ta holdings annual report 2013

7/22/2019 TA Holdings Annual Report 2013

1/100


2/100

TA HOLDINGS 2013 ANNUAL REPORT 1

TABLE OF CONTENTS

Group Prole, Directors and Senior Management 2

Group Investments and Principal Activities 3

Registered Ofce and Corporate Information 4

Chairmans Statement 5

Review of Investments 7

Four Year Performance Highlights 14

Report of the Directors 16

Corporate Governance 17

Report of the Actuaries 18

Independent Auditors Report 19

Consolidated Income Statement 20

Consolidated Statement of Comprehensive Income 21

Consolidated Statement of Financial Position 22

Consolidated Statement of Changes in Equity 23

Consolidated Statement of Cash Flows 24

Notes to the Consolidated Financial Statements 25

Company Statement of Financial Position 89

Notes to the Company Statement of Financial Position 90

Shareholder Analysis 91

Notice to Shareholders 92


3/100

TA HOLDINGS 2013 ANNUAL REPORT2

GROUP PROFILE, DIRECTORS AND SENIOR MANAGEMENT

TA Holdings Limited is an investment holding company. The Groups main interests consist of investments ininsurance, hotels and agrochemicals. The Company was founded in 1935 as Tobacco Auctions Limited (henceTA). It was listed on the Zimbabwe Stock Exchange in 1964. The Company has a small corporate ofce which isresponsible for making investment decisions and other capital allocation decisions for the Group. Managers of the

investee companies have operational decision-making autonomy and accountability. This gives them the authoritywhich should result in optimal performance of the investments they manage.

DIRECTORS

S S Mutasa (Non-executive Chairman) G Sainsbury (Chief Executive Ofcer)Z Randeree (Non-executive Director)F Daniels (Non-executive Director) +*R N Gordon (Non-executive Director) *+J Vezey (Non-executive Director) +*B P Nyajeka (Executive Director)

Member of: Remuneration Committee+ Audit and Risk Committee* Investments Committee

CURRENT HEADS INVESTEE COMPANIES

M Sachak Chief Executive Ofcer - TA InsuranceJ Murehwa Chief Executive Ofcer - Sable Chemical IndustriesG Stutchbury Chief Executive Ofcer - Cresta Hospitality (Pvt) LtdM Javangwe Managing Director - Zimnat Life Assurance

O Matingo Managing Director - Grand ReinsuranceD A Nganunu Managing Director - Botswana Insurance CompanyN Jazire Managing Director - Lion Assurance CompanyDr R Dafana Managing Director - Zimbabwe Fertiliser CompanyL Tanyanyiwa Managing Director - Minerva Risk Advisors (Pvt) LtdT Makaya Managing Director - Cresta Marakanelo BotswanaT Fisher Managing Director - Zimnat Asset ManagersS Mazorodze Managing Director - Zimnat Lion Insurance

SENIOR MANAGEMENT CORPORATE OFFICE

G Sainsbury Chief Executive OfcerB P Nyajeka Chief Finance OfcerS Choto Head of Group Reporting


4/100


GROUP INVESTMENTS & PRINCIPAL ACTIVITIES

EFFECTIVE

NAME OF COMPANY SHAREHOLDING PRINCIPAL ACTIVITY

ZIMBABWE INVESTMENTSAon Zimbabwe 30% Insurance brokersCresta Hospitality (Pvt) Ltd 100% Hospitality and leisureGrand Reinsurance (Pvt) Ltd (Grand Re) 100% ReinsuranceSable Chemical Industries Ltd (Sable) 51% Manufacturer of nitrogenous fertiliserZimbabwe Fertiliser Company Ltd (ZFC) 22% Manufacturer & distributor of fertiliser and

pesticidesZimnat Asset Management Co (Pvt) Ltd 100% Asset management companyZimnat Life Assurance Company Ltd (Zimnat Life) 100% Life assurersZimnat Lion Insurance Company Ltd (Zimnat Lion) 100% Short-term insurersFreecor Ltd 100% Investment holding companySovereign Health (Pvt) Ltd 49% Medical insuranceZimnat Financial Services (Pvt) Ltd 100% Micro-nance

OUTSIDE ZIMBABWE INVESTMENTS

Botswana Insurance Company (Pty) Ltd 62% Short-term insurersCresta Hospitality Holdings Ltd 100% Hotel managementCresta Hotels (Pty) Ltd 100% Hotel managementCresta Marakanelo (Pty) Ltd 35% Hospitality and leisureLion Assurance Company Ltd 54% Short-term insurers

Metonic Investments Ltd 100% Investment holding companyNeural (Pty) Ltd 100% Insurance managementTA Investments and Consultants Ltd 100% Investment holding companyTrans Industries (Pty) Ltd 100% Investment holding companyQuest Ventures (Pty) Ltd 100% Investment holding company


5/100


REGISTERED OFFICE & CORPORATE INFORMATION

REGISTERED OFFICE: 17th Floor, Joina City Cnr Julius Nyerere / Jason Moyo Avenue Harare

SECRETARIES: TA Management Services (Pvt) Ltd 17th Floor, Joina City Cnr Julius Nyerere / Jason Moyo Avenue Harare

TRANSFER SECRETARIES: Corpserve (Pvt) Ltd

2nd Floor, ZB Centre Cnr First Street/Kwame Nkrumah Avenue Harare

AUDITORS: PricewaterhouseCoopers Chartered Accountants (Zimbabwe) Building No. 4, Arundel Ofce Park Norfolk Road, Mt Pleasant Harare

PRINCIPAL LAWYERS: Atherstone & Cook

7th Floor, Mercury House 24 George Silundika Avenue Harare

BANKERS: Stanbic Bank Park Lane Branch 77 Park Lane Harare


6/100


7/100


CHAIRMANS STATEMENT

intent of improving the product and service in everyarea. Cresta Marakanelo has continued to grow byopening new hotels outside Gaborone. During 2013Cresta Marakanelo opened a new hotel in Jwaneng,

which is 100 kilometres west of Gaborone. Plansare underway to lease a new hotel and conferencecentre outside the capital.

Sable Chemical IndustriesIn my statement to shareholders for the year ended 31December 2004 I said:Sables intrinsic value arises from two attributes:a) transporting urea into Zimbabwe - a land lockedcountry at the Southern most tip of the second largestcontinent in the world is both very expensive andmore costly than importing ammonia into Zimbabwe,and b) the owners of Sable, if its assets are prudently

maintained and protably operated, have an option toincur the lowest capital costs of expanding Zimbabwesammonium nitrate manufacturing capacity from itscurrent level of 240,000 metric tons per annum to acapacity of 580,000 metric tons per annum through asimple expansion of the ammonia plant. Sable is pivotalto the mission of increasing fertiliser consumption at thelowest possible foreign exchange cost to Zimbabwe---

---If Sable did not exist, Zimbabwe would have tosatisfy all its nitrogenous fertiliser needs by importingurea. Zimbabwe will have to import 195,131 tons of

urea to replace 110,244 tons of ammonia necessaryto produce Sables annual capacity of 240,000 tons ofammonium nitrate---

---Sables second advantage is that it provides itsowners and Zimbabwe with the cheapest possibleway of doubling Zimbabwes nitrogenous fertiliserproduction capacity. Ideally, Sables prots would be

of a size to permit Sable to nance expansion of its

annual capacity --- Realising that ideal depends on theelectrolysis plant possessing a long life---

Ten years from the time I wrote this statement, I stillbelieve in what I said, which is that Sable is a strategicinvestment for Zimbabwe and a good business forTA to be in. However, the issue now is for Sable tohave a viable electricity tariff for at least three yearswhilst we are implementing alternative technology toproduce ammonia, the feedstock in the manufactureof ammonium nitrate. Sable is currently engagingGovernment and ZESA to achieve this.

As at 31 December 2013, the Groups nancial yearend, and to date, the tariff negotiations had not beencompleted and the future returns from Sable could

therefore not be estimated with reasonable certainty.As a result we could not justify the value of Sable inTAs books and consequently, in order to comply withthe requirements of International Accounting Standard(IAS) 36: Impairment of Assets and IAS 39: Financial

Instruments: Recognition and Measurement, theGroup recorded an impairment charge of US$13.7million against its investment in associate, Sable. Thisdid not have an impact on Group cash ows.

I wish to assure the shareholders that this impairmentwill be reassessed once the tariff negotiations havebeen nalised and we are in a position to estimate thefuture returns from Sable with reasonable certainty.

Corporate GovernanceThere were no changes to the Board during the year.

AcknowledgementOn behalf of the Board, I wish to thank managementand staff for their effort during the past year. I also wishto thank the various stakeholders and all authorities for

their continued support.

Thank you.

