the reduction of noise and visual pollution.

We will be sensitive to the conservation of environmentally protected or threatened areas, species and scenic aesthetics. We shall also aim to achieve the enhancement of the landscape, wherever possible, by means of indigenous plant material reinforcement.

We must conserve rather than exploit nature.

Corporate Social Responsibility //


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2014 Cresta Annual Report Corporate Social Responsibility //

Corporate Social Responsibility // (cont.)

OUR CORPORATE ENVIRONMENTAL CONSIDERATIONThe Cresta Group believes that corporate social responsibility (CSR) should not just be about philanthropy and compliance but that it should also offer a more holistic corporate approach towards economic, social, and environmental impacts as a whole. The group also places strong emphasis on measuring its success, not only in terms of financial gain, but also in terms of the degree to which it has contributed towards local economic development, environmental conservation and social justice.

SUSTAINING THE ENVIRONMENTThe Group seeks to minimize its impact on the environment. Our responsible hospitality policies aim to ensure operational compliance with all relevant environmental legislation in all the areas we operate in. We are continually assessing our environmental impact and actively seeking ways to reduce it through improvements in our hotels’ operating infrastructure and modifying working practices aimed at reducing energy consumption, reducing water consumption and reducing the amount of waste produced from our hotels. Management also works with suppliers to minimize the environmental impact of their activities. Environmental performance is also being integrated into the operational objectives of general managers and other managerial staff.

SUPPORTING THE NATIONAL ECONOMYThe Cresta Group is a significant contributor towards governmental revenue in all the areas in which it operates through payment of taxes.

PROMOTING GOOD GOVERNANCEThe Cresta Group recognises the need to conduct its business in accordance with generally accepted best corporate practices and in line with the global principles of corporate governance and business ethics.

WORKING WITH THE LOCAL COMMUNITYCresta hotels are located in various places in the country. These areas are shared with an extraordinarily diverse range of local cultures and ethnic groups, all of which cherish their own particular cultural traditions and heritage. The Cresta Group is committed both to protecting and sustaining the lifestyle of such groups and showcasing and promoting their individual cultural heritage. Such promotion includes the inclusion of local designs, fabrics, handicrafts, sculptures and artworks within the design concept of the hotel or lodge, promoting local handicrafts in the hotel gift shops, and in showcasing local cultural traditions by means of dance, song, musical and theatrical displays for the hotel guests.

SUPPORTING THE LOCAL ECONOMYWherever possible, the Group purchases its raw materials from the local community. This may take the form of fruit and vegetables, meat, dairy products and a wide range of other food stuffs. The Group also works with local suppliers and out-growing schemes so as to enable local growers to meet the exacting quality standards required by the group, as well as to practise economies of scale in supply.

SUPPORTING THE LOCAL SOCIETYThe Group is committed to the concept of the creation of optimum economic opportunities for the local communities in which it operates. These can take many forms, such as; employment, supply of raw materials, supply of handicrafts or supply of local dance troupes.

Charitable donations in cash and in-kindCresta and its staff support a broad range of charitable causes and community initiatives. These take many forms; building houses, cash, supply of foodstuffs or clothing, supply of bed linen,etc. The Group encourages its hotels to reach out to local communities and become involved in community projects. Our staff members devote their time and energy to projects and our hotels donate items and resources in accordance with our corporate social responsibility policy. During the year, staff members in various areas have been involved in a wide range of events and activities linked to projects to benefit children and the needy.


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Corporate Social Responsibility // 2014 Cresta Annual Report


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Group Annual Financial Statements //for the year ended 31 december 2014

2014 Cresta Annual Report Financial Statements //

INDEX PageStatement of directors’ responsibility 34

Independent auditors’ report 35

Statement of comprehensive income 36

Statement of financial position 37

Statement of changes in equity 38

Statement of cash flows 39

Summary of significant accounting policies 40

Financial risk management 57

Critical accounting estimates and assumptions 66

Notes to the annual financial statements 69


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Financial Statements // 2014 Cresta Annual Report


34


STATEMENT OF DIRECTORS’ RESPONSIBILITYFor The Year Ended 31 December 2014

The directors have reviewed the Group and Company budget and cash flow forecasts for the year to 31 December 2015. On the basis of this review, and in the light of the current financial position and existing borrowing facilities of the Group, the directors are satisfied that Cresta Marakanelo Limited is a going concern and have continued to adopt the going concern basis in preparing the financial statements. The Group’s external auditors, PricewaterhouseCoopers, have audited the financial statements and their unqualified audit report appears on page 35 of the financial statements.

The Board recognises and acknowledges its responsibility for the Group’s systems of internal financial control. Cresta Marakanelo Limited has adopted policies on business conduct, which cover ethical behaviour, compliance with legislation and sound accounting practice and which underpin the Group’s internal financial control process. The control systems include written accounting and control policies and procedures, clearly defined lines of accountability and delegation of authority, and comprehensive financial reporting and analysis against approved budgets. The responsibility for operating these systems is delegated to the executive director and management, who have confirmed that they have reviewed the effectiveness thereof.

The directors consider that the systems are appropriately designed to provide reasonable assurance, as to the reliability of financial statements and that assets are safeguarded against material loss or unauthorised use and that transactions are properly authorised and recorded.

The effectiveness of the internal financial control systems is monitored through management reviews, comprehensive reviews and testing by internal auditors and the external auditors’ review and testing of appropriate aspects of the internal financial control systems during the course of their statutory examinations of the Company and Group.

The Group and Company’s directors have considered the results of these reviews, none of which indicate that the systems of internal control were inappropriate or operated unsatisfactorily. Additionally, no breakdowns involving material loss have been reported to the directors in respect of the year under review.

The annual financial statements for the year ended 31 December 2014 and which appear on pages 36 to 87 were authorised for issue by the Board of Directors on 18th March 2015 and are signed on its behalf by:

Director Director

The Group’s directors are required by the Botswana Companies Act, 2003 to maintain adequate accounting records and to prepare financial statements for each financial year which show a true and fair view of the state of affairs of the Company and Group at the end of the financial year and of the results and cash flows for the period. In preparing the accompanying Company and Group financial statements, International Financial Reporting Standards have been followed, suitable accounting policies have been used and applied consistently, and reasonable and prudent judgments and estimates have been made. Any changes to accounting policies are approved by the Group’s Board of Directors and the effects thereof are fully explained in the financial statements. The financial statements incorporate full and responsible disclosure in line with the significant accounting policies of the Group noted on pages 40 - 56.


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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CRESTA MARAKANELO LIMITEDFor The Year Ended 31 December 2014

Report on the financial statements

We have audited the accompanying consolidated annual financial statements and separate annual financial statements of Cresta Marakanelo Limited, which comprise the consolidated and separate statements of financial position as at 31 December 2014, and the consolidated and separate statements of comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 36 to 87.

Directors’ Responsibility for the Financial Statements

The company’s directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error.

Auditor’s Responsibility

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

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

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

Opinion

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

Gaborone13 May 2015


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GROUP COMPANY hs 2014 2013 2014 2013 Notes P’000 P’000 P’000 P’000

Revenue 1 303,195 281,124 279,465 256,565 Cost of sales 2 (177,519 ) (162,831 ) (165,635 ) (151,516 ) Gross profit 125,676 118,293 113,830 105,049Other income 1,514 647 427 - Other (losses)/gain-net 27 (812 ) 27 (338 )Sales and distribution expenses 2 (9,239 ) (8,314 ) (8,571 ) (7,845 )Administration and operating expenses 2 (83,119 ) (78,408 ) (69,259 ) (66,164 )Operating profit 34,859 31,406 36,454 30,702Dividend income from subsidiary - - - 555 Finance income 4 614 811 2,424 2,255Finance expense 4 (3,170 ) (2,867 ) (1,774 ) (2,658 )Profit before income tax 32,303 29,350 37,104 30,854Income tax expense 5 (8,245 ) (6,865 ) (8,245 ) (6,883 )Profit for the year 24,058 22,485 28,859 23,971Other comprehensive income: Currency translation differences (subject to subsequent recycling through profit or loss) 40 (116 ) - - Other comprehensive income/(expense) for the year 40 (116 ) - - Total comprehensive income for the year 24,098 22,369 28,859 23,971Basic and diluted earnings per share (thebe) 6 13.32 12.36 15.63 12.98

STATEMENT OF COMPREHENSIVE INCOMEFor The Year Ended 31 December 2014



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STATEMENT OF FINANCIAL POSITIONAs At 31 December 2014

GROUP COMPANY s 2014 2013 2014 2013 Notes P’000 P’000 P’000 P’000

ASSETS Non-Current AssetsProperty, plant and equipment 10 143,581 150,104 138,969 143,679 Intangible assets: 11 Lease rights/Trade marks/Software 748 229 748 229 Goodwill 13,878 14,994 5,274 5,274 Investment in subsidiary 7 - - 7 7 Loan to subsidiary 8 - - 14,948 14,896 Loan receivable-Cresta Employee Staff Plan 9 - - 1,373 1,281 Deferred income tax assets 17 4,216 3,640 4,216 3,640 Total non-current assets 162,423 168,967 165,535 169,006

Currents assets Inventories 13 2,919 2,651 2,411 2,072 Loan to subsidiary 8 - - 1,938 1,858 Trade and other receivables 14 18,015 21,972 17,529 20,704 Current income tax assets 11 13 - - Cash and cash equivalents 15 45,801 21,421 43,091 18,337 Total current assets 66,746 46,057 64,969 42,971 Total assets 229,169 215,024 230,504 211,977

EQUITY Capital and reserves Stated capital 16 18,500 18,500 18,500 18,500 Treasury Shares 12 (5,915 ) (5,915 ) (550 ) (550 )Foreign currency translation reserve 32 (8 ) - - Retained earnings 132,508 117,510 133,560 113,933 Total equity 145,125 130,087 151,510 131,883

LIABILITIES Non-current liabilities Deferred lease obligation 20 30,831 26,588 29,058 25,223 Borrowings 18 17,227 20,711 17,227 20,711 Total non-current liabilities 48,058 47,299 46,285 45,934

Current liabilities Trade and other payables 19 29,699 26,791 26,423 23,318 Current income tax liabilities 1,297 1,222 1,297 1,217 Borrowings 18 3,663 8,455 3,663 8,455 Deferred revenue 21 1,327 1,170 1,326 1,170Total current liabilities 35,986 37,638 32,709 34,160Total liabilities 84,044 84,937 78,994 80,094Total equity and liabilities 229,169 215,024 230,504 211,977



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STATEMENT OF CHANGES IN EQUITYFor The Year Ended 31 December 2014

Ordinary Treasury Foreign Retained Total shares Shares currency earnings equity transalation reserve P’000 P’000 P’000 P’000 P’000

GROUP Year ended 31 December 2013 Balance at 1 January 2013 18,500 (5,915 ) 108 103,002 115,695Total comprehensive income for the year - - (116 ) 22,485 22,369Gross dividends paid - - - (7,977 ) (7,977 )Balance at 31 December 2013 18,500 (5,915 ) (8 ) 117,510 130,087 Year ended 31 December 2014 Balance at 1 January 2014 18,500 (5,915 ) (8 ) 117,510 130,087Total comprehensive income for the year - - 40 24,058 24,098Gross dividends paid - - - (9,060 ) (9,060 )Balance at 31 December 2014 18,500 (5,915 ) 32 132,508 145,125 COMPANY Year ended 31 December 2013 Balance at 1 January 2013 18,500 (550 ) - 98,090 116,040 Total comprehensive income for the year - - - 23,971 23,971 Gross dividends paid - - - (8,128 ) (8,128 )Balance at 31 December 2013 18,500 (550 ) - 113,933 131,883 Year ended 31 December 2014 Balance at 1 January 2014 18,500 (550 ) - 113,933 131,883Total comprehensive income for the year - - - 28,859 28,859Gross dividends paid - - - (9,232 ) (9,232 )Balance at 31 December 2014 18,500 (550 ) - 133,560 151,510



