http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/RSS.ashxAfrican Annual Reports PagesTue, 25 Aug 2009 16:41:07 +0200http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=1http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=1ANNUAL 2009 REPORT communication the frontiers of Expanding2009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=2http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=2Enlarge the place of your tent, stretch your tent curtains wide, do not hold back; lengthen your cords, strengthen your stakes. Isaiah 54 v 2 (NIV)2009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=3http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=3Expanding the frontiers of communication We are working relentlessly to achieve sustainable growth to extend the frontiers of communication through the through innovation and network expansion. We are committed deployment of relevant technologies such as GPRS, 3G, Wi-Fi and unlock value to all our stakeholders and open new horizons for our customers. Wi-Max. We believe that the accelerated growth programme will Econet Wireless Holdings Limited Annual Report 2009 12009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=4http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=4Contents Econet Today Financial Highlights Organisational Vision Board of Directors Econet Corporate Profile Chairman's Statement to the Shareholders Chief Executive Officer’s Operations Review Corporate Social Investment Directors’ Report 3 6 5 12 10 8 16 15 Directors’ Responsibility for Financial Reporting Corporate Governance Certificate by Company Secretary Report of the Independent Auditors Financial Statements Supplementary Information Detachable Proxy Form for Annual General Meeting 18 17 22 62 26 23 Econet Wireless Holdings Limited Annual Report 2009 22009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=5http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=5Financial Highlights SUMMARY (ZW$) 2009 TRADING RESULTS Total Revenue -Cellular Network Operations -Other Services Operating profit Loss before taxation Loss attributable to shareholders Cash utilised in operations Capital Expenditure Share performance Basic loss per share (ZW$) Headline loss per share (ZW$) Market price per share 28 February 2009 (US cents) Number of shares in issue at 28 February Market capitalisation (US$) Ratios Return on shareholders’ equity (2008-18.6%) Shareholders’ equity Debt to shareholders' equity (2008-0%) Operating statistics Connected capacity Average minutes of use per subsciber (MOU) Average revenue per user (ARPU) US$ 803 421 944 21 880 243 126 071 889 (1 727 210 752) (1 080 524 533) (1 854 416 671) (34 195 449) (6 434) (31 544) 80 169 095 983 135 276 786 (20%) 5 491 763 214 40% 1 200 000 98 8.69 1 200 000 Connected Capacity subscribers Subscribers (thousands) 1 200 640 450 250 654 2005 2006 2007 2008 2009 Econet welcomes the dollarisation of the tariff regime with effect from January 2009. The charging of telecoms products and services in USD will ensure industry viability and increased foreign currency generating capacity for the nation, bringing about stability and predictability to the industry. Econet Wireless Holdings Limited Annual Report 2009 32009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=6http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=6We owe our success to our customers because they have fuelled our growth. We strive to understand their needs and find ways of delighting them in every single experience. As we expand the frontiers of communication, we will continue to delight our customers with relevant consumer innovations such as mobile internet and mobile email. Econet Wireless Holdings Limited Annual Report 2009 42009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=7http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=7Organisational Vision Our Vision To provide telecommunications to all the people of Zimbabwe. Our Mission world-class standards and ethics. OUR VALUES The values we hold in common are: efficient and high-quality telecommunications of uncompromising To serve Zimbabwe by pioneering, developing and sustaining reliable, made up of individuals. These people are the Company. Each Internally we will always remember that we are a company Personal excellence. our knowledge base, with an uncompromising passion for relentlessly pursue innovative solutions and constantly grow technological field. To remain leaders in the field, we shall forward in the fast moving and highly competitive We are a company committed to finding the best way Pioneering one is an intrinsically valuable member of the organisation, their place. Each one is an intrinsically valuable member. honest praise, constructive criticism and fair reward have effective and confident co-operation, in environments where sense of responsibility. We believe in working in teams, in and stimulates personal development, job satisfaction and a show concern for each other in an atmosphere that is open irrespective of their gender, race or position. We will always we will carry out our duties skillfully and diligently. quality of service. In all our professional areas and at all levels, oriented manner with clearly defined goals, in terms of community, we always work in a customer and objective- In everything we do, both within Econet and in the Professionalism makes them true stakeholders in Econet Wireless. will reach out to customers in a holistic and organic way that with warmth and a genuine desire to meet their needs. We externally. Our relationship with our customers will enthuse Who we are inside the Company shall reflect who we are Econet Wireless Holdings Limited Annual Report 2009 52009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=8http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=8Board of Directors As at 28 February 2009 T. Nyambirai Chairman Mr Nyambirai is the founder and Group Chief Executive Officer of TN Financial Services, TN Asset Management and TN Bank Limited. S. T. Masiyiwa Group Chief Executive Officer Mr Masiyiwa spearheaded the formation of Econet Wireless (Private) Limited, Zimbabwe’s largest mobile network operator. C. Fitzgerald Non-Executive Mr Fitzgerald joined Econet Wireless International from a position of finance director at one of the largest farming inputs businesses in Zimbabwe. T.P. Mpofu (Mrs) Non-Executive Mrs Mpofu joined Econet in February 2001 as Finance Director from CocaCola Central Africa. D. Mboweni Chief Executive Officer Mr Mboweni joined Econet Wireless in 1996. He was a key member of the pioneering team that launched the Mascom Wireless network in Botswana and Econet Wireless Nigeria (EWN). K.V. Chirairo Finance Director Mr Chirairo joined Econet Wireless as Chief Accountant on 1 June 1998. Econet Wireless Holdings Limited Annual Report 2009 62009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=9http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=9Board of Directors As at 28 February 2009 Z. M. T. Wazara Non-Executive Mr Wazara joined Econet Wireless in December 1996 and became heavily involved in all the business planning activities. J. G. B. Pattison Executive Mr Pattison joined Econet in June 1998, with a wealth of experience in GSM cellular. P.J. Campbell Non-Executive Mr Campbell was appointed to the Econet Board on 31 January 2001. R. Chidembo Non-Executive Mr Chidembo joined Econet in February 2000 and brought to the management team a wealth of both local and international experience. A. N. H. Eastwood Non-Executive Mr Eastwood was appointed to the Econet Board on 31 January 2001. Econet Wireless Holdings Limited Annual Report 2009 72009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=10http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=10Econet Corporate Profile ECONET WIRELESS HOLDINGS LIMITED company of businesses involved in cellular operations, Econet Wireless Holdings Limited (EWHL) is the holding Ecoweb is the largest internet service provider in Zimbabwe, Ecoweb Data Control and Systems (1996) (Private) Limited T/A and directly and indirectly employs in excess of 1 500 staff. SUBSIDIARIES largest quoted companies in terms of market capitalisation, Zimbabwe's leading technology company. It is one of the which is listed on the Zimbabwe Stock Exchange (ZSE), is number of non-telecommunications companies. EWHL, Capital Holdings (Private) Limited, which holds interests in a services. The Group has an investment subsidiary, EEW provision of internet access and transaction processing towns in the country. individual customers. It has a presence in all the major cities and Transaction Payment Solutions (Private) Limited offering broadband and dial-up services to both corporate and prospects for continued growth. EW Capital Holdings Limited at 28 February 2009. Demand remains strong, with excellent operator in Zimbabwe, with a subscriber base of 1 200 000 as Econet Wireless (Private) Limited is EWHL's cellular network Econet Wireless (Private) Limited manufacturers of smart card-based point-of-sale systems. ASSOCIATES customer service, in partnership with one of the world's leading operators access to cutting-edge technology to enhance international financial institutions and telecommunications telecommunications. The company provides local and the convergence of banking, information technology and switching , point of sale and value-added services, that exploit The company is a leading provider of financial transaction vehicle through which the Group holds a variety of growing earnings and preserving value for shareholders. Pentamed Investments (Private) Limited EW Capital Holdings (Private) Limited is EWHL's investment investments, carefully selected with the twin objectives of Zimbabwean insurance and financial services group. Corporation Limited, with 21.66% of the listed diversified second largest shareholder in Africa First Renaissance (AFRE) EWHL, through EW Capital Holdings (Private) Limited, is the Africa First ReNaissance (AFRE) Corporation Limited Limited in November 2007. Limited, acquired 66% of Mutare Bottling Company (Private) EWHL through wholly owned Pentamed Investments (Private) Econet will continue to expand the frontiers of communication through relevant consumer innovations. The launch of GPRS to post-paid customers and a successful 3G trial run is a clear commitment towards meeting evolving customer needs. Econet Wireless Holdings Limited Annual Report 2009 82009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=11http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=11The business will continue innovating to meet the evolving needs of our customers; hence the investment in new technologies such as GPRS, 3G, Wi-Fi and Wi-Max. With our inspired brands, we foresee a bright future. We are moving ahead with renewed vigour and refreshed confidence, to open new frontiers of communication. Econet Wireless Holdings Limited Annual Report 2009 92009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=12http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=12Chairman’s Statement to the Shareholders I am pleased to present the Group’s audited financial results provider of telecommunications services in Zimbabwe. OPERATIONS REVIEW The Group maintained its vision of ensuring the provision of telecommunications to all the people in Zimbabwe by increasing connected capacity to 1.2 million subscribers. The network rollout in Matabeleland and Bulawayo was for the year ended 28 February 2009. Econet Wireless Holdings Limited has maintained its position as a leading successfully implemented after the commissioning of new equipment. A launch of data services (GPRS) was rolling out 3G services. implemented and the Company is now in advanced stages of FINANCIAL PERFORMANCE Group results include financial performance of Mutare Bottling Company (Private) Limited, a subsidiary, and Africa First ReNaissance (AFRE) Corporation Limited, an associate company. The fair value gain that had continued to anchor the performance of the business was significantly reduced in core business. The dollarisation of the economy ushered in business viability. Chairman of the Board TAWANDA NYAMBIRAI the year under review, marking the return of the Group to its real revenue streams from operations, thereby enhancing Revenue Revenue for the year was US$87.9 million. Turnover remained “The Group maintained its vision of ensuring the provision of telecommunications to all the subdued for the first ten months of the financial year due to controlled tariffs. However, the last two months of January following the approval of a United States dollar- based tariff. and February recorded an improvement in revenues, Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) The EBITDA closed the period under review at US$26.6 million. Group performance was, however, negatively affected by the first ten months when inflation reached astronomical heights. Loss per share The Group's basic loss per share was US$0,01. Limitations on financial reporting The Zimbabwe economic environment has created extraordinary challenges to financial reporting, as (PAAB), the Zimbabwe Accounting Practices Board (ZAPB) and the Zimbabwe Stock Exchange (ZSE). Accordingly, the acknowledged by the Public Accountants and Auditors Board people in Zimbabwe by increasing subscribers.” connected capacity to 1.2 million Econet Wireless Holdings Limited Annual Report 2009 102009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=13http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=13Highlights 1,2 million Revenue Connected capacity US$3,1million US$0,01 before. Profit before tax (US$) US$87,9 million an adverse opinion, a situation that has affected all quoted auditors' report on the Group’s financial statements will be Loss per share network, have made the prospects for the Group brighter than counters in Zimbabwe. CORPORATE SOCIAL INVESTMENT the community through the “Econet in the Community” In line with the Group's broad objective of participating in APPRECIATION directors for their sterling contribution during the year and I would like to express my sincere appreciation to my fellow and drugs. pandemic through provision of requisite medical services programme, the Group assisted in curbing the cholera admirably under the difficult circumstances. partners, management and staff, who have performed also pay particular tribute to our customers, suppliers, business Capernaum Trust The Group continues to be mindful of the plight of orphaned school fees and other requirements. children in Zimbabwe by assisting them through payment of Joshua Nkomo Scholarship Fund The fund administers a scholarship programme for the top become the best national scholarship agency, which inspires and facilitates the generation of transformational leaders of of positive transformation in Zimbabwe and the region. OUTLOOK The introduction of the use of multiple foreign currencies in the economy, coupled with the pegging of tariffs in real terms, the stability of prices and the drive to expand the integrity, who shall become community builders and agents the country's ten provinces every year. The fund's vision is to ten academically gifted Zimbabwean students from each of T. Nyambirai Chairman of the Board 28 July 2009 Econet Wireless Holdings Limited Annual Report 2009 112009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=14http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=14Chief Executive Officer’s Operations Review OPERATING ENVIRONMENT The macroeconomic environment deteriorated throughout the year, posing serious challenges to the viability of the industry as a was characterised by hyperinflation, shortages of basic shortages. The introduction of multiple currencies and the authorisation to bill in foreign currency by the regulator in industry. whole. The business environment for the period under review commodities, sub-economical pricing and foreign currency January 2009, helped to restore hope and viability to a distressed OPERATIONS REVIEW Notwithstanding the difficulties indicated, the Group remained committed to ensuring the provision of telecommunications to all people in Zimbabwe, by increasing connected capacity to 1.2 million subscribers. Efforts to upgrade the network were high capacity base stations in the two Matabeleland provinces implemented starting with swap outs and installation of new DOUGLAS MBOWENI Chief Executive Officer in Bulawayo has already commenced. GPRS enabled data on data. progressing to roll out 3G technology to further enhance service FINANCIAL PERFORMANCE services were fully implemented and the Company is now and in Bulawayo city. Added to this, work on a new switch based During the year Econet expanded its network capacity to 1,2 million subscribers in order hyperinflationary environment and the resultant price distortions Auditors Board (PAAB), the Zimbabwe Accounting Practices commentary, I will focus on our prospects for the year ahead. statements was significantly flawed due to the prevailing Financial reporting in the period covered by our financial in our economy. These limitations have been extensively dealt with in media statements made by the Public Accountants and Board (ZAPB) and the Zimbabwe Stock Exchange (ZSE). Therefore, rather than to focus on our past performance, in this to fully exploit the huge market potential. The dollarisation of the tariff ensured business viability. of 2.5 million subscribers by 28 February 2010. Significant