RITES (AFRIKA) (PROPRIETARY) LIMITED DIRECTORS' REPORT ST

Transcription

1 RITES (AFRIKA) (PROPRIETARY) LIMITED DIRECTORS' REPORT ST FOR THE YEAR ENDED 31 MARCH, 2009 GENTLEMEN, Your Directors have immense pleasure to present to you the annual report of your company together with the auditedatementofaccountsandthereportoftheatutoryauditorhereonfortheyearended31 March2009. During the year under review your company had achieved income of Pula 6,263,224 as compared to income of Pula 3,155,458 achieved during the la financial year. Your company had made a net profit before tax of Pula 341,843 as compared to net profit of Pula 84,543 made during the la financial year. FINANCIAL RESULTS The financial results of the company are summarized below: Particulars Income Expenditure Net profit/(loss) before Tax Income Tax Expenses Net profit/(loss) after Tax 6,263,224 5,921, ,843 87, ,735 3,155,458 3,070,915 84,543 40,047 44, 496 Income From: Consultancy fee 6,127,070 3, 006, 627 Other incomes 136, , 831 Accumulated Profit/(Loss) at the end of the year 733, , 279 DIVIDEND The Board of Directors is pleased to announce a dividend of 220 % for the year PROJECTS SECURED & EXECUTED FUTURE PROJECTS PROPOSALS SUBMITTED BOTSWANA SCENARIO RITES LTD. AUDITOR ACKNOWLEDGEMENTS (Figures in Pula) Again the backdrop of global recession and resource crunch, further business could not be secured in the fiscal year However this is not a conraint considering that the company has enough business at hand for the next two years to suain at the current operating levels with growth. Your company enjoys good reputation with the clients with additional works flowing in under exiing contracts. In this scenario, as soon as the effect of recession has abated, it will not be difficult to secure new projects. The work on design phase consultancy services for the Upgradation of Tshesebe Masunga road project was completed. Design age for Improvement of Franciown Airport project has been completed. Franciown Airport project has in fact gone into conruction with Runway and building packages awarded. Design activities for the Hukuntsi and Tsabong airports is in full swing and all inveigation works will be completed by April Final Design Report is expected to be submitted by Augu With setting up of 'Civil Aviation Authority of Botswana' by the Government of Botswana, upgrading of various airports in Botswana has become imminent in NDP 10 of the Government. Civil Aviation Authority of Botswana has asked your company to prepare revised routing in view of Improvements of Franciown Airport. However this has been deferred as they are now contemplating to give your company the work of routing of entire Botswana airspace. Your company had submitted offer for Reconruction of NataGweta Road which is pending with Road Department. Botswana is economically and politically able country and has good potential especially in infraructure development, civil conruction and information technology areas. Recession has slightly hit the economy, which has slowed the implementation of projects. We are thankful to the Management of Rites Ltd., officers and aff for their continuous support, cooperation and valuable services for the company. We anticipate continued support from RITES Ltd., for successful completion of the projects in hand and for bidding forthcoming assignments. M/s J.V.Ramani and Associates were the auditors of the Company for the year Board of Directors would like to place on record their sincere thanks for the valuable services rendered by them. Wetakethisopportunity toacknowledgewith thankhevaluablecooperationreceivedfromthedepartment of Civil Aviation, Department of Roads, Miniry of Works & Transport, Miniry of Finance, Department of Town and Regional Planning, Department of Mines, Department of Crop Production and Forery, Department of Sanitation and Wae Management and other departments of Government of Botswana. We are also thankful to the officers and the aff of Bank of Baroda (Botswana) Ltd, for their valuable support and timely help. We are also thankful to His Excellency, the Indian High Commissioner, the Secretary and other officers and aff members of the Indian High Commission in Botswana for their valuable support. For and on behalf of the Board of Directors Gaborone, Botswana Sanjiv Bhushan th 19 June 2009 Director ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH, 2009 Directors' responsibilities and approval The directors are required by the Companies Act of Botswana (Companies Act, 2003), to maintain adequate accounting records and is responsible for the content and integrity of the annual financial atements and related financial information included in this report. It is their responsibility to ensure that the annual financial atements fairly present the ate of affairs of the company as at the end of the Financial year and the results of its operations and cash flows for the period then ended, in confornity with International Financial Reporting Standards. The annual financial atements are prepared in accordance with International Financial Reporting Standards and are based upon appropriate accounting policies consiently applied and supported by reasonable and prudent judgments and eimates. The directors acknowledge that they are ultimately responsible for the syem of internal financial control eablished by the company and places considerable importance on maintaining a rong control environment. To enable the directors to meet these responsibilities, the sets andards for internal control aimed at reducing the risk of error or loss in a co effective manner. The andards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the