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GROUP COMPANY 2014 2013 2014 20113 Notes P’000 P’000 P’000 P’000

Cash flows from operating activities Cash generated from operations 24 71,570 67,133 69,874 62,442Interest paid 4 (1,774 ) (2,658 ) (1,774 ) (2,658 )Tax paid (8,580 ) (7,499 ) (8,580 ) (7,518 )Net cash generated from operating activities 61,216 56,976 59,520 52,266

Cash flows from investing activities Purchase of property, plant and equipment 10 (19,233 ) (30,908 ) (18,383 ) (29,243 )Purchase of computer software 11 (788 ) - (788 ) - Proceeds on disposal of plant and equipment 137 98 137 - Loan repayments received from Employee Share Trust - - 85 75Loan (provided to)/repayments received from subsidiary - - (132 ) 2,065 Interest received (excluding capitalised portion ofEmployee Share Trust) 590 195 1,822 1,674Net cash paid to acquire the business of Cresta Jwaneng - (7,500 ) - (7,500 )Dividend received from subsidiary - - - 555 Net cash utilised in investing activities (19,294 ) (38,115 ) (17,259 ) (32,374 )

Cash flows from financing activities Repayment of borrowings (7,166 ) (5,641 ) (7,166 ) (5,641 )Borrowing made for acquisition of Jwaneng business - 8,000 - 8,000 Dividends paid to company’s shareholders 22 (9,060 ) (7,977 ) (9,232 ) (8,128 )Net cash utilised in financing activities (16,226 ) (5,618 ) (16,398 ) (5,769 )Net increase in cash and cash equivalents 25,696 13,243 25,863 14,123 Cash and cash equivalents at beginning of year 20,312 7,060 17,228 3,105 Exchange (loss)/gain on cash and cash equivalents (207 ) 9 - - Changes in cash and cash equivalents 25,696 13,243 25,863 14,123 Cash and cash equivalents at end of year 15 45,801 20,312 43,091 17,228

STATEMENT OF CASH FLOWSFor The Year Ended 31 December 2014


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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESFor The Year Ended 31 December 2014

General information

Cresta Marakanelo Limited is a public limited Company listed on the Botswana Stock Exchange and primarily operates hotels and related services in Botswana and Zambia.

The consolidated Group financial statements and separate Company financial statements for the year ended 31 December 2014 have been approved for issue by the Board of Directors on 18 March 2015. Neither the entity’s Board of Directors nor others have the power to amend financial statements after issue.

Summary of significant accounting policies

The principal accounting policies applied in the preparation of these Group and Company financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

1.1 Basis of preparation

The Group and Company financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS). The financial statements have been prepared under the historical cost convention.The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. These areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Group’s financial statements are disclosed in the “Critical estimates and assumptions” section of the financial statements.

Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

a) New and amended standards effective for 31 December 2014 year end for the Group and Company:

Amendment to IAS 32, ‘Financial instruments: Presentation’ on offsetting financial assets and financial liabilities. This amendment clarifies that the right of set-off must not be contingent on a future event. It must also be legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendment also considers settlement mechanisms. Effective for the period beginning on or after 1 January 2014. The amendment does not impact the Group and Company significantly.

Amendments to IFRS 10, consolidated financial statements’, IFRS 12 and IAS 27 for investment entities: The amendments mean that many funds and similar entities will be exempt from consolidating most of their subsidiaries. Instead they will measure them at fair value through profit or loss. The amendments give an exception to entities that meet an ‘investment entity’ definition and which display particular characteristics. Changes have also been made in IFRS 12 to introduce disclosures that an investment entity needs to make. Effective for the period beginning on or after 1 January 2014. The amendment does not impact the Group and Company.

Amendments to IAS 36, ‘Impairment of assets’, on the recoverable amount disclosures for non-financial assets: This amendment removed certain disclosures of the recoverable amount of CGUs which had been included in IAS 36 by the issue of IFRS 13. Effective for the period beginning on or after 1 January 2014. The amendment does not impact the Group and Company significantly.



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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESFor The Year Ended 31 December 2014 (Cont.)


1.1 Basis of preparation (continued)

Amendment to IAS 39 on novation of derivatives: The IASB has amended IAS 39 to provide relief from discontinuing hedge accounting when novation of a hedging instrument to a CCP meets specified criteria. Similar relief will be included in IFRS 9, ‘Financial Instruments’. Effective for the period beginning on or after 1 January 2014. The amendment does not impact the Group and Company.

Other standards, amendments and interpretations which are effective for the financial year beginning on 1 January 2014 are not material to the Group and Company.

b) Standards, amendments and interpretations to existing standards but not effective for 31 December 2014 year-end and have not been early adopted by the Group and Company:

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2014, and have not been applied in preparing this financial statement. None of these is expected to have a significant effect on the financial statements of the Group and Company, except the following set out below:

IFRS 9 – Financial Instruments (2009): This IFRS is part of the IASB’s project to replace IAS 39. IFRS 9 addresses classification and measurement of financial assets and replaces the multiple classification and measurement models in IAS 39 with a single model that has only two classification categories: amortised cost and fair value. Effective for the period beginning on or after 1 January 2018. The impact on the Group and Company cannot be reasonably estimated at this time.

IFRS 9 – Financial Instruments (2010): The IASB has updated IFRS 9, ‘Financial instruments’ to include guidance on financial liabilities and de-recognition of financial instruments. The accounting and presentation for financial liabilities and for derecognising financial instruments has been relocated from IAS 39, ‘Financial instruments: Recognition and measurement’, without change, except for financial liabilities that are designated at fair value through profit or loss. Effective for the period beginning on or after 1 January 2018. The impact on the Group and Company cannot be reasonably estimated at this time.

Amendments to IFRS 9 – Financial Instruments (2011): The IASB has published an amendment to IFRS 9, ‘Financial instruments’ that delays the effective date to annual periods beginning on or after 1 January 2018. The original effective date was for annual periods beginning on or after from 1 January 2013. This amendment is a result of the board extending its timeline for completing the remaining phases of its project to replace IAS 39 (for example, impairment and hedge accounting) beyond June 2011, as well as the delay in the insurance project. The amendment confirms the importance of allowing entities to apply the requirements of all the phases of the project to replace IAS 39 at the same time. The requirement to restate comparatives and the disclosures required on transition have also been modified. Effective for the period beginning on or after 1 January 2018. The impact on the Group and Company cannot be reasonably estimated at this time.

Amendment to IFRS 11, ‘Joint arrangements’ on acquisition of an interest in a joint operation: This amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business. The amendments specify the appropriate accounting treatment for such acquisitions. Effective for the period beginning on or after 1 January 2016. The impact on the Group and Company cannot be reasonably estimated at this time


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1.1 Basis of preparation (continued)

b) Standards, amendments and Interpretations to existing standards but not effective for 31 December 2014 year-end and have not been early adopted by the Group and Company: (continued)

Amendment to IAS 16, ‘Property, plant and equipment’ and IAS 38,’Intangible assets’ on depreciation and amortisation: In this amendment the IASB has clarified that the use of revenue based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The IASB has also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. The amendments specify the appropriate accounting treatment for such acquisitions. Effective for the period beginning on or after 1 January 2016. The impact on the Group and Company cannot be reasonably estimated at this time.

IFRS 15 – Revenue from contracts with customers: The FASB and IASB issued their long awaited converged standard on revenue recognition on 29 May 2014. It is a single, comprehensive revenue recognition model for all contracts with customers to achieve greater consistency in the recognition and presentation of revenue. Revenue is recognised based on the satisfaction of performance obligations, which occurs when control of good or service transfers to a customer. Effective for the period beginning on or after 1 January 2017. The impact on the Group and Company cannot be reasonably estimated at this time.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group and Company.

1.2 Consolidation

a) Subsidiaries

Subsidiaries are all entities (including structured entities such as the Cresta Employee Share Trust) over which the Group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquire on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in statement of comprehensive income.

Any contingent consideration to be transferred by the group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in statement of comprehensive income or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.


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1.2 Consolidation (continued)

Inter-Group transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary amounts reported by subsidiaries have been adjusted to conform with the group’s accounting policies.

(b) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(c) Disposal of subsidiaries

When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in statement of comprehensive income. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to statement of comprehensive income.

1.3 Business Combinations

The Group accounts for business combinations using the acquisition method of accounting. The cost of the business combination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equity instruments issued. Costs directly attributable to the business combination are expensed as incurred, except the costs to issue debt which are amortised as part of the effective interest and costs to issue equity which are included in equity.

Contingent consideration is included in the cost of the combination at fair value as at the date of acquisition. Subsequent changes to the assets, liabilities or equity which are arise as a result of the contingent consideration are not effected against goodwill, unless they are valid measurement period adjustments.

The acquiree’s identifiable assets, liabilities and contingent liabilities which meet the recognition conditions of IFRS 3 Business Combinations are recognised at their values at acquisition date, except for non-current assets (or disposal group) that are classified as held for sale in accordance with IFRS 5 Non-current held for sale and discontinued operations, which are recognised at fair value less costs to sell.

Contingent liabilities are only included in the identifiable assets and liabilities of the acquiree where there is a present obligation at acquisition date.


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1.3 Business Combinations (continued)

On acquisition, the Group assesses the classification of the acquiree’s assets and liabilities and reclassifies them where the classification is inappropriate for Group purposes. This excludes lease agreements and insurance contracts, whose classification remains as per their inception date.

In case where the Group held a non-controlling shareholding in the acquiree prior to obtaining control, that interest is measured at fair value as at acquisition date. The measurement to fair value is included in statement of comprehensive income for the year. Where the existing shareholding was classified as an available for sale financial asset, the cumulative fair value adjustments recognised previously in other comprehensive income and accumulated in equity are recognised in statement of comprehensive income as a reclassification adjustment.

Goodwill is determined as the consideration paid, plus the fair value of any shareholding held prior to obtaining control, plus non-controlling interest and less the fair value of the identifiable assets and liabilities of the acquiree.

Goodwill is not amortised but is tested on an annual basis for impairment. If goodwill is assessed to be impaired, that impairment is not subsequently reversed.

Goodwill arising on acquisition of foreign entities is considered an asset of the foreign entity. In such cases the goodwill is translated to the functional currency of the Group at the end of each reporting period with the adjustment recognised in equity through other comprehensive income.

1.4 Foreign Currency Translation

(a) Functional and presentation currency

Items included in the financial statements of the Group are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Pula, which is the Group’s functional and presentation currency. (b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the statement of comprehensive income within ‘finance income or cost’.


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1.4 Foreign Currency Translation (continued)

(c) Group Companies

The results and financial position of all Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(a) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;(b) income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and(c) all resulting exchange differences are recognised in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognized in other comprehensive income.

1.5 Revenue recognition

Revenue comprises the fair value for the sale of goods and services, net of value-added tax, rebates and discounts and after eliminated sales within the Group.

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group activities. Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured. Revenue comprises the sale of bed space, food and beverages.

Revenue is recognised as follows:

(a) Provision of services - Accommodation revenue

Provision of services is recognised in the accounting period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided.

The Group sells bed nights at its hotels and lodges to guests and also provides guided safaris to guests. Revenue from these services is recognised when the service is provided to the guest, usually over the period of the guests stay at the hotels and lodges.


