Zimplow Financials

Z I M P L O WA N N U A L R E P O R T Mission, Vision and Core Values MISSION To avail quality, affordable and reliable steel products on time everytime to the mining, farming, construction and manufacturing sectors. VISION To be a market leader in the design, sourcing and distribution of at least one of our products in eight countries south of the Sahara for all our products by 2020. CORE VALUES Integrity Being absolutely truthful and accepting responsibility for our actions. Quality Being professional and quality oriented in everything we do. Teamwork Working together to achieve a common goal. Dependability Our customers, employees and suppliers must be able to count on us. Fun Embracing a positive attitude and spontaineity. Zimplow Limited « ii » 2011 Annual Report Contents 2 Directorship and Administration 3 Notice to Shareholders 4 Chairman’s Review 5 Report of The Directors 6 Corporate Governance 7 Financial Highlights 8 Independent Auditor’s Report 10 Consolidated Statement of Comprehensive Income 11 Consolidated Statement of Financial Position 12 Consolidated Statement of Changes In Equity 13 Consolidated Statement of Cash Flows 14 Notes to the Financial Statements 54 Consolidated Statement of Value Added 55 Shareholders’ Analysis 56 Financial Review 2011 57 Financial Calendar Zimplow Limited «1» 2011 Annual Report 6th Avenue / Fife Street.Directorship and Administration DIRECTORS: P Devenish Z Kumwenda* A Kurauone B Mitchell* D Mkonto* E Mlambo T Moyo N Nhira Z L Rusike (Chairman) F Rwakonda* (Appointed 22 August 2011) * Executive D Mkonto GROUP SECRETARY: TRANSFER SECRETARIES: Corpserve (Private) Limited Cnr 1st Street / Union Avenue. Harare AUDIT COMMITTEE: A Kurauone (Chairman) T Moyo N Nhira REMUNERATION COMMITTEE: Z L Rusike (Chairman) P Devenish E Mlambo EXECUTIVE COMMITTEE: Z Kumwenda B Mitchell D Mkonto F Rwakonda REGISTERED OFFICE: 39 Steelworks Road. PO Box 1059. Heavy Industrial Sites. Bulawayo AUDITORS: Ernst & Young Derry House. Bulawayo BANKERS: African Banking Corporation Limited Barclays Bank of Zimbabwe Limited Kingdom Bank Limited Merchant Bank of Central Africa Limited National Merchant Bank Limited CURRENCY OF FINANCIAL STATEMENTS: United States Dollars PERIOD OF FINANCIAL STATEMENTS: Zimplow Limited Year ended 31 December 2011 «2» 2011 Annual Report . 3. they offer themselves for re-election. To receive and adopt the directors’ report and audited financial statements for the year ended 31 December 2011. To approve the remuneration of directors for the year ended 31 December 2011. Proxy forms must be lodged at the registered office of the Group not less than forty-eight hours before the time of the meeting. and Mr Z Kumwenda and Mrs D Mkonto who retire from office by rotation. To approve the payment of final dividend number 68 of 0. who retire from office in accordance with the Group’s Articles of Association . Rwakonda. 2. All being available. BY ORDER OF THE BOARD D MKONTO Company Secretary 39 Steelworks Road P. Bulawayo on 28 March 2012 at 10:00 hours to transact the following business: AGENDA Ordinary Business 1. To fix the auditors’ remuneration for the year ended 31 December 2011.O. To appoint auditors for the financial year ending 31 December 2012. To elect directors Mr F. Such proxy need not be a member of the Group.27 United States cents per share proposed on 22 February 2012. Box 1059 BULAWAYO 22 February 2012 A member entitled to attend and vote is entitled to appoint one or more proxies to act in the alternative and to attend and vote and speak in his stead. Zimplow Limited «3» 2011 Annual Report . 4. 6. To approve the minutes of the Annual General Meeting held on 30 March 2011. Falcon Street and Wanderer Road. 5. 7.Notice to Shareholders SIXTH SECOND ANNUAL GENERAL MEETING Notice is hereby given that the Sixth second Annual General Meeting of shareholders will be held at the CT Bolts Division Office. The subsidiary contributed US$1. for the 12 months ended 31 December 2011 as compared The CEO. Additionally. that will be brought about by huge wage demands. 3 million for the same period in 2010. increased by 87% in 2011 as compared to the same period in 2010. the results of which have been consolidated. The full impact of electricity tariff increases by the Zimbabwe C. was 25% compared to 20% in 2010 and this resulted in attributable profit of US$2. US$2. Liquid- pared to net income before tax for the 12 months to 31 De- ity challenges which intensified towards the end of 2011 cember 2010 of US$2.34 million for 2010. the Company man- December 2011 as compared to attributable income after aged to grow both volumes and profit in the face of serious tax of US$2. the rainfall as compared with 127 tonnes for the 12 months ended patterns in the region have been erratic. ACKNOWLEDGEMENTS My appreciation goes to fellow Board members for the Tassburg volume sales increased by 47% to 107 tonnes clarity of direction they continue to offer to the business. pressures on margins. 2 million in 2010 to US$1. This increase was due to improved local market as well as additional revenue from the new acquisition. achieving yet another commendable set of results. Z L Rusike Chairman 22 February 2012 FINANCIAL REVIEW Group Revenue for the 12 months ended December 31.5 million as compared to US$12. Bolts mild steel volume sales increased by 15% for Electricity Supply Authority of 51% and increases in all the 12 months ended 31 December 2011 to 146 tonnes utilities will be fully felt in 2012.5 million to turnover and $145 thousand dollars to income before tax. Spare parts vol- The year 2012 is expected to exert more cost pressures umes decreased by 11% in 2011 when compared to 2010. management and employees deserve credit for to 73 tonnes for the same period in 2010.Chairman’s Review INTRODUCTION Zimplow net income before tax for the twelve months The much anticipated upturn in the economy for 2011 fiz- ended 31 December 2011 was US$3. This represents a 24% and local cost increases. 8 million for the 12 months ended December 31 2011. over a ten month period. Mild steel bolts in units increased by pursuing its growth strategies aimed at improving local and 34% in 2011 while high tensile bolts in units substantially regional competitiveness. cember 2011 increased by 27% to 74 thousand implements. as compared with 59 thousand implements for the PROSPECTS 12 months ended 31 December 2010. Zimplow Limited «4» 2011 Annual Report .73 million for the year ended 31 In spite of these and other challenges. The effective tax rate for the year under review the situation. led by electricity tariffs worsened increase. 92 million. The decrease was OPERATIONS mainly due to an advance corporation tax payment of Mealie Brand volumes for the 12 months ended 31 De- US$443 thousand dollars. 64 million as com- zled out particularly in the second half of the year. Domestic revenue increased by 30% while foreign revenue improved by 17%. 2011 increased by 26% to US15.The Group is still 31 December 2010. I am delighted as your chairman to report and comment on a pleasing set of results for the 12 Net cash flow from operating activities decreased from months ended 31 December 2011.T. On 1 March 2011 the company acquired 49% of a South African animal traction distribution company – African Traction and Associated Technologies(AFRITRAC). 21 United States cents) per share was proposed on 22 February 2012.27 United States cents (2010-0. Capital commitments for the year to 31 December 2012 amount to US$ 326 560.Report of the Directors Your directors’ report on the operations of Zimplow Limited for the year ended 31 December 2011 is as follows: PROFIT AND APPROPRIATION The profit and relative appropriations are as follows: 31 December 2011 31 December 2010 US$ US$ Profit for the year Equity dividend proposed/paid Retained earnings brought forward Retained earnings carried forward 2 730 282 (686 851) 4 171 468 6 214 899 2 342 001 (700 000) 1 829 467 4 171 468 DIVIDEND A final dividend number 68 of 0. AUDITORS Messrs Ernst & Young remain in office until the conclusion of the Annual General Meeting on 28 March 2012. in terms of Extraordinary General Meetings of Members held on 30 August 1989. Messrs Ernst & Young have indicated their willingness to continue in office. Rusike Chief Executive Officer Z. 16 November 2005 and 14 November 2007. For and on behalf of the Board Chairman Z. DIRECTORATE The names of the directors and secretary are those in office at the time of the printing of this Notice (22 February 2012). 10 November 2004. at which members will be asked to fix their remuneration for the year under review and to appoint the auditors for the ensuing year. SHARE CAPITAL The unissued ordinary shares of 163 722 372 have been placed under the control of the directors. Kumwenda Zimplow Limited «5» 2011 Annual Report . PLANT AND EQUIPMENT Capital expenditure for the year ended 31 December 2011 totalled US$ 510 762. PROPERTY. Stating whether applicable accounting standards have been followed subject to any material departures disclosed and explained in the financial statements. The annual. four executive directors and six non-executive directors. Their terms of reference and composition are regularly reviewed. half yearly statements and financial reporting matters are reviewed by the committee at appropriate intervals. AUDIT COMMITTEE The audit committee liaises with the Group’s external auditors. Keeping proper accounting records. The chairman of the various committees are all non-executive directors. The external auditors have unrestricted access to the audit committee. EXECUTIVE COMMITTEE The executive committee sits between board meetings to deliberate and consider detailed operational issues of the Group which includes strategy implementation. Selecting appropriate accounting policies and applying them consistently. DIRECTORS’ RESPONSIBILITY STATEMENT The directors are responsible for: 1. They have introduced structures of corporate governance. certain functions and responsibilities have been delegated to the following committees.Corporate Governance BOARD OF DIRECTORS The board of directors consists of a non-executive chairman. 5. 3. Zimplow Limited «6» 2011 Annual Report . dictate policy. Preparing the financial statements on a “going concern” basis unless it is inappropriate to presume that the Group will continue in business. REMUNERATION COMMITTEE This committee sets the remuneration of the executive directors and approves guidelines for the Group’s pay reviews. Safeguarding the assets of the Group and taking reasonable steps for the prevention and detection of fraud and other irregularities. The board meets regularly to review results. Making judgements and estimates that are both reasonable and prudent. 2. formulate overall strategy and approve the budgets. 6. 4. 01 0.01 0.01 Operating cash flow 0.Financial Highlights Year Ended 31 December 2011 US$ Year Ended 31 December 2010 US$ 15 503 306 12 298 300 Profit before taxation 3 635 273 2 922 253 Profit after taxation 2 730 282 2 342 001 Total assets 16 745 397 13 493 652 Market capitalisation 26 902 210 21 913 886 (US$ per share) (US$ per share) Basic earnings 0.01 Turnover Ordinary Share Performance Weighted average number of shares Zimplow Limited 334 743 344 «7» 2011 Annual Report 327 071 924 . BASIS OF OPINION An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. whether due to fraud or error. as well as evaluating the overall presentation of the financial statements. AUDITORS’ RESPONSIBILITY Our responsibility is to express an opinion on these consolidated financial statements based on our audit. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors.Independent Auditor’s Report Chartered Accountants (Zimbabwe) Derry House Cnr Fife Street/6th Avenue P. including the assessment of the risks of material misstatement of the financial statements. DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The Group’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards (IFRS) and in the manner required by the Companies Act (Chapter 24:03) and the relevant statutory instruments (SI 33/99 and SI 62/96) and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement. the consolidated statement of comprehensive income. whether due to fraud or error. but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. The procedures selected depend on the auditor’s judgment. In making those risk assessments. the notes to the financial statements which include a summary of significant accounting policies and other explanatory information. Bulawayo Tel: +263 9 76111 Fax: +263 9 72359 REPORT OF THE INDEPENDENT AUDITORS To the members of ZIMPLOW LIMITED REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying consolidated financial statements of Zimplow Limited set out on pages 10 to 53.O. the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended. Box 437. We conducted our audit in accordance with International Standards on Auditing. Zimplow Limited «8» 2011 Annual Report . Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. which comprise the consolidated statement of financial position as at 31 December 2011. the financial statements have. AUDIT OPINION In our opinion. Report on other legal and regulatory requirements In our opinion. in all material respects. Registered Public Auditors Bulawayo 28 February 2012 Zimplow Limited «9» 2011 Annual Report . and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. been properly prepared in compliance with the disclosure requirements of the Companies Act (Chapter 24:03) and the relevant Statutory Instruments (SI 33/99 and SI 62/96). the financial position of Zimplow Limited as at 31 December 2011. in all material respects. the consolidated financial statements present fairly.Independent Auditor’s Report continued We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1 Other comprehensive (loss)/income for the year.01 Diluted 22 0. net of tax 4 546 (160 353) (19) 105 Total comprehensive income for the year 2 569 929 2 342 106 Profit attributable to: Owners of the parent 2 677 328 2 342 001 Non-controlling interests 52 954 - 2 730 282 2 342 001 Total comprehensive income attributable to: Owners of the parent 2 583 057 2 342 106 Non-controlling interests (13 128) - 2 569 929 2 342 106 Earnings per share ($) Basic 22 0.01 0. 6.1 Profit for the year 2 730 282 2 342 001 Other comprehensive income : Fair value (loss)/gain on available for sale financial assets (29 752) 124 Exchange differences on translating foreign operations Income tax relating to components of other (135 147) - comprehensive income.01 0.Consolidated Statement of Comprehensive Income for the year ended 31 December 2011 Notes Year Ended 31 Dec 2011 US$ Year Ended 31 Dec 2010 US$ TURNOVER 15 503 306 12 298 300 Domestic 11 235 468 8 635 365 Export 4 267 838 3 662 935 Cost of sales (8 737 971) (6 801 772) Gross profit 6 765 335 5 496 528 Net operating expenses (3 300 806) (2 720 466) 3 3 464 529 2 776 062 Finance income 249 237 161 049 Finance costs (78 493) (14 858) Profit before taxation 3 635 273 2 922 253 Income tax expense (904 991) (580 252) Operating profit 6.01 Zimplow Limited « 10 » 2011 Annual Report . Kumwenda Zimplow Limited « 11 » 2011 Annual Report .2 1 171 111 378 982 804 488 378 421 980 708 140 627 Current tax liabilities 335 988 368 859 232 912 1 886 081 1 551 768 1 354 247 TOTAL EQUITY AND LIABILITIES 16 745 397 13 493 652 10 970 752 7 2 863 605 2 667 362 2 668 756 Available for sale financial assets 8 Goodwill 9 147 976 41 625 3 053 206 177 728 - 2 845 090 177 604 - 2 846 360 Non Current Liabilities Deferred tax liability Current Liabilities Trade and other payables Provisions ASSETS Non Current Assets Property.Consolidated Statement of Financial Position as at 31 December 2011 Notes 31 Dec 2011 US$ 31 Dec 2010 31 Dec 2009 US$ US$ EQUITY AND LIABILITIES Issued share capital and reserves 5.1 12. plant and equipment Current Assets Inventories 10 7 057 950 5 372 463 5 829 151 Trade and other receivables 11 2 686 329 2 242 511 1 163 878 Other current assets - - 91 412 13 3 947 912 3 033 588 1 039 951 13 692 191 10 648 562 8 124 392 TOTAL ASSETS 16 745 397 13 493 652 10 970 752 Cash and bank balances Chairman Z L Rusike 22 February 2012 Chief Executive Officer Z.2 76 496 (69 065) 101 702 - 101 597 - Retained earnings 6 161 945 4 171 468 1 829 467 Equity attributable to owners of the parent Non-controlling interests 19 Total equity 13 725 199 512 633 14 237 832 11 342 051 - 11 342 051 8 997 645 - 8 997 645 6.1 (65 400) - - Available for sale reserve Foreign currency translation reserve 18.3 621 484 599 833 618 860 12.1 7 621 223 7 068 881 7 066 581 Share based payment reserve 18. 