company and all employees are required to maintain the highe ethical andards in ensuring the company's business is conducted in a manner that in all reasonable circumances is above reproach. The focus of risk management in the company is on identifying, assessing, managing and monitoring all known forms of risk across the company. While operating risk cannot be fully eliminated the company endeavors to minimise it by ensuring that appropriate infraructure, controls, syems and ethical behaviour are applied and managed within predetermined procedures and conraints. The directors are of the opinion, based on the information and explanations given by management that the syem of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial atements. However, any syem of internal Financial control can provide only reasonable, and not absolute, assurance again material misatement or loss. The director has reviewed the company's cash flow foreca for the year to March 31, 2010 and, in the light of this review and the current financial position, he is satisfied that the company has or has access to adequate resources to continue in operational exience for the foreseeable future. The board of directors are primarily responsible for the financial affairs of the company. The external auditors are responsible for independently reviewing and reporting on the company's annual financial atements. The annual financial atements have been examined by the company's external auditors and theirreport ispresentedonpage6667. The annual financial atements set out on page 67 to 70, which have been prepared on the going concern basis, wereapprovedbythedirectorson andweresignedonitsbehalfby: Director Director Gaborone Gaborone INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF RITESAFRIKA (PTY) LTD. Report on the Financial Statements We have audited the accompanying financial atements of Rites Afrika (Pty) Ltd., set out on pages 67 to 70, which comprise the balance sheet as at March 31, 2009, and the income atement, atement of changes in equity and cash flow atement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Directors' Responsibility for the Financial Statements The directors are responsible for the preparation and fair presentation of these financial atements in accordance with International Financial Reporting Standards and in compliance with the Companies Act in Botswana. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial atements that are free from material misatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting eimates that are reasonable in the circumances. Auditor's Responsibility Our responsibility is to express an opinion on these financial atements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those andards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial atements are free from material misatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial atements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misatement of the financial atements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial atements in order to design audit procedures that are appropriate in the circumances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting eimates made by management, as well as evaluating the overall presentation of the annual financial atements. 66

2 RITES (AFRIKA) (PROPRIETARY) LIMITED We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial atements present fairly, in all material respects the financial position of Rites Afrika (Pty) Ltd. as of March 31, 2009, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. ReportonOtherLegalandRegulatory Requirements We confirm that: in our opinion, the company has kept proper books of account with which the financial atements are in agreement. Ramani & Associates Date : BALANCE SHEET AT MARCH 31, 2009 Note(s) 2009 Pula 2008 Pula ASSETS NonCurrent Assets Property, Plant and Equipment 4 11,538 4,454 Deferred Tax 5 23,136 34,675 15,567 20,021 Current Assets Contract work in progress 6 490, ,522 Current tax receivable 6,335 7,836 Trade and other receivables 8 737,174 92,435 Cash and cash equivalents Total Assets 9 2,409,767 3,643,867 3,678,541 1,592,128 2,472,921 2,492,942 EQUITY AND LIABILITIES Equity Stated Capital 10 10,000 10,000 Retained Income 733, , , ,279 Liabilities Current Liabilities Current tax payable 94,677 29,528 Trade and other payables 11 2,840,850 1,940,135 2,935,527 Total Liabilities 2,935,527 Total Equity and Liabilities 3,678,541 INCOME STATEMENT FOR THE YEAR ENDED MARCH 31, ,969,663 1,969,663 2,492,942 Revenue 12 6,127,070 3,006,627 Contract Cos Gross profit Other income 13 (4,912,002) 1,215,068 51,708 (2,173,352) 833,275 66,869 Unrealised foreign exchange gain/(loss) Operating expenses (46,722) (962,657) (897,563) Finance Income Profit before taxation 15 84, ,843 81,962 84,543 Taxation Profit for the year 16 (87,108) 254,735 (40,047) 44,496 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED MARCH 31, 2009 Stated Retained Total Capital Income Equity Pula Pula Pula Balance at March 31, , , ,783 Changes in equity Profit /(Loss) for the year 44,496 44,496 Dividends Total Changes 44,496 44,496 Balance at March 31, , , ,279 Changes in Equity Profit /(Loss) for the year 254, ,735 Dividends (35,000) (35,000) Total Changes 219, ,735 Balance at March 31, , , ,014 Note( s) 10 Note(s) 2009 Pula 2008 Pula CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2009 CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations Finance Income Tax(Paid) /received Net Cash from operating activities ,599 84,446 (28,027) 848,018 19,439 81,962 (37,529 63,872 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant & equipment 4 (15,379) (4,545) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid Total Cash movement for the year (15,000) 817,639 59,327 Cash at the beginning of the year 1,592,128 1,532,801 Total Cash at end of the year 9 2,409,767 1,592,128 NOTES TO THE ANNUAL FINANCIAL STATEMENTS Accounting Policies 1. Presentation of Annual Financial Statements The annual financial atements have been prepared in accordance with International Financial Reporting Standards, and the Companies Act of Botswana (Companies Act, 2003). The annual financial atements have been prepared on the hiorical co basis, and incorporate the principal accounting policies set out below. These accounting policies are consient with the previous period, except for the changes set out in note 2 Changes in accounting policy. 