Final Results

04 May 2012

TAU CAPITAL PLC

PRELIMINARY RESULTS ANNOUNCEMENT

Tau Capital plc and its subsidiaries ("Tau" or the "Group"), an investment group investing in both public and private businesses that are established in, operating in or have exposure to Central Asia, Kazakhstan and surrounding countries, today announces its results for the year to 31 December 2011.

Highlights:

• Net assets of $144,099,374. Audited Net Asset Value per share as at 31 December 2011 of $0.60, representing a decrease of -18.5% for the year.

• Relevant market indices: RENCASIA down -31.9%, KASE Index down -35.5%.

• As at 31 December 2011 approximately 96% of capital invested; public equity exposure 54% of portfolio (57% as at 31 December 2010); private equity exposure 40% of portfolio (41% as at 31 December 2010).

• Portfolio unleveraged and unhedged at year-end, with no short positions.

• Public equity markets characterized by extreme volatility throughout the year.

• Negative contributors dominated the listed equities portfolio performance. Key holdings responsible for negative contributions included: Uranium One, Kazakhmys, Zhaikmunai, ENRC, KazMunaiGas EP, Ivanhoe Mines, and Centerra Gold.

• Private equity investments contributed positively.

• As at 31 December 2010, Tau held four Kazakhstan-based private equity investments: Oil & Gas Services provider TenizService LLP, Oil & Gas Exploration company Lucent Petroleum LLP, Telecom Services provider Alem Communications Holding LLP, and Pharmaceuticals distributor Stopharm LLP.

• TenizService loan was exited on 6 September 2011 at an acknowledged 15.5% IRR since September 2008.

• Invested a further $10.5 million as a convertible loan into Lucent Petroleum in 2 stages, $6m on 22 February 2011 and $4.5m on 15 July 2011 , bringing the total investment to $15 million. Subsequent to year-end, this loan was converted into a 6.18% equity stake in the Company.

• Stopharm Convertible Bridge Loan converted to equity on 27 December 2011.

Further information, please contact:

The financial information set out in the announcement does not constitute the Group's statutory financial statements for the year ended 31 December 2011, but is derived from those financial statements. The auditors have reported on those financial statements; their report was not modified, but did draw attention to matters by way of an emphasis of matter paragraph relating to significant uncertainty in respect of the valuation of the private investments as of 31 December 2011, and did not contain statements under s15(4) or (6) of the Companies Act 1982 of the Isle of Man.

Chairman's Statement

The year 2011 was characterized by severe volatility for Tau Capital PLC ("the Fund" or "the Portfolio"). The Fund began the year fully invested with a low cash level and no hedging positions in place. Improving economic data flow, solid corporate earnings and well-supported commodity prices on the back of strong Chinese growth all indicated improved investor sentiment as the global economic recovery continued.

This scenario did not persist. The first major shock occurred in the form of the devastating Japanese earthquake in March 2011. Then during the summer, a confluence of events rattled investor confidence. In Europe, the sovereign debt situation and risk of major contagion worsened while the trajectory of economic activity appeared to be toward an eventual recession. In the U.S., economic data weakened materially and the country lost its AAA sovereign credit rating. Political timidity and plodding in Europe and political discord in the U.S. negatively affected both situations. The Arab Spring turmoil, concerns regarding lost Libyan oil supplies, and Emerging Market inflation and the associated monetary policy tightening concerns also eroded investor confidence. The Fund significantly reduced its Public Equity exposure ahead of the major selloff in August but performance still suffered somewhat. The proceeds from the Private Equity exit in TenizService LLP were partly re-deployed in the Public markets in the latter part of the year in order to take advantage of what were considered largely depressed and oversold markets at that time.

Most of the Fund's resource companies struggled to perform, even those whose underlying commodity prices were rising, as earnings multiple compression and risk aversion prevailed during the remainder of the year. Additionally, some well publicized stories about ENRC corporate governance issues as well as a prolonged employee strike at KazMunaiGas and riots in the Western part of Kazakhstan in December hurt investor sentiment for Central Asian stocks. These adverse developments overshadowed Kazakhstan's excellent progress demonstrated by the country joining the world's top 50 easiest economies to start and operate a business in, according to a World Bank survey.