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1.5 Revenue recognition (continued)

(b) Sale of goods - Foods, beverages and curios

Sales of foods, beverages, curios and ancillary goods are usually in cash or by credit card. Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (the recorded revenue includes applicable credit card fees payable for the transaction. Such fees are included in bank charges).

(c) Interest income

Interest income is recognised on a time-proportion basis using the effective interest method.

(d) Dividend income

Dividend income is recognised when the right to receive payment is established.

(e) Customer loyalty programmes

The Group operates a loyalty programme where customers accumulate points for every paid (night) spent in the Cresta hotel. The reward points are recognised as a separately identifiable component of the initial sale transaction, by allocating the fair value of the consideration received between the award points and the other components of the sale such that the reward points are initially recognised as deferred income at their fair value. Revenue from the reward points is recognised when the points are redeemed.

1.6 Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payments required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.

1.7 Dividend distribution

Dividend distribution to the Group’s shareholders is recognised as a liability in the group’s financial statements in the year in which the dividends are approved by the Group’s shareholders. Withholding tax of 7.5% is payable on the gross value of dividends. The withholding tax is treated as once off tax on the hands of the shareholder.


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1.8 Property, plant and equipment

Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the statement of comprehensive income during the financial year in which they are incurred.

Land and buildings comprise mainly hotel properties. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

- Buildings: lower of lease period and useful lives of 50 years- Improvements to leasehold premises: lower of lease period and useful lives of 5 - 10 years- Plant and equipment 6 - 7 years- Furniture, fixtures and fittings 4 - 7 years- Motor vehicles 5 - 7 years- Computers 3 years

Operating equipment (which includes uniforms, kitchen utensils, crockery, cutlery and linen) is recognised as an expense based on usage. The period of usage depends on the nature of the operating equipment and varies between one to three years.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

Gains and losses

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within other (losses)/gains – net, in the statement of comprehensive income.

Impairment

Plant and equipment are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount, the latter being the higher of fair value less cost to sell of the asset and its value in use.


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1.9 Intangible assets

(a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired business/subsidiary/associate at the date of acquisition. Goodwill on acquisition of business/subsidiaries is included in ‘intangible assets’. Goodwill on acquisitions of associates is included in ‘investments in associates’. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash generating units for the purpose of impairment testing. The allocation is made to those cash generating units or Groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

(b) Trademarks and licenses

Separately acquired trademarks and licenses are shown at historical cost. Trademarks and licenses acquired in a business combination are recognised at fair value at the acquisition date. Trademarks and licenses have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licenses over their estimated useful lives of 15 to 20 years.

(c) Lease rights

Lease rights represents rights covered by contract or similar arrangement to occupy, lease out or otherwise utilise property. Separately acquired lease rights are shown at historical costs. Lease rights acquired in a business combination are recognised at fair value at the acquisition date. Where land rights are acquired directly through agreement, the Group records these at nominal amounts at the inception of the underlying lease/rental agreements or when such agreements are renewed.

Lease rights have a finite useful life based on the underlying contractual agreement assigning such rights to the consignee and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight line method to allocate the cost of the lease rights over their estimated useful lives based on contractual assignment terms.

(d) Computer software

Acquired computer/other software is capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives (four years).

Costs associated with maintaining computer software programmers are recognised as an expense as incurred. Costs that are directly associated with the development of identifiable and unique software products controlled by the Company, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets.


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1.10 Impairment of non-financial assets

Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash generating units). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date.

1.11 Financial assets

The Group classifies its financial assets in the following categories: at fair value through statement of comprehensive income, loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

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

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Assets in this category are classified as current assets if expected to be settled within 12 months, otherwise, they are classified as non-current. During the year the Group did not have assets under this category.

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting year. These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade and other receivables’ and cash and cash equivalents in the statement of financial position.

(c) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of it within 12 months of the end of the reporting period.


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1.11 Financial assets (continued)

Recognition and measurement

Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss is initially recognised at fair value, and transaction costs are expensed in the statement of comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for- sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the statement of comprehensive income within ‘other (losses)/gains – net’ in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income as part of other income when the Group’s right to receive payments is established.

Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognised in other comprehensive income.

When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in other comprehensive income are included in the statement of comprehensive income as ‘gains and losses from investment securities’. Interest on available-for-sale securities calculated using the effective interest method is recognised in the statement of comprehensive income as part of other income. Dividends on available-for-sale other comprehensive income instruments are recognised in the statement of comprehensive income as part of other income when the Group’s right to receive payments is established.

Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.


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1.11 Financial assets (continued)

Impairment of financial assets

(a) Assets carried at amortised cost

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or 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 difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where 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.

For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated statement of comprehensive income. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated statement of comprehensive income.

1.12 Financial liabilities

The Groups financial liabilities at statement of financial position date include ‘Borrowings’ and ‘Accounts payable and accruals’ (excluding VAT and employee related payables). These financial liabilities are subsequently measured at amortised cost using the effective interest method. Financial liabilities are included in current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

1.13 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the average cost method. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs necessary to complete the sale. Provision is made for slow moving and obsolete inventories.


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1.14 Trade receivables

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

1.15 Cash and cash equivalents

Cash and cash equivalents are carried in the statement of financial position at cost which approximates fair value. Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, net of bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the consolidated statement of financial position.

1.16 Stated capital

Ordinary shares are classified as equity and stated at the fair value of the consideration received. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Where any Group holds equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Group’s equity holders until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, and is included in equity attributable to the Group’s equity holders.

1.17 Related parties

Related parties consist of entities under common ownership and control. Related parties comprise the holding Group, subsidiary companies, directors of the Group and key management. Transactions with related parties are in the normal course of business.

1.18 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.


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1.19 Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

1.20 Cost of sales

Cost of sales comprise direct cost incurred in the provision of goods and services and are recognised as incurred.

1.21 Income tax

a) Income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the statement of comprehensive income, except to the extent that it relates to items recognised directly in other comprehensive income. In this case the tax is also recognised in other comprehensive income.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date where the Group operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

b) Deferred tax

Deferred income tax is recognised for in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.

Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.


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1.22 Employee benefits

a) Pension obligations

The Group operates a defined contribution pension scheme. A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity. The group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

b) Termination benefits

Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after reporting date are discounted to present value. Contract staffs are paid terminal gratuities in accordance with their respective employment contract.

c) Other benefits

(i) Severance payments and gratuities

The Group does not provide pension benefits for all its employees, but operates a gratuity scheme for expatriates in terms of employment contracts, and a severance benefit scheme for citizens in terms of section 28 of the Botswana Employment Act. Severance pay is not considered to be a retirement benefit plan as the benefits are payable on completion of each 60 month period of continuous employment, at the option of the employee. The expected gratuity and severance benefit liability is provided in full byway of a provision.

(ii) Leave pay

The costs of paid leave is recognised as an expense as the employee render services that increases the entitlement or, in the case of non-accumulating absence, when absence occurs.

(iii) Profit sharing and bonus plans

The Group recognises a liability and an expense for bonuses and profit sharing due to management and employees where contractually obliged or where there is past practice that has created a constructive obligation.

Employees of the Group receive remuneration in the form of a share of dividends paid by the Group. This scheme is managed through an employee trust scheme whereby employees render services as consideration for distribution from the employee trust scheme which owns the underlying shares in the Group’s shares. The objective of the scheme is to retain staff. Only employees who meet the required criteria of two years in continuous employment are eligible to share in the trust distribution.




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1.22 Employee benefits (continued)

c) Other benefits (continued)

(iv) Medical aid

In terms of the employment contracts and the rules of relevant medical aid scheme, medical benefits are provided to employees. The Group subsidies a portion of medical aid contribution for certain employees. Contributions in relation to Group’s obligations in respect of these benefits are charged against statement of comprehensive income in the period of payment.

1.23 Provisions

Provisions are recognised when:

i) the Group has a present legal or constructive obligation as a result of past events; ii) it is more likely than not that an outflow of resources will be required to settle the obligation; andiii) the amount has been reliably estimated.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

1.24 Earnings per ordinary share

Earnings per ordinary share are calculated using the weighted average number of ordinary shares in issue during the period and are based on the net profit attributable to ordinary shareholders.

1.25 Segmental report

Business segments are distinguishable components of the Group that provide services that are subject to risks and rewards. The costs of shared services are accounted for in a separate (“unallocated”) segment. Transactions between segments are generally accounted for in accordance with Group policies as if the segments were stand alone business with intra segment revenue being eliminated through separate adjustment to revenue.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive management that makes strategic decisions.



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1.26 Contingent liabilities

Contingent liabilities are reflected when the Group has a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group, or it is possible but not probable that an outflow of resources will be required to settle an obligation, or the amount of the obligation cannot be measured with sufficient reliability.

1.27 Exceptional items Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.


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2. Financial risk factors

The Group’s activities expose it to a variety of financial risks:

a) market risk (including currency risk, price risk, fair value interest rate risk, and cash flow interest rate risk ), b) credit risk; and c) liquidity risk.

The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

Risk management is carried out by senior management under policies approved by the board of directors. Management identifies evaluates and hedges financial risks in close co-operation with the Group’s operating units. The board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, and investment of excess liquidity.

2.1 Market risk

i) Foreign currency risk

In the normal course of business, the Group may enter into transactions denominated in foreign currencies. In addition, the Group may have assets and liabilities in foreign currencies, which exposes it to fluctuations in foreign currency exchange rates. Foreign exchange risks arise when future commercial transactions or recognised assets and liabilities denominated in a currency that is not the entity’s functional currency. The Group had no assets and liabilities or significant committed future transactions denominated in foreign currencies at year end.

Foreign currency sensitivity analysis

The Group is exposed to the American Dollar (USD) through its business through tour operators.

The Group used the 10% sensitivity rate when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity includes only outstanding foreign currency denominated monetary items and adjusts translation at the year end for a 10% change in foreign currency rates. A positive number indicates an increase in profit and other equity where Pula strengthens against the relevant currency.

FINANCIAL RISK MANAGEMENTFor The Year Ended 31 December 2014


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FINANCIAL RISK MANAGEMENTFor The Year Ended 31 December 2014 (Cont.)

2.1 Market risk (continued)

i) Foreign currency risk (continued)

Foreign currency sensitivity analysis (continued)

For a 10% weakening of the Pula against the relevant currency would be an equal and opposite impact on the profit and other equity. If foreign currency was to strengthen/weaken against the Pula by 10% and all other variables held constant, the Company’s profits would increase/decrease by P29K (2013: increase/decrease by P43K).

If foreign currency was to strengthen/weaken against the Pula by 10% and all other variables held constant, the Group’s profits would increase/decrease by P31K (2013: increase/decrease by P50K).

ii) Cash flow and fair value interest rate risk

The Group’s interest rate risk arises from long-term borrowings, short-term bank deposits and bank overdrafts. Bank overdrafts are obtained at, and short-term deposits are placed at, variable rates that expose the Group to cash flow interest rate risk. During the financial year, the Group’s borrowings and deposits at variable rates were denominated in Botswana Pula.

The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, and alternative financing. Based on these scenarios, the Group calculates the impact on statement of comprehensive income of a defined interest rate shift.

Interest rate sensitivity analysis The Group is exposed to interest rate cash flow risks only. The sensitivity analysis has been determined on the exposure of financial instruments to interest rates at the reporting date. For floating rate liabilities denominated in the reporting currency, the analysis is prepared assuming the amount of liability outstanding at the reporting date was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If the rates had been 50 basis points higher/lower and all other variables were held constant, The Group’s profits for the year ended 31 December 2014 would increase / decrease by P16K (2013: increase / decrease by P14K).

If the rates had been 50 basis points higher/lower and all other variables were held constant, The Company’s profits for the year ended 31 December 2014 would increase / decrease by P9K (2013: increase / decrease by P13K).