progress has already been made in achieving our goal ahead premised on the increase in our subscriber base. The Group will deliver strong financial performance in the year our financial and operational targets. SUBSCRIBER GROWTH satisfaction are the key attributes that will assist us in achieving Our focus on innovation and our relentless pursuit of customer The subscriber base grew by 83% to 1.2 million during the 12 months to 28 February 2009. The increase in subscriber numbers Econet Wireless Holdings Limited Annual Report 2009 122009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=15http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=15the prepaid offering. USAGE the Econet subscriber mix was significantly skewed towards two Matabeleland provinces. Because of the hyperinflation, was due to expanded network capacity in Bulawayo and the created congestion on the network. INNOVATIONS and 150 minutes for prepaid customers. The high traffic levels abnormal usage level of 260 minutes for post-paid customers during the first ten months of the financial year resulted in subscriber numbers. The low tariff regime that prevailed Minutes of user per subscriber are affected by tariff levels and shareholders and open new horizons for our customers. accelerated growth and innovation will unlock value for our improving economic circumstances. A combination of solutions, simultaneously providing service excellence in the technologies and the provision of relevant communication communication through the deployment of new enabling The Company is committed to extending the frontiers of sustainable growth through innovation and network expansion. the Group to meet some of its external obligations. PEOPLE time that this resource was desperately needed. This helped that international calls were charged in foreign currency at a international calling card, launched in October 2008, ensured Econet Group launched through its subsidiary, Ecoweb. The complemented with Wi-Fi and broadband services that the the regulator. These data-enabling technologies are being conducted in anticipation of the receipt of frequencies from GPRS to selected customers. Trials of 3G were successfully During the year under review, Econet successfully launched Chief Executive 28 July 2009 D. Mboweni has been an exodus of human resources into the emerging markets of Africa, the Middle East and Asia. Econet has has a competitive edge over other listed companies in resources policies to attract and retain the best talent. There The business will continue to adopt progressive human restructured its remuneration practices in such a way that it performance management system. LOOKING AHEAD region. The retention programme is linked to the developed staff retention packages that are competitive in the Zimbabwe. With the dollarisation, the business has business and other players will create an enabling It is hoped that the efforts and initiatives of Government, of this, the business is working relentlessly to achieve the operating environment will continue to improve. Because for wider economic development. Econet is optimistic that for the telecoms industry, thereby allowing it to be a catalyst environment that will yield positive results in restoring viability Econet Wireless Holdings Limited Annual Report 2009 132009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=16http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=16Econet in the Community community social health programme (“Stop Cholera Campaign”) Scholarship) and social welfare (Capernaum Trust). The Group will beneficiaries of social investment initiatives. and has continued to invest in education (Joshua Nkomo “Econet in the Community” has been actively involved in a continue to develop long-term partnerships with all the Econet Wireless Holdings Limited Annual Report 2009 142009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=17http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=17Corporate Social Investment We remain firm in our belief that a company's success cannot be measured on financial performance alone. Our success also lies in the positive transformation of our communities. We believe that every business has a responsibility beyond its basic responsibility to its shareholders; it is a responsibility to the people of the communities in which it serves. As a pioneering Company, we are moving beyond corporate social responsibility to social innovation. Econet believes that technology that does not transform lives is irrelevant. We must provide a service that contributes meaningfully to the improvement of the lives of members of the communities that we serve. Our social role is therefore constantly being reviewed in order to remain relevant to our communities. ‘National Healthcare Trust Zimbabwe’ (NHTZ) In 2008, our social responsibility role took on a more direct and urgent role. Under our health and welfare programme, Econet Econet believes its future depends on the sustainable development of our communities. environmental awareness is now more than just a factor of social responsibility, but rather a business imperative. Joshua Nkomo Scholarship Fund The Joshua Nkomo Scholarship Fund continued with its valuable work in the provision of funding to the nation's most gifted students, who are groomed to be leaders. There was fresh focus on supporting maths and science students as part of the Group's contribution to the development of technology in Zimbabwe. Christian Community Partnership Trust As an institution grounded in faith, our support for evangelical work continues through the Christian Community Partnership Trust, which was established in partnership with other Christian businesses. The Capernaum Trust The Capernaum Trust was established in 1996 to transform the lives of orphaned children in economically disadvantaged situations. The Trust continued its work to offer hope and provided financial and logistical support to teams of dedicated health workers that were involved in fighting the cholera epidemic that affected the country during the later part of 2008. We employed our wide airtime distribution network to spread awareness by printing anti-cholera messages on our recharge cards. Our involvement in fighting the cholera crisis opened our eyes to the urgent need to make our intervention in health care more focused. Econet therefore established the National Healthcare Trust Zimbabwe in December 2008. The Trust's immediate task was in the procurement of essential medicines and equipment needed for delivery of basic healthcare services, and in the provision of key support in the areas of communication. Rather than merely reacting to crisis, the Trust will implement a more proactive and sustained strategy for the rehabilitation and long-term maintenance of Zimbabwe's health sector. The Trust seeks to build and maintain capacity within the health sector in Zimbabwe. Environment During the year, Econet also came up with a comprehensive Environmental and Waste Management Policy. Econet believes inspiration to orphaned children. In the face of greater demand For welfare intervention, the Trust's work continued in the provision of scholarships, food packs and life skills training to over 26 000 orphans nationwide. Our involvement goes beyond the provision of material support, as the trust runs a deliberate and planned programme designed to empower beneficiaries with life skills and activities to restore their self-esteem and groom them into inspired leaders. HIV/AIDS POLICY Econet is convinced that HIV and AIDS have the potential to waste valuable trained human resources and reduce productivity. We continue to recognise the huge impact of HIV and AIDS on the wellbeing of our employees. This includes their welfare outside the workplace, where staff face the burden of committing effort and resources to care and provide for family members. Policies and structures therefore continue to be followed to2009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=18http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=18Directors’ Report The directors have pleasure in presenting their eleventh Annual Report and the Audited Financial Statements of Econet Wireless Holdings Limited and its subsidiaries for the year ended 28 February 2009. In the report “Group” refers to Econet Wireless Holdings Limited and its subsidiary companies. Principal Activities The Group's principal activities remained the same during the year, namely the provision of cellular services, the provision of internet access services, transaction processing services and mobile banking services. The Group also maintained its investments in its subsidiary and associated companies. It also continued to oversee the management of these companies. Consolidated Results The statements of the Chairman and the Chief Executive Officer adequately cover the Group's financial results and its activities during the year. Post-Balance Sheet events An Extraordinary General Meeting of shareholders was held on 27 March 2009 at which shareholders approved a transaction whereby the Group entered into an instalment sale agreement with Econet Wireless Global Limited for the purpose of acquiring telecommunications equipment. Details of the transaction were set out in the relevant circular to Shareholders. Dividends No final dividend was declared to cater for the recovery of the business. Share Capital The authorised share capital of the Group remained unchanged during the year. Reserves The movements in the reserves of the Group are shown in the Statement of Changes in Shareholder Equity. Directors The board membership stood at 11 during the year. Messrs J.G.B. Pattison, T. Nyambirai and S.T. Masiyiwa will retire by rotation at the Group's Annual General Meeting and, being eligible, offer themselves for re-election. At the Annual General Meeting shareholders will be asked to approve payment of directors' fees. Borrowing Powers The details of the Group's borrowing powers are set out in Note 36 to the financial statements. S.T. Masiyiwa DIRECTOR Pension Fund The Group's pension fund scheme is administered by a Board of Trustees. The Trustees manage the assets of the pension fund, which are held separately from those of the Group. The pension scheme funds are handled only in accordance with the rules of the pension fund. Corporate Social Investment The Group continued with its commitment to the economic and social development of the country. This commitment derives from the Group's own commitment to Christian values and at the root of it is the desire to uphold and improve the quality of life of the people of Zimbabwe. Through its “Econet in the Community” programme the Group continued with its social investment initiatives in education, environmental matters, health and social welfare and religious organisations. Donations to Political Parties The Group, as a matter of policy, does not contribute to any political party. Auditors Shareholders will be asked to approve the remuneration of the auditors for the year ended 28 February 2009. The auditors, Messrs Deloitte and Touche, have indicated their willingness to continue in office. Approval for their reappointment will be sought at the Annual General Meeting. By order of the Board T. Nyambirai CHAIRMAN C.A. Banda GROUP COMPANY SECRETARY 28 July 2009 Econet Wireless Holdings Limited Annual Report 2009 162009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=19http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=19Directors’ Responsibility For Financial Reporting information. The financial statements have not been fair presentation of the financial statements and related adequate accounting records, the preparation, integrity and subsidiary companies are responsible for the maintenance of The Directors of Econet Wireless Holdings Limited and its (IAS 29) "Financial Reporting in Hyperinflationary Economies". Touche, have audited the financial statements and their companies' independent external auditors Messrs Deloitte & Econet Wireless Holdings Limited and its subsidiary requirements of International Financial Reporting Standards statements have not been adjusted to be in line with the been published since July 2008 and therefore these financial Reporting Standards in so far as the inflation indices have not prepared in accordance with International Financial statements. concern assumption in the preparation of these financial going concern and therefore continue to adopt the going based on the budgets, and are satisfied that the Group is a to the date of signing of these financials and the prospects, reviewed the performance and financial position of the Group behalf by:- by the Board of Directors on 28 July 2009 and are signed on its The financial statements set out on pages 26-60 were approved report appears in this annual report. and systems has occurred during the year under review. breakdown in the functioning of these controls, procedures attention of the directors to indicate that any material C.A. Banda GROUP COMPANY SECRETARY 28 July 2009 segregation of authority and duties. Nothing has come to the monitored by suitably trained personnel with an appropriate misstatements and losses. The systems are implemented and accountability over assets, and to prevent and detect material statements, and to safeguard, verify and maintain absolute, assurance as to the reliability of the financial control. These are designed to provide reasonable, but not The directors are also responsible for the systems of internal CHAIRMAN T. Nyambirai DIRECTOR S.T. Masiyiwa statements for decision-making purposes. The directors have 4.3, the directors advise caution on the use of these financial As a result of the uncertainties more fully described in note Econet Wireless Holdings Limited Annual Report 2009 172009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=20http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=20Corporate Governance and its subsidiary companies. The organisational values and the guiding principles of Econet Wireless Holdings Limited Commitment to good corporate governance remains one of executive management. It meets formally at least four times a full and effective control over the Group and monitors In the exercise of the above responsibilities, the Board executes Cadbury Report of the United Kingdom and the King Reports of South Africa. The Group also maintained its association with its financial support for the institute. THE BOARD OF DIRECTORS Governance in Zimbabwe: Manual of Best Practice, the and accountability as set out in the Principles for Corporate observance of the principles of transparency, responsibility commitment. The commitment manifests itself by the strict ethical behaviour within the business is testimony to this year to review the Group's performance. to the subsidiary boards. companies. It reviews and ratifies the appointment of directors number of committees and the boards of subsidiary The Board delegates certain specific responsibilities to a with the Institute of Directors of Zimbabwe and continued Rights To facilitate the exercise of their responsibilities all directors Company Secretary, and to the Group's records and other information as and when they so require. The directors also subsidiaries. regarding the Group's operations as well as those of its have authority to seek independent professional advice have unrestricted access to management, including the Group Composition and appointment For the year ended 28 February 2009 the Board comprised experience. Seven members of the Board are non-executive directors. A non-executive director chairs the Group's Board. Appointment of the non-executive directors is on the basis of 11 members with a broad range of business and industry executive directors are subject to election by shareholders. provided for in the Company's Articles of Association. independent judgement to the Group's business. The non- fields, the ultimate objective being to bring a balanced and their skills and experience or expertise in their respective Directors' names The following are the directors who served during the year: Mr T. Nyambirai (Chairman), Mr S.T. Masiyiwa*, Mr P.J. Pattison*, Mrs T.P. Mpofu and Mr Z.M.T. Wazara. *Executive Eastwood, Mr C. Fitzgerald, Mr D. Mboweni*, Mr J.G.B. Campbell, Mr R. Chidembo, Mr K.V. Chirairo*, Mr A.N.H. All directors retire by rotation and stand for re-election as Accountability and delegated functions The Board of Directors is accountable for the Group's overall Dr James Myers was appointed to the board of the Company on 27 May 2009. Messrs Rugare Chidembo and Zachary Board, retired from the Company's Board in May 2009. Wazara, both of whom were long-serving members of the Directors' interests As is the practice each year, the directors are required to welfare and general outlook. It provides leadership and overall responsibility for the following specific areas: review and approval of the Group's strategic business formulates strategic objectives and key policies and has plans, incorporating operating and capital expenditure targets; review and approval of major acquisitions and disposals; reviewing the share capital of the Group and subsidiaries and recommending alteration thereof; reviewing annual financial statements and significant changes in accounting policies; and monitoring and reviewing the Group's overall performance. interests of all the Group's stakeholders. The Board objectives and sustainable prosperity and uphold