All of these issues resulted in the Fund's Net Asset Value per share declining from $0.74 at the beginning of the year to $0.60 as of 31 December 2011. While this represented a -18.5% decline, the Fund outperformed the RENCASIA (-31.9%) and the RENKAZ (-40.2%) indices by +13.4 ppts and +21.7 ppts, respectively.

In sharp contrast to the severe volatility in the Public Equity markets, the Private Equity investments contributed positively to the Fund's performance. The TenizService loan was exited on 6 September 2011 with an acknowledged 15.5% IRR from inception on September 2008. In addition, a commitment to Lucent Petroleum LLP was fulfilled in 2 stages, $6m on 22 February 2011 and $4.5m on 15 July 2011, resulting in a total of US$15 million invested. The Private Equity exposure as of December 31, 2011 was 39.96% of NAV, similar to the December 31, 2010 level.

Given the lack of visibility on the global economic outlook and the shaky recovery in the context of continued high volatility, we remain prepared to adjust our exposures quickly, if necessary, and are continuing to evaluate low-cost hedging opportunities.

Philip Lambert

Chairman

3 May 2012

Investment Manager's Report

Performance

During 2011 the Fund's NAV per share decreased from $0.74 at the beginning of the year to $0.60 as of 31 December 2011. Since inception, the Fund's annualised performance was -10.3% through 31 December 2011, vs. -22.2% for the RENKAZ Index and -14.7% for the RENCASIA Index (total USD returns), the Fund's most relevant benchmarks. In absolute terms, the Fund's performance since inception was -39.6% compared to a decline of -68.8% for the RENKAZ Index and -52.3% for the RENCASIA Index.

In 2011, the Fund outperformed the RENKAZ and RENCASIA Indices by +21.7 and +13.4 percentage points, respectively. Furthermore, the Fund substantially outperformed other Central Asian-focused equity funds by at least 13 percentage points (Gustavia Davegardh Kazakhstan; Swedbank Central Asia Equity; East Capital Bering Central Asia). In terms of risk vs. reward, the Fund's 3-year annualised volatility of 15.2% is less than half that of both the RENKAZ and the RENCASIA Indices.

The year 2011 was challenging for global equity markets and this was particularly true for Frontier Markets such as Central Asia. Markets were characterized by extreme levels of volatility and lack of risk appetite due to several factors. The global economic slowdown and downward global growth forecasts provided the backdrop. A lack of political will and coordination exacerbated both the Eurozone sovereign debt crisis and concerns regarding the U.S. debt ceiling and long-term structural deficit. Inflation fears in Emerging Economies dragged on markets in the first half. Many of the resource companies in the portfolio failed to perform, even those with resilient underlying commodity prices due to general risk aversion.

The stock that hurt the Fund's performance the most was Uranium One due to the overreaction of investor sentiment towards uranium stocks after the March earthquake in Japan and the Fukushima nuclear meltdown. The reality is that the medium-term demand outlook for uranium remains largely intact. The spot uranium price found a resistance level at $52/lb and only declined -15% for the year. However, UUU's stock price fell 56%. UUU remains a high conviction stock in the portfolio, and through the first two months of 2012, has already risen over 55% in USD terms.

Kazakhtelecom contributed +0.15 ppts. In December, the incumbent telecom services provider announced that it would be selling its mobile phone services unit to TeliaSonera for over $1.5bn, well above market expectations, supporting a 9.1% rise in the stock price for the year.

The Fund's Private Equity portfolio delivered a positive contribution to performance during 2011. In September the Alem Communications Holding investment was marked-up after the acquisition of a substantial stake by an unrelated third party and contributed +1.68 ppts to the Fund's performance. In June, the Fund received dividends in the amount of $1.29 million on its investment in Stopharm LLP, adding +0.72 ppts to the Fund's performance. Until it was fully repaid with interest in September, the TenizService loan continued to make a steady positive contribution to performance.

Global Markets

The year started off strongly but this momentum came to an abrupt halt when Japan was struck by a devastating earthquake in March that crippled the country and its economic output. Global supply disruptions followed mainly in the automotive and electronics industries.