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2.2 Credit risk

Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. For banks and financial institutions, only reputable parties are accepted.

The Group continuously monitors defaults of customers and other counter parties identified either individually or by Group, and incorporate the information into credit risk controls.

If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, credit control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. The utilisation of credit limits is regularly monitored. In accordance with standard practice within the industry, the Group may require prepayment of standard charges prior to booking confirmation thereby eliminating significant portion of credit risk prior to rendering services. The balance of dues from guests is settled through bank transfer, in cash or using credit cards. The most significant dues from guest arise from transactions with agents. The Group carefully vets new agents prior to extending credit terms, and deals mostly with agents with whom it has established reliable long term relationships. As a result of this, the Group historically has succeeded in minimising negative impacts of adverse credit risks events.

Credit trading relationship

Individual customer risk limits are set in accordance with limits set by the board according to the category into which a customer falls. Customers are categorised into:

i) Government;ii) Corporate sector (domestic companies, tour agents); and iii) Foreign customers (tour agents and individuals).


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2.2 Credit risk (continued)

The table below shows an age analysis of trade receivables at their carrying value respectively as at the balance sheet date.

Fully Past due Total Performing not impaired ImpairedGROUP P’000 P’000 P’000 P’000

At 31 December 2013 Trade receivables - Government 4,696 3,889 432 375- Corporate sector 11,437 9,871 1,032 534- Foreign customers 4,409 4,244 165 - 20,542 18,004 1,629 909 At 31 December 2014 Trade receivables - Government 2,874 2,662 121 91- Corporate sector 11,767 9,329 826 1,612- Foreign customers 2,968 2,615 230 123 17,609 14,606 1,177 1,826 Fully Past due Total Performing not impaired ImpairedCOMPANY P’000 P’000 P’000 P’000

At 31 December 2013 Trade receivables - Government 4,110 3,404 378 328- Corporate sector 10,010 8,640 920 450- Foreign customers 3,859 3,714 144 - 17,979 15,759 1,442 778 At 31 December 2014 Trade receivables - Government 2,622 2,496 56 70- Corporate sector 9,112 8,325 542 245- Foreign customers 2,821 2,468 230 123 14,555 13,289 828 438



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2.2 Credit risk (continued)

No credit limits were exceeded during the reporting period and management does not expect any losses from non-performance by these counterparties. No trade receivable balances have been re-negotiated.

Independent credit ratings are available for the government of Botswana, which is rated by Standard and Poor’s (S&P) and Moody’s Investor Services, which rates the Government of Botswana as stable, with government issued bonds at A2 ratings. This rating signifies that there is a relatively low risk of default because the issuer or carrier is fairly stable. Independent ratings are not attained for corporate customers.

Credit Quality of other financial assets

• No independent credit ratings are available for domestic banks. The Group however only transacts with banks that are affiliated to large well known global or regional banks.

2.3 Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions.

Management monitors rolling forecasts of the Group’s liquidity reserve on the basis of expected cash flows. Surplus cash held over and above balance required for working capital management are transferred to interest bearing assets. These are invested in interest bearing current accounts and time deposits, and money market deposits, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts. At the reporting date, the Group had the following assets that are expected to readily generate cash inflows for managing liquidity risk.

GROUP

2014 2013 P’000 P’000 Cash at bank and short-term bank deposits Barclays Bank (Botswana & Zambia) 16,988 8,763BancABC (Botswana & Zambia) 15,348 7,661First National Bank of Botswana Limited 8,191 1,372Stanlib Botswana 2,114 2,018Stanbic Bank Botswana 3,087 1,501 45,728 21,315



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2.3 Liquidity risk (continued)

COMPANY

2014 2013 P’000 P’000 Cash at bank and short-term bank deposits Barclays Bank (Botswana) 14,297 6,751BancABC (Botswana) 15,329 6,588First National Bank of Botswana Limited 8,191 1,372Stanlib Botswana 2,114 2,018Stanbic Bank Botswana 3,087 1,501 43,018 18,230

The table below analyses the Group’s and Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

2.4 Analysis of financial instruments a) Financial instruments by category

GROUP Between 1 Between 2 Over Less than and 2 and 5 5 years 1 year years years P’000 P’000 P’000 P’000At 31 December 2014 Trade and other payables 27,176 - - -Borrowings 5,009 5,009 15,152 - 32,185 5,009 15,152 -

At 31 December 2013 Trade and other payables 27,960 - - -Borrowings 8,734 5,195 16,528 4,221 36,694 5,195 16,528 4,221




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2.4 Analysis of financial instruments (continued) a) Financial instruments by category (continued)

COMPANY Between 1 Between 2 Over Less than and 2 and 5 5 years 1 year years years P’000 P’000 P’000 P’000At 31 December 2014 Trade and other payables 22,079 - - -Borrowings 5,009 5,009 15,152 - 27,088 5,009 15,152 -

At 31 December 2013 Trade and other payables 24,488 - - -Borrowings 8,734 5,195 16,528 4,221 33,222 5,195 16,528 4,221

The Group’s approach to managing liquidity is to ensure as far as possible that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

2014 2013 P’000 P’000 GROUP

Loans and receivablesCash and cash equivalents 45,728 21,421Trade and other receivables * 17,083 21,368 62,811 42,789

COMPANY 2014 2013 P’000 P’000Loans and receivables Cash and cash equivalents 43,018 18,337Trade and other receivables * 16,958 20,469 59,976 38,806

There were no assets at fair value through the statement of comprehensive income, or derivatives used for hedging or available for sale financial instruments as at the year end.

* Prepayments and VAT are excluded from trade and other receivables.



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2.4 Analysis of financial instruments (continued) a) Financial instruments by category (continued)

Other financial liabilities 2014 2013 P’000 P’000 GROUP Trade and other payables 23,159 24,700Due to related parties 4,017 3,260 Borrowings 20,890 29,166 48,066 57,126 COMPANY

Trade and other payables 18,080 21,849Due to related parties 3,998 2,639 Borrowings 20,890 29,166 42,968 53,654

All the financial instruments are at amortised cost. There were no liabilities at fair value through the statement of comprehensive income or derivatives used for hedging as at year end.

2.5 Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The capital structure of the Group consists of long term borrowings, bank overdrafts and equity attributable to equity holders of the parent.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The gearing ratios at 31 December 2014 and 2013 were as follows;

2014 2013 P’000 P’000 GROUP

Total borrowings (note 18) 20,890 29,166Less: cash and cash equivalents (note 15) (45,801 ) (21,421 ) Net debt (24,911 ) 7,745Total equity 145,125 130,087Total capital 120,214 137,832Gearing ratio (20.7%) 5.6%



65


2.5 Capital risk management (continued)

2014 2013 P’000 P’000 COMPANY

Total borrowings (note 18) 20,890 29,166Less: cash and cash equivalents (note 15) (43,091 ) (18,337 ) Net debt (22,201 ) 10,829Total equity 151,510 131,883Total capital 129,309 147,712Gearing ratio (17.2%) 7.3%

2.6 Fair value estimation

The carrying value less impairment provision of trade receivables and payables are assumed to be approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.



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CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS For The Year Ended 31 December 2014

3 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. 3.1 Estimated impairment of goodwill

The Group tests annually whether the goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1.9. The recoverable amounts of cash generating units have been determined based on value-in-use calculations. These calculations require the use of estimates. 3.2 Income taxes

Significant judgement is required in determining the Group’s provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax provisions in the period in which such determination is made.

The Group recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the Group to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded at the end of the reporting period could be impacted.

3.3 Useful life and residual values of property, plant and equipment

Property, plant and equipment are depreciated over its useful life taking into account residual values where appropriate. The actual useful lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re–assessing asset useful lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.



67

CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS For The Year Ended 31 December 2014 (Cont.)

3. Critical accounting estimates and assumptions (continued). 3.4 Impairment of assets

The Group follows the guidance of IAS 39 to determine when a financial asset is impaired. This determination requires significant judgment. In making this judgment, the Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost; and the financial health of and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.

Intangible assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount, the latter being the higher of fair value less cost to sell and the value in use.

Allowance for doubtful debts is created where there is objective evidence, such as probability of insolvency or significant financial difficulties of the debtor, that the Group will not be able to collect the amount under original terms of the invoice. An estimate is made with regards to the probability of insolvency and the estimated amount of debtors who will not be able to pay.

3.5 Deferred Revenue The Group operates a loyalty programme where customers accumulate points for purchases made which entitles them to a free meal and or free night of accommodation after reaching 500 points and 1000 points respectively. A customer needs to spend P1,000 to earn 100 points.

The reward points are recognised as a separately identifiable component of the initial sale transaction, by allocating the fair value of the consideration received between the award points and other components of the sale such that the reward points are initially recognised as deferred income at the fair value. Revenue from the reward points is recognised when the points are redeemed and revenue deferred on this basis is reassessed and measured regularly based on the estimated likelihood of redemption. The likelihood of redemption is estimated based on key assumptions, including the period for which points have been held without redemption (the longer such period, the lower the likelihood of redemption) and the number of points held (the less points, the less likely the points will be redeemed).

At 31 December 2014, the deferred revenue was estimated based on an expected redemption rate of 45.9% of total accumulated points. Had the estimated redemption rate been 10% higher/ (lower), the deferred revenue recognised at the balance sheet date would have been P289,213 higher/ (lower).



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CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS For The Year Ended 31 December 2014 (Cont.)


3. Critical accounting estimates and assumptions (continued).

3.6 Business combination

In performing the purchase price allocation with respect to the acquisition of Cezar Hotel in Jwaneng, the Group applied its judgement to determine the assets which are separately identifiable and recognisable, the basis of recognition and measurement. These judgements are summarised as follows:

Separately Identifiable Asset

Fixed Property

Brand Value

Plant and Equipment

Customer Relationships

Forward Bookings

Assembled Workforce

Basis of Recognition and Measurement

Not recognised as no fixed property was acquired. Property is leased based on a market-related contract with the landlord, thus there was no fair value to be assigned to the lease contract.

Not recognised as the value of the Cezar Hotel brand was deemed negligible in relation to the overall value of the transaction as the hotel’s operations were limited to a small geographical area in the Central District of Botswana. No significant national or global marketing efforts had been undertaken using this brand.

Recognised based on determined based on a blended depreciated historical cost and depreciated replacement cost basis.

The most significant (recurring) customer relationships relate to the Debswana Diamond Mine at Jwaneng and district hospital, which is also located at the mine. There are no guaranteed bed night uptakes, agreed rack rates, etc. with respect to these customers and a number of these are transient in that they are contractors / visitors to the mine or hospital. Accordingly, any value assigned to these relationships would be best assigned to the location of the premises and thus included in goodwill.

No significant forward bookings existed and thus no separate asset was recognised with respect to these.

The fair value of the assembled and trained workforce was measured on the Assemblage Cost Avoided method and has been recognised as part of goodwill.