4) Other comprehensive income. Balance at 31 December 2011 – 552 333 9 – – – – – Profit for the year Payment of dividend Share based payment transaction(note 17. Effects of foreign currency translation Fair value loss on AFS financial asset – – – – – – – Adjustment* – 2 300 Payment of dividend – – Profit for the year – – Other comprehensive income for the year – – Balance at 31 December 2010 32 707 7 036 174 – – – – – – – – 32 707 (32 707) Re-denomination of share capital – – – Payment of dividend Profit for the year Other comprehensive income for the year – – – – 7 066 581 Balance at 1 January 2009 (392 486) 2 221 953 101 597 - (69 065) (25 206) - 552 342 (65 400) 2 677 328 (686 851) (65 400) 13 725 199 - - – - (65 400) - - - 2 300 - - - 2 342 001 - 105 - 11 342 051 – - 8 997 645 - - - - 7 066 581 US$ Total (392 486) 2 221 953 101 597 - (135 147) (25 206) 525 761 552 342 (65 400) 2 730 282 (686 851) 512 633 14 237 832 (66 082) – 525 761 – – 52 954 – – 2 300 – – 2 342 001 – 105 – 11 342 051 – – 8 997 645 – – – – 7 066 581 Share Capital Share Available for Foreign Currency Retained Share Based Attributable Non Capital Reserve Premium sale reserve Translation earnings Payment to owners of Controlling Reserve Reserve the Parent Interest US$ US$ US$ US$ US$ US$ US$ US$ US$ for the year ended 31 December 2011 Consolidated Statement of Changes in Equity .Zimplow Limited « 12 » 2011 Annual Report – 7 066 581 Balance at 31 December 2009 – – – – – – 32 716 7 036 174 552 333 – - – 1 829 467 (392 486) 2 221 953 - - – – – – – 76 496 – - – – – 2 677 328 (686 851) (69 065) 6 161 945 (69 065) – – – – – – – – - – – - – 2 342 001 105 – - 101 702 – 4 171 468 - 101 597 – – (25 206) – – – – – 101 597 – - * Being deemed cost adjustment to Tassburg assets that were identified on the consolidation of the fixed asset register.1) Issue of Ordinary Shares on acquistion of Afritrac(note 20) Non Controlling Interest arising from acqusition of Afritrac(note 20. 01 0.6 355 919 - Net cash invested (116 636) (226 942) Dividend paid to owners of the company (686 851) - Increase in cash and cash equivalents 1 046 326 1 993 637 Cash and cash equivalents at 1 January 2011 Effects of exchange rates on the balance of cash held in foreign operations 3 033 588 (132 002) 1 039 951 - Cash and cash equivalents at 31 December 2011 3 947 912 3 033 588 Operating cashflow per share (US$) 0.Consolidated Statement of Cashflows for the year ended 31 December 2011 Notes Year Ended 31 Dec 2011 US$ Year Ended 31 Dec 2010 US$ 3 464 529 2 776 062 Depreciation and amortisation of non current assets 302 328 271 230 Income recognised in respect of share option scheme (65 400) - Profit on disposal of property. plant and equipment (15 917) (40 594) Operating income before working capital changes 3 685 540 3 006 698 (Increase)/decrease in inventories (1 026 982) Increase in trade and other receivables (171 043) (1 094 022) Increase in trade and other payables 101 632 168 372 Cash generated by operating activities 2 589 147 2 537 737 Finance income received 249 237 161 049 Finance costs paid (78 493) (14 858) Taxation paid (910 078) (463 349) Net cash flows from operating activities 1 849 813 2 220 579 Purchase of property. interest. taxation and exchange gains/losses Adjustment for non cash items: 456 689 CASH FLOWS FROM INVESTING ACTIVITIES Net cash inflow on acquisition of subsidiary CASH FLOWS FROM FINANCING ACTIVITIES Zimplow Limited « 13 » 2011 Annual Report .01 CASH FLOWS FROM OPERATING ACTIVITIES Operating profit before dividends.plant and equipment 38 207 56 042 20. plant and equipment (510 762) (282 984) Proceeds on disposal of property. • Tassburg: engaged in the manufacture and distribution of wood screws. Zimplow Limited « 14 » 2011 Annual Report . harrows. IFRS 1 (Revised) is applicable for periods beginning on or after 1 July 2011. hoes and metal fasteners. ridgers. prepared on 1 January 2009 (date of transition to IFRS) IFRS compliant. nuts.Notes to the Financial Statements for the year ended 31 December 2011 1. Historical cost is generally based on the fair value of the consideration given in exchange for assets. the IASB amended IFRS 1 in order to: . as explained in the accounting policies below. Products include ploughs. lags. On 20 December 2010. Financial Reporting in hyperinflationary Economies. The Group has elected to early adopt the amendments to IFRS 1. ground nut shellers and planters. The Tassburg factory is situated in Harare. Products include industrial screws. the Zimbabwe dollar (ZW$). construction and mining industries. Corporate information The financial statements for the reporting period ended 31 December 2011 were authorised for issue in accordance with a resolution of the Group’s Directors on 22 February 2011. is a Zimbabwe based concern. The CT Bolts factory is situated in Bulawayo with an operating branch located in Harare. chrome bolt covers and fittings. cultivators. equipment and financial instruments that are measured at revalued amounts or fair values. • African Traction and Associated technologies “Afritrac:” engaged in the distribution of animal – drawn agricultural implements and tools is situated in South Afica. early adoption is permitted. was subjected to severe hyperinflation before the date of transition to IFRS because it had both of the following characteristics: (a) a reliable general price index was not available to all entities with transactions and balances in the ZW$. • CT Bolts: engaged in the manufacture and distribution of metal fasteners for the mining. nails. 2. the Group’s parent entity. The effect of the application of the amendments to IFRS 1 is to render the opening statement of financial position. mild steel bolts. The Group failed to express a statement of explicit and unreserved compliance with IFRS for the financial year ended 31 December 2009 due to the effects of severe hyperinflation as defined in IFRS 1 (Revised). veranda bolts and high tensile bolts for the household furniture. The Group’s previous functional currency. provide relief for first-time adoptors of IFRS from having to reconstruct transactions that occurred before their date of transition to IFRS. The Group has achieved explicit and unreserved compliance with IFRS after early adoption of the revised IFRS 1 “Firsttime Adoption of International Financial Reporting Standards” issued on 20 December 2010. The opening statement of financial position was reported in the prior year as not being compliant with IFRS due to the inability to comply with International Accounting Standard IAS 21 The Effects of Changes in Foreign Exchange Rates and IAS 29. sockets and anchoring products. construction and agricultural industries. Zimplow Limited. provide guidance for entities emerging from severe hyperinflation to either resume presenting IFRS financial statements or topresent IFRS financial statements for the first time. and (b) exchangeability between the ZW$ and a relatively stable foreign currency did not exist. plant. and . washers. The Group operates three divisions and one Subsidiary as follows: • Mealie Brand: engaged in the manufacture and distribution of animal – drawn agricultural implements. The Mealie Brand factory is situated in Bulawayo. Basis of preparation The financial statements have been prepared on the historical cost basis except for property. Notes to the Financial Statements for the year ended 31 December 2011 (continued) The Group changed its functional currency from Zimbabwe dollars on 1 January 2009.The Group has adopted 1 January 2009 as the effective date of currency normalisation and the date of transition to reporting in terms of International Financial Reporting Standards. The Group elected to measure certain items of trade and other receivables, inventories and trade and other payables at fair value and to use the fair value as the deemed cost of those assets and liabilities in the opening IFRS statement of financial position. The determination of balances for the opening statement of financial position is summarised below : Financial assets and liabilities - Fair value as agreed by the shareholders, i.e. willing buyer willing seller. Accounts receivable - Settlement amounts agreed with debtors in United States dollars. Property, plant and equipment - Property was valued at gross replacement value and reassessed in line with subsequent market trends and necessary adjustments were made. Plant and equipment was reconstructed based on archived information from suppliers’ invoices denominated in United States dollars. Payables - Settlement amounts agreed with creditors in United States dollars. Bank balances - All ZW$ bank accounts were written off to nil. Opening balances represented actual United States dollars. The financial statements comprise three statements of financial position, two statements of comprehensive income, changes in equityand cash flows as a result of the application of the Amendments to IFRS 1.In preparing its opening IFRS statement of financial position, the Group has not adjusted amounts previously determined in accordance with the “Guidance on Change in Functional Currency - 2009”, which was drafted jointly by the Public Accountants and Auditors Board (PAAB), Zimbabwe Accounting Practices Board (ZAPB) and the Zimbabwe Stock Exchange (ZSE). This guidance was adopted as the local standard for reporting by most listed entities and other incorporated entities in Zimbabwe reporting subsequent to severe hyperinflation. As amounts have not changed from those presented in previously issued financial statements, reconciliations have not been presented, because the amendments to IFRS 1 effectively endorsed the approach adopted in the guidance paper issued by the PAAB, ZAPB and the ZSE, which dealt with conversion of local currency balances to stable foreign currency after a period of severe hyperinflation.The principal accounting policies are set below: 2.1 Adoption of standards and interpretations New and revised IFRSs applied with no material effect on the financial statements The following new and revised IFRSs have also been adopted in these financial statements.The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements. Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards - Additional Exemptions for Firsttime Adopters (as part of improvements to IFRS issued in 2009): The amendments provide two exemptions when adopting IFRS forthe first time relating to oil and gas assets, and the determination as to whether the arrangement contains a lease. Not applicable. Amendments to IAS 1 Presentation of Financial Statements (as part of Improvements to IFRSs issued in 2010) The amendments to IAS 1 clarify that an entity may choose to disclose an analysis of other comprehensive income by item in the statement of changes in equity or in the notes to the financial statements. In the current year, for each component of equity, the Group has chosen to present such an analysis in the statement of changes in Equity. Zimplow Limited « 15 » 2011 Annual Report Notes to the Financial Statements for the year ended 31 December 2011 (continued) IAS 24 Related Party Disclosures (as revised in 2009) IAS 24 (as revised in 2009) has been revised on the following two aspects: (a) IAS 24 (as revised in 2009) has changed the definition of a related party and (b) IAS 24 (as revised in 2009) introduces a partial exemption from the disclosure requirements for government-related entities. The Company and its subsidiaries are not government-related entities. The application of the revised definition of related party set out in IAS 24 (as revised in 2009) in the current year has resulted in the identification of related parties that were not identified as related parties under the previous Standard. Specifically, associates of the ultimate holding company of the Company are treated as related parties of the Group under the revised Standard whilst such entities were not treated as related parties of the Group under the previous Standard. The related party disclosures set out in note 14 to the consolidated financial statements have been changed to reflect the application of the revised Standard. Changes have been applied retrospectively. Amendments to IFRS 3 Business Combinations As part of Improvements to IFRSs issued in 2010, IFRS 3 was amended to clarify that the measurement choice regarding non-controlling interests at the date of acquisition is only available in respect of non-controlling interests that are present ownership interests and that entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation. All other types of non-controlling interests are measured at their acquisition-date fair value, unless another measurement basis is required by other Standards. In addition, IFRS 3 was amended to provide more guidance regarding the accounting for share-based payment awards held by the acquiree’s employees. Specifically, the amendments specify that share-based payment transactions of the acquiree that are not replaced should be measured in accordance with IFRS 2 Share-based Payment at the acquisition date (‘market-based measure’). Amendments to IAS 32 Classification of Rights Issues The amendments address the classification of certain rights issues denominated in a foreign currency as either equity instruments or as financial liabilities. Under the amendments, rights, options or warrants issued by an entity for the holders to acquire a fixed number of the entity’s equity instruments for a fixed amount of any currency are classified as equity instruments in the financial statements of the entity provided that the offer is made pro rata to all of its existing owners of the same class of its non-derivative equity instruments. Before the amendments to IAS 32, rights, options or warrants to acquire a fixed number of an entity’s equity instruments for a fixed amount in foreign currency were classified as derivatives. The amendments require retrospective application. The application of the amendments has had no effect on the amounts reported in the current and prior years because the Group has not issued instruments of this nature. Amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement IFRIC 14 addresses when refunds or reductions in future contributions should be regarded as available in accordance with paragraph 58 of IAS 19; how minimum funding requirements might affect the availability of reductions in future contributions; and when minimum funding requirements might give rise to a liability. The amendments now allow recognition of an asset in the form of prepaid minimum funding contributions. The application of the amendments has not had no effect on the amounts reported in the current and prior years because the Group has not entered into any transactions of this nature. Zimplow Limited « 16 » 2011 Annual Report Notes to the Financial Statements for the year ended 31 December 2011 (continued) IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments The Interpretation provides guidance on the accounting for the extinguishment of a financial liability by the issue of equity instruments. Specifically, under IFRIC 19, equity instruments issued under such arrangement will be measured at their fair value, and any difference between the carrying amount of the financial liability extinguished and the consideration paid will be recognised in profit or loss. The application of IFRIC 19 has had no effect on the amounts reported in the current and prior years because the Group has not entered into any transactions of