Shingai MutasaChairman

22 April 2014


8/100


REVIEW OF INVESTMENTS

1. HIGHLIGHTS

Financial performance 2013 2012 2011

US$000 US$000 US$000Income 76,829 72,504 67,452Cash generated from operations 7,093 7,020 5,409Basic (loss)/earnings per share (cents) (4.71) 0.80 2.81Headline earnings per share (cents) 2.15 0.95 0.45

2. OVERVIEW

The Group achieved a 126% increase in headline earnings per share, from 0.95 cents per share for the year ended31 December 2012 to 2.15 cents per share for the year ended 31 December 2013.

The increase in earnings was driven by:

a) 731% increase in prot before tax achieved by Zimbabwe investments. This growth was a result of:

Good underwriting performance at Zimnat Lion which saw underwriting prot increase by 48% to US$1.2million during the year under review from US$0.8 million for the year ended 31 December 2012.

US$1.7 million fair value adjustment on investment property at Zimnat Life arising from the revaluation of the

Zimnat Plaza (formerly the AMC building) in Harare following the change of use of the building from workshopto retail.

Reduction in losses at fertilizer companies, mainly Sable Chemicals.

b) 5% increase in prot before tax by investments outside Zimbabwe. This was achieved despite a 13% depreciationof the Botswana Pula against the United States Dollar (US$), and was driven by the following:

Improved underwriting performance at LAC, where underwriting prot grew by 153% during the year underreview from US$0.24 million to US$0.6 million.

53% growth in investment income at BIC to US$4.6 million.

In line with International Accounting Standard (IAS) 36: Impairment of Assets, and IAS 39: Financial Instruments:Recognition and Measurement, the Group recorded an impairment charge of US$13.709 million against itsinvestment in Sable Chemicals. The impairment arose due to uncertainty over future returns to be realized by theGroup from this investment. This did not have any cash ow impact.

Cash generated from operations remained static at US$7 million when compared with prior year. The Groupcontinues to focus on aggressive working capital management in order to enhance its cash position.


9/100


10/100



3.5 COMMENTARY

3.5.1 Zimbabwe investments

(i) Insurance This business sector comprises Zimnat Lion InsuranceCompany, Zimnat Life Assurance Company, GrandReinsurance and Minerva Risk Advisors.

2013 2012 US$000 US$000Underwriting prot 2,316 2,486 Zimnat Life (Shareholder funds) 1,342 1,217 Zimnat Lion 1,226 827 Grand Reinsurance (252) 442Minerva Risk Advisors(share of prot) 58 160Investment income 3,055 293Finance costs (168) (192)Prot before tax 5,261 2,747Cash generated from operationsZimnat Life (Shareholder funds) 1,741 1,257

Zimnat Lion 1,113 433 Grand Reinsurance (35) 171

2,819 1,861Combined ratioZimnat Life (Shareholder funds) 84% 77%

Zimnat Lion 85% 86% Grand Reinsurance 107% 93%

a) Underwriting performance

Zimnat Lifes underwriting prot was 10% abovelast years. This was attributable to a 31% growthin gross written premium, despite an increase in theclaims ratio from 36% last year to 45% during theyear under review.

Zimnat Lions underwriting prot rose by 48% drivenmainly by a 37% growth in gross written premiumand a reduction in the reinsurance ratio from 58%last year to 39% due to a change in business mix.

GrandRe incurred an underwriting loss of US$0.3million during the year under review largely due to a25% drop in gross written premium and a rise in thereinsurance ratio from 29% last year to 42% duringthe year under review. The reduction in premiumsand increase in reinsurance ratio was due to primaryinsurance companies increasing their retention ratios

thereby reducing the need for reinsurance.b) Investment income

The increase in investment income was due to fairvalue gains on the Zimnat Plaza of US$1.7 million,

gains on equities listed on the Zimbabwe StockExchange (ZSE), and an increase in rental incomedue to a more protable tenant mix.

(ii) Hotels

This business sector comprises of Cresta Zimbabwe

2013 2012 US$000 US$000Earnings before interest, tax,depreciation and amortization 867 1,316Cresta Sprayview pre-openingcosts (222) -Depreciation (604) (496)Finance costs (481) (141)

De-recognition cost onrefurbishment - (117)(Loss)/prot before tax (440) 562Cash generated from operations 1,564 615

Cresta Zimbabwe incurred a loss before tax of US$0.4million versus a prot of US$0.6 million last year dueto:

34% decline in earnings before interest, tax anddepreciation. This was a result of a 12% drop in

Revenue per Available Room from US$50 last yearto US$44, due to a decline in occupancy rates from60% last year to 54% this year. Occupancy rateswere weighed down by the Cresta Sprayview Hotelin Victoria Falls which started operations in August2013.

US$0.2 million pre-opening costs for CrestaSprayview

Increase in depreciation charges as a result ofrefurbishments which were completed at CrestaLodge Harare and Cresta Sprayview.

Rise in nance costs as a result of additionalborrowings to nance the refurbishment of CrestaLodge and Cresta Sprayview.


11/100



(iii) Agrochemicals

This business sector comprises Sable Chemicals, thesole producer of Ammonium Nitrate in Zimbabwe, and

Zimbabwe Fertilizer Company (ZFC).

2013 2012 US$000 US$000Loss after taxZFC (107) (6,601)

Sable Chemicals (217) (2,472) (324) (9,073)TA share of loss of associateZFC (24) (1,485)

Sable Chemicals (111) (1,260) (135) (2,745)Cash generated from operations

ZFC 6,750 11,476 Sable Chemicals 7,871 6,890 14,621 18,366

a) ZFC

The company incurred a signicantly lower loss thanlast year due to a 32% increase in fertilizer sales,reduction in costs and lower bad debts impairmentcharges during the year under review.

b) Sable Chemicals

The company incurred a loss of US$0.2 millionversus US$2.5 million last year. This reduction inlosses was due to an 8% increase in fertilizer sales,and a reduction in nance costs as the companychanged its credit policy to major distributors.

(iv) Impairment charge on equity accountedinvestments

At 31 December 2013, the future returns from

the Groups investment in Sable Chemicalswere uncertain. In accordance with InternationalAccounting Standard (IAS) 36: Impairment of Assets,and IAS 39 Financial Instruments: Recognitionand Measurement, the Group fully impaired itsinvestment in Sable Chemicals. This resulted in aUS$ 13.709 million charge to the income statementfor the year under review.

3.5.2 Outside Zimbabwe investments

(i) Insurance

This business sector comprises Botswana InsuranceCompany which is the largest underwriter of short-term insurance in Botswana, and Lion AssuranceCompany of Uganda.

2013 2012 US$000 US$000Underwriting prot 2,535 3,392

Botswana Insurance Company 1,930 3,153Lion Assurance Company 605 239Investment income 4,810 3,141Finance costs (32) (26)Prot before tax 7,313 6,507Cash generated from operationsBotswana Insurance Company 2,507 1,907Lion Assurance Company 1,273 13 3,780 1,920Combined ratio

Botswana Insurance Company 86% 83%Lion Assurance Company 87% 94%

a) Underwriting prot

Botswana Insurance Company

The drop in underwriting prot was due to a 19%decline in gross written premium, the result of ratecutting in an increasingly competitive insurancemarket in Botswana.

Lion Assurance Company (Uganda)

The increase in the underwriting prot was mainlydue to a decrease in the claims ratio from 35% lastyear to 29% during the year under review as a resultof more prudent underwriting.

b) Investment income

The increase in investment income was driven by fairvalue gains of equities held by BIC.

(ii) Hotels

This business sector comprises Cresta Marakaneloand Cresta Holdings which provide hotel managementservices in Botswana and Zambia.


12/100


2013 2012 US$000 US$000Cresta Marakanelo

Earnings before interest, tax,

depreciation and amortisation 7,124 6,890 Depreciation (2,669) (2,547) Finance costs (290) (270) Amortisation of future lease

costs (IAS 17) (764) (811)Income tax expense (390) (144)

Prot after tax 3,011 3,118Cresta Marakanelo share ofprots (35% effective interest) 1,054 1,091

Cresta Holdings prot before tax 634 961

1,688 2,052

Cash generated from operationsCresta Marakanelo 7,840 7,906

Cresta Holdings 267 507 8,107 8,413

Cresta Marakanelo recorded a 3% decline in protafter tax despite a 13% depreciation of the BotswanaPula against the US$. This performance was drivenmainly by:

Good performance by Cresta Mowana Resort which

had occupancies of 57% and prot of US$1.2 millionduring the year under review.

Revenue contribution by new hotels in Jwanengand Mahalpye, though the Group experienced areduction in prots at Cresta Lodge Gaborone andCresta President Hotel Gaborone due to increasedroom stocks in the Gaborone market.



13/100


4.2 Cash and bank balances

2013 2012US$000 US$000

Zimbabwe investments 4,029 3,863Outside Zimbabwe investments 12,771 9,665Group 16,800 13,528

Cash generated from operations by the Groupremained static at US$7 million compared to last year.After accounting for cash utilised in investing activities,the Groups cash balance increased from US$ 13.5million at 31 December 2012 to US$16.8 million at 31December 2013.