1.1 Significantjudgements In preparing the annual financial atements, management is required to make eimates and assumptions that affect the amounts represented in the annual financial atements and related disclosures. Use of available information and the application of judgement is inherent in the formation of eimates. Actual results in the future could differ from these eimates which may be material to the annual financial atements. Significant judgements include: Trade Receivables The company assesses its trade receivables for impairment at each balance sheet date. In determining whether an impairment loss should be recorded in the income atement, the company makes judgements as to whether there is observable data indicating a measurable decrease in the eimated future cash flows from a financial assets. The impairment for trade receivables is calculated on a portfolio basis, based on hiorical loss ratios, adjued for national and indury and induryspecific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These annual loss ratios are applied to the balances in the portfolio and scaled to the eimated loss emergence period. Impairment teing The recoverable amounts of cashgenerating units and individual assets have been determined based on the higher of valueinuse calculations and fair values. These calculations require the use of eimates and assumptions. It is reasonably possible that the residual value assumption may change which may then impact our eimations and may then require a material adjument to the carrying value of assets. The company reviews and tes the carrying value of assets when events or changes in circumances sugge that the carrying amount may not be recoverable. Assets are grouped at the lowe level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occured, eimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to determine the value in use of assets are inherently uncertain and could materially change over time. Provisions Provisions were raised and management determined an eimate based on the information available. Taxation Annual Report Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The company recognises liabilities for anticipated tax audit issues based on eimates of whether additional taxes will be due. Where the final tax outcome of these matters is difference from the amounts that were initially recorded, such differences will impactthe incometaxanddifferedtaxprovisionsintheperiodinwhichsuchdeterminationismade. The company recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the company to make significant eimates related to expectations of future taxable income. Eimates of future taxable income are 67

3 based on foreca cash flows from operations and the application of exiing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from eimates, the ability of the company to realise the net differed tax assets recorded at the balance sheet date could be impacted. 1.2 Property, plant and equipment The co of an item of property, plant and equipment is recognised as an asset when: it is probable that future economic benefits associated with the item will flow to the company; and the co of the item can be measured reliably. Cos include cos incurred initially to acquire or conruct an item of property, plant and equipment and cos incurred subsequently to add to, replace part of, or service it. If a replacement co is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised. The initial eimate of the cos of dismantling and removing the item and reoring the site on which it is located is also included in the co of property, plant and equipment. Property, plant and equipment is carried at co less accumulated depreciation and any impairment losses. Depreciation is calculated on a raight line basis so as to write off the depreciable amount over its expected useful life to its residual value. Item Average useful life Furniture and fixtures 4 years Motor vehicles 4 years Office equipments 4 years IT equipments 4 years The residual value and the useful life of each asset are reviewed at each financial periodend. Each part of an item of property, plant and equipment with a co that is significant in relation to the total co of the item shall be depreciated separately. The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset. The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. 1.3 FinancialInruments The company classifies financial inruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity inrument in accordance with the subance of the contractual arrangement. Financial assets and financial liabilities are recognised on the company's balance sheet when the company becomes party to the contractual provisions of the inrument. Trade and other Receivables Trade and other recievables are measured at initial recognition at fair value, and are subsequently measured at amortised co using the effective intere rate method. Appropriate allowances for eimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of eimated future cash flows discounted at the effective intere rate computed at initial recognition. Trade and other Payables Trade payables are initially measured at fair value, and are subsequently measured at amortised co, using the effective intere rate method. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, and other shortterm highly liquid invements that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value. 1.4 Tax Current tax assets and liabilities Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset. Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or subantively enacted by the balance sheet date. Deferred tax assets and liabilities A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available again which the deductible temporary difference can be utilised. A deferred tax asset is not recognised when it arises from the initial recognition of an asset or liability in a transaction at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that future taxable profit will be available again which the unused tax losses credits can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or subantively enacted by the balance sheet date. 1.5 Leases A lease is classified as a finance lease if it transfers subantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer subantially all the risks and rewards incidental to ownership. Operating leases lessee Operating lease payments are recognised as an expense on a raightline basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This liability is not discounted. Operating leases lessor Operating lease income is recognized as an income on a rightline basis over the lease term. 1.6 Inventories/WorkinProgress Inventories are measured at the lower of co and net realisable value. Work in progress appearing in the balance sheet represents unbilled work done on the project. The billing on those project will be considered subsequently. 1.7 Impairmentofassets The company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exis, the company eimates the recoverable amount of the asset. If there is any indication that an asset may be impaired, the recoverable amount is eimated for the individual asset. If it is not possible to eimate the recoverable amount of the individual asset, the recoverable amount of the cashgenerating unit to The recoverable amount of an asset or a cashgenerating unit is the higher of its fair value less cos to sell and its value in use. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss of assets carried at co less any accumulated depreciation or amortisation is recognised immediately in profit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease. A reversal of an impairment loss of assets carried at co less accumulated depreciation or amortisation other than goodwill is recognised immediately in profit or loss. 1.8 StatedCapitalandequity An equity inrument is any contract that evidences a residual intere in the assets of an entity after deducting all of its liabilities. 1.9 EmployeeBenefits The co of shortterm employee benefits, are recognized in the period in which the service is rendered and are not discounted. The expected co of compensated absences is recognized as an expense as the employees render services that increase their entiltment or, in the case of nonaccumulating absences, when the absence occurs. Defined contribution plans Payments to defined contribution retirement benefit plans are charged as an expense as they fall due Provisionsandcontingencies Provisions are recognized when: the company has a present obligation as a result of a pa event; it is probable that an outflow of resources embodying economic benefits will be required to settle the Obligation; and a reliable eimate can be made of the obligation. The amount of a provision is the present value of the expenditure expected to be required to settle the obligation. Provisions are not recognized for future operating losses Revenue Contract revenue comprises: the initial amount of revenue agreed in the contract to the extent completed and invoiced; and variations in contract work, claims and incentive payments: to the extent that it is completed and invoiced and probable that they will result in revenue; and they are capable of being reliably measured. Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax. Intere is recognized, in profit or loss, using the effective intere rate method. 68

4 Annual Report ContractCos The related co of providing services recognized as revenue in the current period is included in the contract cos. Contract cos comprise: cos that relate directly to the specific contract; cos that are attributable to contract activity in general and can be allocated to the contract; and such other cos as are specifically chargeable to the cuomer under the terms of the contract 1.13 Borrowingcos Borrowing cos are recognised as an expense in the period in which they are incurred Translation of foreign currencies Foreign currency transactions A foreign currency transaction is recorded, on initial recognition in Pula, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At each balance sheet date: foreign currency monetary items are translated using the closing rate; nonmonetary items that are measured in terms of hiorical co in a foreign currency are translated using the exchange rate at the date of the transaction; and nonmonetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial atements are recognised in profit or loss in the period in which they arise. Cash flows arising from transactions in a foreign currency are recorded in Pula by applying to the foreign currency amount the exchange rate between the Pula and the foreign currency at the date of the cash flow Prioryearfigures Prior year figures have been regrouped to confirm with current years presentation. 