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GROUP COMPANY 2014 2013 2014 2013 P’000 P’000 P’000 P’000

NOTES TO THE ANNUAL FINANCIAL STATEMENTSFor The Year Ended 31 December 2014

1 Revenue Accommodation revenue 172,156 159,568 162,727 148,774Food revenue 94,359 85,664 83,197 74,956Bar revenue 19,920 19,112 17,998 17,341Other 16,760 16,780 15,543 15,494 303,195 281,124 279,465 256,565 2 Expenses by nature Inventory consumed 39,091 36,727 34,950 30,861Employee benefit expense 71,703 64,348 64,114 57,391Transport expenses 1,663 2,135 1,290 1,135Operating lease payments 35,270 31,283 31,581 28,100Lease smoothening 4,243 6,242 3,835 5,551Auditors’ remuneration - Audit fee 1,012 909 784 716- Internal audit 386 256 363 256Depreciation 23,538 22,034 21,326 19,659Bad debts impairment charge 1,473 689 216 689 Directors’ fee 136 138 136 138 Related party transactions - management fees 9,094 8,672 8,382 7,907- profit bonus 8,601 8,185 8,697 7,697Water and electricity 12,154 11,095 11,274 10,045Marketing and promotion 8,320 6,932 7,652 6,932Repairs and maintenance 10,912 10,670 9,823 9,670Other expenses 20,123 18,553 17,954 19,865Utilities 14,170 12,792 13,285 11,987Insurance and legal 2,968 3,352 2,845 2,460Telephone 4,142 3,906 3,872 3,693Travel expenses 878 635 661 537Impairment of investment in trust - - 425 236 Total cost of sales, sales and distribution expenses, administration and operating expenses 269,877 249,553 243,465 225,525 3 Staff costs - pension contributions 2,574 2,335 2,268 2,030- gross salaries and wages 69,128 62,013 61,846 55,362 71,702 64,348 64,114 57,392 Number of employees 975 995 892 912 4 Finance income and costs Interest income (614 ) (811 ) (2,424 ) (2,255 ) Interest expense 1,774 2,658 1,774 2,658 Net foreign exchange losses on intercompany loan 1,396 209 - - 3,170 2,867 1,774 2,658


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NOTES TO THE ANNUAL FINANCIAL STATEMENTSFor The Year Ended 31 December 2014 (Cont.)


5 Income tax expense Company tax 8,821 8,126 8,821 8,126 Deferred tax (credit) (576 ) (1,261 ) (576 ) (1,243 )Tax charge 8,245 6,865 8,245 6,883 The tax on the profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the company as follows:

Profit before tax 32,303 29,350 37,104 30,854 Tax calculated at current tax rates - 22% 7,107 6,457 8,163 6,788 Tax effect of income not subject to tax (Golfview is exempt from taxation) 1,056 313 - - Expenses not deductible for taxation 93 71 93 71 Prior year deferred tax under provision (11 ) - (11 ) - Prior year current tax over provision - 24 - 24 Tax (credit)/ charge 8,245 6,865 8,245 6,883 6 Earnings per share Basic earnings per share is calculated by dividing the net profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year (excluding Treasury Shares): Total comprehensive income attributable to shareholders P’000 24,098 22,369 28,859 23,971 Weighted average number of ordinary shares in issue 180,934 180,934 184,634 184,634 - Total number of shares issued 185,000 185,000 185,000 185,000 - Less: Treasury shares (4,066 ) (4,066 ) (366 ) (366 ) Basic and diluted earnings per share (thebe) 13.32 12.36 15.63 12.98 7 Investment in subsidiary 2014 2013 2014 2013 % % P’000 P’000 Holding Holding Company Held directly; Cresta Golfview Hotel Ltd, Zambia* 100% 100% 7 7 The principal activities of the subsidiary is to operate hotel in Zambia. 8 Loan to subsidiary Cresta Marakanelo Ltd (the holding company) acquired a loan from Barclays Bank of Botswana to acquire the business of Golfview Hotel Ltd. A new company, Cresta Golfview Hotel Ltd (subsidiary) was formed as a vehicle that will purchase the business of Golfview hotel in Zambia. The holding company loaned Cresta Golfview Hotel Ltd the amount received from Barclays Bank of Botswana as a loan. The loan to the subsidiary was at the same terms as the loan from Barclays Bank to the holding company. The loan of P20m was acquired at prime less 2 percentage points. The loan is to be paid over a period of 10 years.



71



Current portion - - 1,938 1,858Non -current portion - - 14,948 14,896 - - 16,886 16,754 At 1 January - - 16,754 18,820 Loan reclassified from Intercompany - - 1,367 - Loan repayments received - - (1,235 ) (2,066 )Interest charged - - 1,232 1,506 Interest received - - (1,232 ) (1,506 )At 31 December - - 16,886 16,754 9 Loan receivable-Cresta Employee Staff Plan The Company’s share trust scheme, the Cresta Marakanelo Limited Employee Share Trust (“CREST”), was established for the purpose of incentivising and encouraging employees to contribute and share in the growth and profitability of Cresta Marakanelo Limited to recognise and reward qualifying employees who have contributed to the growth of the company’s profitability. The Trust was funded by Cresta with a loan of P5,365,000 which it used to purchase 3,700,000 shares (representing 2% of the share capital) at 30 November 2011 in Cresta. These shares are held by the Trust on behalf of its qualifying Cresta employees and the loan is to be recovered through dividend received from Cresta, representing half of the residue after accounting for interest and Trust expenses. The remaining 50% is available for distribution in equal proportion to all qualifying employees at the distribution date. The Trust scheme is accounted for in terms of IAS 19. Only employees who have been with the Cresta for a period of not less than two years and who are not serving notice are eligible for participation in the trust distribution. The fair value of the receivable at year end is as follows:

Loan advanced to the Trust - - 5,365 5,365- Less: Impairment loss - - (5,732 ) (5,308 )- Interest capitalised - - 1,969 1,367 - Repayment - - (229 ) (143 )Net carrying amount - - 1,373 1,281



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10 Property, Plant and Equipment Leasehold Furniture, Capital land and fixtures and Motor Operating work in buildings fittings vehicles Computers equipment progress Total P’000 P’000 P’000 P’000 P’000 P’000 P’000

GROUP Year ended 31 December 2013 Opening net book amount 73,566 40,979 3,098 2,332 8,468 16,964 145,407 Exchange differences - 331 23 45 33 - 432 Additions 2,254 8,789 20 1,675 8,219 9,951 30,908 Assets acquired through Cresta Jwaneng business combination - 2,139 41 - - - 2,180 Disposals (618 ) (5,066 ) - (1,572 ) (5,880 ) - (13,136 )Depreciation on disposals 384 4,392 - 1,571 - - 6,347 Transfers 817 15,199 - 949 - (16,965 ) - Depreciation (2,633) (17,010) (687) (1,704) - - (22,034 )Closing net book amount 73,770 49,753 2,495 3,296 10,840 9,950 150,104 At 31 December 2013 Cost 92,201 116,052 4,020 12,264 10,840 9,950 245,326 Accumulated depreciation (18,431 ) (66,299 ) (1,525 ) (8,968 ) - - (95,223 )Net book amount 73,770 49,753 2,495 3,296 10,840 9,950 150,104 Year ended 31 December 2014 Opening net book amount 73,770 49,753 2,495 3,296 10,840 9,950 150,104 Exchange differences - (332 ) (19 ) (31 ) (68 ) (1 ) (451 )Additions 6,879 8,875 15 1,054 2,410 - 19,233 Disposals (253 ) (1,440 ) (67 ) (89 ) (1,532 ) - (3,381 )Depreciation on disposals 180 1,326 67 87 - - 1,660 Transfers 5,543 4,088 - 267 - (9,898 ) - Written off from WIP - - - - - (46 ) (46 )Depreciation (3,039 ) (17,882 ) (658 ) (1,959 ) - - (23,538 )Closing net book amount 83,080 44,388 1,833 2,625 11,650 5 143,581 At 31 December 2014 Cost 104,370 127,243 3,949 13,465 11,650 5 260,682 Accumulated depreciation (21,290 ) (82,855 ) (2,116 ) (10,840 ) - - (117,101 )Net book amount 83,080 44,388 1,833 2,625 11,650 5 143,581



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10 Property, Plant and Equipment Leasehold Furniture, Capital land and fixtures and Motor Operating work in buildings fittings vehicles Computers equipment progress Total P’000 P’000 P’000 P’000 P’000 P’000 P’000

GROUP Year ended 31 December 2013 Opening net book amount 73,566 40,979 3,098 2,332 8,468 16,964 145,407 Exchange differences - 331 23 45 33 - 432 Additions 2,254 8,789 20 1,675 8,219 9,951 30,908 Assets acquired through Cresta Jwaneng business combination - 2,139 41 - - - 2,180 Disposals (618 ) (5,066 ) - (1,572 ) (5,880 ) - (13,136 )Depreciation on disposals 384 4,392 - 1,571 - - 6,347 Transfers 817 15,199 - 949 - (16,965 ) - Depreciation (2,633) (17,010) (687) (1,704) - - (22,034 )Closing net book amount 73,770 49,753 2,495 3,296 10,840 9,950 150,104 At 31 December 2013 Cost 92,201 116,052 4,020 12,264 10,840 9,950 245,326 Accumulated depreciation (18,431 ) (66,299 ) (1,525 ) (8,968 ) - - (95,223 )Net book amount 73,770 49,753 2,495 3,296 10,840 9,950 150,104 Year ended 31 December 2014 Opening net book amount 73,770 49,753 2,495 3,296 10,840 9,950 150,104 Exchange differences - (332 ) (19 ) (31 ) (68 ) (1 ) (451 )Additions 6,879 8,875 15 1,054 2,410 - 19,233 Disposals (253 ) (1,440 ) (67 ) (89 ) (1,532 ) - (3,381 )Depreciation on disposals 180 1,326 67 87 - - 1,660 Transfers 5,543 4,088 - 267 - (9,898 ) - Written off from WIP - - - - - (46 ) (46 )Depreciation (3,039 ) (17,882 ) (658 ) (1,959 ) - - (23,538 )Closing net book amount 83,080 44,388 1,833 2,625 11,650 5 143,581 At 31 December 2014 Cost 104,370 127,243 3,949 13,465 11,650 5 260,682 Accumulated depreciation (21,290 ) (82,855 ) (2,116 ) (10,840 ) - - (117,101 )Net book amount 83,080 44,388 1,833 2,625 11,650 5 143,581


10 Property, Plant and Equipment (continued) Leasehold Furniture, Capital land and fixtures and Motor Operating work in buildings fittings vehicles Computers equipment progress Total P’000 P’000 P’000 P’000 P’000 P’000 P’000

COMPANY Year ended 31 December 2013 Opening net book amount 73,566 35,073 2,696 1,525 7,862 16,964 137,686 Additions 2,234 7,925 20 1,634 7,499 9,931 29,243 Assets acquired through Cresta Jwaneng business combination - 2,139 41 - - - 2,180 Disposals (618 ) (4,313 ) - (1,572 ) (5,429 ) - (11,932 )Depreciation on disposals 384 4,206 - 1,571 - - 6,161 Transfers 817 15,199 - 949 - (16,965 ) - Depreciation (2,633 ) (15,267 ) (523 ) (1,236 ) - - (19,659 )Closing net book amount 73,750 44,962 2,234 2,871 9,932 9,930 143,679 At 31 December 2013 Cost 92,181 108,152 3,421 10,711 9,932 9,930 234,327 Accumulated depreciation (18,431 ) (63,190 ) (1,187 ) (7,840 ) - - (90,648 )Net book amount 73,750 44,962 2,234 2,871 9,932 9,930 143,679 Year ended 31 December 2014 Opening net book amount 73,750 44,962 2,234 2,871 9,932 9,930 143,679 Additions 6,838 8,502 15 741 2,287 - 18,383 Disposals (253 ) (1,440 ) (67 ) (89 ) (1,532 ) - (3,381 )Depreciation on disposals 180 1,326 67 87 - - 1,660 Transfers 5,524 4,088 - 267 - (9,879 ) - Written off from WIP - - - - - (46 ) (46 )Depreciation (3,038 ) (16,201 ) (521 ) (1,566 ) - - (21,326 )Closing net book amount 83,001 41,237 1,728 2,311 10,687 5 138,969 At 31 December 2014 Cost 104,290 119,302 3,369 11,630 10,687 5 249,283 Accumulated depreciation (21,289 ) (78,065 ) (1,641 ) (9,319 ) - - (110,314 )Net book amount 83,001 41,237 1,728 2,311 10,687 5 138,969



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11 Intangible assets Goodwill Opening net book amount 14,994 9,205 - - Exchange differences (678) 515 - - Impairment for the year (438) - - - Arising out of acquisition of business from United Promotional Enterprises (Pty) Ltd T/A Cezar Hotel - 5,274 5,274 5,274 Closing net book amount 13,878 14,994 5,274 5,274

Impairment test of goodwill For the purpose of impairment testing, goodwill is attached to the following cash generating units (CGU); Cresta Golfview Hotel Ltd 8,604 9,720 - - Cresta Jwaneng Hotel 5,274 5,274 5,274 5,274 13,878 14,994 5,274 5,274

The Group did not identify any impairment for the Cresta Jwaneng CGU. The Group did identify an impairment for the Cresta Golfview Zambia CGU. An impairment charge of P438K arose in the Cresta Golfview Zambia during the course of the 2014 year, resulting in the carrying amount of the goodwill being written down.