4.3 Borrowings

Group borrowings increased from US$6.4 million at31 December 2012 to US$8 million at 31 December2013 mainly due to an increase in borrowings byCresta Zimbabwe of US$1.5 million to fund the opening ofCresta Sprayview (Victoria Falls) and the refurbishmentof Cresta Lodge Harare.

5 OUTLOOK

5.1 Zimbabwe

(i) Insurance Despite tight liquidity conditions, all Zimbabwean

insurance companies are expected to record growthin both premium and underwriting prots. Thiswill be achieved by continuing to target protable

business channels, and an aggressive focus on costcontainment and reduction.

Growth in investment income will be linked to returnsprevailing in the Zimbabwe investment market as awhole.

Results recorded so far for 2014 indicate growth ofpremiums and prots for our insurance sector.

(ii) Hotels Tight liquidity conditions have created a condition

where both occupancies and room rates are falling.This is causing intense competition in an alreadysaturated market and consequently margins arelikely to continue to be under pressure.

The nal phase of the Cresta Lodge refurbishmenthas been suspended until trading conditions improve.

With no refurbishment activities planned for 2014,occupancies at the effected hotels, Cresta Lodge and


4.1 Net Asset Value (NAV)

Insurance Hotels Total NAV Agro- IFRS Groupbefore Chemicals* Consolidation NAV

Agro- Adjustments chemicalsUS$000 US$000 US$000 US$000 US$000 US$000

2013Zimbabwe investments 18,573 9,456 28,029 3,281 (7,324) 23,986Outside Zimbabwe investments 26,618 10,478 37,096 - (180) 36,916Group 45,191 19,934 65,125 3,281 (7,504) 60,9022012Zimbabwe investments 14,526 9,733 24,259 17,125 (6,789) 34,595Outside Zimbabwe investments 24,696 10,500 35,196 - (487) 34,709Group 39,222 20,233 59,455 17,125 (7,276) 69,304

* Note: The NAV attributable to the Agro Chemicals business sector represents TAs share of NAV of Agrochemicalsassociates, ZFC and Sable Chemicals.

The reduction in the Groups NAV was due to the impairment of the investment in Sable Chemicals as at 31December 2013.

The NAV attributable to insurance business sector increased by US$5.969 from 31 December 2012 to 31 December2013. This was mainly driven by:

The growth in prots attributable to the performance of Zimnat Lion and Zimnat Life.

Prots earned by BIC and LAC during the year under review. These outweighed the US$2.5 million translationloss incurred during the year.


14/100


Cresta Sprayview, are expected to drive revenuesand occupancies for the Group for the year ahead.

The Group has embarked on an aggressive costcontainment exercise in an effort to preserve margins.

(iii) Agro-chemicals Finalization of a viable electricity tariff for Sable will

enable the company to complete refurbishment ofits plant so as to return the company to its installedcapacity

Strict credit control policies have enabled thecompany to lower its level of debt and reducenance costs. This trend should continue in theforthcoming year.

5.2 Outside Zimbabwe investments

(i) Insurance Whilst competition in Botswana is expected

to remain intense, management at BIC haveemployed strategies that will enable the companyto regain market share and increase protability.

At LAC the market share growth that hascharacterized the previous year is expected tocontinue.

(ii) Hotels At Cresta Marakanelo, the company expects to

regain market share at its hotels in Gaborone,which will in turn drive revenue and protabilitygrowth in 2014. In addition, the two hotels openedin 2013 are expected to continue to grow theircontribution to overall protability.

Discussions are at an advanced stage for thecompany to lease a new hotel and conferencecenter in Botswana. Construction is expected tostart in the third quarter of 2014.

G. SainsburyGroup Chief Executive Ofcer22 April 2014



15/100


FOUR YEAR PERFORMANCE HIGHLIGHTS For the year ended 31 December 2013

2013 2012 2011 2010OUTSIDE ZIMBABWE INVESTMENTS US$ 000 US$ 000 US$ 000 US$ 000Total income 28,211 29,938 31,323 30,549Total expenses (22,168) (24,500) (26,590) (29,025)Prot before interest, share of associatesprot/(loss) and tax 6,043 5,438 4,733 1,524Net nance costs (4) (27) (24) (2)Share of associated companies prot/(loss) after tax 1,054 1,003 215 (262)Prot before tax 7,093 6,414 4,924 1,260Taxation (1,544) (1,941) (1,248) (1,248)Prot after tax 5,549 4,473 3,676 12

Prot attributable to parent company 3,474 2,515 2,018 (1,234)Prot attributable to non-controlling interests 2,075 1,958 1,658 1,246

5,549 4,473 3,676 12

2013 2012 2011 2010ZIMBABWE INVESTMENTS US$ 000 US$ 000 US$ 000 US$ 000Total income 48,618 42,566 36,129 21,601Total expenses (44,142) (40,278) (33,457) (22,874)Prot before interest, share of associatesprot/(loss) and tax 4,476 2,288 2,672 (1,273)Net nance costs (793) (614) (577) (450)Share of associated companies prot/(loss) after tax 32 (2,523) 232 (4,170)Impairment of investment in associate (13,709) - - -

(Loss)/prot before tax (9,994) (849) 2,327 (5,893)Taxation (1,242) (346) 290 761(Loss)/prot after tax (11,236) (1,195) 2,617 (5,132)

(Loss)/prot attributable to parent company (11,236) (1,195) 2,617 (5,132)

2013 2012 2011 2010

CONSOLIDATED US$ 000 US$ 000 US$ 000 US$ 000Total income 76,829 72,504 67,452 52,150Total expenses (66,310) (64,778) (60,047) (51,899)Prot before interest, share of associatesprot/(loss) and tax 10,519 7,726 7,405 251Net nance costs (797) (641) (601) (452)Share of associated companies prot/(loss) after tax 1,086 (1,520) 447 (4,432)Impairment of investment in associate (13,709) - - -(Loss)/prot before tax (2,901) 5,565 7,251 (4,633)Taxation (2,786) (2,287) (958) (487)(Loss)/prot after tax (5,687) 3,278 6,293 (5,120)

(Loss)/prot attributable to parent company (7,762) 1,320 4,635 (6,366)Prot attributable to non-controlling interests 2,075 1,958 1,658 1,246

(5,687) 3,278 6,293 (5,120)


16/100


FOUR YEAR PERFORMANCE HIGHLIGHTS For the year ended 31 December 2013

RATIO ANALYSIS

Share Performance 2013 2012 2011 2010Basic (loss)/earnings per share (US cents) (4.71) 0.80 2.81 (3.11)

Earnings yield (77.19) 8.01 23.41 (14.79)Dividend per share (US$) - - - -Price/Earnings Ratio (PER) (1.30) 12.5 4.27 (6.76)Market price at year end (US$) 0.06 0.10 0.12 0.21Market capitalisation ($000) 10,056 16,485 19,782 34,618Number of shares in issue at 31 December 164,845,910 164,845,910 164,845,910 164,845,910

Financial Performance 2013 2012 2011 2010Return on shareholders equity (%) (9.34) 4.73 9.59 (13.25)(Loss)/prot before tax margin (%) (3.78) 8.52 11.59 (8.88)Effective tax rate (%) (96.02) 41.09 12.49 (10.50)Net asset value per share (US$) 0.37 0.42 0.40 0.37

Gearing Ratio (%) 13.19 9.21 4.42 4.01

DEFINITIONSBasic Earnings per share Prot after tax attributable to parent company/number of ordinary shares

Earnings yield Basic Earnings per share/market price per share

Price earnings ratio Market price at year end/basic earnings per share

Market capitalisation Market price at year end x number of ordinary shares in issue

Return on shareholders equity Prot attributable to parent company/shareholders equity

Prot before tax margin Prot before tax/total revenues

Net asset value per share Shareholders equity/number of ordinary shares

Gearing ratio Total borrowing/shareholders equity


17/100


REPORT OF THE DIRECTORS

The directors have pleasure in presenting toshareholders for their consideration and adoption theaudited nancial statements of the Group for the yearended 31 December 2013.

Principal ActivitiesT A Holdings Limited is an investment holding companywhose principal investments are in insurance, hotelsand agro-chemicals.

Directors Responsibility Relating To AnnualFinancial StatementsThe directors are responsible for the preparation andfair presentation of the nancial statements of theCompany and Group in accordance with InternationalFinancial Reporting Standards and in the mannerrequired by the Zimbabwe Companies Act (Chapter24:03) and the relevant Statutory Instruments (SI)

SI 33/99 and SI 62/96 and for such internal control asmanagement determines is necessary to enable thepreparation of nancial statements that are free frommaterial misstatement, whether due to fraud or error.These nancial statements which have been preparedunder the historical cost convention, (except forinvestment properties, land and buildings and nancialinstruments that have been measured at fair value) arein agreement with the underlying books and recordsand have been properly prepared in accordance withthe Groups Accounting Policies and comply with therequirements of the Companies Act (Chapter 24:03)and the relevant Statutory Instruments (SI) SI 33/99and SI 62/96.