The Middle East and North African geopolitical situation worsened significantly in early 2011, which added to the timidity and uncertainty in the markets. The Libyan conflict between Government supporters and rebels led to reduced oil supplies and pushed Brent crude oil prices above $128 per barrel in April 2011, a new post-crisis high. In response to the expected negative impact on global growth due to high oil prices, the IEA agreed to release emergency oil stockpiles to compensate for supply shortages caused by the unrest.

In late July, extreme volatility and nervousness set in. Politicians in the U.S. could not reach an agreement on the debt ceiling or the structural deficit. Contagion fears associated with Greece's debt crisis grew and represented a major cloud over European banks. There was clear evidence of weakening U.S. and European macro trends, including very disappointing U.S. employment data. S&P downgraded the U.S. credit rating to AA+ from AAA. Consumer confidence collapsed in both the U.S. and Europe. Inflation rose markedly in Emerging Markets and especially China, which saw YoY prices increase by 6.5% in July 2011. This was a three-year high which raised fears of accelerating monetary policy tightening, especially in the property sector, and a hard economic landing due to credit contraction.

Thematically, 2011 was a year when mostly negative political noise accounted for the majority of the biggest headlines, while central bankers went to great lengths to avoid catastrophe. This was no more evident than when the U.S. lost its AAA credit rating in August as no agreement could be reached regarding a credible plan for reducing the Government's budget deficits going forward. The Federal Reserve took several actions during the year to support the economy, including a second round of quantitative easing, the so-called Operation Twist, to lower longer-term interest rates, and leaving the door open for another round of quantitative easing if needed.

While the lack of political coordination in the U.S. was unfortunate, the really bad political headlines came out of Europe during 2011, in particular in the latter part of the year. The Eurozone sovereign debt issues flared up again and this time with a vengeance. The increased turbulence in the European government bond markets, which at times came to be viewed as a litmus test for the Eurozone's future, was the clearest sign of this. The possible restructuring of Greek sovereign debt, the fear of contagion to Portugal, Ireland, Spain and Italy and bank liquidity drying up, made up the backdrop for the numerous meetings during which policy makers took important but slow steps towards greater budgetary and political integration of the Eurozone. However, due to a lack of concrete decisions and continued political turmoil, this did not create any lasting recovery of confidence among investors. Italian bond yields reached unsustainably high levels above 7% by the end of the year. The very weak confidence of the private sector due to the continuing Eurozone debt crisis led the Eurozone economic region to disconcertingly low growth in Q4 2011. The ECB acted to support the Eurozone economy by lowering interest rates, buying sovereign bonds of peripheries, and offering low rate loans to European banks.

As a result of these developments, 2011 was characterized by risk aversion, flight to safety and with very high asset correlations in a typical risk on/off environment. Equity funds suffered severe outflows, in particular Emerging Market funds, and substantial amounts of capital flowed into safe haven assets such as gold and high quality bonds. U.S. Treasuries were one of the best performing assets during 2011, with 10-yr bond yields falling to below 2% by the end of the year.

Central Asia

Overall, Kazakhstan's business climate improved dramatically in 2011. According to the World Bank's "Doing Business" ranking, Kazakhstan is now one of the top 50 easiest places in the world to start-up and operate a business in. The survey showed that Kazakhstan moved up 11 spots to 47th place, with particularly strong progress in the "protecting investors" category. This successful result continues a steady trend for Kazakhstan, the world's fastest reformer in last year's rankings.

In addition, rating agency Standard & Poor's upgraded Kazakhstan's sovereign credit rating to BBB+ (Stable) citing fiscal and current account surpluses, doubling oil output over the next decade, average net FDI of 4% of GDP, average real GDP growth of 6% per year through 2014 and a stronger, but still weak, financial sector.

The economy in Kazakhstan continued to grow at a rapid pace with GDP increasing 7.5% in 2011 thanks to increased output volumes of commodities and high prices. Inflation remained manageable at an estimated 7.4% YoY.