this nature. Improvements to IFRSs issued in 2010 Except for the amendments to IFRS 3 and IAS 1 described earlier, the application of Improvements to IFRSs issued in 2010 has not had any material effect on amounts reported in the consolidated financial statements. New and revised IFRSs in issue but not yet effective The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective: Amendments to IFRS 7 Disclosures – Transfers of Financial Assets (1) IFRS 9 Financial Instruments (2) IFRS 10 Consolidated Financial Statements (2) IFRS 11 Joint Arrangements (2) IFRS 12 Disclosure of Interests in Other Entities (2) IFRS 13 Fair Value Measurement (2) Amendments to IAS 1 Presentation of Items of Other Comprehensive Income (3) Amendments to IAS 12 Deferred Tax – Recovery of Underlying Assets (4) IAS 19 (as revised in 2011) Employee Benefits (2) IAS 27 (as revised in 2011) Separate Financial Statements (2) IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures (2) (1) Effective for annual periods beginning on or after 1 July 2011. (2) Effective for annual periods beginning on or after 1 January 2013. (3) Effective for annual periods beginning on or after 1 July 2012. (4) Effective for annual periods beginning on or after 1 January 2012. The amendments to IFRS 7 increase the disclosure requirements for transactions involving transfers of financial assets. These amendments are intended to provide greater transparency around risk exposures when a financial asset is transferred but the transferor retains some level of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are not evenly distributed throughout the period. The amendments to IFRS 7 increase the disclosure requirements for transactions involving transfers of financial assets. These amendments are intended to provide greater transparency around risk exposures when a financial asset is transferred but the transferor retains some level of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are not evenly distributed throughout the period. The directors do not anticipate that these amendments to IFRS 7 will have a significant effect on the Group’s disclosures regarding transfers of trade receivables. However, if the Group enters into other types of transfers of financial assets in the future, disclosures regarding those transfers may be affected. Zimplow Limited « 17 » 2011 Annual Report debt investments that are held within a business model whose objective is to collect the contractual cash flows. IFRS 9 amended in October 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition. a package of five Standards on consolidation. there is only one basis for consolidation. IFRS 10 includes a new definition of control that contains three elements: (a) power over an investee.Notes to the Financial Statements for the year ended 31 December 2011 (continued) IFRS 9 issued in November 2009 introduces new requirements for the classification and measurement of financial assets. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income. (b) exposure. SIC-12 Consolidation – Special Purpose Entities has been withdrawn upon the issuance of IFRS 10. Key requirements of IFRS 9 are described as follows: • IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. IFRS 12. associates and disclosures was issued. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods. under IAS 31. In addition. joint arrangements are classified as joint operations or joint ventures. that is control. it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed. In May 2011. there are three types of joint arrangements: jointly controlled entities. IFRS 11 replaces IAS 31 Interests in Joint Ventures. The directors anticipate that IFRS 9 will be adopted in the Group’s consolidated financial statements for the annual period beginning 1 January 2013 and that the application of IFRS 9 may have significant impact on amounts reported in respect of the Group’s financial assets and financial liabilities. the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss. under IFRS 9. IFRS 11. • The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. SIC-13 Jointly Controlled Entities – Non-monetary Contributions by Venturers has been withdrawn upon the issuance of IFRS 11. Under IFRS 11. unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. with earlier application permitted. IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements. under IAS 39. . In contrast. and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. IFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified. However. Under IFRS 10. IAS 27 (as revised in 2011) and IAS 28 (as revised in 2011). Specifically. Previously. to variable returns from its involvement with the investee. Zimplow Limited « 18 » 2011 Annual Report . depending on the rights and obligations of the parties to the arrangements. jointly controlled assets and jointly controlled operations. and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. for financial liabilities that are designated as at fair value through profit or loss. or rights. including IFRS 10. Specifically. Extensive guidance has been added in IFRS 10 to deal with complex scenarios. joint arrangements. IFRS 9 is effective for annual periods beginning on or after 1 January 2013. Key requirements of these five Standards are described below. investment properties that are measured using the fair value model in accordance with IAS 40 Investment Property are presumed to be recovered through sale for the purposes of measuring deferred taxes. the amendments to IAS 1 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss. and requires disclosures about fair value measurements. The scope of IFRS 13 is broad. The amendments to IAS 1 are effective for annual periods beginning on or after 1 July 2012. Income tax on items of other comprehensive income is required to be allocated on the same basis. quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under IFRS 7 Financial Instruments: Disclosures will be extended by IFRS 13 to cover all assets and liabilities within its scope. In general. The Standard defines fair value. IFRS 13 is effective for annual periods beginning on or after 1 January 2013. The directors anticipate that these five standards will be adopted in the Group’s consolidated financial statements for the annual period beginning 1 January 2013. Specifically. IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. establishes a framework for measuring fair value. associates and/or unconsolidated structured entities. under the amendments. it applies to both financial instrument items and nonfinancial instrument items for which other IFRSs require or permit fair value measurements and disclosures about fair value measurements. These five standards are effective for annual periods beginning on or after 1 January 2013. The amendments to IAS 12 provide an exception to the general principles in IAS 12 that the measurement of deferred tax assets and deferred tax liabilities should reflect the tax consequences that would follow from the manner in which the entity expects to recover the carrying amount of an asset. The amendments to IAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. Earlier application is permitted provided that all of these five standards are applied early at the same time. Zimplow Limited « 19 » 2011 Annual Report . the directors have not yet performed a detailed analysis of the impact of the application of these Standards and hence have not yet quantified the extent of the impact. the disclosure requirements in IFRS 12 are more extensive than those in the current standards.However. In general. the disclosure requirements in IFRS 13 are more extensive than those required in the current standards. and (b) items that will be reclassified subsequently to profit or loss when specific conditions are met. For example. However. with earlier application permitted. joint arrangements. IFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries. unless the presumption is rebutted in certain circumstances. joint ventures under IFRS 11 are required to be accounted for using the equity method of accounting. The application of these five standards may have significant impact on amounts reported in the consolidated financial statements.Notes to the Financial Statements for the year ended 31 December 2011 (continued) In addition. except in specified circumstances. whereas jointly controlled entities under IAS 31 can be accounted for using the equity method of accounting or proportionate accounting. The directors anticipate that IFRS 13 will be adopted in the Group’s consolidated financial statements for the annual period beginning 1 January 2013 and that the application of the new Standard may affect the amounts reported in the financial statements and result in more extensive disclosures in the financial statements. The presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods. The Group changed its functional and presentation currency from the ZW$ to the United States Dollar (US$) with effect from 1 January 2009. The directors anticipate that the amendments to IAS 19 will be adopted in the Group’s consolidated financial statements for the annual period beginning 1 January 2013 and that the application of IAS 19 will not affect the amounts reported in the current and prior years because the Group has not entered into any transactions of this nature. two statements of comprehensive income. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. 2. and hence eliminate the ‘corridor approach’ permitted under the previous version of IAS 19 and accelerate the recognition of past service costs. Transition to International Financial Reporting Standards (IFRS) The Group is resuming presentation of IFRS Financial Statements after early adoption of revised IFRS 1 First time Adoption of International Financial Reporting Standards isssued on 20 December 2010.Notes to the Financial Statements for the year ended 31 December 2011 (continued) The amendments to IAS 12 are effective for annual periods beginning on or after 1 January 2012. The directors anticipate that the application of the amendments to IAS 12 in future accounting periods may result in adjustments to the amounts of deferred tax liabilities recognised in prior years regarding the Group’s investment properties of which the carrying amounts are presumed to be recovered through sale. changes in equity and cashflows as a result of the retrospective application of the Amended IFRS 1. Comparative financial information The financial statements comprise of three satements of financial position. Zimplow Limited « 20 » 2011 Annual Report . The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The amendments require all actuarial gains and losses to be recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the consolidated statement of financial position to reflect the full value of the plan deficit or surplus. The effects of changes in Foreign Exchange Rates and IAS 29 Financial Reporting in Hyper Inflationery economies. changes in equity and cashflows are for 12 months. plant and equipment. the directors have not yet performed a detailed analysis of the impact of the application of the amendments and hence have not yet quantified the extent of the impact. trade and other receivables. The comparative statement of the comprehensive income. The Group’s previous functional currency.2 Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards. the Zimbabwean Dollar (ZW$) was subjected to severe hyper inflation before the date of transition to IFRS because it had both of the following characteristics: (a) a reliable general price index was not available to all entities with transactions and balances in the Zimbabwe Dollar and (b) exchangeability between the ZW$ and relative stable foreign currency did not exist. However. The Group failed to present IFRS Financial Statements for the year ended 31 December 2009 due to effects of sever hyper inflation as defined in IFRS 1. inventories and trade and other payables at fair values as the deemed cost of those assets and liabilites in the opening IFRS statement of financial position. The amendments to IAS 19 are effective for annual periods beginning on or after 1 January 2013 and require retrospective application with certain exceptions. Deemed Cost Exemption The Group elected to measure certain items of property. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur. The opening Statement of Financial Position was reported in the prior year as not being compliant with International Accounting Standards (IAS ) 21. plant and equipment The Group assesses the useful lives and residual values of property.Notes to the Financial Statements for the year ended 31 December 2011 (continued) Reconciliation of previosuly prepared financial statements to IFRS compliant financial statements In preparing its opening IFRS statement of financial position. The carrying amount of goodwill as at 31 December 2011 was US$41 625. including expectations of future events that are believed to be reasonable under the circumstances. The Group may also rely on independent opinions of experts in related specialist fields.4 Summary of significant accounting policies Segment reporting Operating segments provide products or services that are subject to risks and rewards that are different from those of other operating segments. The Group’s Directors are of the opinion that the Statement of Financial Position represents a true and fair position of the Group. management has made the following judgements. Zimplow Limited « 21 » 2011 Annual Report . taking into account past experience and macro-economic changes. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate inorder to calculate present value. plant and equipment each period. The Group’s reportable segments. • Useful lives and residual values of property. uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. reconciliations have not been presented. No impairment was recognised during the year. • Fair values The Group makes estimates and judgements in the valuation of property. • Impairment of Goodwill Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill has been allocated. Estimates and judgements are continually evaluated. estimates and formulate assumptions that may affect the reported amounts of revenues. 2. liabilities and the disclosure of contingent liabilities/ assets at the reporting period end date. Judgement is required in determining fair values of assets. Since the amounts have not changed. Detailed information on the reportable segments identified and presented is disclosed in note 4. the Group has not adjusted the amounts previously determined in accordance with the Guidance on Change in Functional Currency 2009.3 Significant accounting judgements. Operating segments are considered reportable segments when their operating results and financial position are: • Regularly reviewed by the Group’s chief operating decision makers as part of the decision making process regarding resources to be allocated towards each segment’s operations. 2. which have the most significant effect on the amounts recognised in the financial statements. assets. and are based on historical experience and other factors. However. are distinctly determined across the different product types manufactured and their customer markets served. and the valuation of financial assets (such as trade receivables). estimates and assumptions The preparation of the Group’s financial statements requires the Group’s Directors and Management to make judgements. expenses. and • Duly assessed against internally determined key performance indicators. for which internal financial management information is available and consistently reviewed. plant and equipment. Judgements In the process of applying the Group’s accounting policies. apart from those involving estimates. The cost of an acquisition is measured at the aggregate of the fair values. Changes in the fair value of contingent consideration classified as equity are not recognised. Total comprehensive income is attributed to non controlling interest even if this results in the non controlling interest having a deficit balance. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. The acquisition method of accounting is used to account for the acquisition of subsidiaries and business units by the Group. except that. Where applicable. Accounting policies of subsidiaries and business units are changed where necessary to ensure consistency with the policies adopted by the Group. would have affected the amounts recognised as of that date. Inter-Group transactions. if known. as incurred. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs. Acquisition – related costs are recognised. in the Statement of Comprehensive Income. the Group reports provisional amounts for the items for which the accounting is incomplete. All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant IFRS. They are de-consolidated from the effective date that control ceases. of assets given. Subsequent to acquisition. Any difference between the amount by which the non – controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Group. balances and unrealised gains on transactions between Group entities are eliminated. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. • Non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5: “Non-current Assets Held for Sale and Discontinued Operations”. to reflect new information obtained about facts and circumstances that existed as of the acquisition date that. as part of profit or loss for the period. which are recognised and measured in accordance with IAS 12: “Income Taxes” and IAS 19: “Employee Benefits” respectively. at the date of exchange. or additional assets or liabilities are recognised. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. equity instruments issued and liabilities incurred or assumed at the date of exchange for control of the acquiree or business unit. Subsidiaries are fully consolidated from the effective date on which control is transferred to the Group. The choice of measurement basis is made on an acquisition – by – acquisition basis. The interest of non–controlling shareholders may be initially measured either at fair value or at the non – controlling interest’s proportionate share of the acquiree’s identifiable net assets. non–controlling interests consist of the amount attributed to such interests at initial recognition and the non–controlling interest’s share of changes in equity since the date of the combination. Zimplow Limited « 22 » 2011 Annual Report . liabilities and contigent liabilities that meet the conditions for recognition under IFRS 3 (2008) are recognised at the fair value at the acquisition date . Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (refer below). The acquiree’s identifiable assets . the cost of acquisition includes any asset or liability resulting from a contingent consideration arrangement. Those provisional amounts are adjusted during the set measurement period. • Liabilities or equity instruments related to the replacement by the Group of an acquiree’s share based payment awards. measured at its acquisition date fair value. Non – controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. which are measured in accordance with IFRS 2: “Share Based Payment” • Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements. which are recognised and measured at fair value less costs to sell.Notes to the Financial Statements for the year ended 31 December 2011 (continued) Basis of Consolidations and business combinations Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The policy described above is applied to all equity-settled share-based payment transactions that were granted on and after 31 July 2011. Impairment losses relating to goodwill cannot be reversed in future periods.Notes to the Financial Statements for the year ended 31 December 2011 (continued) The aforementioned measurement period is the period from the date of acquisition to the date the Group receives complete information about facts and circumstances that existed as of the acquisition date – and is subject to a maximum of one year. Details regarding the determination of the fair value of equity-settled sharebased transactions are set out in note 17. after reassessment. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. irrespective of whether other assets or liabilities of the entity are assigned to those units. Where the recoverable amount of the cash-generating unit is less than the carrying amount. Zimplow Limited « 23 » 2011 Annual Report . allocated to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination. Following initial recognition. Goodwill is measured as the excess of the sum of the consideration transferred. The impact of the revision of the original estimates. the amount of any non – controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any). the excess is recognised immediately. with a corresponding adjustment to the equity-settled employee benefits reserve. is recognised in profit or loss such that the cumulative expense reflects the revised estimate. with a corresponding increase in equity (equity-settled employee benefits reserve). For the purpose of impairment testing. from the acquisition date. goodwill acquired in a business combination is. based on the Group’s estimate of equity instruments that will eventually vest. if any. but is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. At the end of each reporting period. the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. an impairment loss is recognised. in profit or loss as a bargain purchase gain Share-based payment arrangements Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Goodwill is not amortised. the amount of any non – controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest (if any) in the entity over the fair value of the identifiable net assets recognised. Where goodwill forms part of the cash-generating unit and part of the operation within that unit is disposed of. Goodwill Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). and • Is not larger than a reportable segment determined in accordance with IFRS 8: “Operating Segments”. the Group’s interest in the net fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred. Each unit to which the goodwill is so allocated: • Represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. goodwill is measured at cost less any accumulated impairment losses. Bargain purchase gain If. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period. the Group revises its estimate of the number of equity instruments expected to vest. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. Foreign currency translations The Group’s consolidated financial statements are presented in United States dollars. except where that fair value cannot be estimated reliably. and at the date of settlement. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. However. At the end of each reporting period until the liability is settled. in which case they are measured at the fair value of the equity instruments granted. The excess of the market-based measure of the replacement awards over the market-based measure of the acquiree awards included in measuring the consideration transferred is recognised as remuneration cost for post-combination service. the market-based measure of the unvested share-based payment transactions is allocated to the non-controlling interest in the acquiree based on the ratio of the portion of the vesting period completed to the greater of the total vesting period or the original vesting period of the share-based payment transaction. the fair value of the liability is remeasured. the replacement awards are measured at their market-based measure in accordance with IFRS 2. If the share-based payment transactions have vested by the acquisition date. All of the market-based measure of the replacement awards is recognised as remuneration cost for post-combination service. i) Transactions and balances Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange at the reporting date. they are included as part of the non-controlling interest in the acquiree. both the acquiree awards and the replacement awards are measured in accordance with IFRS 2 Share-based Payment(“market-based measure”) at the acquisition date. The balance is recognised as remuneration cost for post-combination service. if the share-based payment transactions have not vested by the acquisition date.Notes to the Financial Statements for the year ended 31 December 2011 (continued) Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received. when the outstanding equity-settled share-based payment transactions held by the employees of an acquiree are not exchanged by the Group for its share-based payment transactions. the acquiree share-based payment transactions are measured at their market-based measure at the acquisition date. measured at the date the entity obtains the goods or the counterparty renders the service. However. At the acquisition date. The portion of the replacement awards that is included in measuring the consideration transferred in a business combination equals the market-based measure of the acquiree awards multiplied by the ratio of the portion of the vesting period completed to the greater of the total vesting period or the original vesting period of the acquiree award. with any changes in fair value recognised in profit or loss for the year. Zimplow Limited « 24 » 2011 Annual Report . which is also the parent company’s functional currency. a liability is recognised for the goods or services acquired. measured initially at the fair value of the liability. For cash-settled share-based payments. Share-based payment arrangements of the acquiree in a business combination When the share-based payment awards held by the employees of an acquiree (acquiree awards) are replaced by the Group’s share-based payment awards (replacement awards). when the acquiree awards expire as a consequence of a business combination and the Group replaces those awards when it does not have an obligation to do so. Income and expense items are translated at the average exchange rates for the period. Zimplow Limited « 25 » 2011 Annual Report . Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. respectively). at which time. unless exchange rates fluctuate significantly during that period.e. translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss. On the disposal of a foreign operation (i. are recognised in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate). or a disposal involving loss of significant influence over an associate that includes a foreign operation). Non-current assets held for sale Non current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification. These are recognised in other comprehensive income until the net investment is disposed. Exchange differences arising. a disposal of the Group’s entire interest in a foreign operation.. or a disposal involving loss of control over a subsidiary that includes a foreign operation. This condition is regarded as met only when a sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. the cumulative amount is reclassified to the income statement. For the purposes of presenting consolidated financial statements. Non current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less cost to sell and are no longer depreciated. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.e. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income. in which case the exchange rates at the dates of the transactions are used.Notes to the Financial Statements for the year ended 31 December 2011 (continued) All differences arising on settlement or translation of monetary items are taken to the income statement with the exception of monetary items that are designated as part of the hedge of the Group’s net investment of a foreign operation. the assets and liabilities of the Group’s foreign operations are translated into the parent company’s functional currency using exchange rates prevailing at the end of each reporting period. if any. a disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation. The gain or loss arising on retranslation of non-monetary items is treated in line with the recognition of gain or loss on change in fair value of the item (i. Interest revenue is accrued on a time proportionate basis. is made for the difference between depreciation based on the revalued carrying amount of the assets and depreciation based on the original cost. The decrease recognised in other comprehensive income reduces the amount accumulated in equity as a revaluation reserve. An annual transfer. is recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset. Sale of Goods Revenue from the sale of goods is recognised when all the following conditions are satisfied: The Group has transferred to the buyer the significant risks and rewards of ownership of the goods. Revenue excludes value added tax and other sales related duties. Dividend and Interest revenue Dividend revenue from investments is recognised when the shareholder’s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably). When items of property. performed by the Group’s Directors or independent external valuers. rebates. The decrease. from the asset revaluation reserve to retained earnings. are performed frequently enough to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. • The amount of revenue can be measured reliably. recognised after the date of a revaluation.Notes to the Financial Statements for the year ended 31 December 2011 (continued) Income and revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Valuations. The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. the decrease shall be recognised in profit or loss. discounts and other similar allowances. Any revaluation surplus (increase in the carrying amount of an asset as a result of a revaluation) is recognised in other comprehensive income in the Statement of Comprehensive Income and accumulated in equity (revaluation reserve) in the Statement of Changes in Equity. Zimplow Limited « 26 » 2011 Annual Report . by reference to the principal outstanding and at the effective interest rate applicable. • It is probable that the economic benefits associated with the transaction will flow to the entity. if any. plant and equipment are measured at fair value less accumulated depreciation and impairment losses. and • The costs incurred or to be incurred in respect of the transaction can be measured reliably. Property. plant and equipment Property. and is reduced for estimated customer returns. however. which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount. If an asset’s carrying amount is decreased as a result of a revaluation. within the Statement of Changes in Equity. Other income Other income is recognised in the period that it is due and receivable. plant and equipment are revalued. The increase is recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss. any accumulated depreciation at the date of a revaluation is restated proportionately with the change in the gross carrying amount of the asset so that the carrying amount after revaluation equals its revalued amount. plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. If that is the case the carrying amount of the asset is increased to its recoverable amount. All other repairs and maintenance are recognised in profit or loss in the Statement of Comprehensive Income during the financial period in which they are incurred. the recoverable amount is estimated. the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. over its remaining useful life. Where the carrying amount of an asset exceeds its recoverable amount. An item of property. Depreciation is calculated on a straight line basis over the following asset class useful life spans in order to allocate their cost or revalued amounts to their residual values: • Buildings: 50 years. 