Share CapitalAuthorised:The authorised share capital of the Company during theyear ended 31 December 2013 remained unchanged,and stood as follows:

223 071 861 ordinary shares of US$0.01 each; 27 005 771 non-redeemable, non-cumulative,

participating, convertible preference shares ofUS$0.01 each; and

194 716 convertible redeemable preferenceshares of US$0.01 each.

Issued:The issued ordinary share capital remained the sameat 164 845 910 ordinary shares of US$0.01 each. Thepreference share capital also remained unchangedat 27 005 771 non redeemable, non-cumulative,participating, convertible preference shares ofUS$0.01 each.

ResultsThe results for the year are set out in the nancialstatements on Pages 20 to 90.

Dividends

No dividend was declared in the year ended 31December 2013.

Corporate GovernanceThe Groups code on corporate practices and conductis set out in the Statement on Corporate Governance

and the directors have complied with it.

Directors and their interests in securitiesThere were no changes in directors during the year.Names of the current directors of the Company appearon Page 2. Messrs Francis Daniels and Julian Vezeyretire from the Board, by rotation, in terms of theArticles, and have offered themselves for re-election.At 31 December 2013 the directors held the followingdirect and indirect benecial interests in the shares ofthe Company:

2013 2013 2012 2012Direct Indirect Direct Indirect

SS Mutasa Nil 69,632,935 Nil 59,000,876F Daniels 46,800 2,029,391 46,800 3,105,309RN Gordon Nil Nil Nil Nil

BP Nyajeka 31,046 Nil 31,046 5,005Z Randeree Nil Nil Nil NilG Sainsbury Nil Nil Nil NilJ Vezey Nil Nil Nil Nil

The indirect benecial interests of Messrs SS Mutasaand F Daniels are held through Masawara Plc and itssubsidiaries.TA Holdings Limited 1979 Share Purchase Trust

Number of ordinary shares held by the

Trust on 1 January 2013 349 826Number of ordinary shares transferredinto the Trust during the year NilNumber of ordinary shares held by theTrust at 31 December 2013 349 826

LitigationThe Directors are not aware of any pending litigationwhich might have a material impact on the Companysnancial position.

AuditorsAt the forthcoming Annual General Meeting,

shareholders will be asked to approve the remunerationof the auditors and to appoint auditors for the ensuingyear.

By Order of the BoardT A Management ServicesHarare22 April 2014


18/100


CORPORATE GOVERNANCE

Good corporate governance is at the heart of the wayin which the Directors of the Company discharge theirduties. The Board subscribes to, and observes thehighest norms of corporate governance as dictatedby internationally recognised codes such as theKing Reports. These standards are expressed in thevalues that the Directors subscribe to, the governancestructures that they have put in place and thegovernance processes that they observe in conductingthe affairs of the Company and Group.

ValuesThe Board is always guided by the following corevalues: integrity; transparency; promoting the best interests of the shareholders,

employees and other stakeholders of the Company

and Group; and compliance with the requirements of the legaland regulatory environment in which the Companyand Group operate.

Governance Structures

Board of DirectorsThe Board is the primary governance organ. One ofits key functions is to develop, review and monitorthe overall strategy and policies of the Company andGroup. It, therefore, considers and approves, amongother things, all major investment decisions, the keyrisks to which the business is exposed, and measures

to eliminate or minimize the impact of such risks,capital expenditure and the appointment of certain keyexecutives.

The Board currently comprises seven (7) Directors -two (2) executives and ve (5) non-executives. Thenon-executive Directors are drawn from differentspheres of economic life, bringing to the Boardextensive and diverse expertise and experience whichenrich the quality of the deliberations of the Board. Allnon-executive directors are subject to retirement byrotation and re-election by shareholders at least onceevery three (3) years in terms of the Companys Articles

of Association. The appointment of new directors inbetween Annual General Meetings is initially approvedby the Board, and subsequently conrmed byshareholders at the next Annual General Meeting. Inorder to more fully discharge its duties, the Board hasconstituted standing committees to deal with specicareas.

Audit and Risk CommitteeThe Audit & Risk Committee is made up of threenon-executive Directors, namely Messrs F Daniels(Chairman), RN Gordon and J Vezey, with the GroupChief Executive Ofcer and the Group Chief FinanceOfcer attending ex-ofcio. The Committee essentially

oversees integrity of the Companys and Groupsnancial reporting and the internal controls and riskmanagement systems and processes. It reviews andapproves all interim reports and the annual nancialstatements of the Company and Group. It monitors andapproves internal control policies and procedures. It

also deliberates on the reports and ndings of internaland external auditors. The external auditors haveunfettered access to the Committee, as well as to theentire Board.

Investment CommitteeThe Committee consists of three (3) non-executivedirectors, namely Messrs RN Gordon (Chairman),F Daniels, J Vezey with the Group Chief ExecutiveOfcer and the Group Chief Finance Ofcer attendingex-ofcio.

The Investment Committees primary functions are to: consider, review, and where necessary, approve

strategic investments or recommend them forapproval to the Board; and

review and recommend strategies in respect of theCompanys portfolio investments.

Remuneration CommitteeThe Committee is made up of two (2) non-executivedirectors, Messrs SS Mutasa and RN Gordon. TheGroup Chief Executive Ofcer attends ex ofcio.The Committee determines the remuneration policyfor executive directors and senior executives. TheCommittee seeks to ensure that the Company andGroup are competitive at the highest levels by attractingthe best skills available to undertake particular rolesin the management of the Company and Group. Theremuneration packages of senior executives includeshare-based schemes, to ensure that the interests ofmanagement are aligned with those of the Company

and Group, and to guarantee long term commitmentand performance.Governance ProcessesThe Board of Directors meets at least once everyquarter or as often as the circumstances may determine.The Committees also meet at the same intervals (ormore frequently, if necessary) with meetings of allthe three committees usually preceding each regularboard meeting. The Companys shareholders meet atleast once every year, at the Annual General Meeting.The external auditors of the Company have unlimitedaccess to the Audit & Risk Committee and the Board,

and deliver their report at each Annual GeneralMeeting. In appropriate circumstances, the Directorsseek advice from relevant professionals on particularmatters.

TA Management ServicesHarare22 April 2014


19/100

18

REPORT OF THE ACTUARIES

22 APRIL 2014


20/100

19

INDEPENDENT AUDITORS REPORT

PricewaterhouseCoopers, Building No. 4, Arundel Oce Park, Norfolk Road, Mount PleasantP O Box 453, Harare, Zimbabwe

T: +263 (4) 338362-8, F: +263 (4) 338395, www.pwc.com

T I Rwodzi Senior PartnerThe Partnerships principal place of business is at Arundel Ofce Park, Norfolk Road, Mount Pleasant, Harare, Zimbabwe where a list of the Partners names is available for inspection.

Independent auditors report

to the shareholders of

TA Holdings Limited

We have audited the consolidated nancial statements of TA Holdings Limited and its subsidiaries (the Group), and thestatement of nancial position of TA Holdings Limited (the Company) standing alone, together the nancial statements,which comprise the consolidated and separate statements of nancial position as at 31 December 2013, and theconsolidated statements of income, comprehensive income, changes in equity and cash ows for the year then ended,and notes, comprising a summary of signicant accounting policies and other explanatory information, set out on pages20 to 90.

Directors responsibility for the nancial statementsThe directors are responsible for the preparation and fair presentation of these nancial statements in accordance withInternational Financial Reporting Standards and the requirements of the Zimbabwe Companies Act (Chapter 24:03) andthe relevant Statutory Instruments (SI) SI 33/99 and SI 62/96, and for such internal control as the directors determineis necessary to enable the preparation of nancial statements that are free from material misstatement, whether due tofraud or error.

Auditors responsibilityOur responsibility is to express an opinion on these nancial statements based on our audit. We conducted our audit inaccordance with International Standards on Auditing. Those standards require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether the nancial statements are free from

material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the nancialstatements. The procedures selected depend on the auditors judgment, including the assessment of the risks of materialmisstatement of the nancial statements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entitys preparation and fair presentation of the nancial statements in orderto design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinionon the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by management, as well as evaluating the overallpresentation of the nancial statements.

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

OpinionIn our opinion, the nancial statements present fairly, in all material respects, the nancial position of the Group and theCompany as at 31 December 2013, and the Groups consolidated nancial performance and its consolidated cash owsfor the year then ended, in accordance with International Financial Reporting Standards and the requirements of theZimbabwe Companies Act (Chapter 24:03) and the relevant Statutory Instruments SI 33/99 and SI 62/96.