Kazakhstan early presidential elections, held in April 2011, resulted in landslide re-election of N. Nazarbayev. In January 2012 parliamentary elections were held and the incumbent "Nur Otan" party easily won another large majority implying continued political stability in the country going forward. Two opposition parties won over 7% of the vote, thus securing official representation in the parliament.

Unfortunately, certain events detracted from these positive news stories. In particular, the ongoing corporate governance issues in commodity producer and London-listed ENRC did not help sentiment. The long-lasting peaceful labour strikes in Kazakhstan's Western oil region at state-controlled oil producer KazMunaiGas EP were a distraction that eventually erupted into short-lived riots in December with a number of casualties. However, President Nazarbayev acted quickly to appease the protesters by announcing high-profile dismissals, offering some operating autonomy over certain oil production assets to those in the region, and guaranteeing jobs for previously fired employees. The announcement of a second bond restructuring being required by BTA Bank also hurt investor sentiment.

Mongolia continues to draw the attention of foreign investors as part of its stated plan to attract over $20 billion in FDI to develop its vast endowment of natural resources. The massive Tavan Tolgoi coal deposit, with over 6 billion tonnes of resources including the world's largest untapped deposit of high quality coking coal, is expected to draw the world's attention to Mongolia when it is sold publicly via an IPO in 2012 that could value the project at over $10 billion.

The Fund continues to invest in targeted high quality opportunities in other Central Asian countries. As of December 31, 2011, 67% of the Portfolio was invested in Kazakhstan, while 28% was invested in Kyrgyzstan, Mongolia, Turkmenistan, Uzbekistan, and Russian companies with a strategic presence in Central Asia.

Investment Activities

The Fund entered 2011 close to fully invested at only 1.4% in cash and not employing any hedging arrangements for its Public Equity portfolio on the basis of strong demand for commodities and a continued expansion of global economic activity.

During the first half of 2011 the Fund added exposure to the Mining and Oil & Gas Sectors through the execution of Ivanhoe Mines rights and the purchase of additional KMG EP shares in January. The Fund also partially took profits on Uranium One in February, just before the earthquake in Japan, which severely hurt sentiment in the sector. In March, the Fund managed to exit two illiquid positions: Aurum Mining and Shalkiya Zinc. Options expiring in-the-money meant additions of KMG EP in March and Kazakhmys in May.

In July and August the Public Equity exposure was reduced significantly (-12% of NAV), in particular in the high beta sectors such as Metals & Mining, due to global macroeconomic fears. After major selloffs the market exposure was again increased substantially during late September, November and December by adding Gold producers Centerra and Polymetal as well as more high beta names as Kazakhmys, ENRC, Sberbank and Uranium One. Smaller illiquid names were also divested during the second half of the year (Caspian Energy, Kazakhstan Kagazy, Chimpharm).

By the end of 2011 the Fund had once again increased its Public Equity exposure to 54.3% of NAV by adding Mining and Gold names on the back of anticipating strong markets in the short term.

On the Private Equity side, in February 2011, the Fund provided a US$6.5 million loan to Lucent Petroleum LLP, a Private Equity investment, fulfilling a commitment made in September 2010. This required more than the cash on hand available for investments. Rather than liquidating any of the public equity exposure, it was decided that borrowed funds from the Prime Broker would be utilized. This decision was based on positive expectations for the stocks in the Fund's portfolio. In July 2011 the final cash drawdown in the amount of US$4 million was made resulting in a total fulfilled commitment into Lucent Petroleum LLP in the amount of US$15 million.

In September 2011, the Fund successfully exited the TenizService LLP Loan investment earning 15.5% IRR. The Fund received a principal and interest payment which increased cash position by US$30.03 million.

Exposure by Asset Class

Exposure by Sector Exposure by Country

31 Dec 2011 31 Dec 2011

Outlook

The prospects for 2012 are mixed in our view. There are many positive factors driving the markets at the moment but there are also numerous major potential risks that could be detrimental and derail the recovery in 2012.

Policy responses globally have finally caught up with reality and a lot of the main issues are being addressed at the moment. Monetary easing on a global scale will support the markets going forward, at least in the short run, as it is by no means a long-term solution to the underlying problems. The economic rebound in the U.S. is currently gaining momentum while Europe's leading economic indicators have been more favorable than the market expected. Risk appetite has been slightly restored with investors for the time being net buyers of equities during the first two months of 2012.