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates. Key assumptions used in the calculation of recoverable amounts, discount rates and growth rates, are as follows for Cresta Golfview: Inflation 7.00% 7.00% - - Growth rate beyond the budget period 3.00% 6.00% - - Discount rate 15.20% 14.70% - - Recoverable amount of the goodwill (P 000’s) 8,604 39,162 Headroom % 0% 237%

Should the discount rate be increased by 1%, further impairment of P417K would be required. Should the post-budget growth rate be decreased by 1%, further impairment of P162K would be required. Key assumptions used in the calculation of recoverable amounts, discount rates and growth rates, are as follows for Cresta Jwaneng: Inflation 5.50% 7.00% 5.50% 7.00%Growth rate beyond the budget period 5.00% 5.00% 5.00% 5.00%Discount rate 15.70% 16.70% 15.70% 16.70%Recoverable amount of the goodwill (P 000’s) 19,936 49,609 19,936 - Headroom % 378% 694% 378% -

No reasonable movement in any of the underlying assumptions would indicate impairment of the goodwill for this business unit.




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11 Intangible assets (continued) Trademarks Opening net book amount 20 60 20 60 Amortisation charge (20 ) (40 ) (20 ) (40 )Closing net book amount - 20 - 20 Cost 597 597 597 597 Accumulated amortisation (597 ) (577 ) (597 ) (577 )Net book amount - 20 - 20 Trademarks were acquired on 1 July 1999 on acquisition of the Marang Hotel and are amortised over 15 years. Lease rights Opening net book amount 209 210 209 246 Amortisation charge (36 ) (37 ) (36 ) (37 )Closing net book amount 173 173 173 209 Cost 365 365 365 365 Accumulated amortisation (192 ) (156 ) (192 ) (156 )Net book amount 173 209 173 209 Lease rights relate to leasehold concessions acquired through the leasing of property from Botsalo Hotel (Pty) Ltd on 1 October 2009 and are amortised over 10 years. Software Opening net book amount - - - - Additions 788 - 788 - Amortisation charge (213 ) - (213 ) - Closing net book amount 575 - 575 - Cost 788 - 788 - Accumulated amortisation (213) - (213 ) - Net book amount 575 - 575 - Net book amount of intangible assets (excluding goodwill) 748 229 748 229 12 Treasury Shares The company acquired 365,056 of its own shares through an offer to qualifying shareholders between 10 October 2011 and 2 December 2011. Only shareholders holding stocks of between 100 and 2000 were eligible. The total amount paid to acquire the shares was approximately P550,000 and has been deducted from retained earnings within shareholders equity. These shares are held as treasury shares. The company has the right to re-issue these shares at a later date.

5,915 5,915 550 550 In addition, shares issued to the Cresta Employee share Trust Scheme have been disclosed as treasury shares on consolidation of the trust.




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13 Inventories Foods, beverages and tobacco 2,889 2,631 2,381 2,052Curio shop 30 20 30 20 2,919 2,651 2,411 2,072 The cost of inventories recognised as expense and included in ‘cost of sales’ amounted to 39,091 36,727 34,950 30,861 14 Trade and other receivables Trade receivables 17,609 20,542 14,555 17,979 less: Provision for impairment (1,826 ) (909 ) (438 ) (778 )Trade receivables - net 15,783 19,633 14,117 17,201 Prepayments 932 605 571 235 Amount due from related parties - - 1,855 2,266 Other receivables 1,300 1,734 986 1,002 18,014 21,972 17,529 20,704 As at 31 December 2014, trade receivables of P1,177(2013 December: P1,629K) were overdue but not impaired. These relate to a number of customers for which there is no history of default. Trade receivables of P1,826K (2013:P909K) were over due and deemed not recoverable and have been provided for and included in provision for impairment. The ageing analysis of these trade receivables is as follows: over 3 months 1,177 1,629 828 1,442 The movement on the impairment of trade receivables is as follows: Movement of impairment Opening balance 909 881 778 727 Charge for the year 1,473 689 216 689 Bad debts written off (556 ) (638 ) (556 ) (638 )Bad debts recovered - (23 ) - - Closing balance 1,826 909 438 778 15 Cash and cash equivalents Cash at bank and in hand 28,359 12,085 25,649 9,731Short-term bank deposits 17,442 9,336 17,442 8,606 45,801 21,421 43,091 18,337 Short-term bank deposits have an average maturity of not more than 90 days. Cash and bank overdrafts include the following for the purposes of the cash flow statement. Cash and cash equivalents 45,801 21,421 43,091 18,337 Bank overdrafts (note 18) - (1,109 ) - (1,109 ) 45,801 20,312 43,091 17,228




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16 Stated Capital 185 000 000 ordinary shares of no par value Issued and fully paid: At end of year 18,500 18,500 18,500 18,500

17 Deferred income tax Deferred tax assets Beginning of the year 3,640 2,415 3,640 2,397 Net income statement (credit) 576 1,225 576 1,243 End of the year 4,216 3,640 4,216 3,640 The deferred tax arise from: - accelerated tax depreciation on property, plant, equipment and software (2,176 ) (1,909 ) (2,176 ) (1,909 )Lease rights - operating lease expenditure 6,392 5,549 6,392 5,549 End of the year 4,216 3,640 4,216 3,640 The analysis of deferred tax assets and deferred tax liabilities is as follows: Deferred tax liabilities - Deferred tax liabilities to be recovered more than 12 months (2,088 ) (1,413 ) (2,088 ) (1,413 ) - Deferred tax liabilities to be recovered within 12 months (88 ) (496 ) (88 ) (496 ) (2,176 ) (1,909 ) (2,176 ) (1,909 )Deferred tax assets - Deferred tax assets to be recovered after 12 months 5,548 4,911 5,548 4,911 - Deferred tax liability to be recovered within 12 months 844 638 844 638 6,392 5,549 6,392 5,549 Net 4,216 3,640 4,216 3,640 18 Borrowings Non-current Barclays Bank of Botswana Limited loan 17,227 20,711 17,227 20,711

Current

Barclays Bank of Botswana Limited loan 3,663 7,346 3,663 7,346 Bank overdrafts - 1,109 - 1,109 3,663 8,455 3,663 8,455 Bank borrowings which mature until 2022 attract an average coupon rate of prime minus 2% annually (2013: prime less 2% annually). The two loans from Barclays Bank of Botswana Limited are repayable in monthly instalments of P253,351 and P164,132 respectively at variable rate of prime less two (currently 7%).The loan relating to the acquisition of Cresta Marang Gardens was repaid over 179 monthly instalments commencing on 1 January 2000 and the last instalment was made in December 2014.




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18 Borrowings (continued)

The banking facilities available to the company as at year end: Bank overdraft 10,000 10,000 10,000 10,000 The bank overdraft bears interest at prime plus 0.5% (2013: prime plus 0.5%). The facilities are secured by: - First mortgage bond over Mowana Safari Lodge, being Lot 872 Kasane for P15,000,000. -The bank has issued guarantees in favour of Botswana Power Corporation in the amount of P130,000 as security for the supply of power on credit to the company. The carrying amounts and fair value of non- current borrowings are as follows: Bank borrowings 17,227 20,711 17,227 20,711

19 Trade and other payables Trade payables 8,652 8,305 6,999 7,489Related party balances 4,016 3,260 3,998 2,639Other accrued expense 10,414 10,004 8,991 8,981VAT payable 1,062 1,205 1,062 1,205Other payables 5,555 4,017 5,373 3,004 29,699 26,791 26,423 23,318 20 Deferred lease obligation This balance represents the difference in the straight-lined recognition of operating lease charges under IAS -17 leases, and actual lease payments made in accordance with underlying lease agreements. Balance beginning of year 26,588 20,340 25,223 19,672Movement during the year 4,243 6,248 3,835 5,551Balance at end of year 30,831 26,588 29,058 25,223 21 Deferred revenue Balance beginning of year 1,170 - 1,170 - Movement during the year 157 1,170 157 1,170Balance at end of year 1,327 1,170 1,327 1,170


- First mortgage bond over Lots. Rem 930, 931 and 21367 in Francistown for P18,390,000. - First mortgage bond over Lot. 872, Kasane for P3,090,000. - Cession of material damage policies covering the properties mentioned above. - Unlimited suretyship by Cresta Marakanelo Ltd.

The fair value of current borrowings equal their carrying amount, as the impact of discounting is not significant. The fair values are based on cash flows discounted using a floating (market) rate currently at 7% (prime less 2). The carrying amounts of the borrowings are denominated in Botswana Pula.



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22 Dividends Gross dividend 9,060 7,977 9,232 8,128 Withholding tax at 7.5% (680 ) (598 ) (692 ) (610 )Net dividends 8,380 7,379 8,540 7,518 23 Operating lease commitment

No later than 1 year 37,459 34,017 34,103 30,657Later than 1 year and no later than 5 years 182,152 157,617 166,964 144,460Later than 5 years 39,382 94,762 30,602 81,188 258,993 286,396 231,669 256,305 The company/group holds the following leases: Cresta Lodge Lot 50719- Gaborone- 10 year lease with Letlole La Rona Limited (formerly Botswana Hotel development Company (Pty) Ltd (BHDC)) commenced in 1 July 2002. Annual lease rentals amount to P3,600,000 for the first year with annual escalations of 8%. However, a new 10 year lease agreement has been entered with effect from 1 July 2010. According to the agreement, annual lease rentals amount to P5,880,000 for the first year with annual escalations of 8%. Cresta President Hotel Lot 1168/9 - Gaborone - 10 year lease with Letlole La Rona commenced 1 July 2002. Annual lease rentals amount to P540,000 for the first year with annual escalations of 8%. However, new 10 year lease agreement has been entered with effect from 1 July 2010. According to the agreement, annual lease rentals amount to P3,960,000 for the first year with annual escalations of 8%. Cresta Rileys Hotel Tribal Lot TB - Maun - 10 year lease with Botswana Hotels Development Company (Proprietary) Limited commenced 1 July 2002. Annual lease rentals amount to P840,000 for the first year with annual escalations of 8%. However, new 10 year lease agreement has been entered with effect from 1 July 2010. According to the agreement, annual lease rentals amount to P1,680,000 for the first year with annual escalations of 8%. Cresta Bosele Hotel Lot 276 - Selebi Phikwe - 10 year lease with Letlole La Rona Limited commenced 1 July 2002. Annual lease rentals amount to P648,000 for the first year with annual escalations of 8%. However, new 10 year lease agreement has been entered with effect from 1 July 2010. According to the agreement, annual lease rentals amount to P1,560,000 for the first year with annual escalations of 8%. Cresta Thapama Hotel Lot 6348 - Francistown - 10 year lease with Letlole La Rona Limited commenced 1 July 2002. Annual lease rentals amount to P1,320,000 for the first year with annual escalations of 8%. However, new 10 year lease agreement has been entered with effect from 1 July 2010. According to the agreement, annual lease rentals amount to P3,960,000 for the first year with annual escalations of 8%.