PricewaterhouseCoopersChartered Accountants (Zimbabwe)

Harare 9 June 2014


21/100


CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2013

2013 2012Note US$ 000 US$ 000

INCOMEGross insurance premium revenue 3.1 71,340 75,931Insurance premiums ceded to reinsurers on insurance contracts 3.2 (27,885) (30,863)Net insurance premium revenue 43,455 45,068

Fees and commission income 4 8,230 8,262Realised investment income 5 3,500 2,676Net realised gains/ (losses) on disposal of investments 6 590 (766)Net fair value gains 7 4,456 1,732Hotel revenue 8 15,304 14,785Other operating income 9 1,294 747

Total income 76,829 72,504

EXPENSES

Insurance claims and loss adjustment expenses 10 (31,149) (28,590)Insurance claims and loss adjustment expenses recoveredfrom reinsurers 10 7,095 6,104

Net insurance claims (24,054) (22,486)Expenses for the acquisition of insurance contracts 11 (9,647) (10,476)Finance costs 12 (797) (641)Hotel cost of sales 15 (4,443) (4,554)

Operating and administrative expenses 13 (28,166) (27,262)Total expenses (67,107) (65,419)Prot before share of prot of associates 9,722 7,085Share of prots/ (losses) of associates 23.1 1,086 (1,520)Impairment of investment in associate 23.1 (13,709) -

(Loss)/prot before income tax (2,901) 5,565Income tax expense 16.1 (2,786) (2,287)(Loss)/prot for the year (5,687) 3,278

(Loss)/prot attributable to:Owners of the parent (7,762) 1,320Non-controlling interests 2,075 1,958

(5,687) 3,278

(Loss)/earnings per share for prots attributable toowners of the CompanyBasic (cents) 17 (4.71) 0.80Diluted (cents) 17 (4.05) 0.69

Note:Included in the Groups gross insurance premium revenue for the year ended 31 December 2013 is gross insur-

ance premium revenue attributable to policyholders of US$6.522 million (2012: US$6.198 million). Refer to note 42for detail on the nancial performance of the Group attributable to shareholder business and policyholder business.


22/100


23/100


CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 December 2013

2013 2012

ASSETS Note US$ 000 US$ 000Property, plant and equipment 19 28,543 26,279Intangible assets 20 1,750 1,917Investment properties 21 16,218 14,302Investment in associates 23 13,490 27,581Financial assets 25 36,375 30,612Deferred tax asset 33 - 3Inventory 27 186 264Reinsurance assets 34.2 19,320 18,012Deferred acquisition costs 28 2,376 3,262Insurance receivables 29 10,658 11,263Trade and other receivables 30 10,461 6,256Taxation receivable 39 36 618Cash and cash equivalents 41 16,800 13,528Total assets 156,213 153,897

EQUITY AND LIABILITIES

EquityIssued share capital 31 1,919 1,919Non distributable reserves 22,122 22,861Available for-sale nancial assets reserve - 17Foreign currency translation reserve (5,989) (3,469)Revaluation reserve 33,613 30,737Treasury shares (18) (18)Retained earnings (3,879) 4,959Equity attributable to equity holders of the parent 47,768 57,006Non-controlling interests 13,134 12,298

Total equity 60,902 69,304

LiabilitiesBorrowings 32 8,031 6,380Deferred tax liabilities 33 4,282 4,008Deferred income 35 1,233 1,603Investment contracts with Discretionary Participation Features 34.4 16,850 13,550Investment contracts without Discretionary Participation Features 34.5 10,651 7,750Insurance contract liabilities 34.1 41,832 41,879Insurance payables 36 3,959 1,575Provisions 37 1,303 1,293Trade and other payables 38 7,170 6,555Total liabilities 95,311 84,593

Total equity and liabilities 156,213 153,897

Note:Included in the Groups assets and liabilities at 31 December 2013 are policyholder assets with a carrying amountof US$31.325 million (2012: US$24.626 million) and policyholder liabilities with a carrying amount of US$31.325million (2012: US$24.626 million). Refer to note 43 for the split between assets and liabilities attributable to share-holders and assets and liabilities attributable to policyholders.

Shingai Mutasa Gavin SainsburyChairman Chief Executive Ofcer

22 April 2014 22 April 2014


24/100


25/100


CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 December 2013

2013 2012 Note US$ 000 US$ 000

Cash generated from operating activities 40 7,094 7,020

Tax paid 39 (823) (1,230)Net cash generated from operating activities 6,271 5,790

Investing activitiesRental income on investment properties 5 1,048 546Dividends received 5 807 962Interest income from investments 5 1,645 1,168Purchase of property, plant and equipment 19 (3,578) (4,550)Proceeds from sale of property, plant and equipment 191 704Purchase of intangible assets 20 (251) (58)Purchase of nancial instruments 25.4 (28,033) (28,707)Proceeds from the disposal of nancial instruments 26,066 22,216Purchase of investment properties 21 (451) (105)Proceeds from sale of investment properties 295 30Net cash used in investing activities (2,261) (7,794)Financing activitiesRepayment of borrowings 32.2 (1,363) (2,110)Proceeds from borrowings 32.2 3,014 5,591Finance costs paid 12 (797) (641)Dividends paid to non-controlling interests (547) (727)Net cash generated from nancing activities 307 2,113

Net increase in cash and cash equivalents 4,317 109Cash and cash equivalents at 1 January 13,528 14,328Net effect of exchange rate movements on cash and cash equivalents (1,045) (909)

Cash and cash equivalents at 31 December 41 16,800 13,528Note:

Included in the Groups cash and cash equivalents balance at 31 December 2013 is a cash and bank balanceattributable to policyholders of US$0.705 million (2012: US$0.001 million).


26/100


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2013

2.2 Changes in accounting policy and disclosures

a. New standards, amendments and interpretations,

effective on or after 1 January 2013

The following new standards, amendments andinterpretations are effective for accounting periods

beginning on or after 1 January 2013 and are relevant to

the Group.

Standard Content Applicable for

/Interpretation nancial years

beginning on/

after

IAS 1 (amendment) Presentation of 1 July 2012

nancial

statements

IAS 16 (amendment) Property, plant 1 January 2013

and equipmentIAS 19 (amendment) Employee benets 1 January 2013

IAS 27 (revised) Separate nancial 1 January 2013

statements

IAS 28 (revised) Investments in 1 January 2013

associates and

joint ventures

IAS 32 Financial 1 January 2013

(amendment) instruments:

presentation

IFRS 7 Financial 1 January 2013

(amendments) instruments:

disclosuresIFRS 10 (new) Consolidated 1 January 2013

nancial

statements

IFRS 12 (new) Disclosures of 1 January 2013

interests in other

entities

IFRS 13 (new) Fair value 1 January 2013

measurementIAS 1 (amendment) Financial statements presentation

regarding other comprehensive income. The amendment

requires entities to group items presented in other

comprehensive income on the basis of whether those

gains or losses can be reclassied to prot or loss at a

later date.

IAS 16 (amendment) Property, plant and equipment.

The amendment claries that spare parts and servicing

equipment are classied as property, plant and equipment

rather than inventory when they meet the denition of

property, plant and equipment.

IAS 19 (amendments) Employee benets. These

amendments provide additional guidance in order to

distinguish between benets payable in exchangefor termination of employment and those payable in

exchange for service, and make signicant changes to

the disclosures for all employee benets.

1 Corporate information

TA Holdings Limited (the Company) is a limited liability

company incorporated and domiciled in Zimbabwe

whose shares are publicly traded on the Zimbabwe Stock

Exchange (ZSE). TA Holdings Limited (the Company)and its subsidiaries (together the Group) have main

operations in the hospitality and insurance industry

sectors. The Groups insurance subsidiaries underwrite

life and non-life insurance risks, such as those associated

with death, disability, health, property and liability. The

Group does business in Zimbabwe, Uganda, Botswana,

South Africa and Zambia. The address of its registered

ofce and principal place of business is disclosed on page

4 of this Annual Report. The detailed principal activities of

the Company and its investee companies are described

on page 3.

The consolidated nancial statements of the Group forthe year ended 31 December 2013 were approved for

issue by the board of directors on 22 April 2014.

2 Signicant accounting policies

The principal accounting policies applied in the preparation

of these consolidated nancial statements are set out

below. These policies have been consistently applied to

all the years presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated nancial statements of the Group have

been prepared in accordance with International FinancialReporting Standards (IFRS) and the IFRS Interpretations

Committee (IFRS IC) interpretations as issued by the

International Accounting Standards Board (IASB) and

in the manner required by the Zimbabwe Companies Act

(Chapter 24:03) and the relevant Statutory Instruments

(SI) SI 33/99 and SI 62/96.