Cheap money is plentiful and is chasing few assets at the moment, including equities and commodities. Investors are lacking alternatives with bonds not being attractively priced and offering very low yields in real terms. The flood of money coming from monetary easing and continued demand from Emerging Markets also support commodity prices, which have surged in recent months. Higher commodity prices are supportive for the Fund of course, but only to the point higher prices do not become value destructive for the global economy. Rising oil prices in particular are a threat in this respect. So far global inflation is under control as the Emerging Market inflation concerns of H1 2011 have given way to disinflationary trends. Surging commodity prices could rapidly change this dynamic, which would be negative for the economic rebound we are currently witnessing.

Valuations are also currently supportive, with earnings multiples for global equities below historic averages. But it is important to keep in mind that after a very strong start to 2012, it is likely that we will observe a correction in the near term. Furthermore, profit margins remain close to all time highs, which could potentially cap the upside from here in our view.

Our medium to long-term view is positive. However, it is of paramount importance to identify the risks facing global equity markets in 2012. The deleveraging process that started after the latest financial crisis will have to continue on a global scale within the private sectors, banks and governments which will dampen economic growth for the coming years.

The fiscal austerity measures implemented in Europe, although with few substantial, identifiable, and plausible plans for stimulating growth, will take a toll on economic activity and may be a harbinger of further political turmoil. The political landscape in the Eurozone remains very fragile, with the French Presidential elections in April being a key event. The Euro area needs to find a workable solution by the end of 2012, a process which is likely to bring political tumult and uncertainty to investors.

The U.S. recovery needs to continue on its growth path in order to support global markets. Employment, consumer confidence and a recovering housing sector are key indicators to follow. The unsustainably high fiscal debt and deficits in the U.S. need to be addressed soon as well. At some point during the latter part of 2012 investors may start pricing in necessary fiscal measures and austerity to bring debt levels down, which would be negative for markets.

An excessively fast slowdown in China would also hurt global economic growth prospects. A deflating property bubble, high wage inflation and overleveraged local governments remain tail risks in our view. The ongoing geopolitical discord in the Middle East, with rising tensions between Iran and Israel being at the epicenter, remains a key risk as well.

Given the lack of visibility on the global economic outlook and the continued high volatility, prudence dictates that we remain prepared to adjust our exposures quickly, if necessary.

PRIVATE EQUITY

During 2011 no new Private Equity investments were executed. The Fund made final tranches of payments to Lucent Petroleum LLP, fully exited the TenizService LLP project and converted provided to Stopharm Convertible Bridge Loan into equity.

Stopharm LLP ("Stopharm")

Stopharm's FY2011 financial accounts were cosmetically affected under IFRS by the agreed delay of a sizable shipment to SK Pharma from December 31, 2011 to January 15, 2012. Revenues reached $171.7M, compared to $173.8M in 2010. EBITDA reached $11.2M, 12% higher than in 2010 and 34% higher than budgeted (excludes implied EBITDA from the SK Pharma delayed shipment). Further to this and more relevant in the context of the internal improvement projects carried out by the company EBITDA margin reached 6.4% vs. 7.2% in 2010.

Lucent Petroleum LLP ("Lucent")

In 2011 further commitments to Lucent were made by Fund: $6.5 million tranche on February 22 and $4 million tranche on July 15. The total investment as of December 31, 2011 is $15 million, which represents a 6.18% stake in the company. In January 2012 the Convertible Bridge Loan provided by the Fund to Lucent has been converted into equity. Post-conversion, the Fund holds a 6.18% equity interest in Lucent Petroleum LLP.

During 2011 Lucent completed drilling on its reservoirs; testing results are expected to be ready in Q2 2012. Due to delays in availability of certain specialized drilling equipment the drilling program had to be revised and timeframes have been extended. As a result the budget was revised and the project's operational expenses had to be increased. However the company remains fully funded in order to complete the drilling programs and testing.