the best sound judgement in directing the Group to achieve its budgets; setting of corporate objectives and performance business interests. With the exception of Mr T. Nyambirai, none of the directors had a material interest in any contract of significance to which the Group was a party during the year, other than their service contracts. interests. Directors are also required to disclose their other sub2009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=21http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=21Group Company Secretary. The Group Company Secretary All Directors have access to the advice and services of the committee meets with the external auditors, management and internal auditors regularly to review internal accounting reporting. controls, auditing and risk management matters and financial of new and improved accounting practices in the business. The Financial Reporting Standards and facilitates the development non-executive director. BOARD COMMITTEES is constituted of non-executive directors and chaired by a reviewed by the Audit and Remuneration Committee, which Directors' remuneration The remuneration of directors and senior executives is financial statements and submission thereof to the Board for assets of the Group. It also reviews the fees of the Group's The committee's primary functions are to review the Group's approval; to assess the effectiveness of internal systems and external auditors. controls; to ensure preservation of, and accountability for, the number of committees. The committees operate within defined terms of reference laid down by the Board. The members of the Econet Wireless Holdings Limited Board The Board delegates certain of its responsibilities to a which they were eligible to attend, is set out below: record of attendance at Board and committee meetings Mrs T.P. Mpofu and Mr Z.M.T. Wazara (since resigned). Eastwood, Mr C. Fitzgerald, Mrs M. Harris, Mr D. Mboweni, Members of the Audit and Remuneration Committee are: Mr P.J. Campbell (Chairman), Mr K.V. Chirairo, Mr A.N.H. Audit and Remuneration Committee The Audit and Remuneration Committee of the Group and directors and chaired by a non-executive director. It meets not less than four times a year. The Chief Executive Officer committee. and the Financial Director are ex-officio members of the its subsidiary companies is constituted of non-executive and recommendation of the Group's investments policy to the investments, expansion and development of the network and new products. It also examines the technical aspects of security controls of the technical and engineering operations. Board for consideration and approval. It evaluates potential Investments Committee The Investments Committee is responsible for the formulation acquisitions, mergers and reconstructions, and reviews committee carries out regular reviews of International EWHL AUDIT AND REMUNERATION COMMITTEE 4 conjunction with the Group's external auditors, the disclosure and explanation of its financial results. In responsible reporting by way of comprehensive and open Through this committee the Group achieves meaningful and Wazara (since resigned). INVESTMENTS COMMITTEE Mr D. Mboweni, Mrs T.P. Mpofu, Mr J.G.B. Pattison and Z.M.T. (Chairman), Mr S.T. Masiyiwa, Mr K.V. Chirairo, Mrs M. Harris, Members of the Investments Committee are: Mr C. Fitzgerald Meetings held Z.M.T. Wazara J.G.B. Pattison T.P. Mpofu D. Mboweni K.V. Chirairo C. Fitzgerald A.N.H. Eastwood R. Chidembo P.J. Campbell T. Nyambirai S.T. Masiyiwa 2 3 3 3 3 3 3 3 3 3 3 4 N/A 1 3 N/A N/A N/A 3 3 3 3 3 NON-EXECUTIVE 4 SUBSIDIARY BOARD MEETINGS N/A N/A 3 N/A N/A EXECUTIVE 16 N/A 1 4 4 4 1 4 1 1 2 3 3 N/A 2 N/A N/A N/A N/A N/A 11 4 9 11 N/A N/A N/A N/A N/A N/A Econet Wireless Holdings Limited Annual Report 2009 192009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=22http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=22Corporate Governance Foreign Loans Committee The committee reviews the Group's major foreign loans obligations and puts forward recommendations on the servicing of these obligations. employees are regularly and systematically seconded to overseas and regional operations to ensure retention of such skills. Investor Relations Communication with the public and shareholders remains a primary policy of the Group. The Group's executive meets annually after the release of the Group's results. with the shareholders and investment analysts at least biThe Group's Annual Report and other corporate publications are available on the corporate website www.econet.co.zw. At the Group's Annual General Meeting each substantial statements and directors' report. It is the Group's policy to promote the highest standards of ethical behaviour among its employees. Employees are execution of their duties. required to observe the highest ethical standards in the Insider trading The Group complies with the Zimbabwe Stock Exchange listing requirements in relation to transactions by directors and employee or his/her nominees or members of their immediate employees in securities issued by the Group. No director or family, may deal in any securities of the Group at any time information. issue is put to the meeting for discussion and/or noting. The meeting is also invited to receive and adopt the financial For Extraordinary General Meetings the level of proxy votes meeting, together with details of abstentions. when he/she is in possession of unpublished, price-sensitive lodged for and against each resolution are disclosed at each Employment and equity practices its interim and annual results, during which directors and The Group operates a closed period prior to the publication of employees of the Group may not deal in securities of the Group. In terms of policy, directors and employees who wish to transact in the shares of the Group, even outside of the Group's “closed or block period”, are required to obtain the clearance of the Chairman. Internal controls ensures that employees are kept informed on matters affecting them and also factors influencing the Group's financial performance. This is done through regular corporate website. The Group has in place a communications system which briefings, presentations, electronic mailings and the Internal controls comprise methods and procedures adopted The share option scheme, which had been in operation for scheme was not renewed. by management to achieve the objectives of safeguarding some time, expired at the end of November 2008. The assets, preventing and detecting errors and fraud, ensuring the accuracy and completeness of accounting records, and the Board confirms that throughout the financial year, and up to procedures in place for identifying, evaluating and managing preparation of accurate and reliable financial statements. The The Group is an equal opportunity employer. Applications from disabled persons receive full and fair consideration, having regard to the aptitudes and abilities of the applicant. the approval of the Annual Report, there have been the significant risks to the achievement of the Group's strategic objectives. This is in line with the Board's responsibility for the Group's system of internal control and review of its effectiveness. Detailed policies and procedures are in place processes and transactions. In the event of disability every effort is made to ensure that employment continues and appropriate training is given. Career development and promotion of disabled people is, as far as possible, identical to that of other employees. across the Group, covering the regulation and reporting of The Group takes a positive approach to equality and diversity. It takes on and promotes development opportunities whenever these arise, with a view to developing skills and expertise. Skilled and professional As part of the internal controls the Group has an internal audit division. The division co2009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=23http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=23head of the division attends the meetings of the Audit and Remuneration Committee and submits a report at the overall responsibility of reviewing the internal control systems and reports its findings to the Board. Independence of Auditors meeting. The Audit and Remuneration Committee has The Group's Audit and Remuneration Committee confirms the independence of the Auditors, Deloitte & Touche, who are engaged by the Group for audit-related services. The Group uses other accounting firms to assist with non-audit management consultancy work as and when required. Going concern In light of the current financial situations and existing borrowing facilities available to the Group, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the statements. going-concern basis in preparing the annual financial By order of the Board T. Nyambirai CHAIRMAN S.T. Masiyiwa DIRECTOR C.A. Banda GROUP COMPANY SECRETARY 28 July 2009 Econet Wireless Holdings Limited Annual Report 2009 212009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=24http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=24Certificate by Company Secretary lodged with the Registrar of Companies, the returns required under the Act and the returns are true and correct. terms of the Companies Act (Chapter 24:03), the Group has In my capacity as Group Company Secretary, I confirm that, in CHARLES A. BANDA GROUP COMPANY SECRETARY 28 July 2009 CHARLES A. BANDA Group Company Secretary Econet Wireless Holdings Limited Annual Report 2009 222009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=25http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=25Deloitte & Touche Kenilworth Gardens 1 Kenilworth Road Newlands PO Box 267 HARARE Zimbabwe Tel: (263) (4) 746248/54 (263) (4) 746271/5 Fax:(263) (4) 746255 www.deloitte.co.zw REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF ECONET WIRELESS HOLDINGS LIMITED Report of the independent auditors on the financial statements We have audited the accompanying consolidated financial statements of Econet Wireless Holdings Limited, which comprise policies and other explanatory notes set out on pages 26 to 60. changes in equity and consolidated cash flow statement for the year then ended, and a summary of significant accounting the consolidated balance sheet as at 28 February 2009, and the consolidated income statement, consolidated statement of applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and 24:03). This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and accordance with International Financial Reporting Standards and the provisions of the Zimbabwe Companies Act (Chapter Directors' responsibility for the financial statements The directors are responsible for the preparation and fair presentation of these consolidated financial statements in are free of material misstatement. requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical Auditors' responsibility Our responsibility is to express an opinion on these consolidated financial statements, based on our audit. We conducted our evaluating the overall presentation of the consolidated financial statements. appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as the purpose of expressing an opinion on the effectiveness of the entity's internal controls. An audit also includes evaluating the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Basis for adverse opinion on compliance with International Financial Reporting Standards The Zimbabwe economy is recognised as being hyperinflationary for purposes of financial reporting. These financial at the balance sheet date. statements that report in the currency of a hyperinflationary economy should be stated in terms of the measuring unit currency IAS 29, (Financial Reporting in Hyperinflationary Economies) have not been complied with. The standard requires that financial statements have not been prepared in conformity with International Financial Reporting Standards in that the requirements of economic factors which are pervasive to the Zimbabwean economic environment as explained in Note 4.3. The non-compliance with IAS 29 arises from the inability to reliably measure inflation due to the interaction of multiple Audit Tax Consulting Financial Advisory Econet Wireless Holdings Limited Annual Report 2009 23 A member firm of Deloitte Touche Tohmatsu2009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=26http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=26REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF ECONET WIRELESS HOLDINGS LIMITED (Continued) Adverse opinion on non-compliance with International Financial Reporting Standards In our opinion, because of the significance of the matters described in the Basis for Adverse Opinion paragraph, the financial Reporting Standards. and of the results of its operations and its cash flows for the year then ended in accordance with International Financial statements do not give a true and fair view of the financial position of Econet Wireless Holdings Limited as at 28 February 2009, 33/99 and SI 62/96). comply with the disclosure requirements of the Companies Act (Chapter 24:03), and the relevant statutory instruments (SI Report on legal and regulatory requirements These financial statements have been properly prepared in accordance with the accounting policies set out in note 4, and Without further qualifying our opinion, we draw your attention to the following: Fair value determination for transactions, assets and liabilities The determination of fair values presented in the financial statements is affected by the prevailing economic environment and assumptions used in the determination of the fair values. disclosed in Note 5 to these financial statements. the fair values may therefore be distorted. This may result in significant variations in fair values, depending on factors and The significant assumptions and the estimation uncertainties pertaining to items that are carried at fair value have been dollar balance sheet and income statement. part of the financial statements are not covered by this report. Consequently, no assurance is expressed on the United States Supplementary Information The United States dollars supplementary balance sheet and income statement set out on pages 62 and 63 that are included as Deloitte & Touche Harare, Zimbabwe 28 July 2009 Chartered Accountants (Zimbabwe) Econet Wireless Holdings Limited Annual Report 2009 242009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=27http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=27Margins improved significantly following the dollarisation of the tariff. We continue to seek ways of enhancing shareholder streams and product innovation. value as the business expands its revenue 2009 Financial Statements Consolidated Income Statement Consolidated Balance Sheet Company Balance Sheet Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Notes to the Consolidated Financial Statements Supplementary Information Detachable proxy form Econet Wireless Holdings Limited 26 28 27 29 30 62 31 Econet Wireless Holdings Limited Annual Report 2009 252009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=28http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=28Consolidated Income Statement For the year ended 28 February 2009 All figures in ZW$ NOTES 2009 Revenue Cost of sales and external services sold Gross profit Other income Employee costs Operating costs - Administration - Marketing and sales - Network - Other Depreciation 7 825 302 187 (118 793 899) 706 508 288 27 747 442 (49 975 857) (90 519 652) (12 047 695) (16 911 377) (438 729 260) 126 071 889 125 330 838 (741 051) Operating profit before depreciation Profit from operations Investment income Net finance costs Share of profit of associate Impairment of investment in associate Fair value gain on financial assets Foreign currency exchange losses Loss before taxation Taxation Loss for the year Attributable to: Equity holders of the parent Minority interest 8 9 10 19 19 Profit before foreign currency exchange losses and taxation 10.1 11 351 388 (1 122 388) 6 027 572 755 (5 889 130 504) 14 692 561 277 694 650 (2 004 905 402) (1 727 210 752) 650 191 949 (1 077 018 803) (1 080 524 533) 3 505 730 (1 077 018 803) (6 434) (31 544) (6 416) (31 458) Basic loss per share (dollars) Headline loss per share (dollars) Diluted basic loss per share (dollars) Diluted headline loss per share (dollars) 12 12 12 12 Econet Wireless Holdings Limited Annual Report 2009 262009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=29http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=29Consolidated Balance Sheet As at 28 February 2009 All figures in ZW$ NOTES 2009 ASSETS Non-current assets Property, plant and equipment Investment property Deferred tax assets Held-to-maturity investments Investment in associate Available-for-sale investments Held-for-trading investments Total non-current assets Current assets Inventories Trade and other receivables Bank balances and cash Total current assets Total assets EQUITY AND LIABILITIES EQUITY Capital and reserves Share capital Share premium Reserves Accumulated losses Total capital and reserves Minority interest Total shareholders equity LIABILITIES Non-current liabilities Deferred tax liabilities Interest-bearing debt Total non-current liabilities Current liabilities Trade and other payables Provisions and accruals Taxation Deferred revenue Interest-bearing debt Total current liabilities Total equity and liabilities 13 14 16 18 19 20 22 8 315 276 059 31 656 856 