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FERRARI
Year TWO
The Company continuously move in synergy to be able to serve our customers needs. Through the diverse offerings of the Ferrari Company, we remain deeply committed to enhancing peoples overall quality of life. .
38.13%
Total Asset Growth
28 %
Capital Investment Growth
Three
2
Table of Contents
CEO letter Presidents Report Financial Highlights Financial Statements Statement of Financial Performance Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to Financial Statements Certification of Financial Statements Contact Information 4 5 6 7 8 16 17 1 2 3
Presidents Report
We continuously drive ourselves to create the right solutions for our customers, and to uphold the trust of our shareholders. Our unwavering focus on our financial statements has been a transformative and key component of our performance as an institution.
rental revenues and the trade and investment opportunities with other companies. Ferrari Company maintained its focus on the development of properties. We decided to dispose of undeveloped properties, on the back of the upbeat sentiment in the property sector. Thus, we traded with Hat Spring Company to acquire Tennessee Avenue in exchange of cash and Atlantic Avenue. We recognize that as the real estate industry becomes more competitive, we need to differentiate ourselves and devise a strategy to develop our properties fast at the lowest cost, yet with enough return to remain profitable. To execute our development-centric strategy, we need to construct more buildings, acquire lands suitable for development and triple the return from these properties. Choosing the best, developing the most able, and retaining the most committed are the tenets that shape the company geared towards development. Moving forward, we expect a more challenging environment. But we also welcome the next chapter in our history with optimism. Our economy is rebuilding; if investors risk appetite continues to improve, then emerging markets will likely be the recipients of large investments. The companies thrust of promoting investments through infrastructure development is expected to usher a renewed demand for credit and more opportunities for trading and investments. We are looking forward to participating in this invigorated business environment. With our strong balance sheet, the Ferrari Company is well poised to capitalize on these growth opportunities. On behalf of our management and shareholders, I thank our people for staying committed to our institutional goals. To our customers, rest assured we will stay true to our promise of being your real estate partner. The road to success may not always be paved and easy, but with your unfailing support, we will always be driven to do our very best.
M 2,875.80
stronger in total assets, increasing by M 793.80 from the previous year.
3.9
5.2
Year 2
Year 1
The economy in the second year has been erratic due to investment spending and development of properties by all companies. The Ferrari Company has improved all its effort to maintain the stability and resiliency of the real estate system. Against this backdrop, Ferraris net income decreased by 25.77% to M 388.80, from M 523.80 in year one. This resulted in the Return on Average Equity of 16%. We ended the year with M 2,875.80 billion in resources, 38.13% higher than the same period last year. This was on the back of an investment of 400 to other companies and buildings with a total cost of M 282. Riding the positive growth of the economy, our lands rose 15.22% to 1060 from 920 of the previous year. We strengthened our capital through a 420 investment from other companies, though coupled with a decreased earnings growth this year, total equity reached M 2,832.60 by year-end, a 40% increase in equity. Total revenues grew 3.56% to M 756.00 from M 730 in the previous year. Nevertheless, the weakness in net interest income was caused by an increase in rental expenses, miscellaneous expenses and depreciation expense. The total expense had an erratic increase of 119% to 324.00 from 148.00 of the previous year. This erratic experience has shaken the company, pulling down the companys net income for the second year. Net cash outflow was M 28.20 leading to a 2.43% decrease in ending cash balance, from M 1162 to M 1133.80. Net cash flows provided by operating activities decreased by 32.68%; for investing activities, net cash outflows decreased by 8.69%; and cash flow from financing activities totalled M 420. . We opened the orange group lands the first monopoly built with three buildings \ (houses), geared towards servicing the preferential requirements of our companies, Angelie De Ramos as well as take advantage of the increase in President
Financial Highlights
Financial Position
3500 3000 2500 2000 1500 1000 500 0 Year 1 Year 2 Assets Liabilities Shareholders' Equity
Financial Performance
800 700 600 500 Revenue 400 300 200 100 0 Year 1 Year 2 Expenses Net Income