The consolidated nancial statements have been

prepared on a historical cost basis, as modied by the

revaluation of land and buildings, investment property,

available-for-sale nancial assets, nancial assets at fair

value through prot or loss and long-term policyholder

insurance contract liabilities that are measured based on

actuarial valuations performed at the reporting date.The preparation of nancial statements in conformity

with IFRS requires the use of certain critical accounting

estimates. It also requires management to exercise

its judgement in the process of applying the Groups

accounting policies. The areas involving a higher degree

of judgement or complexity, or areas where assumptions

and estimates are signicant to the consolidated nancial

statements are disclosed in note 2.30.

The consolidated nancial statements are presented inUnited States Dollars (US$), which is the Companys

functional and presentation currency.


27/100


IAS 27 (revised) Separate nancial statements. This

standard includes the provisions on separate nancial

statements that are left after the control provisions of IAS

27 have been included in the new IFRS 10.

IAS 28 (revised) Associates and Joint Ventures. The

revised standard includes the requirements for joint

ventures, as well as associates, to be equity accounted

following the issue of IFRS 11.

IAS 32 (amendment) Financial instruments: presentation.

The amendment claries the tax effect of distributions

to holders of equity by stating that income tax relating

to distributions to holders of an equity instrument and

to transaction costs of an equity transaction should be

accounted for in accordance with IAS 12 Income Taxes.

IFRS 7 (amendment) Financial instruments: disclosures.The amendments enhance current offsetting disclosures.

These new disclosures are intended to facilitate

comparison between those entities that prepare IFRS

nancial statements to those that prepare nancial

statements in accordance with US GAAP.

IFRS 10 (new) Consolidated nancial statements. This

standard builds on existing principles by identifying the

concept of control as the determining factor in whether

an entity should be included within the consolidated

nancial statements. The Standard introduces a single

consolidation model for all entities based on control,irrespective of the nature of the investee (i.e. whether an

entity is controlled through voting rights of investors or

through other contractual arrangements).

IFRS 12 (new) Disclosures of interests in other entities.

IFRS 12 includes the disclosure requirements for all forms

of interest in other entities, including joint arrangements,

associates, special purpose vehicles and other off balance

sheet vehicles.

IFRS 13 (new) Fair value measurement. IFRS 13 aims to

improve consistency and reduce complexity by providing

a precise denition of fair value and a single source of

fair value measurement and disclosure requirements for

use across IFRSs. The requirements do not extend the

use of fair value accounting but provide guidance on how

it should be applied where its use is already required or

permitted by other standards within IFRSs.

b. New standards, amendments and interpretations,

effective for accounting periods beginning after

1 January 2013 and the Group has not early

adopted them

The following new standards, amendments andinterpretations have been issued but are not yet effective

and are relevant to the Groups operations:

Standard Content Applicable for

/Interpretation nancial years

beginning on/

after

IAS 32 Financial 1 January 2014(amendment) instruments:

presentation

IAS 36 Impairment of 1 January 2014

(amendments) assets

IAS 39 Financial 1 January 2014

(amendment) instruments:

recognition and

measurement

IFRS 9 (new) Financial 1 January 2015

instruments

Amendments to Consolidated 1 January 2014

IFRS 10, IFRS 12 nancial

and IAS 27 statements,Disclosure of

interests in

other entities and

Separate

nancial

statements

respectively.

IFRIC 21 (new) Levies 1 January 2014

The Group is considering the implications of these new

standards, amendments and interpretations, and the

impact on the Group and timing of their adoption.

IAS 32 (amendment) Financial instruments: presentation.

This amendment claries some requirements for offsetting

nancial assets and nancial liabilities on the balance

sheet.

IAS 36 (amendments) Impairment of assets. The

amendments reduce the circumstances in which the

recoverable amount of assets or cash-generating units is

required to be disclosed, clarify the disclosures required,

and introduce an explicit requirement to disclose the

discount rate used in determining impairment (or

reversals) where the recoverable amount (based on

fair value less costs of disposal) is determined using a

present value technique.

IAS 39 (amendment) Financial instruments: recognition

and measurement. The amendment makes it clear that

there is no need to discontinue hedge accounting if a

hedging derivative is novated, provided certain criteria

are met.

IFRS 9 (new) Financial instruments. This standard is

the rst step in the process to replace IAS 39, Financial

instruments: recognition and measurement. IFRS 9retains but simplies the mixed measurement model and

establishes two primary measurement categories for

nancial assets: at amortised cost and fair value.



28/100


Any contingent consideration to be transferred by the

Group is recognised at fair value at the acquisition date.

Subsequent changes to the fair value of the contingent

consideration that is deemed to be an asset or liability

is recognised in accordance with IAS 39 either in protor loss or as a change to other comprehensive income.

Contingent consideration that is classied as equity is not

re-measured, and its subsequent settlement is accounted

for within equity.

Goodwill is initially measured as the excess of the

aggregate of the consideration transferred and the

fair value of non-controlling interest over the net

identiable assets acquired and liabilities assumed. If this

consideration is lower than the fair value of the net assets

of the subsidiary acquired, the difference is recognised

in the income statement as a gain on bargain purchase.

Inter-company transactions, balances, income and

expenses on transactions between group companies

are eliminated. Prots and losses resulting from inter-

company transactions that are recognised in assets are

also eliminated. Accounting policies of subsidiaries have

been changed where necessary to ensure consistency

with the policies adopted by the Group.

2.3.2 Changes in ownership interests in subsidiaries

without change of control

Transactions with non-controlling interests that do not

result in loss of control are accounted for as equitytransactions that is, as transactions with the owners in

their capacity as owners. The difference between fair value

of any consideration paid and the relevant share acquired

of the carrying value of net assets of the subsidiary is

recorded in equity. Gains or losses on disposals to non-

controlling interests are also recorded in equity.

2.3.3 Disposal of subsidiaries

When the Group ceases to have control, any retained

interest in the entity is re-measured to its fair value at

the date when control is lost, with the change in carrying

amount recognised in the income statement. The fair

value is the initial carrying amount for the purposes of

subsequently accounting for the retained interest as

an associate, joint arrangement or nancial asset. In

addition, any amounts previously recognised in other

comprehensive income in respect of that entity are

accounted for as if the Group had directly disposed of the

related assets or liabilities. This may mean that amounts

previously recognised in other comprehensive income

are reclassied to the income statement.

2.3.4 Associates

Associates are all entities over which the Group

has signicant inuence but not control, generallyaccompanying a shareholding of between 20% and 50%

of the voting rights and are neither subsidiaries nor joint

arrangements. Investments in associates are accounted

for using the equity method of accounting. Under the

IFRS 10, IFRS 12 and IAS 27 (amendments) regarding

the preparation of consolidated nancial statements.

The amendments provide investment entities (as

dened) an exemption from the consolidation of particular

subsidiaries and instead require that an investment entitymeasure the investment in each eligible subsidiary at fair

value through prot or loss in accordance with IFRS 9

Financial Instruments or IAS 39 Financial Instruments:

Recognition and Measurement. Changes have also

been made in IFRS 12 to introduce disclosures that an

investment entity needs to make.

IFRIC 21 (new) Levies. This interpretation provides

guidance on when to recognise a liability for a levy imposed

by a government, both for levies that are accounted for in

accordance with IAS 37 Provisions, contingent liabilities

and contingent assets and those where the timing and

amount of the levy is certain.

2.3 Basis of consolidation

The Group nancial statements include those of the

Company, its subsidiaries, discretionary trust investments

and the Groups interest in associates (together referred

to as the Group).

2.3.1 Subsidiaries

Subsidiaries are all entities over which the Group has

control. The Group controls an entity when it is exposed

to, or has rights to, variable returns from its involvement

with the entity and has the ability to affect those returnsthrough its power over the entity. Subsidiaries are fully

consolidated from the date on which control is transferred

to the group. They are deconsolidated from the date that

control ceases.

The Group applies the acquisition method to account for

business combinations. The consideration transferred

for the acquisition of a subsidiary is the fair values of the

assets transferred, the liabilities incurred to the former

owners of the acquiree and the equity interests issued by

the Group. The consideration transferred includes the fair

value of any asset or liability resulting from a contingent

consideration arrangement. Identiable assets acquired

and liabilities and contingent liabilities assumed in a

business combination are measured initially at their fair

values at the acquisition date.

The Group recognises any non-controlling interest in the

acquiree on an acquisition-by-acquisition basis, either at

fair value or at the non-controlling interests proportionate

share of the recognised amounts of acquirees identiable

net assets. Acquisition-related costs are expensed as

incurred.

If the business combination is achieved in stages, theacquisition date fair value of the acquirers previously held

equity interest in the acquiree is re-measured to fair value

at the acquisition date. Any gains or losses arising from

such re-measurement are recognised in prot or loss.



29/100


30/100



amount of the asset and the net amount is restated to

the revalued amount of the asset. Upon disposal, any

revaluation reserve relating to the particular asset being

sold is transferred to retained earnings.