152 803 213 828 784 138 442 251 870 750 600 1 784 721 10 396 266 874 226 039 172 1 857 037 371 286 891 020 2 369 967 563 12 766 234 437 23 24 25 25 6 353 201 312 (1 080 680 647) 5 272 520 665 219 242 549 5 491 763 214 16 29 2 627 086 578 864 120 178 3 491 206 756 26 27 28 29 1 875 893 960 139 358 537 138 363 720 316 756 836 1 312 891 414 3 783 264 467 12 766 234 437 28 July 2009 T. NYAMBIRAI CHAIRMAN K.V. CHIRAIRO DIRECTOR C.A. BANDA GROUP COMPANY SECRETARY Econet Wireless Holdings Limited Annual Report 2009 272009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=30http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=30Company Balance Sheet As at 28 February 2009 All figures in ZW$ NOTES 2009 ASSETS Non-current assets Property, plant and equipment Investment in subsidiaries - loan Total non-current assets Current assets Inter-company balances Total assets EQUITY AND LIABILITIES EQUITY Capital and reserves Share capital Share premium Reserves Accumulated profit Total capital and reserves LIABILITIES Non-current liabilities Deferred tax liabilities Total equity and liabilities 17.2 25 446 200 23 321 250 48 767 450 394 183 998 442 951 448 17.2 25 25 386 099 630 49 217 958 435 317 588 7 633 860 442 951 448 The principal information has been stated in the consolidated financial statements; therefore no cash flow, statement of changes in equity or income statement is provided for the Company. T. NYAMBIRAI CHAIRMAN 28 July 2009 K.V. CHIRAIRO DIRECTOR C.A. BANDA GROUP COMPANY SECRETARY Econet Wireless Holdings Limited Annual Report 2009 282009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=31http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=31Consolidated Statement of Changes in Equity For the year ended 28 February 2009 RESERVES ACCUMULATED ATTRIBUTABLE TO LOSSES EQUITY HOLDERS OF THE PARENT MINORITY INTEREST TOTAL Balance at 29 February 2008 All figures in ZW$ - - - 323 982 378 (102 016 301) 3 505 730 (6 229 258) 219 242 549 8 281 821 660 (2 403 254 751) 870 750 600 (174 150 120) (1 077 018 803) (5 999 308) (386 064) 5 491 763 214 Revaluation of property, plant and equipment 7 957 839 282 Deferred tax arising on revaluation (2 301 238 450) Fair value gain on available-for-sale financial instruments 870 750 600 Deferred tax arising on fair value gain (174 150 120) Loss for the year Exchange differences arising on translation Share buy-back Balance at 28 February 2009 6 353 201 312 (1 080 524 533) 229 950 (386 064) (1 080 680 647) 7 957 839 282 (2 301 238 450) 870 750 600 (174 150 120) (1 080 524 533) 229 950 (386 064) 5 272 520 665 Share capital, share premium and capital redemption reserve fund reflected a nil position as a result of the redenomination of the currency. financial asset is recognised in profit or loss. and is effectively realised, is recognised in profit and loss. Where a revalued financial asset is impaired, the portion of the reserve that relates to that which are not classified under other categories. Where a revalued financial asset is sold, the portion of the reserve that relates to that financial asset, Non-distributable reserves- the reserve arises from the revaluation of property, plant and equipment, available-for-sale financial assets and reserves nominal value of the shares is transferred to the capital redemption reserve fund. Capital redemption reserve fund - when shares are redeemed or purchased wholly or partly out of the Company profits, an amount equal to the Econet Wireless Holdings Limited Annual Report 2009 292009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=32http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=32Consolidated Cash Flow Statement For the year ended 28 February 2009 All figures in ZW$ NOTES 2009 Cash flows to operating activities Operating loss before working capital changes Net movement in working capital Cash utilised in operations Cash flows to investing activities Net finance cost Net expenditure on property, plant and equipment Net cash used in investing activities Cash flows from financing activities Share buy-back Increase in interest-bearing debt Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 30.1 30.2 (323 806 847) 248 932 790 (74 874 057) (1 122 388) (34 195 449) (35 317 837) (386 064) 397 468 978 397 082 914 286 891 020 - 30.3 286 891 020 Econet Wireless Holdings Limited Annual Report 2009 302009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=33http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=33Notes to the Consolidated Financial Statements For the year ended 28 February 2009 1 GENERAL INFORMATION The Company was incorporated in Zimbabwe on 4 August 1998 and its main operating subsidiary on 23 August 1994. The address of its registered office and principal place of business is Econet Park, 2 Old Mutare Road, Msasa, Harare. The main business of the Group is mobile telecommunications and related value added services. 2.1 2 Subsequent events - Demonetisation of Zimbabwe dollar In the fiscal policy statement presented by the Minister of Finance on 16 July 2009, the Zimbabwean dollar was demonetised. The fiscal statement introduced the use of multiple currencies. ADOPTION OF NEW AND REVISED STANDARDS These financial statements are presented in Zimbabwe dollars, being the currency of the primary economic environment in which the Group operates. Supplementary financial information has been presented in United States dollars as some of the transactions during the year were in United States dollars. 3 IFRIC 12 "Service Concession Arrangements (effective 1 January 2008)" IFRIC 13 "Customer Loyalty Programmes" IFRIC 14 IAS 19: "The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction" (effective 1 January 2008). STANDARDS AND INTERPRETATIONS ISSUED BUT NOT EFFECTIVE Standards and Interpretations effective in the current period In the current year, the Group has adopted all of the revised Standards and Interpretations applicable to the Group issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for the accounting periods beginning on or after 1 January 2008. The adoption of these new and revised Standards and Interpretations did not have a material impact on the financial statements of the Group. At the date of the authorisation of these financial statements, the following Standards and Interpretations, which are applicable to the Group, were either issued or revised but not yet effective: IFRS 2: Share-based Payments (Revised) Effective from 1 January 2009. IFRS 3: Business Combinations (Revised). Effective from 1 July 2009. IFRS 5: Non-current Assets Held for Sale and Discontinued Operations (Revised). Effective from 1 July 2009. IFRS 7: Financial Instruments: Disclosures. IAS 1: Presentation of Financial Statements (Revised). Effective from 1 January 2009. IAS 16: Property, Plant and Equipment (Revised). Effective from 1 January 2009. IAS 19: Employee Benefits. IAS 20: Accounting for Government Grants and Disclosures of Government Assistance. IAS 23: Borrowing costs (Revised). Effective from 1 January 2009. IAS 27: Consolidated and Separate Financial Statements (Revised). Effective from 1 July 2009. IAS 28: Investment in Associates (Revised). Effective from 1 July 2009. IAS 29:Financial Reporting in Hyperinflationary Economies. IAS 32: Financial Instruments: Presentation (Revised). Effective from 1 January 2009. IAS 36: Impairment of Assets (Revised). Effective from 1 January 2009. IAS 38: Intangible Assets (Revised). Effective from 1 January 2009. IAS 39: Financial Instruments: Recognition and Measurement (Revised). Effective from 1 July 2009. IAS 40: Investment Property (Revised). Effective from 1 January 2009. The Directors anticipate that all of the above Interpretations will be adopted in the Group's financial statements for the period commencing 1 March 2009 and that the adoption of those Interpretations will not have a material impact on the financial statements of the Group in the period of initial application. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 4.1 4 The principal accounting policies of the Group, which are set out below, are consistent in all material respects with those applied in the previous year and conform with standards issued by the International Accounting Standards Board (IASB) with the exception of non compliance with IAS 22009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=34http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=34Notes to the Consolidated Financial Statements For the year ended 28 February 2009 4 4.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Currency reforms The Zimbabwean currency was restated on 1 August 2008 by the removal of ten zeros and on 1 February 2009 by the removal of a further twelve zeros. In total, twenty two digits were removed by the Reserve Bank of Zimbabwe as part of currency reforms. As a result, prior year comparatives which are reflected in these financial statements in the currency unit prevailing at 28 February 2009, have become inconsequential to these financial statements. Accordingly, no comparative figures are shown. The Zimbabwe dollars shown in these financial statements have been restated in accordance with these changes. Limitations of financial reporting in the Zimbabwean economic environment The uncertainties in the adverse Zimbabwean economic environment during the financial year ended February 2009 have resulted in limitations in financial reporting. These uncertainties include: 4.3 4.3.1 Non-availability of official inflation indices Inflation indices were not published from July 2008. Subsequent estimates by economists were wide ranging, between percentages of trillions and quadrillions. The use of foreign currency and multiple pricing which were prevalent in the economy distorted the process of measuring inflation. Given the chronic hyperinflation, the time lapse between the balance sheet and reporting dates rendered the financial information presented in inflation adjusted financial statements less useful and relevant for making economic decisions. Official inflation indices, when available, were only available at month end periods. Therefore the use of assumptions to determine inflation in the intervening periods rendered the information presented susceptible to estimation errors. In these circumstances, inflation-adjusted financial statements have not been prepared as required by the International Financial Reporting Standards (IAS 29): "Financial Reporting in Hyperinflationary Economies." 4.3.2 Measurement of transactions The measurement of transactions in local currency was dependent on the mode of settlement. As a result there may be significant variations in the valuation of assets and liabilities. Accordingly, such valuations may be inherently unreliable. These uncertainties have been aggravated by; Multiple Pricing There were multiple prices for the same commodity/service, largely dependent on the modes of settling transactions from cheque/transfer, cash, fuel coupons, foreign currency etc. Multiple pricing resulted in distortions in financial reporting. Multiple exchange rates There were various exchange rates applicable which varied significantly namely; cash rates, cheque rates, transfer rates and Old Mutual Implied Rates. If a transaction occurs at more than one rate and is recorded at its nominal value this may result in distortions in financial reporting. Dollarisation The introduction of licensed operations in foreign currency and the basing of most other transactions in foreign currency for most of the non-licensed operators, created challenges for the Company in determining its functional currency in the latter part of 2008. As a result of these uncertainties and inherent limitations, caution is advised in the use of these financial statements for decisionmaking purposes. 4.4 Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to the end of February of each year. Control is achieved where the Company has the power to govern the financial and operating activities of an entity so as to obtain benefits from its activities. The results of the subsidiaries acquired or disposed of during the year are included in the consolidated financial statements, from the effective date of acquisition or up to the effective date of disposal. Where necessary, adj2009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=35http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=354 4.5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Business combinations Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 "Business Combinations" are recognised at their fair values at the acquisition date, except for 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," which are recognised and measured at fair value less costs to sell. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit and loss. The interest of minority shareholders in the acquiree is initially measured at minority's proportion of the net fair value of assets, liabilities and contingent liabilities recognised. 4.6 Investment in associates An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale. Investments in associates are carried in the balance sheet at indexed cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of individual investments. Losses in associates in excess of the Group's interest in those associates are not recognised, unless the Group has incurred legal or constructive obligations or made payments on behalf of the associate. Any excess of the cost of acquisition, over the Group’s share of the net fair values of the identifiable net assets of the associate at the date of acquisition, is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the Group’s share of the net fair values of the identifiable net assets of the associate at the date of acquisition (that is discount on acquisition) is credited to profit and loss in the period of acquisition. Where a Group company transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate. 4.7 Goodwill Goodwill arising on consolidation represents the excess of the cost of acquisition, over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary, associate or jointly controlled entity recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost, less any accumulated impairment losses. Negative goodwill arising on acquisition, represents the excess of fair value of the net identifiable assets acquired over the cost of the acquisition. Negative goodwill, in excess of the fair values of the non-monetary assets acquir2009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=36http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=36Notes to the Consolidated Financial Statements For the year ended 28 February 2009 4 4.8 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Intangible assets 4.8.1 Project development costs Project development costs are recognised as an expense in the period in which they are incurred, except where it is reasonably anticipated that these costs will be recovered through future commercial activity, in which case the costs are capitalised. Assessments of carrying values are done regularly and if there is an indication that the asset has suffered an impairment loss, an impairment is recognised immediately in profit or loss. 4.8.2 Pre-operating expenditure Expenditure incurred before the commencement of operations is capitalised, and is amortised on a straight-line basis over a period of ten years. 4.8.3 Internet licence fees Licence fees represent the cost of acquisition of a Class 'B' Internet Access Provider licence. The licence is amortised on a straight-line basis over 8 years. The carrying amount of the licence is reviewed annually and written down for permanent impairment where it is considered necessary. 4.9 Other investments Unquoted shares are shown at cost unless the directors are of the opinion that there has been a permanent diminution in value, in which case a provision is raised which is charged to the income statement. 4.10 Impairment of tangible and intangible assets excluding goodwill At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units, for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value, less cost to sell and value in use. Value in use calculations may not be practical in our current economy and therefore we have used fair value less cost of sale. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than the carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. 4.11 Foreign currency transactions and balances Transactions in foreign currencies are translated into Zimbabwe dollars at rates of exchange prevailing at the date of the transaction. For the period from 1 January 2009 to 28 February 2009, the Group transacted in multiple currencies, including the United States dollar, the South African rand and the Zimbabwe dollar. The basis of translation of foreign currency transactions to the Zimbabwe dollar is detailed below. Zimbabwe dollar financial information Monetary 2009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=37http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=374 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 4.12 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment made of specific borrowings, pending their expenditure on qualifying assets, is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are expensed in the period in which they are incurred. 