2 Changes in accounting policy The annual financial atements have been prepared in accordance with International Financial Reporting Standards on a basis of consient with the prior year except for the adoption of the following new or revised andards. IFRS 7 Financial Inruments: Disclosure (effective fir annual period commencing on or after 1/1/2007) IAS 1 Presentation of financial atements (effective fir annual period commencing on or after 1/1/2007) 3 Statements and interpretations not yet effective At the date of authorisation of these annual financial atements, the following andards and interpretations were in issue but not yet effective: IAS 23 Borrowing cos (effective fir annual period commencing on or after 1/1/2009) IAS 1 Presentation of financial atements (effective fir annual period commencing on or after 1/1/2009) 4 Financial assets by category Financial assets by category is given below: Loans & Receivables Total 2009 Trade and other receivables 717, ,162 Cash & Cash equivalents 2,274,127 2,991,289 2,274,127 2,991, Trade and other receivables 70,614 70,614 Cash & Cash equivalents 1,592,128 1,662, Pula 1,592,128 1,662, Pula 5 Deferred Tax Deferred tax assets Accelerated capital allowance for tax purposes 4,893 7,552 On other timing differences (12,463) (7,569) 8,015 15,567 Reconciliation of deferred tax asset (liability) At beginning of the year 15,567 7,425 Originating temporary difference on fixed assets (4,893) (2,042) Originating temporary difference on other timing differences 12,463 23,136 10,184 15,567 6 Contract work in Progress Contract work in progress 490, Contract work in progress details Co incurred 490,591 5,109,901 Recognized profits less recognized losses 1,061,150 Advance received 490,591 (5,390,469) 780,582 7 Property, plant and equipment Co/ Accu. Carrying Co/ Accu. Carrying Valuation Depn Value Valuation Depn Value Furniture and fixtures 60,319 (60,318) 1 60,319 (60,318) 1 Motor vehicles 57,728 (57,727) 1 57,728 (57,727) 1 Office Equipments 92,809 (92,808) 1 92,809 (88,358) 4,451 IT Equipments 26,884 (15,349) 11,535 11,505 (11,504) 1 237,740 (226,202) 11, ,361 (217,907) 4,454 Reconciliation of property, plant and equipment 2009 Opening net Additions Depreciation Closing net book value book value Furniture and fixtures 1 1 Motor vehicles 1 1 Office Equipments 4451 (4,450) 1 IT Equipments 1 15,379 (3,845) 11,535 4,454 15,379 (8,295) 11,538 Reconciliation of property, plant and equipment 2008 Opening net Additions Depreciation Closing net book value book value Furniture and fixtures 11,165 (11,164) 1 Motor vehicles 10,114 (10,113) 1 Office Equipments 1 4,545 (95) 4,451 IT Equipments ,281 4,545 (21,372) 4, Pula 2008 Pula 8 Trade and other receivables Trade receivables prepayments Deposits Retention receivable Other receivable 709,462 20,012 7, ,174 18,169 21,821 7,700 35,472 9,273 92,435 9 Cash and cash equivalents Cash and cash equivalents consi of: Cash on hand Bank balances Short term deposits 6,144 2,267, ,640 2,409,767 1, ,294 1,132,600 1,592, Stated Capital Issued 10, 000 Ordinary shares at no par value 10,000 10,000 The new Companies Act of Botswana (Companies Act 2003) is effective from 3rd July 2007 which repeats the old Companies Act (Cap 41:01). Section 5 of this Act introduces a new definition of "Stated Capital" which replaces the exiing definition of Share 11 Trade and other payables Trade payables Current account with holding company Value Added Tax Operating lease payables Deposits received Dividend payable Other payables 361,066 1,829, ,186 2,000 20, ,206 2,840, ,407 1,328,403 76,433 14,665 2, ,227 1,940, Revenue Contract revenue 6,127,070 3,006, Contract Cos Direct salary Directors' remuneration Mr. Sanjiv Bhushan Technical fees paid to the Holding Company Withholding tax on technical fees Other direct contract cos 84, ,609 1,612, ,344 2,803,800 4,912,002 33, , , ,445 1,131,147 2,173, Profit before taxation Profit before taxation for the year is ated after accounting for the following: Operating lease charges Premises Contractual amounts 174, ,705 69

5 2009 Pula 2008 Pula Depreciation on Property, plant and equipments 8,295 21,372 Employee cos 228, ,014 Printing and ationery 167, , Finance Income Intere revenue Bank 84,446 84,446 81,962 81, Taxation Major components of the tax expenses Current Basic Company Tax 56,806 29,528 Additional Company Tax 37,871 94,677 18,661 48,189 Adjument on Deferred Taxation 5 (7,569) 87,108 (8,142) 40, Auditors' remuneration Fees 51,670 36, Cash generated from operations Profit before taxation 341,843 84,543 Adjuments for: Depreciation and amortisation 8,295 21,372 Intere received (84,446) (81,962) Changes in working capital: Contract work in progress 289,931 (609,821) Trade and other receivables (644,739) 97,280 Trade and other payables 880, , ,027 19, Tax (paid) refunded Balance at beginning of the year (21,692) (11,032) Current tax for the year recognized in income atement (94,677) (48,189) Balance at end of the year 88,342 (28,027) 21,692 (37,529) 20 Dividends paid Dividends (15,000) 21 Related parties Relationships Holding company Rites Limited; incorporated in India Members of key management S. Bhushan; director Dr. K. Pal; director Related party balances Amount included in "Trade payable" regarding related parties Rites Limited, India 1,829,392 1,328,403 S. Bushan (net) 3,700 10, Risk management The company's activities