For the Game Year-Ended Month 13, Year 2 Total Revenue Rent Revenue Salary Revenue Miscellaneous Revenue Total Income Total Expense: Rent Expense Miscellaneous Expense Depreciation Expense Total Expense Income before Tax Less: Income Tax Expense Net Income Year 2 26.00 600.00 130.00 756.00 Year 1 100.00 600.00 30.00 M 730.00 M
M M
M M
Assets Cash on Hand Property and Buildings Investment in Equity Securities Total Assets Liabilities and Shareholders Equity Liabilities Trade and other Payables Total Liabilities Equity Contributed Capital Retained Earnings Total Shareholders Equity Total Liabilities and Shareholders Equity
Note M 2 3 M
For the Game Year-Ended Month 13, Year 2 Note Contributed capital, start of turn 1 Additional Contributed Capital Contributed capital, turn 13 Retained Earnings, turn 1 Net Income Retained Earnings, turn 13 Balances, turn 13 M M 5 Year 2 1,500.00 420.00 1,920.00 523.80 388.80 912.60 2,832.60 M Year 1 M 1,500.00 0 1,500.00 523.80 0 523.80 2,023.80
For the Game Year-Ended Month 13, Year 2 Cash flow from Operating Activities Received from Passing Go Received from Rentals Received from Miscellaneous Paid for Rentals Paid for Miscellaneous Payment for Income Tax Net Cash flows provided by Operating Activities Cash flow from Investing Activities Payment for the Acquisition of Land Sale of Property Payment for Investing Payment for Building Houses Net Cash flows provided by Investing Activities Cash flow from Financing Activities Received from Investment Net Cash flows provided by Financing Activities Net Change in Cash for the Year Beginning Cash Ending Cash Year 2 600.00 26.00 130.00 (156.00) (150.00) (58.20) 391.80 (220.00) 80.00 (400.00) (300.00) (840.00) 420.00 420.00 (28.20) 1,162.00 1,133.80 Year 1 600.00 100.00 30.00 (148.00) 0 0 M 582.00 M (920.00) 0 0 0 (920.00) 0 0 (338.00) 1,500.00 1,162.00
M M M
M M M
Reporting Entity. Ferrari Company is engaged in real estate operations as a developer of raw land, residential subdivision and mixed-use urban projects including condominium and commercial buildings, industrial and farm estates. Ferrari Company is a professionally-managed portfolio of diversified real estate holdings and is basically meant for high net worth investors. But, not-so-rich investors can also get a slice of the real estate pie by investing in our funds, which give them an opportunity to participate in specific asset classes such as residential, commercial, hospitality etc. in a more concentrated manner. The nature of Ferrari Company is used in three fundamental ways. First, is to view it as a tangible asset, real estate constitutes the physical components of location and space., real estate is defined as the land and any built improvements permanently affixed on, or to, the land. Next, to denote the bundle of rights associated with the ownership and use of the physical characteristics of space and location constitutes the services that Ferrari provides to our users. The value of a bundle of rights is a function of the propertys physical, locational, and legal characteristics. The physical characteristics include the age, size, design, and construction quality of the structure, as well as the size, shape, and other natural features of the land. For residential property, the locational characteristics include convenience and access to places of employment, schools, shopping, health care facilities, and other places important to households. The location characteristics of commercial properties may involve visibility, access to customers, suppliers, and employees, or the availability of reliable data and communications infrastructure. The physical and location characteristics required to provide valuable real estate services vary significantly by property type. And finally, to refer our company to the industry, or business activities, related to the acquisition, operation, and disposition of the physical assets. Real estate creates jobs for many applicants, and is the source of high percentage of local government revenues. Our market activity is influenced by the activities and conditions that take place in three sectors of a market economy: the user market, the financial or capital market, and lastly, the government sector. Our company users compete in the market for location and space. Among the users are both renters and owners. The financial resources to acquire our assets are allocated in the capital market; hence, the equity (ownership) and debt investors are 8
Estimates and assumptions. Preparing financial statements requires management to make assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates, and assumptions that affect the application of policies and reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income and expense. The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Judgments made by management in the application of IFRS that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 32 of the Consolidated Financial Statements. Measurement Basis. The accompanying financial statements are presented and prepared in Monopoly dollars under the historical cost convention. Fiscal year. Ferrari Company operates on a thirteen month fiscal year.