Land is not depreciated. Depreciation is provided for on

a straight line basis over the useful lives of the following

classes of assets:

Buildings: over 40 - 50 years

Machinery and vehicles: 3 - 10 years

Furniture, ttings and other: 3 - 10 years

The assets residual values, and useful lives and method

of depreciation are reviewed and adjusted if appropriate

at each nancial year end and adjusted prospectively, if

appropriate.

Impairment reviews are performed when there areindicators that the carrying value may not be recoverable.

Impairment losses are recognised in the income statement

as an expense.

An item of property and equipment is derecognised upon

disposal or when no further future economic benets are

expected from its use or disposal. Any gain or loss arising

on derecognition of the asset (calculated as the difference

between the net disposal proceeds and the carrying

amount of the asset) is included in the income statement

in the year the asset is derecognised.

2.6 Investment properties

Property held for long-term rental yields that is not

occupied by the companies in the Group is classied as

investment property.

Investment properties are measured initially at cost,

including transaction costs. Subsequent to initial

recognition, investment properties are stated at fair value,

which reects market conditions at the reporting date.

Gains or losses arising from changes in the fair values

of investment properties are included in the income

statement in the year in which they arise.

Fair values are evaluated annually by an accredited

external, independent valuer, applying a valuation model

recommended by the International Valuation Standards

Committee.

Investment properties are derecognised either when

they have been disposed of, or when the investment

property is permanently withdrawn from use and no future

economic benet is expected from its disposal. Any gains

or losses on the retirement or disposal of an investment

property is recognised in the income statement in the year

of retirement or disposal.

Transfers are made to or from investment property only

when there is a change in use evidenced by the end of

owner-occupation or commencement of an operating

On the partial disposal that does not result in the Group

losing control over a subsidiary that includes a foreign

operation, the proportionate share of cumulative amount of

exchange differences are re-attributed to non-controlling

interests in that foreign operation and are not recognisedin the income statement. In any other partial disposals,

the proportionate share of the cumulative amount of the

exchange differences is reclassied to the consolidated

income statement.

Goodwill and fair value adjustments arising on the

acquisition of a foreign entity are treated as the foreign

entitys assets and liabilities and are translated at the

closing rate

2.5 Property, plant and equipment

Property, plant and equipment, including owner-occupied

property, is initially stated at cost. Costs include allexpenditure that is directly attributable to the acquisition

of an asset and bringing it to a working condition for its

intended use, including import duties and non-refundable

purchases taxes, but excluding trade discounts and

rebates. Maintenance and repairs expenditure, which

neither adds to the value of property and equipment nor

signicantly prolongs its expected useful life, is recognised

directly in the income statement.

Subsequent costs are included in the assets carrying

amount or recognised as a separate asset, as appropriate,

only when it is probable that future economic benetsassociated with the item will ow to the Group and the

cost of the item can be measured reliably. All other repairs

and maintenance are charged to the income statement

during the nancial.

For subsequent measurement the Group uses

the revaluation model i.e. fair value at the date of

revaluation less subsequent accumulated depreciation

and subsequent accumulated impairment losses in the

valuation of freehold land and buildings. All other classes

of property, plant and equipment are measured using the

cost model.

Valuations of freehold land and buildings are performed

annually by external independent appraisers to ensure

that the fair value of a revalued asset does not differ

materially from its carrying amount.

Any revaluation surplus is recognised in other

comprehensive income and accumulated in the asset

revaluation reserve in equity, except to the extent that

it reverses a revaluation decrease on the same asset

previously recognised in the income statement, in which

case the increase is recognised in the income statement. A

revaluation decit is recognised in the income statement,except to the extent that it offsets an existing surplus on

the same asset recognised in the revaluation reserve.

Additionally, accumulated depreciation as at the

revaluation date is eliminated against the gross carrying


31/100


lease to another party or completion. For a transfer from

investment property to owner-occupied property, the

deemed cost for subsequent accounting is the fair value

at the date of change in use.

Properties that are being constructed or developed for

future use as investment property shall be classied as

such when construction commences.

If owner-occupied property becomes an investment

property, the Group accounts for such property in

accordance with the policy stated under property, plant

and equipment up to the date of the change in use.

2.7 Revaluation of property, plant and equipment

and fair value of investment property

In assessing the carrying amounts of property, plant

and equipment and investment property managementconsiders the condition of the assets and their life span

on an item by item basis and by placing fair market values

that are obtainable from the sale of assets in a similar

condition.

Valuations are performed with sufcient regularity to

ensure that the fair value of a revalued asset does not

differ materially from its carrying amount.

Increases in the carrying amount arising on revaluation of

land and buildings are credited to other comprehensive

income and shown as other reserves in shareholdersequity. Decreases that offset previous increases of the

same asset are charged in other comprehensive income

and debited against revaluation surplus directly in equity;

all other decreases are charged to the income statement.

When revalued assets are sold, the amounts included in

revaluation surplus are transferred to retained earnings.

Gains or losses arising from changes in the fair values

of investment properties are included in the income

statement in the year in which they arise.

The fair value of property, plant and equipment and

investment property as at 31 December 2013 was

determined by professional valuers. The following

methods and assumptions were adopted in the valuation

process:

2.7.1 Land

Active market by reference to recent property transactions

of similar properties, complemented by periodic property

valuations done by Local Authorities for rating purposes.

2.7.2 Residential property

Active market by reference to recent property transactions

of similar properties.

2.7.3 Commercial, ofce space and industrial property

By reference to observable prices in active markets or

recent market transactions on arms length terms. In the

absence of market-based evidence of fair value because

of the specialised nature of an item, lack of recenttransactions, items rarely sold, or an inactive market, fair

value was estimated using the depreciated replacement

cost approach.

2.8 Intangible assets

Intangible assets acquired separately are measured on

initial recognition at cost. The cost of intangible assets

acquired in a business combination is their fair value as

at the date of acquisition. Following initial recognition,

intangible assets are carried at cost less any accumulated

amortisation and any accumulated impairment losses.

Internally generated intangible assets, excluding

capitalised development costs, are not capitalised andexpenditure is reected in the income statement in the

year in which the expenditure is incurred.

The useful lives of intangible assets are assessed to be

either nite or indenite.

Intangible assets with nite lives are amortised over

the useful economic life and assessed for impairment

whenever there is an indication that the intangible asset

may be impaired. The amortisation period and the

amortisation method for an intangible asset with a nite

useful life are reviewed at least at each nancial yearend. Changes in the expected useful life or the expected

pattern of consumption of future economic benets

embodied in the asset are accounted for by changing

the amortisation period or method, as appropriate, and

are treated as changes in accounting estimates. The

amortisation expense on intangible assets with nite

lives is recognised in the income statement in operating

expenses.

Intangible assets with indenite useful lives are tested

for impairment annually either individually or at the cash

generating unit level. Such intangibles are not amortised.

The useful life of an intangible asset with an indenite

life is reviewed annually to determine whether indenite

life assessment continues to be supportable. If not, the

change in the useful life assessment from indenite to

nite is made on a prospective basis.Gains or losses arising from derecognition of an intangible

asset are measured as the difference between the net

disposal proceeds and the carrying amount of the asset

and are recognised in the income statement when the

asset is derecognised.

Subsequent to initial recognition, the intangible assetis carried at cost less accumulated amortisation and

accumulated impairment losses.

Changes in the expected useful life or the expected pattern



32/100


2.8.2 Computer software

Costs associated with maintaining computer software

programmes are recognised as an expense as incurred.

Development costs that are directly attributable to the

design and testing of identiable and unique softwareproducts controlled by the Group are recognised as

intangible assets when the following criteria are met:

It is technically feasible to complete the software

product so that it will be available for use;

Management intends to complete the software product

and use or sell it;

There is an ability to use or sell the software product;

It can be demonstrated how the software product will

generate probable future economic benets;

Adequate technical, nancial and other resources

to complete the development and to use or sell the

software product are available; and

The expenditure attributable to the software productduring its development can be reliably measured.

Directly attributable costs that are capitalised as part of

the software product include the software development

employee costs and an appropriate portion of directly

attributable overheads.

Computer software costs recognised as assets are

amortised over their useful lives, which do not exceed ve

years.

2.8.3 Deferred acquisition costs (DAC)Those direct and indirect costs incurred during the

nancial period arising from the writing or renewing

of short-term insurance contracts, are deferred to the

extent that these costs are recoverable out of unearned

premiums. All other acquisition costs are recognised as

an expense when incurred.

Subsequent to initial recognition, DAC for short-term

insurance contracts are amortised over the terms of

the insurance policies as premiums are earned. The

reinsurers share of deferred acquisition costs is amortised

in the same manner as the underlying asset amortisation

is recorded in the income statement.

Changes in the expected useful life or the expected

pattern of consumption of future economic benets

embodied in the asset are accounted for by changing the

amortisation period and are treated as a change in an

accounting estimate.