Alem Communications Holding LLP ("Alem")

Alem's operations continued to improve in 2011 according to the Company's unaudited management financial statements. Revenues for the year totaled $27.1 million, representing a 61% increase over 2010, supported by a 67% YoY increase in the monthly revenue run rate to $2.78 million in December 2011. Gross margin in December was 32% while the normalized EBITDA margin fell to -0.7% (+11.7% in November), in line with expectations and primarily reflecting the commencement of a major marketing campaign.

During 2011 household coverage and subscriber growth continued to increase (especially in the strategically important Mobile Broadband division: +117% and +260%, respectively). The total number of subscribers reached 289,351 by the end of 2011, recording a 32% increase since year end 2010. Revenue generation per subscriber also continued to improve, with overall blended ARPU up by 24.3%.

In 2011 the shareholder capital of Alem was increased and the Fund did not participate in any of the cash injections. The valuation of the Fund's investment in Alem was not modified as a result of the injections as they were based on par value of the initial investment. However, in October 2011, the Fund announced a 15% increase in the carrying value of the investment, as per IPEVCA guidelines, as a result of a material acquisition of a stake in Alem by an independent third party.

A sales process is underway with a target exit of Q2 2012.

TenizService LLP ("Teniz")

The Fund fully exited the Teniz investment in 2011, following the Board's decision not to convert interest accrued on the loan into the equity of Waterford on the expiration of the loan on September 4, 2011. As a result the Fund received the loan amount and accrued interest in the total amount of $30.03 million on September 4th, 2011, earning 15.5% IRR from inception on September 2008.

Consolidated Statement of Comprehensive Income

All results derive from continuing operations.

Consolidated Statement of Financial Position

Company Statement of Financial Position

Consolidated Statement of Changes in Equity for the year ended 31 December 2011

Consolidated Statement of Changes in Equity for the year ended 31 December 2010

Company Statement of Changes in Equity for the year ended 31 December 2011

Company Statement of Changes in Equity for the year ended 31 December 2010

Consolidated Statement of Cash Flows

Company Statement of Cash Flows

Notes to the Financial Statements

1. General

Tau Capital plc (the "Company") is a closed-ended investment fund incorporated and domiciled in the Isle of Man on 3 April 2007 and registered with number 119384C. The Company was established to allow investors the opportunity to realise returns through investing in both public and private businesses that are established in, operating in or have exposure to Kazakhstan. Although Kazakhstan focused, the Company will also seek investment opportunities in the Kyrgyz Republic, Uzbekistan, Turkmenistan, Tajikistan, Mongolia and Russia (the "Investment Countries"). The Company is listed on the Alternative Investment Market of the London Stock Exchange. The Company has no employees.

The Company's public investments are held by a subsidiary, Tau Cayman LP. Tau Cayman LP also holds two (2010: three) private investments. The other private investment is held by Tau SPV 1 Cooperatief. Tau Cayman LP, Tau SPV 1 Cooperatief, Tau Cayman Limited and Tau Capital plc are referred to as the "Group" (see note 19).

The Group intends to invest in public companies with substantial operating assets in Kazakhstan or in the Investment Countries who have securities listed on the KASE or other stock exchanges or over-the-counter-markets. These investments may be in combination with additional debt or equity-related financings, and potentially in collaboration with other financial and/or strategic investors.

In addition, the Group aims to provide equity and equity-related investment capital to private companies operating in, or with business exposure to Kazakhstan and further in the Investment Countries who are seeking capital for growth and development, consolidation or acquisition, or as a pre-initial public offering round of financing. Investments may also be made in special situations if Compass Asset Management Ltd (the "Investment Manager") considers the investment to be of a type in keeping with the aims of the Group.

2. Accounting Policies

The financial statements have been prepared on the historical cost basis, modified by the revaluation of investments. The principal accounting policies adopted are set out below.

a) Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), issued by the International Accounting Standards Board ("IASB"), interpretations issued by the International Financial Reporting Committee of the IASB and applicable legal and regulatory requirements of Isle of Man law and the AIM Rules of the London Stock Exchange.

b) New accounting standards

As of the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:

·; IFRS 9: Financial Instruments was issued in November 2009. The standard is effective for annual periods, beginning on or after 1 January 2015, with earlier application permitted. The adoption of this standard is expected to have limited impact on the classification and measurement of financial instruments.