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. Impairment of non financial assets The Group assesses at each reporting period end date whether there is an indication that an asset may be impaired. or when annual impairment testing for an asset is required. Upon disposal. the asset is considered impaired and is written down to its recoverable amount. at each reporting period end date. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. Impairment losses of continuing operations are recognised in profit or loss in the Statement of Comprehensive Income in those expense categories consistent with the function of the impaired asset. If such indication exists. An assessment is made at each reporting period end date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. on a systematic basis. Such reversal is recognised in profit or loss unless the asset is carried at its revalued amount. • Plant and machinery: 5 to 50 years. • Motor vehicles: 5 years.Notes to the Financial Statements for the year ended 31 December 2011 (continued) Subsequent costs are included in an asset’s carrying amount or recognised as a separate asset. After such a reversal. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use. and is determined for an individual asset. If any such indication exists. had no impairment loss been recognised for the asset in prior periods. unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. The useful lives and residual values of assets are reviewed and adjusted. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. less any residual value. Zimplow Limited « 27 » 2011 Annual Report . depreciation will cease to be charged on the asset until its residual value subsequently decreases to an amount below its carrying amount. That increased amount cannot exceed the carrying amount that would have been determined. in which case the reversal is treated as a revaluation increase and recognised in other comprehensive income. Where the residual value of an asset increases to an amount equal to or greater than the asset’s carrying amount. as appropriate. net of depreciation. if appropriate. any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount. In assessing value in use. with the effect of any changes in estimate accounted for on a prospective basis. • Office furniture and computer equipment: 4 to 10 years. the Group’s management makes an estimate of the asset’s recoverable amount. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. The Group’s lease transactions in place throughout the current reporting period only extend as far as the Group’s capacity as a lessee under operating lease arrangements. except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. that are not fixed in amount but are based on the future amount of a factor that is susceptible to change other than with the passage of time. construction or production of assets that necessarily take a substantial period of time to get ready for their intended use or sale are capitalised as part of the cost of the respective assets. The estimated useful life and amortisation method are reviewed at the end of each reporting period. Intangible assets Intangible assets acquired separately Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Group as a lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term. Internally-generated intangible assets . or portions thereof. or contains a lease is based on the substance of the arrangement at inception date. Contingent rentals: Contingent rentals are lease payments. with the effect of any changes in estimate being accounted for on a prospective basis. All other leases are classified as operating leases. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses. Details regarding lease transactions are as disclosed in note 15. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Contigent rents are recognised as an expense in the period in which they are incurred. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis. In the event that lease incentives are received to enter into operating leases. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee.Notes to the Financial Statements for the year ended 31 December 2011 (continued) Leases The determination of whether an arrangement is.research and development expenditure Zimplow Limited « 28 » 2011 Annual Report . such incentives are recognised as a liability. except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Borrowing costs Borrowing costs directly attributable to the acquisition. Amortisation is recognised on a straight-line basis over their estimated useful lives. The CT Bolts premises where the Group operates from were leased under such terms for part of the current reporting period. The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Derecognition of intangible assets An intangible asset is derecognised on disposal. and • the ability to measure reliably the expenditure attributable to the intangible asset during its development.costs of direct materials. all of the following have been demonstrated: • the technical feasibility of completing the intangible asset so that it will be available for use or sale.purchase costs on weighted average cost Finished goods and work in progress . net of outstanding bank overdrafts. financial and other resources to complete the development and to use or sell the intangible asset. • the ability to use or sell the intangible asset. less estimated costs of completion and the estimated costs necessary to make the sale. on the same basis as intangible assets that are acquired separately. and only if. on the same basis as intangible assets that are acquired separately. Intangible assets acquired in a business combination Intangible assets that are acquired in a business combination are recognised separately from goodwill and are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Inventories Inventories are valued at the lower of cost and net realisable value. Gains or losses arising from derecognition of an intangible asset. intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses. Zimplow Limited « 29 » 2011 Annual Report . or when no future economic benefits are expected from its use or disposal. labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs. • the intention to complete the intangible asset and use or sell it. Net realisable value is the estimated selling price in the ordinary course of the business. internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses. For presentation purposes of the Statement of Cash Flows. • how the intangible asset will generate probable future economic benefits. Cash and cash equivalents Cash and cash equivalents comprise cash at banks. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if. Subsequent to initial recognition. development expenditure is recognised in profit or loss in the period in which it is incurred. are accounted for as follows: Raw materials .Notes to the Financial Statements for the year ended 31 December 2011 (continued) Expenditure on research activities is recognised as an expense in the period in which it is incurred. cash on hand and short term highly liquid deposits with an original maturity of three months or less. cash and cash equivalents consist of cash and cash equivalents as defined above. • the availability of adequate technical. Costs incurred in bringing each product to its present location and condition. Subsequent to initial recognition. arerecognised in profit or loss when the asset is derecognised. measured as the difference between the net disposal proceeds and the carrying amount of the asset. Where no internally-generated intangible asset can be recognised. Current tax The tax currently payable is based on taxable profit for the period. and is accounted for using the liability method. directing and controlling the activities of Zimplow Limited. Key management Key management include Group executive directors and management having authority and responsibility for planning. and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. and when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. Deferred tax liabilities are generally recognised for all taxable temporary differences. and a reliable estimate of the amount of the obligation can be made. registered and operating (where applicable) as trading concerns in Zimbabwe. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Where the effect of the time value of money is considered material. Deferred tax Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. A provision is made for the estimated liability for annual leave as a result of services rendered by the employees up to the reporting period end date.Notes to the Financial Statements for the year ended 31 December 2011 (continued) Provisions Provisions are recognised when the Group has a legal or constructive obligation as a result of past events. the tax is also recognised in other comprehensive income. Taxation The tax expense for the period comprises current and deferred tax. in its parent entity capacity.deductible.taxable or non . Zimplow Limited « 30 » 2011 Annual Report . Group entity members The Group’s member entities at the reporting period end. Tax is recognised in the statement of comprehensive income in profit or loss. include: • Bulawayo Steel Products (Pvt) Ltd • African Traction and Associated Technologies trading concern in South Africa. except to the extent that it relates to items recognised directly as other comprehensive income. the amount of a recognised provision represents the present value of the expenditures expected to be required to settle the obligation. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting period end date. Employee entitlements to annual leave are recognised when they accrue to employees. as well as its Group member entities. Taxable profit differs from profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are permanently non . In this case. Dividend distribution Dividend distribution to the Group’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Group’s shareholders and declared. all incorporated. if a legally enforceable right exists to set off current tax asset against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity. The carrying amount of deferred tax assets is reviewed at each reporting period end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. and contributions to the National Social Security Authority (NSSA).Deferred tax assets and deferred tax liablities are offset. except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Employee benefits Defined contribution plans Current contributions to the Zimplow Pension Fund. which is a defined contribution fund.Notes to the Financial Statements for the year ended 31 December 2011 (continued) Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates. Deferred tax assets and liabilities are measured at the tax rate that are expected to apply in the year when the asset is realised or the liability is settled. Deferred tax relating to items recognised outside prifit or loss is recognised outside profit or loss. The net amount of Value Added Tax recoverable from. in which case the Value Added Tax is recognised as part of the cost of acquisition of the asset or as part ofthe expense item applicable. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. and interests in joint ventures. are recognised as an expense when employees have rendered service entitling them to the contributions . based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Zimplow Limited « 31 » 2011 Annual Report . Value added tax Revenues. Termination benefits The Group recognises gratuity and other termination benefits in the financial statements when it has a presentobligation relating to termination.The Group’s obligations under the NSSA scheme are limited to specific contributionslegislated from time to time. and • With receivables and payables that are stated with the amount of Value Added Tax included. expenses and assets are recognised net of the amount of Value Added Tax except: • Where the Value Added Tax incurred on a purchase of assets or services is not recoverable from the taxation authority. which are determined by legislation (as promulgated under the National Social Security Act 1989). or payable to the taxation authority is included as part of receivables orpayables in the Statement of Financial Position as at the end of the reporting period. loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. except for shortterm receivables when the recognition of interest would be immaterial. and equity investments in a portfolio of quoted companies on the Zimbabwe Stock Exchange (ZSE). the cumulative gain or loss previously accumulated in the Available for Sale revaluation reserve is reclassified to profit or loss. Impairment of financial assets Financial assets are assessed for indicators of impairment at each reporting period end date. Derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire. The Group has not taken out any derivative instruments. trade and other receivables.Notes to the Financial Statements for the year ended 31 December 2011 (continued) Financial instruments Initial recognition The Group’s financial assets falling within the scope of IAS 39: “Financial Instruments: Recognition and Measurement” include cash and short term deposits. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset. directly attributable transaction costs. the Group continues to recognise the financial asset and also recognises a collateralised borrowing for any related proceeds received. the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay.e. Financial assets are recognised initially at fair value plus transaction costs. Group management. Dividends on AFS equity instruments are recognised in profit or loss in the statement of Comprehensive Income when the Group’s right to receive the dividends is established. determines the classification of its financial assets at initial recognition.Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of contractual arrangements. Subsequent measurement The subsequent measurement of financial assets depends on their classification. Financial assets are Zimplow Limited « 32 » 2011 Annual Report . or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. in the case of investments not at fair value through profit or loss. in line with guidance prescribed in IAS 39. Gains and Losses arising from the changes in fair value are recognised in other comprehensive income and accumulated in the Available For Sale revaluation reserve with the exception of impairment losses. Interest income is recognised by applying the effective interest rate. Loans and receivables are measured at amortised cost using the effective interest method. less any impairment. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market – place (regular way purchases) are recognised on the trade date. The Group’s non – cash and cash equivalent financial asset profile is classified and measured as follows: Financial assets Available for sale financial assets (AFS) Listed shares held by the Group that are traded in an active market are classified as being Avalaible For Sale and are stated at fair value. i. The fair value of the ZSE traded investments is recognised with direct reference to trading prices as published on the Stock Exchange. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset. Loans and receivables Trade receivables. Where the investments are disposed of or are determined to be impaired. the date that the Group commits to purchase or sell the assets. less any impairment loss on that investment previously recognised in profit or loss. net of transaction costs. the pre viously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised. Financial liabilities Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. it is written off against the allowance account. as a result of one or more loss events that occurred after the initial recognition of the financial asset. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. With reference to the Group’s financial asset portfolio. with the interest expense recognised on an effective yield basis.Notes to the Financial Statements for the year ended 31 December 2011 (continued) impaired where there is objective evidence that. The Group’s financial liabilities and borrowings are initially measured at fair value. the Group’s obligations are discharged. an increase in the number of delayed payments in the portfolio past the average credit period. Changes in the carrying amount of the allowance account are recognised in profit or loss. and only when. Subsequent recoveries of amounts previously written off are credited against the allowance account. the cumulative loss . is removed from Available For Salereserve and recognised in profit or loss. Equity instruments issued by the Group are recorded at the proceeds received. where the carrying amount is reduced through the use of an allowance account. the amount of the impairment is the difference between the asset’s carryingamount and the present value of estimated future cash flows. in a subsequent period. a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. if. Derecognition of financial liabilities The Group derecognises financial liabilities when. discounted at the financial asset’s original effective interest rate. net of direct issue costs and are presented in the Statement of Changes in Equity as owner based equity transactions. Forlisted equity investments classified as Available For Sale. the estimated future cash flows of the investment have been impacted. When a trade receivable is considered uncollectible. and interest bearing loans and borrowings. cancelled or they expire. Assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis.The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables. For financial assets carried at amortised cost. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset/ liability and of allocating interest income/ expense over the relevant period. The Group’s financial liabilities are limited to trade and other payables. as well as observable changes in national or local economic conditions that correlate with default on receivables. Financial liabilities are subsequently measured at amortised cost using the effective interest method. Where there is evidence of impairment. The Group’s management has not designated any financial liabilities as financial liabilities at fair value through profit or loss. The effective interest rate is the rate that exactly discounts estimated future cash receipts/ payments (including all fees on points paid or received that form an integral part of the effective Zimplow Limited « 33 » 2011 Annual Report .measured as the difference between the aquisition costs and the current fair value. Objective evidence of impairment for a portfolio of receivables include the Group’s past experience of collecting payments. a shorter period. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the Statement of Financial Position if.723 203 257 Allowance for credit losses 14.921 512 689 Discount to customers 71. plant and equipment Zimplow Limited « 34 » 2011 Annual Report 8 167 40 594 .681 12 925 - 275 3.435 68 165 29.117 - - 11 261 52.917 Profit on disposal of property. and only if. where appropriate. Administration expenses 2.767 2 697 176 64.498.749 1 874 733 85.478 715 86 716 2 795 153 Auditors remuneration: Current year Depreciation of property. or. Operating Profit Year Ended Year Ended 31 Dec 2011 31 Dec 2010 US$ US$ Profit for the year is atttributable to: Owners of the parent 2 677 328 2 342 001 Non controlling interests 52 954 - 2 730 282 2 342 001 The operating profit before taxation is arrived at After charging.Notes to the Financial Statements for the year ended 31 December 2011 (continued) interest rate.658 45 094 Other emoluments 294 555 200 400 335 213 245 494 Selling expenses 694. transaction costs and other premiums or discounts) through the expected life of the financial asset/ liability. plant and equipment: Buildings Directors’ emoluments Fees Research and development costs Staff costs: Salaries and allowances Net Exchange loss Provisions for gratuity National Social Security Authority After crediting: Share-based payments (see note 17) Equity-settled share-based payments 65 400 Net Exchange gain - 15.516 29 516 Plant and equipment 272 812 241 714 302.361. or to realise the assets and settle the liabilities simultaneously. there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis.831 3.328 271 230 40. 3. 493) Income taxes – – – – (904 991) Group’s income after tax – – – – 2 730 282 Results Reportable segment profit Unallocated items: Segment profit represents the profit earned by each segment without allocation of the central administration costs and directors’ salaries.152) 15 503 306 3 206 804 274 097 (16 372) 3 464 529 Finance income – – – – 249. The Fastenors segment is a manufacturer and distributor of metal fasteners. construction. Zimplow Limited « 35 » 2011 Annual Report . Information reported to the Group’s Chief operating decision maker for the purpose of resource allocation and assessment of segment performance is more specifically focused on the type of product produced. This is the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.182.995.463 325. Segment information The Farming implements segment is a manufacturer and distributor of animal drawn implements for the agricultural sector.152) 15 503 306 - Total revenue 13.000.237 Finance costs – – – – (78.577 (1. agricultural sectors and house hold furniture industry. Revenue F arming Implements Fasteners Adjustment Total External customers Inter – segment 12 507 843 675 038 2.881 3.wood screws.320. The following is an analysis of the Group’s revenue and results from operations by reportable segments for the year ended 31 December 2011.114 – (1.000.Notes to the Financial Statements for the year ended 31 December 2011 (continued) 4.veranda bolts and high tensile bolts to the mining. 557.381 2 347 068 Other (Eliminations) (149 065) (135 616) 16 745 397 13 493 652 1 504 108 1 225 191 527 492 433.300 2.070 151.252) Group’s income after tax – – – – 2.300 33.376 Other (Eliminations) (145 519) (106 799) Total Segment Liabilities 1 886 081 1 551 768 Total Segment Assets Segment Liabilities Farming Implements Fasteners Zimplow Limited « 36 » 2011 Annual Report .049 Finance costs – – – – (14.228) 12.228) – 9.774.461 2.650) 2.062 Finance income – – – – 161.776.001 Year Ended 31 Dec 2011 US$ Year Ended 31 Dec 2010 US$ External customers 9.342.228 (33.Notes to the Financial Statements for the year ended 31 December 2011 (continued) 4.298.643.642 (18. Segment information continued The following is an analysis of the Group’s revenue and results from operations by reportable segments for the year ended 31 December 2010 Revenue F arming Implements Fasteners Adjustment Total 2 523 839 – 12.298.858) Income taxes – – – – (580.774.645.067 (33.461 Inter – segment - Total revenue Results Reportable segment profit Unallocated items: Segment Assets and Liabilities Segment Assets Farming Implements 14 249 081 11 282 200 Fasteners 2. Notes to the Financial Statements for the year ended 31 December 2011 (continued) 4.904 302. is limited to financial position data as at 31 December 2011. and financial performance data for the twelve month period to 31 December 2011. Geographic information Revenue from external customers (based on customer location) US$ US$ Local 11. Segment information continued Other Segment information Depreciation and Amortisation Farming Implements Year Ended 31/12/2011 US$ 231. Zimplow Limited « 37 » 2011 Annual Report .694 91.424 Year Ended 31/12/2010 US$ 212 074 70. The Group’s disclosed segment information.503.068 45 467 510.838 3 662 935 15.267.468 8 635 365 4.328 59 156 271 230 Fasteners Additions to non current assets Year Ended 31/12/2011 Year Ended 31/12/2010 US$ Farming Implements US$ 419. Internal transactions are appropriately eliminated on consolidation and data aggregation.235.762 Fasteners 237 517 282 984 Transfer prices between operating segments are set on an arm’s length basis in a manner similar to transactions with third parties.306 12 298 300 Foreign Total The Group’s operations are located in Zimbabwe( the entity’s country of domicile) and South Africa. 628 327 071 924 327 071 924 US$ US$ US$ 32 716 32 707 - Capital reserves 7 036 174 7 036 174 7 066 581 Share premium 552 333 - - 7 621 223 7 068 881 7 066 581 Authorised Increase in ordinary shares Afritrac Acquisition .31 December 2008 Issued share capital and reserves comprise of.3 Share options granted under the Company’s employee share option plan At 31 December 2011. in terms of Extraordinary General Meetings of Members held on 30 August 1989. Rwakonda 1 000 - Zimplow Limited « 38 » 2011 Annual Report . the directors of the Group held directly and indirectly. 16 November 2005 and 14 November 2007. Kumwenda 14 530 15 609 D.277.28 February 2011 Tassburg Aquisition . Issued share capital Shares 5. Share Capital 5. 5. the unissued shares are under the control of the Directors. another 40% in 2017 and 20% will expire in 2018. Mkonto 1 213 1 213 B. and to the limitations of the Zimbabwe Stock Exchange.0001 US cents each 500 000 000 500 000 000 500 000 000 Ordinary shares issued and fully paid 327 071 924 327 071 924 298 210 425 9 205 704 - - - - 28 861 499 336. Devenish 1 213 1 213 A. of which 40% will expire in 2016. Further details of the employee share option plan are provided in note 17. the following shares: Name Year Ended 2011 Year Ended 2010 Z. Share options granted under the Company’s employee share option plan carry no rights to dividends and no voting rights.4 At 31 December 2011. Nhira P.Notes to the Financial Statements for the year ended 31 December 2011 (continued) 5. Kurauone 1 000 - E. Rusike 1 000 - F. Mitchell 63 501 000 63 500 000 1 084 980 1 203 464 N.2 Subject to Section 183 of the Companies Act (Chapter 24:03). Moyo 1 000 - Z. Mlambo 1 000 - T. 10 November 2004.1 Reconciliation of authorised and Issued share capital Year Ended 2011 Year Ended 2010 Year Ended 2009 Shares Shares 500 000 000 500 000 000 500 000 000 - - - Ordinary shares at 0. executives and senior employees held options over 16 350 000 ordinary shares of the Company. 5. 342 16 841 3 530 - (1 649) - 621 484 599 833 618 860 Accelerated wear and tear Gain on financial assets Net exchange gain Share based payment expense Zimplow Limited « 39 » 2011 Annual Report .454 17 795 17 929 13.559 17 200 904 991 580 252 (4.2 Reconciliation of tax charge Tax on profit for the year at 25. 6.629) - - (3 816) 40 983 - 26.3.648) (5 386) (845) 4.253 582 097 Foreign income tax @ 28% 40 983 - Deferred taxation 26 196 (19 045) Withholding tax 26.75% in comparison to 20.6%-2010) Tax effect on expenses that are not deductible in determining taxable profit Effect of different tax rates between current and deferred tax Effect of tax on foreign subsidiary @28% Withholding Tax The tax rate used for the 2011 reconciliation is 25.420 (1 497) Income taxed at special rate (63.559 904 991 17 200 580 271 6.75% ( inclusive of 3% AIDS Levy ) (20.6% in 2010 as the entity did not manage to export a greater number of implements due to high local demand and competition in the export market. Deferred tax liability Key components of deferred tax: 31 Dec 2011 31 Dec 2010 31 Dec 2009 568 079 567 465 590 395 Prepayments 23.Notes to the Financial Statements for the year ended 31 December 2011 (continued) 6.546) (4.546) 19 19 902 996 602 010 11.338) (33 626) Export Promotion Incentive (13.1 Charge based on income for the year Income tax expense reported in the income statement Consolidated statement of other comprehensive income Deferred tax related to items charged or credited directly to OCI during the year: Fair value gain on available for sale financial assets Income tax charged directly to other comprehensive income 6. Taxation 31 Dec 2011 31 Dec 2010 US$ US$ Zimbabwe income tax 811.416 16 429 13 030 Deferred Income (4. plant and equipment Land & Plant & Motor Office furniture Buildings Machinery vehicles & computer -freehold equipment US$ US$ US$ US$ At cost/valuation At 1 January 2009 Total US$ 630 000 1 760 185 444 829 65 143 2 900 157 Additions 2 511 19 425 268 584 52 552 343 072 Disposals - - (84 811) - (84 811) 632 511 1 779 610 628 602 117 695 3 158 418 - 2 300 - - 2 300 Additions (30) 11 984 213 869 57 161 282 984 Disposals - - (51 706) (15) (51 721) 632 481 1 793 894 790 765 174 840 3 391 981 Additions 2 595 22 753 421 239 64 175 510 762 Acquisition through business 2 213 - 7 491 1 142 10 846 (262) - (886) (135) (1 283) - - (123 841) (1 737) (125 578) 637 027 1 816 647 1 094 768 238 285 3 786 728 (7 369) (53 213) (233 048) (26 345) (319 975) (29 475) (96 465) (84 665) (13 747) (224 352) At 31 December 2009 Adjustment* At 31 December 2010 combination Effects of foreign currency exchange Disposals At 31 December 2011 Accumulated depreciation At 1 January 2009 Charge for the year Impairment losses recognised in profit and loss - Disposals - - 59 100 - 59 100 At 31 December 2009 (36 844) (154 113) (258 613) (40 092) (489 662) Charge for the year (29 516) (98 099) (121 275) (22 340) (271 230) - - 36 267 6 36 273 At 31 December 2010 (66 360) (252 212) (343 621) (62 426) (724 619 Charge for the year (27 631) (100 516) (142 040) (32 141) (302 328) 121 - 365 51 536 - - 102 700 588 103 288 At 31 December 2011 (93 870) (352 728) (382 596) (93 928) (923 123) Carrying amount At 31 December 2009 595 667 1 625 497 369 989 77 603 2 668 756 At 31 December 2010 566 121 1 541 682 447 144 112 414 2 667 362 At 31 December 2011 543 158 1 463 919 712 172 144 357 2 863 605 Disposals Effects of foreign currency exchange Disposals (4 435) (4 435) *Being deemed cost adjustment to Tassburg’s assets that were identified on the consolidation of the fixed assets register Zimplow Limited « 40 » 2011 Annual Report . Property.Notes to the Financial Statements for the year ended 31 December 2011 (continued) 7. 9. plant and equipment are not encumbered and do not form collateral on any borrowing and loan facilities in place. The Group’s property. • Office furniture and computer equipment: 4 to 10 years.752) 124 119 526 Closing balance 147. Capital commitments Year Ended 2011 Year Ended 2010 Authorised but not yet contracted US$ 326 560 US$ 808 499 - 52 200 326 560 860 699 Authorised and contracted Capital commitments are expected to be financed through the utilisation of funds generated by the Group’s operating activities. 8. • Motor vehicles: 5 years.Notes to the Financial Statements for the year ended 31 December 2011 (continued) Depreciation is calculated on a straight line basis over the following asset class useful life spans in order to allocate their cost or revalued amounts to their residual values: • Buildings: 50 years. Goodwill Year Ended 2011 Year Ended 2010 Year Ended 2009 US$ US$ US$ 47 200 - - - - - 47 200 - - Year Ended 2011 Year Ended 2010 Year Ended 2009 US$ US$ US$ - - - combinations occurring during the year (note 20) 47 200 - - Effect of foreign currency exchange differences (5 575) - - Balance at end of year 41 625 - - Cost Accumulated impairment losses Cost Balance at beginning of year Additional amounts recognised from business Zimplow Limited « 41 » 2011 Annual Report . • Plant and machinery: 5 to 50 years.976 177 728 177 604 2009 US$ 58 078 The fair value of the Group’s investments in listed equity shares at 31 December 2011 is determined by reference to published price quotations in an active market. Quoted Available for Sale Financial Assets Year Ended Year Ended Year Ended Opening balance 2011 US$ 177 728 2010 US$ 177 604 Fair value adjustment (29. 466 517 584 203 752 Movement in the allowance for doubtful debts Balance at beginning of the year Impairment losses recognised on receivables Amounts recovered during the year Balance at end of the year Year Ended 2011 US$ 12 295 14 681 (12 295) 14 681 Year Ended 2010 US$ - 12 295 - 12 295 Year Ended 2009 US$ - Local trade receivables The average credit period on local sales of goods is 30 days.120 days - 8 242 - Over 120 days 1.Included in the Group’s local trade receivables balance are debtors with a carrying amount of US$ 14 681 which are past due at the reporting period end date for which the Group has provided for them as doubtful debts.785.732 401 586 203 021 61 . Thereafter. The amount of write – down of inventories recognised as an expense is US$12 001 which is recognised in “cost of sales”. Limits and scoring attributed to customers are constantly reviewed.). 