4.13 Property, plant and equipment Property, plant and equipment are stated in the balance sheet at their revalued amounts, being fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date. Any revaluation increase arising on the revaluation of property, plant and equipment is credited to the revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to the profit and loss to the extent of the decrease previously charged. A decrease in the carrying amount arising on the revaluation of property, plant and equipment is charged to profit or loss to the extent that it exceeds the balance, if any, held in the property revaluation reserve relating to a previous revaluation of the asset. Revaluations are performed by suitably qualified independent professional appraisers. The basis of valuation is as follows: Buildings Network equipment Computer equipment and furniture Motor vehicles - Open market value - Gross replacement cost - Open market value - Open market value Depreciation on revalued assets is charged to profit or loss. On the subsequent sale or retirement of revalued property, plant and equipment, the attributable revaluation surplus remaining in the revaluation reserve is transferred directly to retained earnings. No transfer is made from the revaluation reserve to retained earnings, except when an asset is derecognised. Properties in the course of construction for production or for other purposes not yet determined are carried at cost less any recognised impairment loss. Costs include professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group's accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for intended use. Depreciation is charged so as to write off the value of assets over their estimated useful lives, using the straight-line method. The residual values of assets are reassessed each year, and where the value exceeds the carrying amount, depreciation is no longer charged. When the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. The residual values of each asset category have been assessed by looking at the fair value of the asset now after taking into account age, usage and obsolescence. In determining the recoverable amount of assets, expected cash flows are discounted to their present values. The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in profit or loss. 4.14 Investment properties Investment properties are properties held to earn rentals and/or for capital appreciation. It is stated at its fair value at the balance sheet date, as determined by independent professional valuers. Gains or losses arising from chang2009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=38http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=38Notes to the Consolidated Financial Statements For the year ended 28 February 2009 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 4.15 Leases The Group as lessor Leases where the Group transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee, are classified as finance leases. The outstanding principal amounts, less unearned finance charges, are included in advances and other accounts on the balance sheet. The finance charges earned are computed at the effective interest rates in the contracts and are brought into income in proportion to balances outstanding under each contract. The unearned finance charges are shown as a deduction from advances and other accounts. Leases of assets under which all the risks and benefits of ownership are effectively retained by the lessor, are classified as operating leases. Rental income from operating leases is recognised on a straight-line basis over the lease term. The Group as lessee Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation, so as to achieve a constant rate of interest on the remaining liability. Finance charges are charged directly to profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group's general policy on borrowing costs (see policy note 4.13 property, plant and equipment). Contingent rentals are recognised as an expense in the periods in which they are incurred. Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which the economic benefits from the leased assets are consumed. 4.16 Inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises all costs necessary to bring the inventories to their present location. Net realisable value represents the estimated selling price less all estimated costs incurred in the marketing, selling or distribution, where applicable. The basis of determining cost is the weighted average method. Obsolete and slow-moving inventories are identified and written down to their estimated economic or realisable value. Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses. Write downs to net realisable value and inventory losses are expensed in the period in which they occur. 4.17 Revenue recognition Revenue, which excludes Value Added Tax, cash discounts and sales between Group companies, represents the invoiced value of goods and services supplied by the Group. The Group measures revenue at the fair value of the consideration received or receivable. Revenue is recognised only when it is probable that economic benefits associated with the transaction will flow to the Group and the amount of revenue and associated costs incurred, can be measured reliably. If necessary, revenue is split into separately identifiable components. The main categories of revenue and bases of recognition for the Group are: 4.17.1 Contract products Connection fees R2009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=39http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=394 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 4.17 Revenue recognition (continued) 4.17.2 Pre-paid products Starter packs Revenue is recognised on the date all risks and rewards associated with the starter packs are transferred to the purchaser. 4.17.3 Internet services Subscriptions Subscriptions revenue is recognised on a straight-line basis over the period to which it relates. Services Revenue is recognised on the accrual basis, in accordance with the substance of the agreement. Other sales Revenue is recognised on the date all risks and rewards associated with the sale are transferred to the purchaser. 4.17.4 Automated transaction services Software and hardware sales Revenue is recognised when goods are delivered and ownership has passed. Service revenues Revenue is recognised on the accrual basis, in accordance with the substance of the agreement. 4.17.5 Other Other sales Revenue is recognised on the date all risks and rewards associated with the sale are transferred to the purchaser. Services Revenue is recognised on the accrual basis, in accordance with the substance of the agreement. Airtime Revenue is recognised when a customer utilises the airtime, at which point the risks and rewards have been transferred. Upon purchase of an airtime voucher the customer receives the right to make outgoing voice calls and to use the short message service to the value of the voucher. Revenue is deferred until such time as the customer uses the airtime, or the credit expires. Interest income Interest income is accounted for on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, to that asset's carrying amount. Dividend income Dividend income from investments is recognised when the shareholders' rights to receive payment have been established. 4.18 Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. 4.18.1 Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit, as reported in the income statement, because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the balance sheet date. Econet Wireless Holdings Limited Annual Report 2009 372009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=40http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=40Notes to the Consolidated Financial Statements For the year ended 28 February 2009 4 4.18 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Taxation (continued) 4.18.2 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, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available, against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised, if temporary differences arise from goodwill or from initial recognition of other assets and liabilities, in a transaction that affects neither the taxable profit nor the accounting profit. The carrying amount of the deferred tax assets is reviewed at each balance sheet 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. Deferred tax is calculated at the tax rates that are expected to apply in the periods when the liability is settled, or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. 4.19 Employee benefits Retirement benefits are provided for Company employees through an independently administered defined contribution fund and the National Social Security Authority (NSSA). Payments to defined contribution retirement benefit schemes are charged as an expense when they fall due. Payments to state managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group’s obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme. 4.20 Share-based payments 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. For equity settled share-based payment transactions with employees, 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, based on the Group's estimate of the equity instruments that will eventually vest. At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the original estimates, if any, is recognised in profit or loss over the remaining vesting period, with a corresponding adjustment to the equity settled employee benefits reserve. This policy is applied to all equity settled share-based payments granted after 7 November 2002. Equity settled share-based payment transactions with other parties are measured at their fair value of the goods or services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of equity instruments granted, measured at the date the entity obtains the goods or the counter-party rendered the service. 4.21 Financial instruments 4.21.1 Financial assets Investments are recognised and derecognised on trade date, where the purchase or sale of an investment is under a contract whose terms require delivery of the investment, within the timeframe established by the market concerned, and are initially measured at fair value plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial assets are classified into the following specific categories: financial assets as “at fair value through profit or loss” (FVTPL), 'held to maturity investments', ‘’available-for-sale” (2009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=41http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=414 4.21.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial assets (continued) 4.21.1.1 Financial assets at FVTPL (continued) A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if: - such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or - the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis. Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. 4.21.1.2 Held-to-maturity investments Bills of exchange and debentures with fixed or determinable payments and fixed maturity dates that the Group has the positive intent and ability to hold to maturity, are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortised cost using effective interest rate method less impairment, with revenue recognised on an effective-yield basis. Effective interest rate method The effective interest rate method is a method of calculating the amortised cost of a financial asset and of allocating interest over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or, where appropriate, a shorter period. Income is recognised on an effective interest rate basis for debt instruments other than those assets designated as at FVTPL. 4.21.1.3 AFS financial assets Listed shares and listed redeemable notes held by the Group, that are traded in an active market, are classified as being AFS and are stated at fair value. Gains and losses arising from changes in fair value are recognised directly in equity in the investments revaluation reserve, with the exception of impairment losses, interest calculated using the effective interest rate method and foreign exchange gains and losses on monetary assets, which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is included in profit or loss for the period. Dividends on AFS equity instruments are recognised in profit or loss when the Group's right to receive the dividends is established. The fair value of AFS monetary assets denominated in a foreign currency, is determined in that foreign currency and translated at the spot rate at the balance sheet date. The change in fair value attributable to translation differences that result from change in amortised cost of the asset is recognised in profit or loss, and other changes are recognised in equity. 4.21.1.4 Loans and receivables Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market, are classified as “loans and receivables”. Loans and receivables are measured at amortised cost, using the effective interest rate method less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. 4.21.1.5 Impairment of financial assets Financial assets other than those at FVTPL are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the in2009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=42http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=42Notes to the Consolidated Financial Statements For the year ended 28 February 2009 4 4.21.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial assets (continued) 4.21.1.5 Impairment of financial assets (continued) For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group's past experience of collecting payments, and increase in the number of delayed payments in the portfolio past the average period of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectable, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. With the exception of the AFS equity instruments if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously 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. In respect of AFS equity securities, impairment losses previously recognised through profit or loss, are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised directly in equity. 4.21.1.6 De-recognition of financial assets The Group derecognises financial assets only when the contractual rights to the cash flows from the assets expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. 4.21.2 Financial liabilities Financial liabilities are classified as either financial liabilities at "FVTPL" or "other financial liabilities". 4.21.2.1 Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL. A financial liability is classified as held for trading if: - it has been incurred principally for the purpose of repurchasing in the near future. - it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit taking. A financial liability other than a financial liability held for trading, may be designated as at FVTPL upon initial recognition if: - such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or - the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that bas2009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=43http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=434 4.21.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial liabilities (continued) 4.21.2.3 Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. 4.22 Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Segment information The principal segments of the Group have been identified on the primary basis by business segment. The basis is representative of the internal structure used for management reporting. Segment revenue reflects both sales to external parties and inter-group transactions. The segment result is presented as segment profit including net finance costs. Taxation is excluded in arriving at segment results. Segment operating assets and liabilities are only those items that can be specifically identified with a particular segment. 