·; Amendment to IAS 32 (Dec 2011) - Offsetting Financial Assets and Financial Liabilities. Effective 1 January 2014. The adoption of this standard in future periods is not expected to have a material impact on the financial statements of the Company.

·; Amendment to IFRS 7 (Dec 2011) - Disclosures - Offsetting Financial Assets and Financial Liabilities. Effective 1 January 2013. The adoption of this standard in future periods is not expected to have a material impact on the financial statements of the Company.

·; Amendments to IAS 1 (June 2011) - Presentation of Items of Other Comprehensive Income. Effective 1 July 2012. The adoption of this standard in future periods is not expected to have a material impact on the financial statements of the Company.

·; IAS 19 (revised June 2011) - Employee Benefits. Effective 1 January 2013. The adoption of this standard in future periods is not expected to have a material impact on the financial statements of the Company.

·; IFRS 13- Fair Value Measurement. Effective 1 January 2013. The adoption of this standard may impact on disclosures in the financial statements in future periods.

·; IFRS 12 - Disclosure of Interest in Other Entities. Effective 1 January 2013. The adoption of this standard may impact on disclosures in the financial statements in future periods.

·; IFRS 11 - Joint Arrangements. Effective 1 January 2013. The adoption of this standard may impact on disclosures in the financial statements in future periods.

·; IFRS 10 - Consolidated Financial Statements. Effective 1 January 2013. The adoption of this standard may impact on disclosures in the financial statements in future periods.

·; IAS 28 (revised May 2011) - Investments in Associates and Joint Ventures. Effective 1 January 2013. The adoption of this standard in future periods is not expected to have a material impact on the financial statements of the Company.

·; IAS 27 (revised May 2011) - Separate Financial Statements. Effective 1 January 2013. The adoption of this standard in future periods is not expected to have a material impact on the financial statements of the Company.

·; Amendments to IAS 12 (Dec 2010) - Deferred Tax: Recovery of Underlying Assets. Effective 1 January 2012. The adoption of this standard in future periods is not expected to have a material impact on the financial statements of the Company.

·; Amendments to IFRS 1 (Dec 2010) - Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters. Effective 1 July 2011. The adoption of this standard in future periods is not expected to have a material impact on the financial statements of the Company.

·; Amendments to IFRS 7 (Oct 2010) - Disclosures - Transfers of Financial Assets. Effective 1 July 2011. The adoption of this standard in future periods is not expected to have a material impact on the financial statements of the Company.

·; IFRIC 20 - Stripping Costs in the Production Phase of a Surface Mine. Effective 1 January 2013. The adoption of this standard in future periods is not expected to have a material impact on the financial statements of the Company.

c) Basis of presentation

The financial statements are presented in US dollars. The functional currency is also the US dollar.

In accordance with Section 3(5) of the Isle of Man Companies Act 1982, no separate Statement of Comprehensive Income has been presented for the Company. The parent company incurred a loss of US$32,792,127 in the year (2010: profit of US$15,601,201).

The Group's business activities, together with the factors likely to affect its future development, performance and positions are set out in the Investment Managers Report on pages 3 to 8. Note 1 and note 11 to the financial statements include the Group's objectives and policies, its financial risk management objectives, details of its financial instruments and hedging activities and its exposures to market risk, credit risk and liquidity risk.

The Group has considerable financial resources and as a consequence the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and consolidated financial statements.