The company/group leases hotel properties under non cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights. The leases for the hotel properties are for a period of 10 years signed with Letlole la Rona Limited (formerly Botswana Hotel Development Company (Proprietary) Limited (BHDC)) with effect from 1 July 2010. The future aggregate minimum lease payments under non-cancellable operating leases are as follows;



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23 Operating lease commitment (continued)

Mowana Safari Lodge Agreement through a “Deed of Fixed Period State Grant” between the Government of Botswana and Cresta Marakanelo (Pty) Ltd dated 22 January 1998 for lease over Lot 2239 - Kasane, representing 34,1684 hectares in the Chobe Administrative District. The state grant is for a period of 50 years expiring on 22 January 2048 upon which the land together with all improvements thereon shall revert to the State absolutely without compensation payable for improvements or otherwise. Cresta Marang Hotel Agreement through a “Deed of Fixed Period State Grant” between the government of Botswana and Cresta Marakanelo Ltd dated 14 November 1996 for lease over plots 930, 931 and 21367 - Francistown, representing 6,3829 hectares in the North East Administrative District. The state grant is for a period of 50 years expiring on 14 November 2046 upon which the land together with all improvements thereon shall revert to the State absolutely without compensation payable for improvements or otherwise. In addition, the company has a lease agreement with Knight Bridge (Pty) Ltd in respect of Residential Hotel for plot 6218 portion of lot 931, Francistown. The lease is for 10 years commencing on 1 July 2007 and renewable at the option of Cresta Marakanelo Ltd for a further 10 year period. Annual lease rental amount to P 2,095,153. Cresta Botsalo Hotel Lot 87 - Palapye - 10 year lease with Botsalo Hotel (Pty) Ltd commenced 1 October 2009. Annual lease rentals amount to P1,500,000 for the first year with annual escalations of 8%. Cresta Golfview Hotel, Zambia Lot 10247 - Lusaka, Zambia - 10 year lease with Golfview Hotel Ltd Ltd commenced 1 February 2012. Annual lease rentals amount to US$360,000 (equivalent to P2,823,529 for the first year with annual escalations of 5%. Cresta Mahalapye Hotel Mahalapye - 10 year lease Tora Properties (Pty) Ltd commenced 1 October 2012. Annual lease rentals amount to P1,620,000 for the first year with annual escalations of 8%. Cresta Jwaneng Hotel Lot 5483 - Jwaneng - 10 year lease with United promotional Enterprise (Pty) Ltd commenced 1 June 2013. Annual lease rentals amount to P2,340,000 for the first year with annual escalations of 8%. Cresta Head office Plot 74538, Marula House, 2nd floor, New CBD,Gaborone - 5 year lease with Primetime Property Holdings Ltd commenced 1 April 2014. Annual lease rentals amount to P1 176 953 for the first year with annual escalations of 8%.




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24 Cash generated from operations Operating activities Operating profit 34,859 31,406 36,454 30,702 Adjustments: - Impairment of Employee share trust loan - - 425 236 - Impairment of Goodwill 438 - - - - Depreciation 23,538 22,034 21,326 19,659 - Operating equipment write off 1,532 5,880 1,532 5,429 - Amortisation of trademarks and lease rights 232 77 232 77 - Deferred lease expenses 4,243 6,248 3,835 5,551 -Deferred revenue 157 1,170 157 1,170 - Loss/(gain) on disposal of plant and equipment (27 ) 812 (27 ) 338 64,972 67,627 63,934 63,162 Changes in working capital: - Inventories (267 ) (798 ) (339 ) (618 )- Receivables and prepayments 3,957 (6,830 ) 3,174 (6,837 )- Trade and other payables 2,908 7,134 3,105 6,735 Cash generated from operations 71,570 67,133 69,874 62,442 25 Related party transactions

i) Purchase of services Management services - fees - Management fees - Cresta Holdings (Pty) Ltd 9,094 8,672 8,382 7,907- Profit bonus - Cresta Holdings (Pty) Ltd 8,601 8,185 8,697 7,697Rent paid - Letlole La Rona (Pty) Ltd 20,123 18,633 20,123 18,633 - Botswana Hotel Development Company (Pty) Ltd 2,201 2,157 2,201 2,157 40,019 37,647 39,403 36,394 Services are provided on the basis of existing agreements with related parties. ii) Year-end balances arising from sales/purchases of services: Receivables from related parties: -Cresta Golfview Zambia (note 14) 1,855 2,266Payables to related parties -Cresta Holdings (Pty) Ltd (note 19) 4,016 3,260 3,998 2,639 iii) Loans to related parties Cresta Golfview Zambia (note 8) - - 16,886 16,754


Related companies are companies under common control, directors or ownership. The following are related parties: Botswana Development Corporation Limited- Shareholder with 26% interest. TA Botswana- 40% shareholder interest. Botswana Hotel Development Company- 100% subsidiary of Botswana Development Company and landlord to Cresta Marakanelo Ltd. Letlole La Rona- subsidiary of Botswana Development Corporation and landlord to Cresta Marakanelo Ltd. Cresta Holdings Botswana Ltd- Management company owned by TA Botswana Ltd. Cresta Golfview Hotel Ltd, Zambia is a wholly owned subsidiary of Cresta Marakanelo Ltd. Cresta Holdings (Pty) Ltd has got a management contract with Cresta Marakanelo Ltd.



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25 Related party transactions (continued)

iv) Key management compensation Key management includes Group chief operating officer, Group sales and marketing manager, Group project manager and Group human resource manager. The compensation paid or payable to key management for employee services is shown below: Salaries and other short-term employee benefits 5,027 4,733 2,921 2,682Termination benefits 790 456 525 456 26 Business Combination During the year 2013, the Group entered into an agreement with United Promotional Enterprise (Pty) Ltd (t/a Cezar Hotel) , a company registered in Botswana, to acquire the hotel business which operated within Jwaneng township. As a result of the acquisition, the Group is expected to increase its presence in the mining town. Customer relationships are not formalised and they are more of a transient in nature in that they are contractors / visitors to the mine or hospital. Accordingly, any value assigned to these relationships would be best assigned to the location of the premises and thus included in goodwill. The fair-value of the assembled and trained workforce was measured on the Assemblage Cost Avoided method and has been recognised as part of goodwill. The following table summarises the consideration paid to UPE for the fair-value of assets acquired at the acquisition date: At fair value 2013 P’000

Inventories (46 ) Property, plant and equipment (2,180 ) Total identifiable net assets (2,226 ) Purchase consideration paid to United Promotional Enterprise (Pty) Ltd 7,500 Residual value allocated to Goodwill 5,274 The revenue included in the consolidated statement of comprehensive income since 1 June 2013 contributed by Cresta Jwaneng was P 8,802,000. Cresta Jwaneng also contributed profit of P 916,000 over the same period. 27 Contingent liabilities During 2003, the Botswana Unified Revenue Service (“BURS”) investigated the company with a view to recover withholding tax in respect of management fees paid from 1988 to 2002. The total management fees paid in the period was P32,931,362 and withholding tax due thereon is P4,002,090 plus penalty interest at 2% per month from date of assessment. In 2011, the High Court of the Republic of Botswana found in favour of company by way of settlement of P323,770 to BURS. However, Attorney General’s Chambers acting on behalf of BURS has lodged an appeal against the High Court decision. The outcome of this matter is not yet reliably known. The directors are satisfied, based on legal opinion obtained, that no provision for the potential liability is required.




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28 Commitments a) Capital commitments Capital expenditure approved by the Board but not yet contracted are as follows: Furniture and Fittings 16,120 14,817 13,975 13,005 b) Operating lease commitments- Group/Company as lessee Refer (Note 23)

29 Segmental information While strategic decision making rights vests with the Board of Cresta Marakanelo Limited, operational and managerial responsibility vests with Executive Management, which includes the Chief Executive Officer, Chief Financial Officer, Group Operations Manager, Group Sales and Marketing Manager, Group Project Manager and Group Human Resources Manager. For the purpose of presenting segmental information, Executive management has been identified as the Chief Decision Maker as defined in IFRS 8 (Operating segments) The main reporting segments reviewed by the Chief Operating Decision Maker are: - Cresta Urban Oasis The hotels under this Gateway operate in major cities in Botswana and Zambia primarily targeting business travellers. These properties are located close to the city centre and have lush gardens offering a more serene environment. The facilities available include meeting and conference rooms, wireless internet access and high-end restaurants, thereby meeting all business travellers’ needs. The hotels under this Gateway are Cresta Lodge Gaborone, Cresta Marang Gardens and Cresta Golfview, Zambia. - Cresta Urban Heartbeat Similar to Cresta Urban Oasis, the hotels in the Cresta Urban Heartbeat brand cater for business travellers as they are located in the city centres of the major cities (Gaborone and Francistown). These hotels offer a cosmopolitan setting with simple rooms and high quality restaurants ideal for business meals. Hotels under this Gateway are Cresta President Hotel and Cresta Thapama Hotel. - Cresta African Roots These hotels offer modern and affordable accommodation, emphasising on value and comfort. They are located in the smaller cities within Botswana and have access to the surrounding areas. Hotels under this Gateway include Cresta Riley’s Hotel, Cresta Bosele Hotel, Cresta Jwaneng Hotel,Cresta Mahalpye Hotel and Cresta Botsalo Hotel. - Cresta African fingerprint Only one hotel, Mowana Safari Lodge, is classified within this brand, and is a signature destination offering a unique travel experience to guests. This Gateway’s hotel has a high rating and offers guests a travel experience, which includes safaris and other activities in addition to top class hotel rooms and restaurants. The Chief Operating Decision Maker reviews performance of each segment based on operating profit achieved, total assets employed and net assets employed.