expose it to a variety of financial risks: market risk ( including currency risk, fair value intere rate risk, cash flow intere rate risk and price risk), credit risk and liquidity risk. Liquidity risk The company s risk to liquidity is a result of the funds available to cover future commitments. The company manages liquidity risk through an ongoing review of future commitments and credit facilities. Cash flow forecas are prepared and adequate utilised borrowing facilities are monitored. Intere rate risk Deposit and all attract intere at rate that vary with prime. The company policy is to manage intere rate risk so that fluctuations in variable rates do not have a material impact on profit (loss). Credit risk Credit risk consis mainly of cash deposits, cash equivalents and trade debtors. The company only deposits cash with major banks with high quality credit anding and limits exposure to any one counterparty. 23 Going concern The financial atements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, DETAILED INCOME STATEMENT Note(s) 2009 Pula 2008 Pula REVENUE Contract revenue 6,127,070 3,006,627 Contract cos (4,912,002) (2,173,352) Gross profit 1,215, ,275 Other Income Note(s) 2009 Pula 2008 Pula Rental Incomes 51,708 44,446 Unrealised Exchange Gain (46,722) 22,423 Intere Income 84,446 89,432 81, ,831 Expenses (962,657) (897,563) Profit before taxation 341,843 84,543 Taxation 87,108 40,047 Profit for the year 254,735 44,496 OPERATING EXPENSES Accounting fees (31,000) (22,702) Advertising (3,377) (24,796) Auditors remuneration 17 (51,670) (36,780) Bank charges (8,626) (4,406) Computer expenses (3,710) Tender fees (3,540) (796) Depreciation, amortisation and impairments (8,295) (21,372) Employee cos (228,693) (160,014) Intere and penalties to BURS (782) Miscellaneous expenses (17,382) (12,215) Intenet charges (8,386) Office expenses (4,791) (4,922) Unrealised Gain/(Loss) on foreign exchange fluctuation (32,053) Insurance & license (35,817) (39,378) Lease rentals on operating lease (166,205) (195,705) Magazines, books and periodicals (668) (18,150) Motor vehicle expenses (25,761) (22,664) Poage (19,119) (12,809) Printing and ationery (167,644) (103,629) Repairs and maintenance (3,314) (4,698) Security (2,916) Staff welfare (23,047) (23,480) Telephone and fax (63,303) (81,306) Travelling Expenses (55,131) (62,133) Trainning Levy (4,570) Utilities (27,824) (962,655) (10,639) (897,563) 70

6 TANZANIA RAILWAYS LIMITED nd DIRECTORS REPORT FOR THE 2 ACCOUNTING PERIOD ENDED 31 December 2008 INTRODUCTION The Directors are pleased to present their report and audited financial nd atements for the 2 accounting period ended 31 December The th Company was incorporated on 25 May 2007 as a Private company to implement the concession granted by Reli Assets Holding Company Limited for providing Railway Services. The Railways was taken over and the operations commenced on the 1 October 2007 and the Company has completed 15 months of operation as at the end of STATEMENT OF DIRECTORS RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENT The Directors are responsible for the preparation of the financial atements of the Company, which show as true and fair view in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). They are also responsible for safeguarding the assets of the Company and for taking reasonable eps for the prevention and detection of fraud and other irregularities. BOARD OF DIRECTORS The names of Directors who served the Company during the period ended 31 December 2008 are: Name Status Nationality Mr. V.K. Agarwal Chairman Indian Mr. N. Jayaram Managing Director Indian Mr. S.K. Seth Director Indian Hon. S.J. Kabayonga (MP) Director Tanzanian Mrs. A.E. Bukuku Director Tanzanian Mr. N. Jayaram, the Managing Director on his reque was repatriated back to th RITES and ceased to be a Director of the Company after 30 January Mr. H.L. Chaudhary took over as Acting Managing Director from Mr. N. Jayaram and his name is under consideration of the Board for full Managing Director. nd Mrs. A.E. Bukuku resigned as a Director on the Board of TRL on 2 April, th Her reappointment with effect from 30 June, 2008 is under consideration of the Board. The Board of Directors wishes to place on record their appreciation of the services rendered and contributions made by the outgoing Directors. PRINCIPAL ACTIVITIES The main activity of the Company is the provision of railway transport services. PHYSICAL PERFORMANCE During period under review, i.e. year 2008, million tons were carried and million Passengers were transported. The operations were severely hampered due to the continuously deteriorating condition of assets since year 2004 as the assets did not receive the required maintenance attention over a long period causing continuously loosing of freight traffic from rail to road. The getting back of freight traffic lo to road back to rail would take several ears subject to condition that quality of assets and consequently the condition of services is improved. The improvement to asset conditions requires funds for their rehabilitation. The goods traffic across the Lake Victoria for the Uganda was conrained due to availability of single ferry M V Umoja which is very old in poor condition. Earlier there were 45 ferries on the lake Victoria where as at present there is only one ferry. The traffic across the lake Tanganyika for Burundli and Congo was also hampered due to Poor functioning of Kigoma port. The co of rehabilitation has gone up for reasons ated above and the rehabilitation of the assets will take time, before the full effects of improvements are realized. The delay in disbursement of IFC loan and