5 SIGNIFICANT ASSUMPTIONS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Residual values of property, plant and equipment During the year management assessed the residual values of property, plant and equipment. Residual values of each asset category have been assessed by looking at the fair value of the asset after taking into account age, usage and obsolescence. These residual values will be reassessed each year and adjustments for depreciation will be done in future periods if there is indication of diminution in value. Useful lives of property, plant and equipment In determining the useful lives of property, plant and equipment management considered the local operating environment, technology changes, use, type, make and model of each asset category. Conversion of the United States dollar for January and February transactions and balances The transactions for the period January to February which were all denominated in United States dollar were translated using the average interbank rate for each of the the two months. All balances as at 28 February were converted from the United States dollar to the Zimbabwe dollar using the closing interbank rate of US$1: ZW$95.42. Convenience translation of Zimbabwe dollars into United States dollars for supplementary information Revenue transactions in local currency were converted into United States dollars using the official exchange rate, from primarily March to September, since all tariff reviews by the regulator were based on the official exchange rate. For the period October to December, a cash rate was applied while all United States dollar denominated revenues were isolated and reported on in real terms.Operating costs were converted using the exchange rate that was dependent on the mode of settlement. For the balance sheet, property, plant and equipment was revalued by independent professional valuers, and the valuation was carried out in United States dollars. Foreign-denominated assets and liabilities were reported at their United States dollars carrying values. The share capital was translated at the official exchange rate ruling at the date of incorporation of 4 August 1998. Share premium, capital reserves and retained earnings were determined as the residual balance after conversion and valuation of all other balance sheet items. For purposes of ascertaining income tax opening values, closing income tax values in Zimbabwe dollars as at 28 February 2009 were established using the interbank rate applicable at that time. Tax liability was categorised into two periods, one dealing with t2009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=44http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=44Notes to the Consolidated Financial Statements For the year ended 28 February 2009 5 SIGNIFICANT ASSUMPTIONS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued) Equity accounting for associates The reporting date for Africa First ReNaissance Limited (AFRE) is 31 December of each year. For the purpose of applying the equity method of accounting, the financial statements of AFRE for the year ended 31 December 2008 have been used. Due to the fact that AFRE is listed, no interim financial information is available at 28 February 2009, as these institutions are not able to release interim financial information for purposes of the Group consolidation due to Zimbabwe Stock Exchange restrictions on the release of financial information. The effects of equity accounting for the Group's associates is disclosed in note 19. Investments Econet Wireless Holdings Limited held investments in Interfresh, Kingdom Meikles Africa Limited (KMAL), Old Mutual, Pearl Properties and Rainbow Tourism Group, which was acquired during the year under review. The opening balances at the time of dollarisation, were arrived at after converting the historical cost by the Old Mutual Implied Rate as at 1 March 2008, and the closing carrying values were determined by reference to closing Zimbabwe Stock Exchange prices at year end. Any impairment or fair value gain was accounted for through equity except for Old Mutual that went through profit and loss. All figures in ZW$ 6 BUSINESS SEGMENTS CELLULAR NETWORK OPERATIONS INTERNET SERVICES TRANSACTIONS PROCESSING SYSTEMS BEVERAGES INVESTMENTS TOTAL The principal activities set out in note 4.23 are the basis on which the Group reports its primary segment information. Segment information for the year ended 28 February 2009 Revenue Profit from operations Net financing income / (charge) Profit/(loss) before forex gain or loss adjustments Total assets Liabilities Net assets Capital expenditure Depreciation, amortisation and impairment Number of employees 800 749 754 124 046 924 752 211 126 194 194 10 584 561 176 (6 702 597 313) 3 881 963 861 32 847 043 11 703 511 15 063 790 8 498 903 8 498 903 188 445 005 (72 135 759) 116 309 246 458 523 729 348 42 3 303 902 (4 579 282) (1 892 049) (6 471 332) 96 866 519 6 184 741 (1 786 965) 17 450 11 138 325 (107 691) 138 334 560 825 302 187 126 071 889 (1 122 388) 277 694 650 885 211 487 1 011 150 250 12 766 234 437 (141 473 473) (7 274 471 225) 869 676 777 1 5 491 763 212 34 195 449 741 051 848 (83 065 960) (275 198 718) 13 800 559 29 610 012 769 889 883 265 The main business of the Group is cellular network operations and included in assets and liabilities are intercompany balances. Other segments comprise of internet services, transaction processing solutions and beverages, which individually constitute less than 10% of the Group. Econet Wireless Holdings Limited Annual Report 2009 422009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=45http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=45All figures in ZW$ 2009 7 REVENUE Revenue is made up of : Local airtime Interconnection fees International airtime Automated transaction services Internet services Beverages Other sales Included in revenue are foreign interconnect charges of Z$140million (2008 - nil). 308 835 297 390 290 262 104 296 385 576 768 13 390 739 6 184 741 1 727 995 825 302 187 8 PROFIT FROM OPERATIONS This is arrived at after charging:Auditors’ remuneration Deferred revenue charge for the year Depreciation Directors' emoluments: - For services as directors - For management services Lease charges 16 933 291 316 756 836 741 051 2 977 833 1 551 595 1 013 059 9 INVESTMENT INCOME Profit on disposal of investments 351 388 10 NET FINANCE COSTS Finance income Finance cost 11 886 095 (13 008 483) (1 122 388) 10.1 Exchange (losses)/gains Arising from -Long-term debt -Econet Wireless Group balances -Held-to-maturity investments -Other balances TAXATION Current income taxation Withholding tax on interest Deferred taxation reversal (2 050 013 638) 47 494 116 213 828 784 (216 214 664) (2 004 905 402) 11 140 130 979 1 483 928 (791 806 856) (650 191 949) Econet Wireless Holdings Limited Annual Report 2009 432009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=46http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=46Notes to the Consolidated Financial Statements For the year ended 28 February 2009 All figures in ZW$ 2009 2009 Percentage 11 TAXATION (continued) Tax rate reconciliation Reconciliation of tax charge: Loss before tax Reconciliation of tax charge Normal tax at 30.9% Disallowable (income) /expenses Tax effect of share of results of associate Impairment of associate Withholding tax on interest (1 727 210 752) (533 708 122) 629 576 518 1 862 519 981 (1 819 741 326) 1 483 928 140 130 979 30.9 (36.45) (107.83) 105.36 (0.09) (8.11) All figures in ZW$ GROUP 2009 2008 12 LOSS PER SHARE Loss Basic loss basis The calculation is based on the loss attributable to ordinary shareholders and the number of shares in issue for the year, which participated in the loss of the Group. The weighted number of shares in issue for the year amounted to: Fully diluted loss basis The calculation is based on the loss attributable to ordinary shareholders and the number of shares in issue after adjusting to assume conversion of share options not yet exercised. The weighted average number of shares after the dilutive effect amounted to: Headline loss basis Headline loss per share is calculated by dividing the headline earnings shown below by the same divisor used in the basic and diluted loss basis. Loss attributable to shareholders Adjustment for non-operating items (gross of tax): Impairment of associate Tax effect on adjustments (1 080 524 533) (5 889 130 504) 1 885 814 420 (5 297 669 401) - 167 945 937 154 743 198 168 406 819 155 204 080 Econet Wireless Holdings Limited Annual Report 2009 442009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=47http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=47All figures in ZW$ GROUP 2009 2008 12 LOSS PER SHARE (continued) Number of shares Weighted number of ordinary shares for the purposes of basic loss per share Effect of potentially dilutive ordinary shares: Share options Weighted number of ordinary shares for the loss of diluted loss per share Basic loss per share (dollars) Headline loss per share (dollars) Diluted basic loss per share (dollars) Diluted headline loss per share (dollars) 167 945 937 460 882 168 406 819 (6 434) (31 544) (6 416) (31 458) 154 743 198 460 882 155 204 080 - All figures in ZW$ 13 PROPERTY, PLANT AND EQUIPMENT COST At 1 March 2008 Additions Disposals Revaluation At 28 February 2009 LAND AND BUILDINGS COMPUTER EQUIPMENT NETWORK EQUIPMENT AND FURNITURE MOTOR VEHICLES CAPITAL WORK-IN PROGRESS TOTAL 1 570 399 204 12 990 003 131 1 570 399 204 12 990 003 131 2 070 845 700 006 365 702 077 210 1 377 277 540 283 277 541 660 32 123 228 34 195 450 - 15 537 948 983 32 123 227 15 572 144 432 ACCUMULATED DEPRECIATION At 1 March 2008 Charge for the period Disposals Revaluation At 28 February 2009 CARRYING VALUE At 28 February 2009 At 1 March 2008 - 7 256 127 323 - 7 256 127 323 741 008 741 008 43 43 - 741 051 7 256 127 323 7 256 868 374 1 570 399 204 5 733 875 809 - 701 336 202 - 277 541 617 - 32 123 227 - 8 315 276 059 - Certain of the network equipment was erected on rented premises. The valuation, which was performed by an independent professional valuer, conforms to International Valuation Standards, was determined based on open market value for all asset categories, except network equipment which was valued on a gross replacement basis. Had property, plant and equipment not been revalued the carrying amount would have been nil. Econet Wireless Holdings Limited Annual Report 2009 452009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=48http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=48Notes to the Consolidated Financial Statements For the year ended 28 February 2009 All figures in ZW$ 2009 14 INVESTMENT PROPERTY At 1 March 2008 Fair value adjustments At 28 February 2009 The Directors are of the opinion that the value of investment property is not in excess of its recoverable amount. 31 656 31 656 15 INTANGIBLE ASSETS The Group's intangible assets has nil balances in Zimbabwe dollar terms because of the revaluation of the Zimbabwe dollar by the removal of 22 zeroes cumulatively. The same applies to project costs. All figures in ZW$ 16 DEFERRED TAXATION The following are the major deferred tax liabilities and assets recognised by the Group, and the movements thereon, during the current period. At 1 March 2008 Charge / (credit) to profit for the year Charge to equity At 28 February 2009 PROPERTY, PLANT AND EQUIPMENT DEFERRED REVENUE OTHERS TOTAL 181 437 2 403 254 751 2 403 436 188 (95 027 051) (95 027 051) (696 961 242) 159 485 879 (537 475 362) (791 806 856) 2 562 740 630 1 770 933 775 Included in the other category is the deferred tax arising from unrealised exchange differences, the general bad debts provision, operating lease recoupments and prepayments. All figures in ZW$ 2009 The following are the deferred tax balances: Deferred tax liabilities Deferred tax assets 2 627 086 578 (856 152 803) 1 770 933 775 Econet Wireless Holdings Limited Annual Report 2009 462009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=49http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=49All figures in ZW$ PERCENTAGE HOLDINGS 2009 17 17.1 INVESTMENTS AND LOANS IN SUBSIDIARIES COMPANY Cost of investments Econet Wireless (Pvt) Ltd (Cellular network operator in Zimbabwe) Data Control & Systems (1996) (Pvt) Ltd (Internet service provider) Transaction Processing Systems (Pvt) Ltd (Computer data processing service provider) Franchise Development & Management All Communications (Pvt) Ltd (Telephone and accessories merchandiser) Chitungwiza Wholesale Meat Suppliers (Pvt) Ltd (Property investment) Econet Wireless Capital Holdings (Pvt) Ltd (Investment company) Pentamed Investments (Pvt) Ltd (Investment company) Total investments in subsidiaries 100% 100% 84.3% 100% - 100% 100% 100% - 17.2 Group balances Econet Wireless (Pvt) Ltd Econet Wireless Global Limited Group balances Pentamed Investments (Pvt) Ltd Net loans from subsidiaries Total investments and loans in subsidiaries Net loans to group companies 346 689 882 47 494 116 394 183 998 23 321 250 417 505 248 417 505 248 The Directors are of the opinion that the costs of the investments in subsidiaries are not in excess of their recoverable amounts. Loans and other group balances are unsecured, interest free and have no fixed terms of repayment. Econet Wireless Holdings Limited Annual Report 2009 472009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=50http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=50Notes to the Consolidated Financial Statements For the year ended 28 February 2009 All figures in ZW$ 2009 18 HELD-TO-MATURITY INVESTMENTS At 1 March 2008 Additions Disposals Interest Exchange gain 213 828 784 213 828 784 19 All figures in ZW$ OWNERSHIP INTEREST INVESTMENTS IN ASSOCIATES Details of the Group's associates are as follows: Name of associate Africa First ReNaissance Corporation Limited The fair value of the Group's interests in associates was $138 442 251 as at 28 February 2009. 2009 PERCENTAGE 21.8 All figures in ZW$ 2009 The movements in investments in associates are as follows: Opening balance Share of revaluation reserve of associate Share of profit of associate Impairment Closing balance The market value of the investments at the reporting date was US$5 646 602 Summarised financial information in respect of the Group's associates’ is set out below: Total assets Total liabilities Group's share of associates’ net assets Revenue Profit Group's share of associates profit for the year Impairment computation Open market value Cost and post-acquisition reserves Impairment 802 620 749 6 027 572 755 6 830 193 504 (6 691 751 253) 138 442 251 93 412 741 303 (50 774 323 380) 42 638 417 923 138 442 251 114 581 028 417 27 649 416 306 6 027 572 755 138 442 251 (6 830 193 504) (6 691 751 253) The impairment charged to the income statement was arrived at after comparing the open market value of the shares of the associate with the carrying amount as at 28 February 2009, less accumulated Group's share of associate reserves. Econet Wireless Holdings Limited Annual Report 2009 482009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=51http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=51All figures in ZW$ 2009 20 AVAILABLE-FOR-SALE INVESTMENTS Quoted investments Opening balance Additions (cash) Fair value gain Closing balance The fair value of the investments at the reporting date was $870 750 600. 870 750 600 870 750 600 21 DIRECTORS’ AND MANAGEMENT’S LOANS There were no material management loans issued during the year. 22 INVESTMENTS HELD-FOR-TRADING Opening balance Fair value gain Closing balance Investments held at fair value through profit and loss are comprised of equity investments. The fair value is based on the stock market published price. 1 784 721 1 784 721 23 INVENTORIES Merchandise Raw materials Spares, stationery and other 47 423 947 3 756 929 174 858 296 226 039 172 The directors are of the opinion that the inventory amounts are recorded at values that are not in excess of their recoverable amounts. All inventories are expected to be recovered within 12 months. Econet Wireless Holdings Limited Annual Report 2009 492009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=52http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=52Notes to the Consolidated Financial Statements For the year ended 28 February 2009 All figures in ZW$ 2009 24 TRADE AND OTHER RECEIVABLES Trade receivables Prepayments and other receivables Provision for doubtful debts The average credit period on sale of goods is 30 days. No interest is charged on trade receivables for the first 15 days from the date of invoice. Thereafter, interest is charged at the minimum bank lending rate ruling at the end of that month. There are currently no receivables that are past due which are not impaired. Movement in the provision for allowance for doubtful debts Balance at the beginning of the year Impairment losses recognised Closing balance The directors believe that the allowance for doubtful debt is adequate. Ageing of impaired trade receivables 30-Current 60-90 90-120 120+ Total 640 644 444 398 951 384 352 641 427 747 (641 427 747) (641 427 747) 2 064 640 589 433 824 529 (641 427 747) 1 857 037 371 25 25.1 SHARE CAPITAL Group and company Authorised 300 000 000 (2008-300 000 000) Shares of: 200 000 000 (2008- 200 000 000) Ordinary shares of $nil each - 100 000 000 (2008-100 000 000) Class "A" shares of $nil each Issued and fully paid 94 408 686 Ordinary shares of $nil each 73 883 893 Class "A" shares of $nil each The nominal value of share capital is nil because of the currency reforms as explained in note 4.2. - 25.2 Econet Wireless Holdings Limited Annual Report 2009 502009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=53http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=5325.2 All figures in ZW$ SHARE CAPITAL (continued) Balance at 29 February 2008 Issue of shares Script dividend Share buy-backs Movement in share capital NUMBER OF SHARES SHARE CAPITAL SHARE PREMIUM Balance at 28 February 2009 25.3 169 095 983 167 496 457 599 1 795 523 (196 596) - - - - Class "A" shares On 1 July 2003, Econet Wireless Holdings Limited (EWHL) entered into an arrangement with Dunstone (Private) Limited, to acquire its 100% owned subsidiary Econet Wireless Capital Holdings (EWCH). Under the arrangement, Econet Wireless Holdings Limited issued 739 843 680 (73 984 368 after share consolidation) Class "A" shares in exchange for 999 000 EWCH shares. These shares rank parri passu in all respects with the existing issued ordinary shares with the exception that, in the event of EWH becoming the owner of Econet Wireless (Private) Limited (EWL) shares, and deciding to distribute the shares to its members, the Class "A" shares will not participate in the distribution of the EWL shares. Scrip issues During the year the Group issued 1 795 523 shares through a script dividend. As at 28 February 2009 the number of shares in issue (before accounting for script issue) were 167 497 056. Share buy-back Under the authority granted at the Annual General Meeting of 18 December 2003 and 31 December 2004, the Company purchased its own shares on the market. The