11. the Group uses an internal credit scoring system to assess the potential customer’s credit quality and defines credit limits by customer.050 45 336 731 Total 571. Inventories Raw materials Year Ended 2011 US$ 2 661 601 Year Ended 2010 US$ 1 695 798 Year Ended 2009 US$ 2 738 055 Finished goods 1 611 287 1 368 212 1 814 104 Spares and components 2. ( Prior year 31 December 2010 was US$ 6 801 772.589 Year Ended 2010 US$ 1 282 027 Year Ended 2009 US$ 398 528 .359. interest is charged at 15% per annum on the outstanding balance.684 62 420 91. No interest is charged on local trade receivables for the first 30 days from the date of invoice. Zimplow Limited « 42 » 2011 Annual Report .971 .057. The average age of these receivables is 45 days.798 284 999 225 554 Trade receivables . Before accepting any new local customer.737.Notes to the Financial Statements for the year ended 31 December 2011 (continued) 10.681) (12 925) - Other receivables and prepayments 589. The Group has insured these balances and are therefore recoverable.Foreign trade receivables 751 622 688 410 539 796 .062 2 308 453 1 276 992 7.60 days 532.90 days 37.Allowance for doubtful debts (local & foreign) (14.Local trade receivables 2 686 329 2 242 511 1 163 878 Ageing of receivables that are past due but not impaired 30. Trade and other receivables Year Ended 2011 US$ 1.950 5 372 463 5 829 151 The cost of inventory recognised as an expense during the year was US$ 8. Trade.1 Trade and other payables Local trade payables Year Ended 2011 US$ 354.421 US$ 140 627 US$ - 65. and earn interest at the respective short term deposit. 13. No interest is charged on outstanding foreign trade receivables.817 Year Ended 2010 US$ 210 678 Year Ended 2009 US$ 112 715 Foreign trade payables 306. members of the Group’s executive team and foreign sales administrators deliberate the prospective customer’s credit worthiness. its foreign sales administrators and marketing managers often meet prospective foreign customers in order to conduct background and screening checks and attach a credit quality rating before accepting credit trading customers.947. 12. 12.2 Provisions – employee benefits Year Ended 2011 Year Ended 2010 Year Ended 2009 Balance at 1 January 2011 US$ 378.121 311 566 140 627 Reductions arising from payments (64. Cash and bank balances Cash at bank and on hand Year Ended 2011 US$ 3.404 415 852 548 414 Other payables and accrued expenses 509 890 177 958 319 579 1 171 111 804 488 980 708 Local trade payables The average credit period on local purchases of key manufacturing inputs ranges between 7 – 30 days (from date of invoice). Zimplow Limited « 43 » 2011 Annual Report . other payables and provisions 12. Credit limits are defined for each foreign customer and set by the executive team. The Group has financial risk management policies in place to ensure that trade payables are paid within the credit time frame.Notes to the Financial Statements for the year ended 31 December 2011 (continued) Foreign trade receivables The credit period on foreign sales of goods ranges between 60 – 90 days.982 378 421 140 627 Additional provision recognised The provision for employee benefits represents annual leave.355 Year Ended 2010 US$ 2 971 156 Year Ended 2009 540. Before accepting any new foreign (export) customer. Members of the Group’s executive team.912 3 033 588 1 039 951 Foreign cash at bank (other than US$) 925 848 Short term deposits are made for varying periods of between one day and three months.560) (73 772) - Balance at 31 December 2011 378. Credit limits and customer quality are constantly reviewed.557 62 432 114 103 3. Foreign trade payables The average credit period on foreign purchases of key manufacturing inputs is 30 days (from date of invoice).407. long service leave entitlements accrued and compensation claims made by the Group’s employees. depending on the immediate and short term cash requirements of the Group. The effect of the time value of money in settling the above employee benefit obligations is considered immaterial. Notes to the Financial Statements for the year ended 31 December 2011 (continued) The Group has an investment with Renaissance Merchant Bank amounting to USD$420 027. This amount matured on 7 May 2011. which are related parties of the Company. Details of transactions between the Group and other related parties are disclosed below. The remuneration of directors and other members of key management during the 12 month reporting period to 31 December 2011 are as follows: Year Ended Year Ended 2011 2010 US$ US$ Short – term employee benefits 335 213 245 494 The remuneration of directors and key executives is determined by the Group’s Remuneration Committee havingregard to the performance of individuals and market trends.Volanto Beleggings CC Refer to note 2. Year Ended 2011 US$ 75 686 77 640 6 857 Year Ended 2010 US$ 56 210 59 268 - Loans from shareholders (Afritrac) M C McMaster 2 176 S Labushange 3 792 M E McMacmaster 8 661 O Guzardi 11 596 Loans owing by related Parties Volanto Beleggings CC 77 147 Volanto CC is a company owned by the previous shareholders of Afritrac namely: M C McMaster S Labushange M E McMacmaster O Guzardi Zimplow Limited « 44 » 2011 Annual Report . Related Party Disclosures Balances and transactions between the Company and its subsidiaries. Rental payments to lessors (under operating lease arrangements): CT Bolts premises – B Mitchell (Group shareholder) Tassburg premises – M Pringle – Wood (Group shareholder) Afritrac Premises .4 for further details on the Group’s operating lease arrangements. and the bank is still to meet this obligation. At 31 December 2011. 14. the Group had available US$ 2 500 000 of undrawn committed borrowing facilities in respect of which all conditions precedent had been met. have been eliminated on consolidation and are not disclosed in this note. 16. therefore continues to expense such contingent payments as they arise. as lessee. as detailed in the statement of changes in equity Capital comprises equity attributable to the equity holders of the parent.Notes to the Financial Statements for the year ended 31 December 2011 (continued) 15. in arrears. are based on a percentage of the monthly turnover of CT Bolts. Afritrac(SA) and Tassburg (Harare). do not have to be separated from the lease contract as a whole. The capital structure of the Group had no long term debt in 2011. The Group is not subject to any externally imposed capital requirements. Year Ended Year Ended 2011 2010 US$ US$ Payments recognised as an expense 160 183 115 478 The non – cancellable nature of the Group’s leases would ordinarily necessitate disclosures in accordance with IAS 17: 35 (“Leases”). return capital to shareholders or issue new shares. The Group’s Audit Commitee reviews the capital structure.1 Capital Management T he Group manages its capital to ensure that entities in the group will be able to continue as going concerns while maximising return to stakeholders through the optimisation of the debt and equity balance. Application Guidance to IAS 39: “Financial Instruments: Recognition and Measurement” states that operating lease payments based on turnover is a common contingent rental term within leases that is categorised as an embedded derivative. The Group’s strategy remains unchanged from 2010.The capital structure of the group consist of issued capital. The Group does not have a non – controlling interest element in its business acquisitions. In this regard. Payments are remitted monthly. The Group manages its capital structure and considers making related adjustments to it in line with changes in prevailing and forecast economic conditions. The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and positive capital ratios in order to support the application of its business model and maximise shareholder value. the aforementioned disclosures are not considered relevant and accordingly do not form part of the note. Set payment terms are not leveraged or indexed to any external sources and are considered to relate only to the Zimbabwean economic environment. Operating Lease Arrangements Operating leases relate to premises occupied by CT Bolts (Bulawayo and Harare) . The Group. Such embedded derivatives are however considered closely related to the host lease contract and accordingly. the Group may adjust the dividend payout to shareholders. introduced in January 2010. Given the contingent rental payment terms in place throughout most of the current reporting period and in place as at period end. As part of this review.retained earnings and Non-controlling interests. Financial Instruments 16. the commitee considers the cost of capital and risks associated with each cost of capital. Zimplow Limited « 45 » 2011 Annual Report . to the former owner of the business unit. future minimum lease payment commitments over prescribed periods would need to be disclosed in accordance with the particulars of lease arrangements. The Group’s contingent rental payment terms. To maintain or adjust the capital structure.reserves. evaluation.2 Financial Risk Management The Group’s activities expose it to a variety of financial risks: market risk (including currency risk. with all other variables held constant. in line with its risk management programme. and minimising potential adverse effects on the Group’s financial performance. the Group did not have any interest bearing loans and borrowings. Zimplow Limited « 46 » 2011 Annual Report . The Group’s aim. acceptance and management of some degree of risk or a combination of risks. credit risk and liquidity risk.338 485 283 15 687 Total assets Liabilities The table below details the Group’s sensitivity to the strengthening of the US$ against the South African Rand and the Botswana Pula by 10%. as denominated in respective currencies. The analysis was applied to monetary items at the reporting period end date. The carrying amount of the Group’s foreign currency denominated monetary assets and liabilities as at the reporting period end date. cash flow interest rate risk and price risk).Notes to the Financial Statements for the year ended 31 December 2011 (continued) The Group monitors capital levels and appropriateness with reference to a gearing ratio. Market risk • Foreign exchange risk The Group operates regionally and is exposed to foreign exchange risk arising from various currency exposures.338 602 855 15 687 Trade and other payables 306 404 – 117 572 – Total net position 915 418 67. is therefore aligned with achieving an appropriate balance between risk and return. primarily with respect to the the South African Rand and the Botswana Pula. The Group’s policy is to keep its gearing ratio between 15% and 35%. Taking an acceptable level of risk is core to a business and operational risks are considered an inevitable consequence of being in business. The Group’s Directors are of the opinion that the entity does not have significant exposure to financial risk. 16. The Group’s Board of Directors and Executive Committee fulfil the entity’s risk appetite formulation and management process in consultation with management of the Group’s operating units. fair value interest rate risk. As at 31 December 2011.441 540 707 15 404 Cash and cash equivalents 530 660 9. Risk management is a dynamic process that requires the ongoing analysis efforts of the Group’s Directors. Foreign exchange risk arises when future commercial transactions or recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency.897 62 148 283 1 221 822 67. are as follows: Year Ended 2011 Year Ended 2010 Assets S African Rand Botswana Pula S Africa Rand Botswana Pula Trade and other receivables 69 1 162 57. The Group’s activities involve the analysis. 538 6. A 50 basis point increase or decrease (equivalent to a 0. The Group similarly adopts the aforementioned approach in formulating policy over equity security investments.976. • Credit risk Credit risk relates to the risk that a trade counterparty will not meet its obligations under a financial instrument or customer contract. Borrowings issued at variable rates expose the Group to cash flow interest rate risk.798 on other comprehensive income and equity attributable to the Group. The Group’s maximum exposure to credit risk for the affected components of the Statement of Financial Position at 31 December 2011 is the aggregate of the carrying amounts as shown therein. The Group endeavours to maximise interest rates on investments and minimise interest rates on borrowings.The Group did not have any borrowings at the end of the year. leading to a financial loss being incurred. depending on whether or not the decline is significant and prolonged.272 40 645 6 955 47 600 Effect on equity 12 279 5000 17 279 30 179 5 164 35 343 • Price risk The Group is exposed to equity securities price risk because of investments held by the Group and classified on the Statement of Financial Position as available for sale. Potential concentrations of credit risk consist principally of short term cash and cash equivalent investments and trade receivables. Borrowings are settled as promptly as possible if interest rates are unfavourable and the Group always strives to negotiate the most favourable rates and tenures to avoid both cash flow and fair value interest rate risk.5% absolute interest rate change) is considered by management as a reasonable possible change in interest rate terms and would therefore be representative of an approximate loan sensitivity analysis. A decrease of 10% on the Zimbabwe Stock Exchange (ZSE) market index. Alternatively. The Group’s interest rate risk arises from medium – long term borrowing arrangements. would have an approximate pre tax negative impact in value of US$ 14. The Group manages the equity price risk through diversification and placing limits on individual and total equity instruments.Credit risk related to cash deposits and equity security investments held in listed concerns: The Group deposits short term cash surpluses only with major banks and financial institutions of high credit standing and within investment limits assigned to each counterparty. The Group policy is to adopt a non – speculative policy on managing interest rate risk. marked as having a similar reducing impact on the specific equity securities within the Group’s investment portfolio at 31 December 2011. the Group acquires equity securities when gains are anticipated. Similarly. • Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Zimplow Limited « 47 » 2011 Annual Report . The Group’s Board of Directors reviews the limits and investment placements on a periodic basis and approve the Committee’s proposals accordingly. or alternatively rejects related proposals and effects changes to Group policy. The Group’s Executive Committee regularly reviews its investment portfolio and considers disposing equity securities when related investee share prices would potentially disadvantage the Group’s position. an increase of 10% in the Group’s listed security investment portfolio value would positively impact profit or loss and equity by a similar amount. The Group’s listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. Investment limits with banks and financial institutions are assigned by the Group’s Executive Committee in an effort to minimise the concentration of risk and therefore mitigate financial loss through potential counterparty failure.734 23. the exposure to listed equity securities at fair value was US$ 147. Alternatively. This is mainly attributable to the Group’s exposure to interest rates on its variable rate borrowings.Notes to the Financial Statements for the year ended 31 December 2011 (continued) Year Ended 2011 Year Ended 2010 S African Rand Botswana Pula Total S African Rand Botswana Pula Total impact impact impact impact US$ US$ US$ US$ US$ US$ Profit before taxation 16. At the reporting period end date. borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group’s objective is to maintain a beneficial balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans. 17. Accordingly. • Liquidity risk Liquidity risk relates to a risk of a shortage of corporate funds being experienced.701 1 035 410 1 171 111 Fair value of financial instruments The estimated net fair values of all financial instruments approximate the carrying amounts shown in the financial statements. largely due to the short term nature of these instruments. Outstanding customer receivables are regularly monitored and a full time credit control department exists to independently perform this function. Share-based payments 17. executives and senior employees with more than five years service with the Group may be granted options to purchase ordinary shares at an exercise price of US$0. In accordance with the terms of the plan. Prudent liquidity risk management includes maintaining sufficient cash and marketable securities. The Group has access to financing facilities. The Group expects to meet its core trading based obligations from operating cash flows and proceeds from the realisation of its financial assets. Zimplow Limited « 48 » 2011 Annual Report . or the issuance of preference shares. the Group has no significant concentration of credit risk which has not been adequately provided for.09 per ordinary share. Group entities perform ongoing credit evaluations of the financial condition of their customers. the total unused amount of which is US$ 2 500 000 at 31 December 2011. Credit limits are established for all customers based on internal credit rating assessments after extensive prospective customer background and credit reference checks are performed. whilst always considering the need for potential funding source diversification through the introduction of finance lease or hire purchase arrangements. The Group does not have any significant credit risk exposure to any single counterparty or any group ofcounterparties having similar characteristics. The Group’s maximum exposure to credit risk at 31 December 2011 and further specific credit risk mitigating activities adopted by the entity are as shown in note 11. The Group maintains flexibility in funding by maintaining funding availability under committed credit lines. as approved by shareholders at a previous annual general meeting. the availability of funding from an adequate amount of committed credit facilities and the ability to close out market positions.Notes to the Financial Statements for the year ended 31 December 2011 (continued) Credit risk related to trade receivables: Trade receivables comprise a relatively large and widespread customer base. the Group’s external funding sources were limited to bank overdrafts and interest bearing loans and borrowings.As at the reporting period end date.1.1 Employee share option plan of the Company 17. The table below summarises the maturity profile of the Group’s financial liabilities at 31 December 2011 based on contractual undiscounted payments: On demand Less than 3 months Total US$ US$ Trade and other payables 135.1 Details of the employee share option plan of the Company The Company has a share option scheme for executives and senior employees of the Group and its subsidiaries. Share options for the Group have been measured at their intrinsic value. The number of options granted is calculated in accordance with the performance-based formula approved by shareholders at the previous annual general meeting and is subject to approval by the remuneration committee.08) of the underlying shares and exercise price of the option (US$0. 17. and will expire after 5 years (i.e 2017). No amounts are paid or payable by the recipient on receipt of the option. 17. Reserves (net of income tax) 18.3 Movements in shares options during the year The following reconciles the share options outstanding at the beginning and end of the year: Balance at beginning of the year Granted during the year(40% of 16 350 000) Balance at the end of the year 2011 Number of Options - 6 540 000 6 540 000 2010 Number of Options - 18. as follows: (i) 40% was granted in 2011.09). The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. vest after 1 year. In respect of any option.1.Notes to the Financial Statements for the year ended 31 December 2011 (continued) Each employee share option converts into one ordinary share of the Company on exercise. (iii) 20% willl be granted in 2013.1. and will expire after 5 years (i. vest after 1 year. the grantee shall be limited to exercising the option.e 2018). vest after 1 year. and will expire after 5 years (i. (ii) 40% will be granted in 2012.1 Equity-settled employee benefits reserve under the Company’s employee share option plan Year Ended Year Ended Year Ended 2011 2010 2009 US$ US$ US$ Balance at the beginnning - - - Arising on share based payments (intrinsic value recognition) (65 400) - - Balance at the end of the year (65 400) - - Zimplow Limited « 49 » 2011 Annual Report . and the right to exercise the option shall only accrue.e 2016). The intrinsic value of a share option at any point in time is the difference between the market price (US$0.2 Fair value of share options granted in the year The Group was unable to estimate reliably the fair value of the equity instruments at the measurement date due to lack of information in the economy that would enable the Group to estimate the risk free rate over the next 10 years as required by binomial option pricing model.The intrinsic value of the share options was ( US$65 400 ) in 2011 and nil in 2010. Non Controlling interests Balance at the beginning of the year Non-controlling interests arising on the acquisition of Afritrac (see note 20) Share of profit for the current year Exchange differences arising on translating the foreign operations Balance at end of year Zimplow Limited « 50 » Year Ended 2011 US$ - Year Ended 2010 US$ - 525 761 52 954 (66 082) 512 633 2011 Annual Report Year Ended 2009 US$ - - - - - - - - . Exchange differences previously accumulated in the foreign currency translation reserve (in respect of translating both the net assets of foreign operations and hedges of foreign operations) are reclassified to profit or loss on the disposal of the foreign operation. Further information about share-based payments to employees is set out in note 17.Notes to the Financial Statements for the year ended 31 December 2011 (continued) The above equity-settled employee benefits reserve relates to share options granted by the Company to its employees under its employee share option plan. 18. 19.2 Foreign currency translation reserve Year Ended Year Ended Year Ended 2011 2010 2009 US$ US$ US$ Balance at the beginnning - - - Exchange differences arising on translating the foreign operations (69 065) - Income tax relating to gains arising on translating the net assets of foreign operations - - Balance at the end of year (69 065) - - Exchange differences relating to the translation of the results and net assets of the Group’s foreign operations from their functional currencies to the Group’s presentation currency are recognised directly in other comprehensive income and accumulated in the foreign currency translation reserve. 845 Current liabilities Trade and other payables (265 552) Tax payable (1 588) Net assets 1 030 904 Zimplow Limited « 51 » 2011 Annual Report .75% each.342 The Group issued 9 205 704 ordinary shares as consideration for the 49% interest in Afritrac. Business combinations 20.919 272.appoint or remove the majority of the members of the board of directors.2 Consideration transferred Cash Equity Total US$ - 552. 20.775 658.505 Non-current assets Plant and equipment 10.Notes to the Financial Statements for the year ended 31 December 2011 (continued) 20. within the ‘other expenses’ line item in the consolidated statement of comprehensive income.06 US cents each.342 552.1 Subsidiaries acquired African Traction and Associated Technologies Principal activity Date of acquisition potential of voting Consideration equity interests Transfered Import and sale of farming 28 February 2011 49% 552 342 implements and tools Afritrac was acquired so as to continue the expansion of the Group’s activities on agricultural implements. The fair value of the consideration given is therefore US$552 342. A cquisition-related costs amounting to US$11 500 have been excluded from the consideration transferred and have been recognised as an expense in the current year. The fair value of the shares is the published price of the shares of the Group at the acquisition date. which was 0. the remainder of the shareholding is held by the previous shareholders in their individual capacity at 12. By virtue of agreement Zimplow Limited is the majority shareholder in Afritrac holding 49%.Zimplow has the power to govern the financial reporting .3 Assets acquired and liabilities recognised at the date of acquisition Current assets Cash and & cash equivalents Trade and other receivables Inventories US$ 355. 20. 761 (1.4 Non-controlling interests The non-controlling interest (51% ownership interest in African Traction and Associated Technologies) recognised at the acquisition date was measured by reference to the fair value of the net assets acquired and amounted to US$525 761.5 Goodwill arising on acquisition Consideration transferred Plus: non-controlling interests (51 % in Afritrac) Less: fair value of identifiable net assets acquired US$ 552.342 525. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. In addition.6 Net cash inflow on acquisition of subsidiaries Consideration paid in cash Less: cash and cash equivalent balances acquired US$ - 355 919 355 919 Zimplow Limited « 52 » 2011 Annual Report . the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies.904) Goodwill arising on acquisition 47 200 Goodwill arose in the acquisition of Afritrac because the cost of the combination included a control premium. future market development and the assembled workforce of Afritrac.030.Notes to the Financial Statements for the year ended 31 December 2011 (continued) 20. 20. revenue growth. 20. 08 was less than the issue price of the share options of US$0. 22.01 Diluted earnings per share 0. The Group had share options of 16 350 000 . How ever the average market price for the year of US$0. The following reflects the income and share data used in the basic earnings per share computations: Profit attributable to ordinary shareholders of the Group Year Ended 31 December 2011 2 730 282 Year Ended 31 December 2010 2 342 001 Number of shares for basic earnings per share (thousands) 334 743 344 327 071 924 Weighted average number of shares(thousands) 334 743 344 327 071 924 Basic earnings per share (US$) 0.01 0. Earnings per share Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity shareholders of the Group by the weighted average number of ordinary shareholders outstanding during the year.09 Zimplow Limited « 53 » 2011 Annual Report . Events after the reporting date Non-adjusting events On the 22 of February 2012.Notes to the Financial Statements for the year ended 31 December 2011 (continued) 21. that could potentially become dilutive.01 0. the directors of the Group proposed a dividend of $900 000.01 The Group did not have any dilutive shares during the year. The following potential ordinary shares are anti dilutive and are therefore excluded from the weighted number of ordinary shares for the purposes of diluted earnings per share. The calculation takes into account the amount retained and reinvested in the Group for the replacement of assets and further development of operations.598 44 2 795 153 46 Government taxes 900 445 11 580 271 10 Providers of capital – dividends 686.306 12 298 300 Less: Cost of material and services (7 654 362) (6 309 664) 7 848 944 5 988 636 APPLIED AS FOLLOWS: % % Employee remuneration/benefits 3. Turnover Year Ended Year Ended 31 December 2011 December 2010 31 US$ US$ 15.206) (124) Retained income 2 569 927 2 342 106 7 848 944 5 988 636 Zimplow Limited « 54 » 100 2011 Annual Report 100 . products and services purchased.851 9 - - Balance retained in the Group 2 847 049 36 2 613 212 44 Depreciation 302 328 271 230 Fair value adjustment on equity (25.Consolidated Statement of Value Added for the year ended 31 December 2011 Value added is a measure of the wealth the Group has been able to create by adding value to the cost of raw materials.503.414. The statement summarises the total wealth created and shows how it was shared by employees and other parties who contributed to the Group’s operations. 28 5 001 – 10 000 90 8.38 Over 1 000 000 25 2.628 100.769.51 50 001 – 100 000 38 3.95 No.955.067 2.05 Chitepo Bernard Norman 4.60 National Social Security Authority (NSSA NPS) 6.79 Local Individual Residents 724 66.196 4.17 Nominees Foreign 10 0.371 0.378 2.94 Non Residents 18 1.147.91 10.725.32 93.28 16.287 Zimplow Limited « 55 » 80.862 44.096.030 8.00 TOP 10 LARGEST SHAREHOLDERS: TFS Nominees (Pvt) Ltd 106.28 291.46 Insurance Companies 11 Employee Share Trust 1 0.43 Fund Managers 10 0.039 27.019.80 100 001 – 500 000 90 8.468 86.107 0.770 3.659 % 0.42 Local Companies 135 12.22 1.06 Mining Industry Pension Fund 6.871 5.491 1.253.966.37 Government/Quasi-Government 1 0.27 Stanbic Nominees (Pvt) Ltd 8.406 6.72 CTB Investments 63.846 0.00 TYPE OF SHAREHOLDERS: Nominees Local 81 7.699.99 2011 Annual Report .47 2.980.31 272.56 4.942.096 100.70 Yumiko Investments (Pvt) Ltd 20.880.Shareholders’ Analysis for the year ended 31 December 2011 SIZE OF SHAREHOLDING: 1 – 5 000 No of Shareholders 668 % 60.398 4.351.21 673.53 25 001 – 50 000 48 4.724 0.242.38 1.09 1.052.23 Old Mutual Life Assurance Zim 14.27 18.424.008.277.35 New Non Residents 25 2.257 0.7 Banks 25 2.18 Barclays Zimbabwe Nominees P/L-NNR 10.795.121 0.282 1.290 5.00 336 277 628 100.64 500 001 – 1 000 000 25 2.11 28.03 Deceased Estates 3 0.500.09 1.01 1 096 100.847.06 14.394 2.016 1 4.78 1 5.89 Investments and Trusts 50 4.000 18.150 0. of Shares held 933.090.002 0.88 Datvest Nominees (Pvt) Ltd 29.943.21 18.741 8.738.39 150.27 12 781 481 0.603.20 10 001 – 25 000 1132 10.91 97.402.28 18.430.093 3.00 336.959 4.26 16 584 298 7.23 Pension Funds 45 4.669.555 31.66 1. 04 336.067 503 457 Summary of Results Turnover Return on investment (%) Financial Status Current assets Current ratio (times) US$ Per Ordinary Share Basic earnings Dividends Market price (US$) – highest (01/11/2011) Market price (US$) – lowest (12/01/2011) Market price (US$) .02 0.628 327 071 924 0.503.306 12 298 300 Profit before tax 3 635 273 2 922 253 Taxation (904 991) (580 252) Profit after tax 2 730 282 2 342 001 24% 24% 13 692 191 10 648 562 Current liabilities 1 886 081 1 551 768 Net current assets 11 806 110 9 096 794 7 7 Total assets employed 16 745 397 13 493 652 Total equity 13 725 199 11 342 051 0.07 0.11 0.08 0.01 0.Financial Review 2011 for the year ended 31 December 2011 Year Ended 31 Dec 2011 US$ Year Ended 31 Dec 2010 US$ 15.04 0. of ordinary shares issued 0.277.01 0.end of year Staff Complement Average number of employees Zimplow Limited « 56 » 2011 Annual Report .06 0.0027 0.01 Net asset value Shares In Issue No.0021 Income retained for the year 0.01 0. The share register will be closed from 9 to 11 March 2012. Payment will be on or about 14 March 2012 to ordinary shareholders registered in the books of the Group at the close of business on Thursday 08 March 2012.O.21 United States cents per share).Financial Calendar Result and dividend announcement for the year ended 31 December 2011 23 February 2012 Annual General Meeting 28 March 2012 Dividend notice In line with the Group’s dividend policy.27 United States cents per share (2010 0. The dividend will be payable out of the profits of the Group for the year ended 31 December 2011. was proposed by directors on 22nd of February 2012. BY ORDER OF THE BOARD D MKONTO Company Secretary 39 Steelworks Road P. both days inclusive and will reopen on Monday 12 March 2012. a final dividend number 68 of 0. Box 1059 BULAWAYO Zimplow Limited « 57 » 2011 Annual Report . Annual Report 2011 .ZIMPLOW LIMITED .