oppage of further usage of loan amount already disbursed by IFC has adversely affected the rehabilitation process and thus the availability of assets. Annual Report As of now out of the total sanctioned loan of USD 44 million, IFC had disbursed USD 14 million. Out of this TRL had used about USD 7.15 million when IFC opped further use of the amount already disbursed. The liquidity position of the Company is very bad and the company is ruggling to meet even the current essential commitments and needs for fuel, salary, utilities etc. Liabilities to suppliers and other creditors are accumulatingas end of 31 December 2008, the current liabilities to Trade and other creditors total T. Shs billion. The Company is in urgent need of infusion of funds by way of additional capital and/or loan, if the Company is to survive. The position has been brought to the notice of the Shareholders, who are in the process of reviewing the Business plan etc. with a view to determine the funding needs and decide on the way forward. Whatever software improvements are possible, such as block trains, effective use of available assets, rationalizing operationsarebeingdone. FINANCIAL PERFORMANCE The Company's performance, after takeover is summarized below: T.Shs in Thousand 2008 (12 months) 2007 (3 months Opn) INCOME: Freight 37,259,490 6,768,758 Passenger 8,096,960 1,561,425 Operating Income 45,356,450 8,330,183 Others 410,968 92,338 Total Income 45,767,418 8,422, 521 EXPENSES: Operating Expenses (69,628,204) (11,374,752) General Expenses (4,569,717) (439,813) Adminirative Expenses (9,804,344) (1,490,874) Financial Expenses (1,282,328) (1,005,730) Foreign Exchange Gain/Loss (390,672) (1,068,949) Total Expenses (85,675,265) (15,380, 118) Profit/(Loss) Before Tax (39,907,847) (6,957,597) Tax on Intere Income (14,834) Corporate Tax Deferred Tax 13,009,014 2,087,279 Net Profit / (Loss) (26,913,667) (4,870,318) No dividend is recommended as there is no diributable income. OUTLOOK The outlook for business, in the light of good growth rate of the economy coupled with the developments taking place, particularly in the mining and cement sectors is considered to be good. However, bringing back of cargo lo to road is likely to take time. As these potential cargo growths materialize and the planned improvements to the assets take place the Railways performance should art improving. AUDITORS M/s Tanna Sreekumar & Co., Certified Public Accountants were appointed as Auditors of the Company. The Board wishes to place on record their sincere thanks for the valuable service rendered by them. AKNOWLEDGEMENTS The Directors wish to thank the employees for their contribution and looks forward to their commitment and dedication in the difficult times ahead in turning around the Railways. The Directors also wish to place on record their appreciation of the support received from Government Miniries and other agencies. La but not lea the Directors also like to place on record the cuomers patronizing the Railways and looks forward to their continued patronage. V.K. AGARWAL th Date : 16 July, 2009 Chairman TRL Board of Directors 71

7 TANZANIA RAILWAYS LIMITED AUDITORS' REPORT TO THE MEMBERS OF TANZANIA RAILWAYS LIMITED Preamble 1 We have audited the financial atements on pages 73 to 77 in accordance with International Standards on Auditing. The financial atements are in agreement with the accounting records. Respective responsibilities of directors and auditors 2 As mentioned on page 71, the company's directors are responsible for the preparation of the financial atements and adopting the accounting policies. It is our responsibility to form an independent opinion, based on our audit of those atements and to report our opinion to you. Basis of opinion 3 An audit includes examination, on a te basis, of evidence relevant to the amounts and disclosures in the financial atements. It also includes an assessment of the significant eimates and judgments made by the directors in the preparation of the financial atements. 4 We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial atements are free from material misatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial atements. Opinion 5 In our opinion the financial atements give a true and fair view of the ate of the company's financial affairs as at 31 December 2008 and of its loss and cash flow for the year then ended in accordance with the International Financial Reporting Standards and comply with the Companies Act, Mr. B. S. Sreekumar Tanna Sreekumar & Co. Certified Public Accountants Dar Es Salaam Date : 16 July,

8 TANZANIA RAILWAYS LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2008 ( 12 months) (7 months) Notes OPERATING INCOME OPERATING EXPENSES GROSS OPERATING LOSS GENERAL EXPENSES ADMINISTRATIVE EXPENSES FINANCIAL EXPENSES ,356,450 (69,628,204) (24,271,754) (4,569,717) (9,804,344) (1,282,328) 8,330,183 (11,374,752) (3,044,569) (439,813) (1,490,874) (1,005,730) FOREIGN EXCHANGE VARIATION OTHER INCOME LOSS BEFORE TAX 8 (390,672) (40,318,815) 410,968 (39,907,847) (1,068,949) (7,049,935) 92,338 (6,957,597) WITHHOLDING TAX ON INTEREST INCOME (14,834) CORPORATE TAX DEFERRED TAX ASSET LOSS FOR THE YEAR / PERIOD 9(a) 9(c) 13,009,014 (26,913,667) 2,087,279 (4,870,318) The accounting policies and notes on pages 74 to 77 form part of these financial atements. H.L. Chaudhary Managing Director STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2008 Notes CAPITAL EMPLOYED: SHARE CAPITAL 20,000,000 20,000,000 ACCUMULATED LOSS (31,783,985) (4,870,318) SHAREHOLDERS' INTEREST (11,783,985) 15,129,682 GOT TOP UP MONEY 5,617,795 LONG TERM LOAN 15 18,737,647 12,571,457 15,129,682 