units purchased were 0.12% of the previously issued share capital of the Company with the nominal value of $nil for a total consideration of $386 064. Ordinary shares and share options 8 631 825 ordinary shares of $nil each were placed under the control of the directors who were authorised to issue them pursuant to the rules of the Company’s share option scheme. The balance of the unissued shares are under the indefinite unrestricted control of the directors, subject to the limitations imposed by the Companies Act (Chapter 24:03) and the Zimbabwe Stock Exchange (ZSE). The options, which are exercisable over 10 years, have been granted to purchase ordinary shares of $nil each at the middle market price obtained on ZSE on the most recent day immediately preceding the option date. GRANT DATE GRANT DATE 23 DECEMBER 1999 31 DECEMBER 2000 GRANT DATE 31 DECEMBER 2001 GRANT DATE 31 OCTOBER 2002 25.4 25.5 25.6 Exercise price ZW$ 1 July 2002 Exercised 2003 Granted up to 30 June 2002 261 500 (173 294) (12 394) (8 535) 3 703 7 402 (63 578) - 63.50 404 595 - 112.50 356 584 - 100.00 85.50 2 000 000 - Exercised 2006 Exercised 2008 Exercised 2005 Exercised 2004 (36 794) (7 784) (22 454) (218 002) (1 892) - Exercised 2007 (19 057) 316 790 (1 716) (1 050 000) - (950 000) 136 690 Econet Wireless Holdings Limited Annual Report 2009 512009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=54http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=54Notes to the Consolidated Financial Statements For the year ended 28 February 2009 28 FEBRUARY 2009 CLASS “A” SHARES ORDINARY SHARES ORDINARY SHARES SHARE OPTION 25 25.7 SHARE CAPITAL (continued) Directors’ shareholding At 28 February the 2009 the directors held directly and indirectly the following number of shares in the Company: S.T. Masiyiwa T. Nyambirai R. Chidembo A. Eastwood C. Fitzgerald D. Mboweni T.P. Mpofu J. Pattison Z. Wazara K. Chirairo P.J. Campbell 73 883 893 29 FEBRUARY 2008 CLASS “A” SHARES ORDINARY SHARES 4 891 075 10 302 821 596 8 990 1 028 449 834 688 1 019 757 228 619 2 672 023 135 823 - - S.T. Masiyiwa T. Nyambirai R. Chidembo A. Eastwood C. Fitzgerald D. Mboweni T.P. Mpofu J. Pattison Z. Wazara K. Chirairo P.J. Campbell 73 098 819 - ORDINARY SHARES 10 248 853 1 236 113 8 896 1 017 522 751 336 1 008 519 217 788 2 831 219 216 982 - 16 404 - SHARE OPTION All figures in ZW$ 2009 26 TRADE AND OTHER PAYABLES Trade payables and accruals Trade accounts payable Other payables 587 692 100 1 288 201 860 1 875 893 960 Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period on purchases is seven days. After this period escalations are negotiated in relation to inflation. The Group has financial risk management policies in place to ensure that all payables are settled within the agreed credit timeframe. Econet Wireless Holdings Limited Annual Report 2009 522009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=55http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=55All figures in ZW$ 2009 27 PROVISIONS AND ACCRUALS Provisions and accruals The provisions and accruals balance is made up of the following; BALANCE AT 1 MARCH 2008 CURRENT PROVISION UTILISED PROVISION BALANCE AT 28 FEBRUARY 2009 139 358 537 Leave pay Bonus and commissions Warranties provision-terminals Licence fees provision All figures in ZW$ - - - - - 103 137 549 16 290 524 19 623 973 306 490 139 358 536 - - - - 103 137 549 16 290 524 19 623 973 306 490 - 139 358 536 The licence fees provision is the liability payable to Post and Telecommunication Regulatory Authority of Zimbabwe which is based on cellular network revenue. All figures in ZW$ 2009 28 DEFERRED REVENUE Prepaid deferred revenue 316 756 836 The deferred revenue arises from the unused prepaid airtime and product support fees. The Directors are of the opinion that the carrying amounts approximate the fair values of the services to be provided. Econet Wireless Holdings Limited Annual Report 2009 532009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=56http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=56Notes to the Consolidated Financial Statements For the year ended 28 February 2009 29 INTEREST-BEARING DEBT At 1 March 2008 Additions during the year Repayments At 28 February 2009 Closing exchange rate Included in the interest-bearing debt balance are unrealised exchange losses of ZW$1 779 542 615. USD 16 326 868 18 739 954 (12 251 777) 22 815 045 95.42 ZW$ 2 177 011 593 All figures in ZW$ 2009 Long-term portion ZW$ Short-term portion ZW$ The maturity profile for the interest-bearing USD debt is disclosed in note 34.10. Summary of borrowing arrangements 864 120 178 1 312 891 414 2 177 011 592 African Export Import Bank (AFREXIM Bank) Included in the balance above is US$2 million owed to Africa Export and Import Bank ("the bank"). The loan is secured by foreign currency receivables and network equipment with a carrying amount of US$20.8 million. The duration of the loan is 36 months effective 1 July 2006, with a floating interest rate (Libor + 3.25%). As at year end the interest rate was 8.3 percent per annum. The last date of repayment of this facility is 28 May 2009. In terms of the conditions of this loan, the Group requires the approval of the bank to incur further borrowings and to declare dividend payments. The agreement also requires that all the Group's foreign revenues be deposited into a collection account held with the bank or a nominated agent of the bank. ZTE The balance due to ZTE is US$20.8 million as at 28 February 2009. A total of US$18.7 million was drawn during the year to fund network upgrade and expansion. The duration of the loan is 48 months, with a fixed interest rate of 7.29 percent per annum. The loan is secured by the equipment purchased, which has a carrying amount of US$27 million. The last date of repayment of this facility is 23 July, 2011. Econet Wireless Holdings Limited Annual Report 2009 542009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=57http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=5730 All figures in ZW$ 2009 CASH FLOW INFORMATION Loss before taxation (1 727 210 752) 741 051 (351 388) (11 886 095) 13 008 483 (14 692 561) 1 565 713 831 5 889 130 504 (6 027 572 755) (323 806 847) (10 687 166) 30.1 Cash generated from operations Adjustments for: Depreciation Profit on disposal Finance income Finance cost Fair value gain Unrealised foreign currency exchange losses Impairment of associate Equity profit of associate Cash generated by operations before working capital changes Impact of translations 30.2 Movements in working capital Increase in inventories Increase in trade and other receivables Increase in trade and other payables Increase in provisions and accruals Increase in deferred revenue (226 039 172) (1 857 037 371) 1 875 893 960 139 358 537 316 756 836 248 932 790 30.3 Cash and cash equivalents Short-term investments Bank balances and cash 286 891 020 286 891 020 Econet Wireless Holdings Limited Annual Report 2009 552009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=58http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=58Notes to the Consolidated Financial Statements For the year ended 28 February 2009 31 All figures in ZW$ RELATED PARTY TRANSACTIONS 2009 Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between Group companies and other related parties are disclosed below. 31.1 Transactions Liquid Telecommunications Ltd Member of Econet Wireless Sales (139 529 199) Global Group (interconnection services) Expense Financial Advisory Services Debtor Debtor Creditor TN Financial Services (Private) Limited 31.2 Balances Common directorships 77 258 139 653 579 195 47 494 116 (45 228 412) Liquid Telecommunications Ltd Econet Wireless Global Group Member of Econet Wireless Global Limited Holding Company Member of Econet Wireless Liquid Telecommunications Ltd Global Group The interconnection services were provided at the Group’s approved price list. The amounts outstanding from related companies are unsecured and will be settled in cash. No guarantees have been given or received and no expense has been recognised in the period for bad or doubtful debts in respect of amounts owed by related parties. All figures in ZW$ 2009 31.3 Compensation of key management personnel The remuneration of directors and other members of key management during the year was as follows: Short-term benefits Post-employment benefits 5 123 639 5 123 639 The remuneration of directors and key executives is determined by the audit and remuneration committee, having regard to the performance of the individuals and market trends. 32 SUBSIDIARIES In the previous financial year the Group through Pentamed Investments (Private) Limited acquired 63% of Mutare Bottling Company (Private) Limited (MBC). The cost of acquisition of MBC was paid by a share swap arrangement. The Group issued 4 412 113 shares in exchange for 6 300 000 MBC shares. Econet Wireless Holdings Limited Annual Report 2009 562009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=59http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=5933 33.1 GROUP EMPLOYEE BENEFITS Econet Wireless Group Pension Fund This is a defined contribution scheme. under the scheme each of the members and the Company contribute to the fund at a rate of 7% of their pensionable emoluments. The members may elect to contribute in excess of the stipulated amount up to the maximum of 10%, or such amount as may be sanctioned by the trustees of the fund. The contributions are made through monthly deduction by the Company from members' salaries and remitted to the fund. During the year a total of ZW$2 891 864 was paid towards the fund. 33.2 National Social Security Authority Scheme This is a defined benefit scheme promulgated under the National Social Security Act of 1989. The Company's obligation under the scheme is limited to specific contributions legislated from time to time. These are presently 3% of pensionable emoluments up to a maximum of $4.2 million per month for each employee as at 28 February 2008. During the year a total of $3 276 615 was paid towards the fund. FINANCIAL RISK MANAGEMENT Capital risk management The Group manages its capital structure to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of debt and equity. The capital structure of the Group consists of debt which includes the borrowings disclosed in note 29, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings. The Group's risk management committee reviews the capital structure on a semi-annual basis. As a part of this review, the committee considers the cost of capital and the risks associated with each class of capital. Based on recommendations of the committee, the Group will balance its overall capital structure through the payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the redemption of existing debt. 34 34.1 34.2 Gearing ratio The Group's risk management committee reviews the capital structure on a semi-annual basis. As part of this review the committee considers the cost of capital and the risks associated with each class of capital. The gearing ratio at the year end was as follows: All figures in ZW$ 2009 Debt (i) Cash and cash equivalents Net (cash) / debt Equity (ii) Net debt to equity ratio (i) Debt is defined as long and short-term borrowings as detailed in note 29. (ii) Equity includes all capital and reserves of the Group. 34.3 Categories of financial instruments Financial assets Held-for-trading investments Held-to-maturity investments Loans and receivables (including cash and cash equivalents) Available-for-sale investments - equity instruments 2 177 011 592 (286 891 020) 1 890 120 572 5 491 763 214 1 784 721 213 828 784 2 143 928 391 870 750 600 At the reporting date, there is no significant concentration of credit risk. The carrying amount reflected above represents the Group's maximum exposure to credit risk for such loans and receivables. Econet Wireless Holdings Limited Annual Report 2009 572009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=60http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=60Notes to the Consolidated Financial Statements For the year ended 28 February 2009 34 34.4 FINANCIAL INSTRUMENTS (continued) Financial risk management objectives The Group's corporate treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyses exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest-rate risk and price risk), credit risk, liquidity risk and cash flow interest-rate risk. The Group's Audit Committee, consisting of executive and non-executive directors, meet on a regular basis to analyse, amongst other matters, currency and interest rate exposures and re-evaluate treasury management strategies against revised economic forecasts. Compliance with Group policies and exposure limits is reviewed at quarterly Board meetings. 34.5 Market risk The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates (see (34.6) below) and interest rates (see (34.7) below). Foreign currency risk management The Group is exposed to foreign currency risk through the funding of its network equipment. The Group also incurs expenditures in foreign currency for maintenance and upgrade of the network equipment. The current foreign currency exposures emanate from the foreign receivables, foreign payables, the African Export Import Bank loan and the ZTE loan. The Group has a dedicated committee of the Board which reviews the loan exposures on a regular basis and monitors repayment plans. The Group has been able to meet its obligations in the current financial period and the Directors believe that appropriate measures have been implemented to ensure that the Group has the ongoing capacity to meet its obligations arising from these exposures. Application of exchange rates in the preparation of the financial statements - the Group does not intend to settle its liabilities using local revenues. It is the intention of management to settle the Group's foreign obligations using foreign revenues, and through raising additional capital in foreign currency to settle the foreign currency obligations of the Group; - the Postal and Telecommunications Authority of Zimbabwe (“POTRAZ”) uses this rate to determine the tariffs that will be applied by the mobile business in terms of the COSITU model. This model uses a cost plus formula to determine the tariffs. All costs that are in foreign currency are converted at this rate in order to determine the tariffs. The Directors believe that it is appropriate to apply the same exchange rate to the foreign currency transactions of the Company so that costs are determined on the same basis as the income levels. 34.7 Interest rate risk management 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. The Group invests in money market instruments which are subject to changes in interest rates on the local money markets. The Group’s policy is to adopt a non-speculative approach to managing interest rate risk and to only invest in instruments that are approved by the Investments Committee of the Board of Directors. Approved funding instruments include; bankers acceptances, call loans, overdrafts, foreign loans and where appropriate, long-term loans. The Group has borrowings that are subject to both fixed interest rates and floating interest rates. Details of the Group’s borrowings are described in note 29. The Board of Directors has a committee that is dedicated to reviewing the loan exposures and repayment plans for the Group’s external borrowings. The committee that reviews the loan exposures meets on a regular basis and uses various models to project the Group’s risk exposures and proposes methods to deal with the risk arising in an 2009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=61http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=6134 34.8 FINANCIAL INSTRUMENTS (continued) Other price risks (continued) The Group invests in tradable securities that are quoted on the Zimbabwe Stock Exchange and maintains two portfolios for these investments; a trading portfolio and a long-term investment portfolio. The Investments Committee of the Board of Directors is responsible for evaluating investment opportunities and authorising strategic and short-term investments of the Group. This committee consists mainly of non-executive Directors and meets regularly to evaluate the risk exposures and to propose mitigating mechanisms to limit the Group’s exposure. Credit risk management Credit risk refers to the risk that the counterparty will default on its contractual obligations, resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group's exposure and the credit ratings of its counterparties are continuously monitored and the credit exposure is controlled by counterparty limits that are reviewed and approved regularly. Financial assets, which potentially subject the group to concentrations of credit risk, consist principally of cash, short-term deposits, trade receivables and intercarrier receivables and payables. The Group’s cash equivalents are placed with high quality financial institutions. Trade receivables are presented net of the allowance for doubtful debts. Credit risk with respect to debtors is limited due to the widespread customer base and ongoing credit evaluations to maintain credit worthiness of the customers. Where appropriate, trade receivables are converted onto the prepaid service. Intercarrier receivables and payables are regulated by interconnect contracts. Intercarrier receivables and payables for foreign cellular traffic are managed through a reputable foreign finance house which ensures the net monthly outstanding amounts are collected from the foreign interconnect partners. No guarantees were provided as at the balance sheet date. 34.9 34.10 Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The table below details the Group's remaining contractual maturities on loans: All figures in US$ 1-3 MONTHS 3 MONTHS-1 YEAR 1-5 YEARS TOTAL Interest bearing 35 GOING CONCERN 2 000 000 11 759 080 9 055 965 22 815 045 The Directors have assessed the ability of the Company and the Group to continue operating as a going concern and believe that at the preparation of these financial statements, the going-concern assumption is still appropriate. However, the Directors believe that under the current economic environment a continuous assessment of the ability of the Company and the Group to continue to operate as a going concern will be performed, to determine the continued appropriateness of the going-concern assumption that has been applied in the preparation of these financial statements. " The Group's balance sheet shows a net current liability position as at 28 February 2009 of ZW$1 413 296 904. The Directors have however, assessed the cash flows and performance of the Company and are satisfied that the Group will be able to pay its debts when they fall due. BORROWING POWERS In terms of the Company's Articles of Association, the Directors may exercise the powers of the Company to borrow up to 200% of the aggregate of: - the issued share capital and share premium or stated capital of the Compan2009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=62http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=62Notes to the Consolidated Financial Statements For the year ended 28 February 2009 All figures in US$ 2009 37 CAPITAL COMMITMENTS Authorised and not contracted The capital expenditure is to be financed from internal cash generation, extended supplier credits and bank credit. 