An impairment review is performed at each reporting

date or more frequently when an indication of impairment

arises. When the recoverable amount is less than the

carrying value, an impairment loss is recognised in the

income statement. DAC are also considered in the liabilityadequacy test for each reporting period.

DAC are derecognised when the related contracts are

either settled or disposed of.

of consumption of future economic benets embodied in

the asset are accounted for by changing the amortisation

period and they are treated as a change in an accounting

estimate.

An impairment review is performed whenever there is an

indication of impairment. When the recoverable amount

is less than the carrying value, an impairment loss is

recognised in the income statement.

2.8.1 Goodwill

Goodwill arises on the acquisition of subsidiaries,

associates and joint arrangements; it represents the

excess of the consideration transferred over Groups

interest in the net fair value of the net identiable assets,

liabilities and contingent liabilities of the acquiree and the

fair value of the non-controlling interest in the acquiree.

After initial recognition, goodwill is measured at cost less

any accumulated impairment losses. For the purpose

of impairment testing, goodwill acquired in a business

combination is allocated to each of the CGUs, or groups

of CGUs, that is expected to benet from the synergies

of the combination. Each unit or group of units to which

the goodwill is allocated represents the lowest level within

the entity at which the goodwill is monitored for internal

management purposes. Goodwill is monitored at the

operating segment level.

Goodwill impairment reviews are undertaken annually ormore frequently if events or changes in circumstances

indicate a potential impairment. The carrying value of

goodwill is compared to the recoverable amount, which

is the higher of value in use and the fair value less costs

to sell. Any impairment is recognised immediately as an

expense and is not subsequently reversed.

The recoverable amount of the non-life insurance cash

generating unit and investment management services

cash generating unit have been determined based on

a valuein-use calculation. The calculation requires the

Group to make an estimate of the expected future cash

ows from each of the cash-generating units and discount

these amounts using a suitable rate which reects the risk

of those cash ows in order to calculate the present value

of those cash ows.

When goodwill forms part of a cash-generating unit (or

group of cash generating units) and part of the operations

within that unit are disposed of, the goodwill associated

with the operation disposed of is included in the carrying

amount of the operation to determine the gain or loss on

disposal of the operation. Goodwill disposed of in this

circumstance is measured based on the relative values

of the operations disposed of and the portion of the cash-generating unit retained.



33/100


2.8.4 Reinsurance commissions

Commissions receivable on outwards reinsurance

contracts are deferred and amortised on a straight line

basis over the term of the reinsurance contract.

2.9 Financial assets

The Group classies its nancial assets into the following

categories: at fair value through prot or loss, loans and

receivables, held to maturity and available for sale. The

classication is determined by management at initial

recognition and depends on the purpose for which the

investments were acquired or originated.

2.9.1 Initial recognition

Financial assets are recognised initially at fair value plus,

in the case of investments not at fair value through prot

or loss, directly attributable transaction costs. Financial

assets carried at fair value through prot or loss areinitially recognised at fair value, and transaction costs are

expensed in the income statement.

Purchases or sales of nancial assets that require delivery

of assets within a time frame established by regulation or

convention in the marketplace (regular way trades) are

recognised on the trade date, i.e., the date that the Group

commits to purchase or sell the asset.

2.9.2 Classication and measurement

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

This category has two sub-categories: nancial assetsheld for trading and those designated at fair value through

prot or loss at inception.

A nancial asset is classied into the nancial assets at

fair value through prot or loss category at inception if

acquired principally for the purpose of selling in the short

term, if it forms part of a portfolio of nancial assets in

which there is evidence of short-term prot-taking, or if so

designated by management.

This category includes derivative nancial instruments

entered into by the Group that are not designated as

hedging instruments in hedge relationships as dened

by IAS 39. Derivatives, including separated embedded

derivatives, are also classied as held for trading unless

they are designated as effective hedging instruments. For

investments designated as at fair value through prot or

loss, either of the two following criteria must be met:

The designation eliminates or signicantly reduces the

inconsistent treatment that would otherwise arise from

measuring the assets or liabilities or recognising gains

or losses on a different basis

The assets and liabilities are part of a group of nancial

assets, nancial liabilities, or both, which are managed

and their performance evaluated on a fair value basis,in accordance with a documented risk management or

investment strategy.

These investments are initially recorded at fair value.

Subsequent to initial recognition, they are remeasured at

fair value. Changes in fair value are recorded in net fair

value gains and losses, determined based on the change

in quoted market prices in active markets for identical

nancial assets.

Interest is accrued and presented in Investment income

or Finance cost, respectively, using the effective interest

rate (EIR). Dividend income is recorded in Investment

income when the right to the payment has been

established.

The Group evaluates its nancial assets at fair value

through prot and loss (held for trading) whether the

intent to sell them in the near term is still appropriate.

When the Group is unable to trade these nancial assets

due to inactive markets and managements intent to sell

them in the foreseeable future signicantly changes,

the Group may elect to reclassify these nancial assetsin rare circumstances. The reclassication to loans and

receivables, available-for-sale or held to maturity depends

on the nature of the asset. This evaluation does not affect

any nancial assets designated at fair value through prot

or loss using the fair value option at designation.

(b) Loans and receivables (including insurance

receivables)

Loans and receivables are non-derivative nancial assets

with xed or determinable payments that are not quoted

in an active market other than those that the Group

intends to sell in the short term or that it has designatedas at fair value through prot or loss or available for

sale. Receivables arising from insurance contracts are

classied in this category and are reviewed for impairment

as part of the impairment review of loans and receivables.

After initial measurement, loans and receivables are

measured at amortised cost, using the EIR, less allowance

for impairment. Amortised cost is calculated by taking

into account any discount or premium on acquisition and

fee or costs that are an integral part of the EIR. The EIR

amortisation is included in nance income in the income

statement. Gains and losses are recognised in the income

statement when the investments are derecognised or

impaired, as well as through the amortisation process.

(c) Held-to-maturity nancial assets

Held-to-maturity investments are non-derivative nancial

assets with xed or determinable payments and xed

maturities that the Groups management has the positive

intention and ability to hold to maturity, other than:

those that the Group upon initial recognition designates

as at fair value through prot or loss;

those that the Group designates as available for sale;

and

those that meet the denition of loans and receivables.

After initial measurement, held to maturity nancial

assets are measured at amortised cost, using the EIR,

less impairment. The EIR amortisation is included in



34/100


2.9.3 De-recognition of nancial assets

A nancial asset (or, when applicable, a part of a nancial

asset or part of a group of similar nancial assets) is

derecognised when:

The rights to receive cash ows from the asset haveexpired, or;

The Group retains the right to receive cash ows

from the asset or has assumed an obligation to pay

the received cash ows in full without material delay

to a third party under a pass-through arrangement;

and either:

The Group has transferred substantially all the risks

and rewards of the asset, or;

The Group has neither transferred nor retained

substantially all the risks and rewards of the asset,

but has transferred control of the asset.

When the Group has transferred its right to receive cashows from an asset or has entered into a pass through

arrangement, and has neither transferred nor retained

substantially all the risks and rewards of the asset nor

transferred control of the asset, the asset is recognised

to the extent of the Groups continuing involvement in the

asset.

Continuing involvement that takes the form of a guarantee

over the transferred asset is measured at the lower of the

original carrying amount of the asset and the maximum

amount of consideration that the Group could be required

to repay.

In that case, the Group also recognises an associated

liability. The transferred asset and the associated liability

are measured on a basis that reects the rights and

obligations that the Group has retained.

2.9.4 Impairment of nancial assets

The Group assesses at each reporting date whether there

is any objective evidence that a nancial asset or group

of nancial assets is impaired. A nancial asset or a group

of nancial assets is deemed to be impaired if, and only

if, there is objective evidence of impairment as a result

of one or more events that has occurred after the initial

recognition of the asset (an incurred loss event) and that

loss event has an impact on the estimated future cash

ows of the nancial asset or the group of nancial assets

that can be reliably estimated.

Objective evidence of impairment may include indications

that the debtors or a group of debtors is experiencing

signicant nancial difculty, default or delinquency in

interest or principal payments, the probability that they

will enter bankruptcy or other nancial reorganisation and

where observable data indicate that there is a measurable

decrease in the estimated future cash ows, such aschanges in arrears or economic conditions that correlate

with defaults.

investment income in the consolidated income statement.

Gains and losses are recognised in the income statement

when the investments are derecognised or impaired, as

well as through the amortisation process.

(d) Available-for-sale nancial assets

Available-for-sale nancial assets are nancial assets

that are either designated in this category because they

are intended to be held for an indenite period of time,

which may be sold in response to needs for liquidity or

changes in interest rates, exchange rates or equity prices;

or that are not classied as loans and receivables, held

to maturity investments or nancial assets at fair value

through prot or loss.

After initial measurement, avail

ta holdings annual report 2013

Documents