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29 Segmental information (cont.) Cresta Cresta Cresta Cresta Urban Urban African African Control Oasis Heartbeat Roots Fingerprint Unit Combined P’000 P’000 P’000 P’000 P’000 P’000

GROUP YEAR ENDED 31 DECEMBER 2014 Revenue 96,299 68,294 85,385 52,011 1,206 303,195 Accom revenue 52,783 41,726 50,757 26,890 - 172,156 Food revenue 33,072 19,121 26,351 15,815 - 94,359 Bar revenue 6,236 4,568 6,223 2,893 - 19,920 Other 4,208 2,879 2,054 6,413 1,206 16,760 Cost of Sales (52,045 ) (37,542 ) (50,850 ) (25,465 ) (11,617 ) (177,519 )Gross profit 44,254 30,752 34,535 26,546 (10,411) 125,676 Other income 1,514 - - - - 1,514 Sales and distribution costs (1,378 ) (587 ) (1,203 ) (1,307 ) (4,764 ) (9,239 )Administration and operating expenses (36,269 ) (15,745 ) (27,179 ) (15,032 ) 11,106 (83,119 )Other (losses)/gains-net 27 - - - - 27 Other income - - - - - - Operating profit 8,148 14,420 6,153 10,207 (4,069 ) 34,859 Finance income - - - - 614 614 Finance expense (1,538 ) - (449 ) - (1,183 ) (3,170 )Reportable segment income before tax 6,610 14,420 5,704 10,207 (4,638 ) 32,303 Income tax expense (8,245 )Other-currency translation difference 40 Net profit after income tax 24,098 Total assets 82,021 10,878 50,650 64,569 21,050 229,168 Total liabilities 8,914 2,373 7,717 5,765 59,275 84,044 Capital expenditure 1,908 2,706 10,989 2,266 1,364 19,233 Depreciation 8,024 1,518 9,273 4,316 407 23,538 Amortisation 61 53 109 9 - 232




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COMPANY YEAR ENDED 31 DECEMBER 2014 Revenue 72,569 68,294 85,385 52,011 1,206 279,465 Accom revenue 43,354 41,726 50,757 26,890 - 162,727 Food revenue 21,910 19,121 26,351 15,815 - 83,197 Bar revenue 4,314 4,568 6,223 2,893 - 17,998 Other 2,991 2,879 2,054 6,413 1,206 15,543 Cost of Sales (40,161 ) (37,542 ) (50,850 ) (25,465 ) (11,617 ) (165,635 )Gross profit 32,408 30,752 34,535 26,546 (10,411 ) 113,830 Other income 427 - - - - 427 Sales and distribution costs (710 ) (587 ) (1,203 ) (1,307 ) (4,764 ) (8,571 )Administration and operating expenses (22,409 ) (15,745 ) (27,179 ) (15,032 ) 11,106 (69,259 )Other (losses)/gains-net 27 - - - - 27 Operating profit 9,743 14,420 6,153 10,207 (4,069 ) 36,454 Finance income - - - - 2,424 2,424 Finance expense (141 ) - (449 ) - (1,184 ) (1,774 )Reportable segment income before tax 9,602 14,420 5,704 10,207 (2,829 ) 37,104 Dividend income Income tax expense (8,245 )Net profit after income tax 28,859 Total assets 63,234 10,878 50,650 64,569 41,173 230,504 Total liabilities 3,864 2,373 7,717 5,765 59,276 78,995 Capital expenditure 1,058 2,706 10,989 2,266 1,364 18,383 Depreciation 5,812 1,518 9,273 4,316 407 21,326 Amortisation 61 53 109 9 - 232




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GROUP YEAR ENDED 31 DECEMBER 2013

Revenue 92,360 64,919 73,339 48,470 2,036 281,124 Accom revenue 52,464 40,072 42,609 25,593 - -Food revenue 28,929 17,811 23,250 15,673 - - Bar revenue 6,074 4,989 5,368 2,680 - -Other 4,892 2,047 2,112 4,523 2,036 -Cost of Sales (48,501 ) (35,594 ) (42,983 ) (24,727 ) (11,026 ) (162,831 )Gross profit 43,859 29,325 30,356 23,743 (8,990) 118,293 Sales and distribution costs (1,395 ) (707 ) (1,141 ) (1,411 ) (3,660 ) (8,314 )Administration and operating expenses (33,160 ) (15,996 ) (21,912 ) (14,580 ) 7,240 (78,408 )Other (losses)/ gains-net (812 ) - - - - (812 )Other Income 647 647 Operating profit 8,492 12,622 7,303 7,752 (4,763 ) 31,406 Finance income - - - - 811 811 Finance expense (486 ) (2 ) (363 ) - (2,016 ) (2,867 )Reportable segment income before tax 8,006 12,620 6,940 7,752 (5,968 ) 29,350 Income tax expense (6,865 )Other-currency translation difference (116 )Net profit after income tax 22,369 Total assets 51,977 9,380 48,621 66,150 38,896 215,024 Total liabilities 12,244 2,964 14,689 5,531 49,509 84,937 Capital expenditure 2,892 1,156 27,541 1,705 226 33,520 Depreciation 7,626 2,663 7,122 4,389 234 22,034 Amortisation 40 - 37 - - 77




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COMPANY YEAR ENDED 31 DECEMBER 2013 Revenue 67,153 64,919 73,339 48,470 2,684 256,565 Accom revenue 41,669 40,072 42,609 25,593 - 149,944 Food revenue 18,221 17,811 23,250 15,673 - 74,956 Bar revenue 4,304 4,989 5,368 2,680 - 17,341 Other 2,958 2,047 2,112 4,523 2,684 14,324 Cost of Sales (37,186 ) (35,594 ) (42,983 ) (24,727 ) (11,026 ) (151,516 )Gross profit 29,967 29,325 30,356 23,743 (8,342 ) 105,049 Sales and distribution costs (925 ) (707 ) (1,141 ) (1,411 ) (3,661 ) (7,845 )Administration and operating expenses (20,755 ) (15,996 ) (21,912 ) (14,580 ) 7,079 (66,164)Other (losses)/ gains-net (338 ) - - - - (338 )Operating profit 7,949 12,622 7,303 7,752 (4,924 ) 30,702 Finance income - - - - 2,255 2,255 Finance expense (486 ) (2 ) (363 ) - (1,807 ) (2,658 )Reportable segment income before tax 7,463 12,620 6,940 7,752 (4,476 ) 30,299 Dividend income 555 Income tax expense (6,883 )Net profit after income tax 23,971 Total assets 47,966 9,380 48,621 66,150 39,860 211,977 Total liabilities 7,403 2,964 14,689 5,531 49,507 80,094 Capital expenditure 795 1,156 27,541 1,705 226 31,423 Depreciation 5,251 2,663 7,122 4,389 234 19,659 Amortisation 40 - 37 - - 77




88

TOP 20 SHAREHOLDERS

Name Shares held % holding

T A BOTSWANA LIMITED 74,000,000 40.00%

BOTSWANA DEVELOPMENT CORPORATION LIMITED 48,100,000 26.00%

MOTOR VEHICLE ACCIDENT FUND 9,250,010 5.00%

FNB NOMS BW(PTY) LTD RE: BIFM BPOPF ACTIVE 8,540,038 4.62%

BOTSWANA INSURANCE FUND MANAGEMENT 6,841,407 3.70%

CRESTA EMPLOYEE SHARE TRUST 3,700,000 2.00%

FNB NOMINEES (PTY)LTD RE: SIMS BPOPF 2,800,000 1.51%

SBB NOMINEES ( PTY) LTD RE A/C B00485 2,183,958 1.18%

FNB NOMS BW(PTY) LTD RE: BIFM BPOPLF WP 1,994,551 1.08%

DEBSWANA PENSION FUND 1,626,207 0.88%

DEBSWANA PENSION FUND 1,554,653 0.84%

FNB NOMINEES (PTY)LTD RE: AGRAY BPOPF 1,103,184 0.60%

SCBN (PTY) LTD RE: AG 214/001 1,019,878 0.55%

HAYES 778,714 0.42%

BURS EMPLOYEE PENSION FUND 515,802 0.28%

FNB NOMINEES BOTSWANA (PTY) LTD RE: SIMS BBDCSPF 510,000 0.28%

SCBN (PTY) LTD RE: AG 216/001 410,994 0.22%

KNIGHTS BRIDGE PTY LTD 350,000 0.19%

SIKALESELE 350,000 0.19%

ESTATE PROPERTY INVESTMENTS (PTY) LTD 340,000 0.18%

165,969,396 89.71%

Other Shareholders 19,030,604 10.29%

185,000,000 100.00%



89

PROXY FORM


(Please complete in block letters)

I/We*

Of

Being a member of Cresta Marakanelo Limited, hereby appoint (see note 1):

1. or failing him/her

2. or failing him/her3. The Chairman of the meeting,as my/our proxy to act for me/us at the Annual General Meeting which will be held for purpose of considering, and if deemed fit, passing with or without modification, the resolutions to be proposed thereat and at each adjournment thereof, and to vote for or against resolutions and/or abstain from voting in respect of the ordinary shares registered in my/our name in accordance with the following instructions (see note 2):

Number of Ordinary Shares

For Against Abstain

Ordinary resolution number 1









Signed: ____________________________ on this _______ day of _________________ 2015

Please read the notes on the reverse side hereof.


90

1. A shareholder may insert the names of two alternative proxies of the shareholder’s choice in the space provided, with or without deleting “the Chairman of the Annual General Meeting”. The person whose name appears first on the form of proxy and whose name has not been deleted will be entitled to act as proxy to the exclusion of those whose names follow.

2. A shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by the shareholder in the appropriate space provided. Failure to comply herewith will be deemed to authorize the proxy to vote at the Annual General Meeting as he/she deems fit in respect of the shareholder’s votes exercisable thereat, but where the proxy is the Chairman, failure to comply will be deemed to authorize the proxy to vote in favour of the resolution. A shareholder or his/her proxy is obliged to use all the votes exercisable by the shareholder or by his/her proxy.

3. Forms of proxy must be lodged at or posted to the Company Secretary at P/Bag 00272, Plot 50676 Fairgrounds Office Park, Phase 2,Block D, Gaborone not later than 48 hours before the time fixed for holding the meeting.

4. The completion and lodging of this form will not preclude the relevant shareholder from attending the Annual General Meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof should such shareholder wish to do so.

5. The Chairman of the Annual General Meeting may reject or accept any form of proxy not completed and/or received other than in accordance with these notes provided that he/she is satisfied as to the manner in which the shareholder concerned wishes to vote.

6. An instrument of proxy shall be valid for the Annual General Meeting as well as for any adjournment thereof, unless the contrary is stated thereon.

7. A vote given in accordance with the terms of a proxy shall be valid, notwithstanding the previous death or insanity of the shareholder, or revocation of the proxy, or of the authority under which the proxy was executed, or the transfer of the ordinary shares in respect of which the proxy is given, provided that no intimation in writing of such death, insanity or revocation shall have been received by the Company not less than one hour before the commencement of the Annual General Meeting or adjourned Annual General Meeting at which the proxy is to be used.

8. The authority of a person signing the form of proxy under a power of attorney or on behalf of a company must be attached to the form of proxy, unless the authority or full power of attorney has already been registered by the Company or the Transfer Secretaries.

9. Where ordinary shares are held jointly, all joint shareholders must sign.

10. 10. A minor must be assisted by his/her guardian, unless the relevant documents establishing his/her legal capacity are produced or have been registered by the Company.

PROXY FORM



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Notice is hereby given that the 2014 Annual General Meeting of members will be held on Friday 26 June 2015 at 0900hrs at the Cresta Lodge Conference room, to transact the following business;

1. To receive, consider and adopt the audited annual financial statements for the period ended 31 December 2014 together with the directors’ and auditors’ reports thereon.

2. To approve the dividends declared by the Directors.

• Finaldividendof6thebepersharepaidtotheshareholdersonorabout23May2015.

3. To re-elect all directors who retire in terms of the Constitution of the Company, section 20.10.1 who are eligible and offer themselves for re-election.

4. To approve the Directors’ remuneration for the past financial year.

5. To approve the dissolution of the Cresta Marakanelo Limited Employee Share Trust (EST) and its Rules.

6. To approve that the Company buy-back 2% constituting 3,700,000 shares of the Company from the EST at the last traded price of Cresta Shares quoted on the Botswana Stock Exchange on the date that Cresta executes the share buy-back; and

That the shares purchased by the Company be retained as treasury shares.

7. To approve the formation of a Cresta Marakanelo Limited Phantom Share Scheme and to adopt its rules.

8. To re-appoint PricewaterhouseCoopers as external auditors for the ensuing year and to approve the remuneration for the year ended 31 December 2014.

9. To transact any other business that may be transacted at an Annual General Meeting.

Any member entitled to attend and vote, if unable to attend for any reason, is entitled to appoint a proxy or proxies to attend, speak,and on a poll, vote in his/her stead, and such proxy need not also be a member of the Company. Proxy forms should be forwarded toreach the Registered Office of the Company at least 48 hours before the time fixed for holding the meeting.

By Order of the BoardV Mganga

CFO / Company Secretary12 May 2015

Notice of Annual General Meeting


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NOTES

Investor Relations

Cresta Marakanelo Limited 2014 annual report