Accounting principles. The financial statements and accompanying notes to the financial statements for Ferrari Company are prepared in accordance with generally accepted accounting principles. Revenue Recognition. Rental revenue is recognized over the duration of the lease term, inclusive of the rent-free periods. Revenue is recognised to the extent that it is probable that 9
Property and Buildings. Property and buildings are carried at cost less accumulated depreciation and any impairment losses in value. Initially, an item of property and equipment is measured at its cost, directly attributable costs of bringing the asset to working condition. With regards to depreciable properties, the useful lives and depreciation method are reviewed periodically to ensure that such useful lives and depreciation method are consistent with the expected pattern of economic benefits from those assets. When an asset is disposed of, the cost and accumulated depreciation and impairment losses, if any, are removed from the accounts and any resulting gain or loss arising from the retirement or disposal is credited to or charged against current operations. Depreciation is charged to the statement of income on a straight-line basis over the estimated useful life of each part of an item of property, plant, and equipment. Land is not depreciated. The estimated useful life for buildings is 50 months. Financial assets. Financial assets include investments, loans and receivables, and derivative financial instruments. Financial assets are recorded initially at fair value. Subsequent measurement depends on the designation of the financial assets. Investments. All equity investments that are not subsidiaries or equity-accounted investees (joint ventures and/or associates) are classified as investments. Investment available-forsale is valued at their fair value. When the fair value cannot be reliably determined, the investment is carried at cost. A gain or loss arising from a change in the fair value of the investment available-for-sale shall be recognized directly in equity, except for impairment losses and foreign exchange gains and losses, until the financial asset is derecognized, at which time the cumulative gain or loss previously recognized in equity shall be recognized in profit or loss. If the investments are valued at cost, income from investments is based on the dividend received from the investments. Cash and Cash Equivalents. Cash and cash equivalents are carried in the balance sheets at cost. For the purpose of the cash flow statements, cash and cash equivalents consist of cash on hand and in banks, and other short term highly liquid investments with original maturities of three months or less from date of acquisition and that are subject to an insignificant risk of change in value. The company has a sizeable cash balance because the company didnt buy much properties. Still, the properties acquired during the year are enough for the business to earn a return from its properties purchased. Moreover, the company usually receives more cash from salary and rental revenue. Rental and miscellaneous expenses also result to an outflow. However, these rental payments are still low since the properties are still underdeveloped. Cash flows from operating activities, with a net amount of M 391.80 include cash receipts from revenue and payments to expenses. Investing activities which comprise of payments for purchases of properties are the major outflows that decrease the cash balance, 11
Cash flows from operating activities. Cash flows from operating activities are calculated by the direct method. Cash payments to rental and miscellaneous expenses are all recognized as cash flow from operating activities. Cash flows from operating activities also include income taxes paid on all activities. Cash flows from investing activities. Cash flows from investing activities are those arising from net capital expenditure, from the acquisition and sale of properties. Net acquisition spending excludes acquisition related costs which are included in cash flows from operating activities. Net capital expenditure is the balance of purchases of property, plant, and equipment less book value of disposals. Cash flows from financing activities. The cash flows from financing activities comprise the cash receipts from additional investment from other companies.
Property and Buildings Land Buildings Houses Total Property and Buildings, gross Less: Accumulated Depreciation Total Property and Buildings, net Land St. James Place New York Avenue Tennessee Avenue Baltic Avenue Kentucky Avenue Indiana Avenue TOTAL Buildings Houses St. James Place New York Avenue Tennessee Avenue TOTAL 13
M 1060 300 M 1360 18 M 1342 Cost M 180 200 180 60 220 220 M 1060 Cost M 100 100 100 M 300
Company IronMan Company CAR-ra Chuchi Company SHOEper Company Royal Ship Company Fast and Furious Company Missouri Battleship Corporation Company C Hachiko Company Mad Hatter Lands & Homes Corp FURry Friends Enterprise Car Company Rhenishoes Company Titanic Company Nike Company HAT-Spring Company TOTAL
Cost M 25 25 20 30 30 30 20 20 20 25 35 20 30 40 30 M 400
Total Income Total Expense Income before Tax Less: Income Tax Expense (10% of 432) Net Income
M M M
Income tax on the profit for the year comprises current tax only. Current income tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantially enacted as of the balance sheet date, and any adjustment to tax payable in respect to previous years. The amount of tax owed is computed by taking the amount of pre-tax income times the tax rate, according to the given tax rate of 10% for pre-tax income ranging from M0 to M1000. 14
No dividends were declared for this year. Shareholding structure on the closing date of the share registration book as of Year two: Company CAR-ra Chuchi Company SHOEper Company Royal Ship Company Fast and Furious Company Missouri Battleship Corporation Company C Hachiko Company Mad Hatter Lands & Homes Corp FURry Friends Enterprise Car Company Rhenishoes Company Titanic Company Nike Company HAT-Spring Company TOTAL Cost M 20 25 25 20 30 20 20 30 20 30 40 40
55
35 M 420
The Ferrari Company received a Get-Out-of-Jail-Free card on turn 1/9. This card entitles the company to get out of jail without paying the fine, a M50 value. There is a reasonable probability that the company will receive this benefit in the future, but it depends upon (1) going to jail (a common risk of doing business, unfortunately) and (2) whether using the card to get out of jail is in the company's best interest.
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Ty. M Bollinger Chief Executive Officer Ferrari Company Date: September 10, 2012 /s/ Ty. M Bollinger
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