123 800 000 38 CONTINGENT LIABILITIES There were no contingent liabilities at the balance sheet date. 39 EVENTS AFTER THE BALANCE SHEET DATE At an Extraordinary General Meeting held on 27 March 2009, the shareholders approved that the Directors of the Company be authorised to enter into an instalment sale agreement in terms of which Econet Wireless Global Limited agreed to supply Econet Wireless (Private) Limited with telecommunications equipment worth US$93.8 million. Kingdom Meikles Africa Limited Extra ordinary General Meeting approved the demerger of Kingdom Financial Holdings Limited and Meikles Africa Limited. The impact of the demerger on the interests of the Group are to be assessed. 40 APPROVAL OF FINANCIAL STATEMENTS The financial statements were approved by the Board of Directors and authorised for issue on 28 July 2009. Econet Wireless Holdings Limited Annual Report 2009 602009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=63http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=63communications industry in Zimbabwe. Our Position in key customer segments. revenue increased and we strengthened our Econet continued to set the pace for the tele- Supplementary Information Shareholders and Other Information Consolidated Balance Sheet Shareholder Analysis Notice to Members Financial Diary Consolidated Income Statement 63 62 64 66 65 Corporate Information and Advisory Our Strategic Business Partnerships Detachable Proxy Form for Annual General Meeting 68 69 Econet Wireless Holdings Limited Annual Report 2009 612009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=64http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=64Supplementary Information For the year ended 28 February 2009 Consolidated Balance Sheet As at 28 February 2009 All figures in US$ 2009 ASSETS Property, plant and equipment Deferred taxation Investments Current assets Total assets EQUITY AND LIABILITIES EQUITY Share capital Non-distributable reserve Distributable reserves Accumulated loss Minority interest LIABILITIES Deferred taxation Interest-bearing debt Current liabilities 40 429 314 9 055 965 40 077 929 89 563 208 176 375 370 67 022 489 16 339 768 (2 212 137) 81 150 120 5 662 042 134 442 629 3 047 094 13 300 351 25 585 296 176 375 370 Attributable to equity holders of the parent Total shareholders' equity 86 812 162 Total equity and liabilities Econet Wireless Holdings Limited Annual Report 2009 622009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=65http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=65Consolidated Income Statement For the year ended 28 February 2009 All figures in US$ 2009 Revenue Cost of sales and external services Gross profit Other income Employee costs Other operating costs -Administration -Marketing and sales -Network costs -Other costs (18 851 090) 87 942 516 1 673 907 (3 840 937) (14 204 967) (3 965 720) (7 954 002) (14 241 683) (18 448 625) (3 028 442) 5 080 957 (1 115 329) 705 765 (1 601 194) 3 070 199 (5 147 563) 26 558 024 69 091 426 Earnings before interest, taxation and depreciation Depreciation and amortisation Impairment of investment in associate Profit from operations Equity accounted earnings Finance income Finance costs Taxation Profit before monetary adjustment Loss for the year Attributable to: Equity holders of the parent Minority interest (2 077 364) (2 212 137) 134 773 (2 077 364) SIGNIFICANT RATIOS Loss per share-basic Loss per share-diluted (0.01) (0.01) Econet Wireless Holdings Limited Annual Report 2009 632009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=66http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=66Shareholders Analysis For the year ended 28 February 2009 SHAREHOLDERS ANALYSIS AS AT 28 FEBRUARY 2009 NUMBER OF SHAREHOLDERS % OF TOTAL SHAREHOLDERS ISSUED ORDINARY SHARES % OF TOTAL SHARE CAPITAL SIZE OF SHAREHOLDING Total 10,000,001 - 1,000,001 - 10,000,000 500,001 - 1,000,000 100,001 - 500,000 50,001 - 100,000 10,001 - 50,000 5,001 - 10,000 1,001 - 5,000 501 - 1,000 201 - 500 101 - 200 0 - 100 1 210 182 84 0 65 846 699 1 443 2 923 37.79 15.65 10.94 0.84 3.15 2.35 9.04 19 182 587 112 939 0.12 0.38 1.31 1.87 0.5 0 244 19 19 7 734 0.25 100 0 0.25 1.09 52 620 268 95 408 686 - 13 275 905 15 576 063 4 551 162 5 220 001 1 245 855 1 786 719 475 254 361 933 55.15 100 0 13.91 16.33 4.77 5.47 TOP SHAREHOLDERS CLASS OF SHARES CLASS “A” ORDINARY TOTAL % OF TOTAL SHARE CAPITAL Other Hellikop Investments (Private) Limited 73 098 819 Stanbic Nominees (Private) Limited Ljon Investments (Private) Limited Pearl Properties (2006) Limited TN Asset Management Nominees First Mutual Life - Shareholders First Mutual Limited Datvest (Private) Limited Renaissance Securities Trading Limited - NNR Fed Nominees (Private) Limited Northunderland Investments (Private) Limited Eco Pavilion Holdings Limited - NNR Ramtell Investments (Private) Limited T.S. Masiyiwa Investments (Private) Limited Old Mutual Zimbabwe Limited Austin Eco Holdings Limited - NNR Old Mutual Life Assurance Company Zimbabwe Limited Econet Wireless Global Limited Econet Wireless Global Limited 73 098 819 45 942 455 95 408 686 1 031 847 1 061 764 1 127 117 1 158 403 1 248 258 1 303 672 1 481 000 1 778 626 2 083 333 2 264 840 2 287 140 2 494 766 2 832 350 3 344 325 4 688 204 4 868 204 8 912 085 4 489 249 73 098 819 4 868 204 8 912 085 4 489 249 43.64 2.91 5.32 2.68 45 942 455 169 252 579 1 031 847 1 061 764 1 127 117 1 158 403 1 248 258 1 303 672 1 481 000 1 778 626 2 083 333 2 264 840 2 287 140 2 494 766 2 832 350 3 344 325 4 688 204 27.42 100 0.62 0.63 0.67 0.69 0.75 0.78 0.89 1.06 1.24 1.35 1.37 1.49 1.69 2.00 2.80 Econet Wireless Holdings Limited Annual Report 2009 642009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=67http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=67Financial Diary 28 August 2009 September 2009 October 2009 28 February 2010 April 2010 May 2010 June 2010 Eleventh Annual General Meeting of Shareholders, Econet Park, Harare Interim press results, analyst briefing and Interim dividend record date Interim dividend payment Financial year end Preliminary financial press results, analyst briefing and dividend record date Twelfth Annual Report 2010 to be published and dividend payment Twelfth Annual General Meeting of Shareholders, Econet Park, Harare Econet Wireless Holdings Limited Annual Report 2009 652009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=68http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=68Notice to Members 2009, at 10.00 a.m. for the following purposes: staff canteen, at the registered office of the Company at Econet Park, 2 Old Mutare Road, Msasa, Harare, Zimbabwe, on Friday, 28 August Notice is hereby given that the Eleventh Annual General Meeting, of the members of Econet Wireless Holdings Limited, will be held in the Ordinary Business To consider and adopt the following resolutions: 1. Financial Statements To receive and adopt the financial statements for the year ended 28 February 2009, together with the reports of the directors and auditors thereon. Dividends To confirm the interim dividend of ZW$3 220.73 cents per share recommended by the directors for the half year ended 31 August 2. 2008. 3. Election of Directors To re-elect Messrs, J.G.B. Pattison, T. Nyambirai and S.T. Masiyiwa as directors of the Company. retire by rotation at the Company's Annual General Meeting and, being eligible, offer themselves for re-election. In accordance with Article 81 of the Company's Articles of Association, Messrs, J.G.B. Pattison, T. Nyambirai and S.T. Masiyiwa will the Company’s Articles of Association. 4. 5. Confirmation of the appointment of Dr J. Myers: Dr J. Myers was appointed to the Board on 27 May 2009. He will retire at the next Annual General Meeting in terms of Article 89.2 of Directors' remuneration To approve the fees paid to the directors for the year ended 28 February 2009. Auditors To approve the auditors’ remuneration for the previous year and to consider reappointing Messrs Deloitte & Touche as auditors for the current year. 6. 6.1 Special Business To consider and if thought fit, to adopt, with or without amendment, the following Resolution: Change of the name of the Company As a Special Resolution That subject to the approval of the Registrar of Companies the name of the Company be changed from Econet Wireless Holdings Limited to Econet Wireless Zimbabwe Limited. 6.2 assets. percent of the issued ordinary shares at the date of the Annual General Meeting, for the purpose of holding the said shares as treasury for the five business days immediately preceding the date of repurchase, the Company's own ordinary shares up to a maximum of ten provided the repurchases are not made at a price greater than 5% above the weighted average of the market value for the securities Share Buy-Back As an Ordinary Resolution That the directors be authorised to purchase, at a price not higher than a price equivalent to 12 times the net asset value per share, from the date of the resolution. created: and further, that his authority expires at the next Annual General Meeting, provided it shall not extend beyond 15 months That a capital redemption reserve fund, appropriated out of revenue reserves standing from time in the books of the Company, be Econet Wireless Holdings Limited Annual Report 2009 662009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=69http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=69Notice to Members 7. Any Other Business To transact such other business as may be transacted at an Annual General Meeting. NOTE: A member of the Company entitled to attend and vote at this meeting is entitled to appoint a proxy to speak and, on a poll, vote in his / her stead. A proxy need not be a member of the Company. Proxy forms should be forwarded to reach the office of the transfer secretaries at least 48 hours before the commencement of the meeting. By order of the Board C.A. BANDA GROUP COMPANY SECRETARY Econet Wireless Holdings Limited Annual Report 2009 672009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=70http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=70Corporate Information and Advisory Company registration number 7548/98 Econet Park, 2 Old Mutare Road Registered Office Principal Bankers Incorporated in the Republic of Zimbabwe Zimbabwe Telephone: +263-4-486121/6 E-mail: info@econet.co.zw Company Secretary Fax:+263- 4-486120 +263-91-222 500 Harare Msasa African Export-Import Bank Limited Cairo 11221 1191 Corniche EL-Nil World Trade Centre, Egypt Zimbabwe Legal Practitioners Mtetwa and Nyambirai Harare 10 Selous Avenue Macdonald House Kantor and Immerman, Legal Advisors to the Company Website: www.econet.co.zw Charles Alfred Banda Zimbabwe 3rd Floor, Karigamombe Centre Kingdom Bank Limited Harare Kwame Nkrumah Avenue 101 Union Avenue Building 101 2ndh Floor, TN Bank Limited Zimbabwe First Transfer Secretaries (Private) Limited Registrars and Transfer Secretaries Harare Kwame Nkrumah Avenue 4th Floor, 101 Union Avenue Building 101 Zimbabwe Deloitte & Touche Auditors Harare Msasa Econet Park, 2 Old Mutare Road Harare Zimbabwe 53 Samora Machel Avenue 4th Floor, Goldbridge North Eastgate Harare Robert Mugabe Way Cnr. Sam Nujoma Street/ Highlands Harare 1 Kenilworth Road Kenilworth Gardens Chartered Accountants (Zimbabwe) Zimbabwe Harare 56 Samora Machel Avenue 8th Floor, Karigamombe Centre Renaissance Merchant Bank Limited Zimbabwe Zimbabwe Econet Wireless Holdings Limited Annual Report 2009 682009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=71http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=71Our Strategic Business Partnership AFREXIMBANK The opportunities in the market have made it imperative to broaden our relationship with key partners. This has and has promoted accelerated growth. 69 enabled the business to deliver value to our stakeholders Econet Wireless Holdings Limited Annual Report 20092009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=72http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=722009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=73http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=73Proxy Form for the Annual General Meeting on Friday, 28 August 2009, at 10.00 a.m. by hand to: The Group Company Secretary For the Eleventh Annual General Meeting of the Company to be held at Econet Park, 2 Old Mutare Road, Msasa, Harare, Zimbabwe, Econet Wireless Holdings Limited, No. 2 Old Mutare Road, Msasa, Harare, Zimbabwe. The Group Company Secretary or by post to: Econet Wireless Holdings Limited, P.O Box BE 1298 Belvedere, Harare, Zimbabwe I/We. Being the registered holder/s of. Ordinary shares in Econet Wireless Holdings Limited do hereby appoint-: 1.or failing him/her 2.or failing voting. Company which will be held at Econet Park, 2 Old Mutare Road, Msasa, Harare to vote for me /us on my/ our behalf or to abstain from him/her the Chairman of the Annual General Meeting, as my/our proxy to act for me/us at the Eleventh Annual General Meeting of the 1. 2. Adoption of 2009 Annual Financial Statements together Approval of dividend recommended by the Company's Directors with the reports of the Directors and Auditors IN FAVOUR OF AGAINST ABSTAIN (Kindly tick where appropriate.) 6.1 Renewal of share buy-backs authority 6.1 Name change 5. 4. 3. Appointment of Auditors and approval of their remuneration Approval of Directors' remuneration Appointment of Directors Signature of Shareholder . PLEASE NOTE Date. If the address on the envelope of this letter is incorrect, please fill in the correct details below and return to the Secretary. Name. Address. . Econet Wireless Holdings Limited Annual Report 20092009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=74http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=74Explanatory notes to resolutions for Annual General Meeting 1. Shareholders may insert the name of a proxy or the name of two alternative proxies of the shareholder's choice follow. 2. whose name has not been deleted shall be entitled to act as proxy to the exclusion of those whose names deletion must be initialed by the shareholder . The person whose name appears first on the form of proxy and in the space provided, with or without deleting “the Chairman of the Annual General Meeting’, but such Chairman of the Annual General Meeting. 3. to the proxy unless that authority has already been recorded by the Company Secretary or waived by the The authority of a person signing proxy under a power of attorney or on behalf of company must be attached meeting. 4. Econet Park, 2 Old Mutare Road, Msasa, Harare, Zimbabwe, not less than 24 hours before the time of the Forms of proxy must be lodged at or posted to be received at the registered office of the Company Secretary, in terms therefor should the shareholder wish to do so. 5. the Annual General Meeting and speaking and voting in person thereat to the exclusion of any proxy appointed The completion and lodging of this form of proxy shall not preclude the relevant shareholder from attending shareholder wishes to vote. 6. other than in accordance with these instructions, provided that he is satisfied as to the manner in which a The Chairman of the Annual General Meeting may accept a proxy form which is completed and /or received Any alteration or correction to this form must be initialed by the signatory/signatories. Econet Wireless Holdings Limited Annual Report 20092009-08-25T16:41:07+02:00http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=75http://ipaper.ipapercms.dk/AfricanShareHolder/zw/ECONET/2009/?Page=75www.econet.co.zw2009-08-25T16:41:07+02:00