REPRESENTED BY: PROPERTY, PLANT AND EQUIPMENT 11 5,217,079 41,200 START UP COSTS 10 2,685,669 3,398,709 DEFERRED TAX ASSET 9(c) 15,096,293 2,087,279 22,999,041 5,527,188 CURRENT ASSETS Inventories 12 3,223, ,267 Trade and other receivables 13 5,289,967 3,413,939 Due from related party , ,106 Tax recoverable 9(b) 5,274 Margin Money 3,244,326 2,017,847 Bank and cash balances 9,783,770 10,547,231 Total 21,913,967 17,329,664 Annual Report Notes CURRENT LIABILITIES Due to related parties 16 23,868,678 4,819,101 Trade and other payables 14 8,472,873 32,341,551 2,908,069 7,727,170 NET CURRENT ASSETS (10,427,584) 9,602,494 Total 12,571,457 15,129,682 The accounting policies and notes on pages 74 to 77 form part of these financial atements. These financial atements were approved by the Directors on th 16 July, 2009 and were signed on its behalf on the same date by: H.L. Chaudhary Managing Director STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2008 Share Accumulated Total capital loss T. Shs'000 T. Shs'000 T. Shs'000 Period ended 31 December 2007 As at 25th May 2007 Shares allotted during the period 20,000,000 20,000,000 Loss for the period (4,870,318) (4,870,318) As at 31 December ,000,000 (4,870,318) 15,129,682 Year ended 31 December 2008 As at 1 January ,000,000 (4,870,318) 15,129,682 Loss for the year (26,913,667) (26,913,667) As at 31 December ,000,000 (31,783,985) (11,783,985) SHARE CAPITAL: Authorized 20,000,000 equity shares of T.Shs 1,000 each Issued and fully paid 20,000,000 20,000,000 20,000,000 equity shares of T.Shs 1,000 each 20,000,000 20,000,000 STATEMENT OF CASH FLOW FOR THE YEAR ENDED 31 DECEMBER 2008 CASH FLOW FROM OPERATING ACTIVITIES: Loss before tax Depreciation and amortisation Amortisation of Start up cos (39,907,847) 156, ,040 (39,038,569) (6,957,597) 3,725 (6,953,872) 73

9 WORKING CAPITAL CHANGES IN: Inventories Trade and other receivables Trade and other payables Due from related party Due to related parties (2,247,168) (1,876,028) 5,564,804 (3,363) 19,049,577 20,487,823 (976,267) (3,413,939) 2,908,069 (369,106) 4,819,101 2,967,859 Cash generated from operations before tax Withholding tax (18,550,747) (9,560) (3,986,013) (5,274) Net cash from operations (18,560,307) (3,991,287) CASH FLOW FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (5,332,117) (44,925) Net cash flow from inveing activities (5,332,117) (44,925) CASH FLOW FROM FINANCING ACTIVITIES: Issue of Shares 20,000,000 GOT Top up money Loan Start up cos 5,617,795 18,737,647 (3,398,709) Net cash flow from financing activities NET CASH FLOW FOR THE 24,355,442 16,601,291 YEAR / PERIOD CASH AND CASH EQUIVALENT 463,018 12,565,078 AS AT 1 JAN CASH AND CASH EQUIVALENT 12,565,078 AS AT 31 DEC CASH AND CASH EQUIVALENT 13,028,096 12,565,078 AS AT 31 DEC COMPRISE OF: MARGIN MONEY BANK AND CASH BALANCES 3,244,326 9,783,770 2,017,847 10,547,231 TOTAL 13,028,096 12,565,078 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER ACCOUNTING BASIS The financial atements have been prepared under the hiorical co convention and are in compliance with International Financial Reporting Standards (IFRS). 2 SIGNIFICANT ACCOUNTING POLICIES (a) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured. The following specific recognition criteria mu be met before revenue is recognised: Revenue is recognised as below: (i) Goods Traffic sales invoice/consignment note (ii) Revenue from the transportation of passengers is recognised on collection. (iii) Intere is recognised on accrual basis on the net carrying amount of the financial asset. (iv) Rental income is recognised when there is certainty of its realisation on accrual basis. (v) Other income is accounted for on accrual basis except supplementary counter claims / awards in favor of the company which are accounted for on final settlement/ realisation. (b) Inventories Inventories are valued at lower of the co arrived at on weighted average basis and net realisable value. Loose tools and sundry items are expensed in the year of purchase. (c) Translation of foreign currencies Transactions in foreign currencies are initially recorded in the functional currency at the rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rate of Tshs / $. The resulting differences from conversion and translation are dealt with in the profit and loss account in the year in which they arise. (d) Property, plant & Equipment and depreciation Property, Plant & Equipment are ated at hiorical co less accumulated depreciation. Depreciation on property, plant and equipment is provided on raight line method over the eimated useful life as follows: Life Annual rate % Furniture 8 years Computer hardware 3 years Machinery and equipment 8 years Motor cycles 5 years Motor vehicles 5 years Expenses on rehabilitation of locomotives, coaches, wagons and other assets belonging to the conceding Authority (RAHCO) is amortised over the remaining period of concession. Property, plant and equipment having purchase co up to TShs 1,000,000 or less are charged to income atement in the year of purchase. In respect of addition/deletion of property, plant and equipment during the year, depreciation is charged on prorata basis. (e) Intangible assets Startup cos are capitalised and amortised on prorata basis over a period of 5 years. (f) Invements Long term invements are valued at co less provision for permanent diminution in value. Current invements are valued at lower of co or fair value. (g) Trade and other receivables Trade receivables are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. Specific provision is made again receivables considered to be doubtful of recovery. Bad debts are written off when identified. 74