The Statement of Financial Position presents assets and liabilities in decreasing order of liquidity and does not distinguish between current and non-current items. All of the Group's assets and liabilities are held for the purpose of being traded or are expected to be realised within one year with the exception of private investments and associated interest receivable. All references to net assets throughout this document refer to net assets attributable to holders of ordinary shares unless otherwise stated.

d) Significant accounting estimates and judgements

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and assumptions. It also requires the Board of Directors to exercise its judgement in the process of applying the Group's accounting policies. Key estimates, assumptions and judgements that have significant risk of causing material adjustment to the carrying amount of assets and liabilities within the next financial year are outlined below:

Fair value of financial instruments

Where the fair value of financial assets and financial liabilities recorded in the Statement of Financial Position cannot be derived from active markets, they are determined using a variety of valuation techniques. Where applicable, investments are valued according to the International Private Equity and Venture Capital Valuation Guidelines based on the opinions and advice of the Investment Manager. Valuation techniques may include the use of mathematical models. The input to these models is taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. It is reasonably possible that outcomes within the next financial year that are different from assumptions could require a material adjustment to the carrying amount of the asset or liability affected. Further details concerning the uncertainties surrounding the valuation of private investments can be found in note 5 and note 18.

e) Financial instruments

i) Classification

The Group designates its assets and liabilities into the category below in accordance with IAS 39 "Financial instruments: Recognition and Measurement".

Financial assets and liabilities at fair value through profit or loss

The category of financial assets and liabilities at fair value through profit or loss is further sub-divided into:

Financial assets and liabilities held for trading: These include equities, debt instruments, OTC options, futures and liabilities from short sales of financial instruments. These instruments are acquired or incurred principally for the purpose of generating a profit from short-term fluctuation in price. Derivatives are categorised as held for trading, as the Group does not designate any derivatives as hedges for hedge accounting purposes as described under IAS 39.

Financial assets and liabilities designated at fair value through profit or loss at inception: including private investments comprising equity, bridging loans, mezzanine loans, profit participating loans, or combinations thereof. These are financial instruments that are not classified as held for trading but are managed, and their performance is evaluated on a fair value basis in accordance with the Group's documented investment strategy. Private investments have been designated at fair value through profit or loss and accounted for in accordance with IAS 39 "Financial Instruments: Recognition and Measurement". IAS 28 "Investments in Associates" and IAS 31 "Interest in Joint Ventures" has not been applied by the Company to the investments that it holds in associates or joint ventures.

ii) Recognition

All regular way purchases and sales of financial instruments are recognised on the trade date, which is the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial instruments that require delivery of assets within the period generally established by regulation or convention in the market place. Realised gains and losses on disposals of financial instruments are calculated using the first-in-first-out ("FIFO") method.

iii) Initial measurement

Financial instruments categorised at fair value through profit or loss, are recognised initially at fair value, with transaction costs for such instruments being recognised directly in the Statement of Comprehensive Income.

iv) Subsequent measurement

After initial measurement, the Group measures financial instruments which are classified as at fair value through profit or loss at their fair values. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. The fair value of financial instruments is based on their quoted market prices on a recognised exchange or sourced from a reputable broker/counterparty in the case of non-exchange traded instruments at the date of the Statement of Financial Position without any deduction for estimated future selling costs. Financial assets are priced at their current bid prices, while financial liabilities are priced at their current offer prices.

If a quoted market price is not available on a recognised stock exchange or from a reputable broker/counterparty, the fair value of the financial instruments may be estimated by the Directors using valuation techniques, including use of recent arm's length market transactions, reference to the current fair value of another instrument that is substantially the same, discounted cash flow techniques, option pricing models or any other valuation technique that provides a reliable estimate of prices obtained in actual market transactions.

Unlisted investments are valued at the Directors' estimate of their fair value in accordance with the requirements of IAS 39 and guidelines issued by the International Private Equity and Venture Capital Association ("IPEVCA") August 2010. In estimating fair value for an investment, the Directors will apply a methodology that is appropriate in light of the nature, facts and circumstances of the investment and its materiality in the context of the total investment portfolio and will use reasonable assumptions and estimations. An appropriate methodology will incorporate available information about all factors that are likely to materially affect the fair value of the investment. Valuation methodologies will be applied consistently from year to year, except where a change would result in a more accurate estimate of the fair value of the investment, which may be up or down (see note 2(d)).

v) De-recognition

The Group de-recognises a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for de-recognition in accordance with IAS 39.

The Group derecognises a financial liability when the obligation specified in the contract is discharged, cancelled or expires.

An analysis of the fair value of financial instruments is set out in note 5.

f) Investments in subsidiaries

In accordance with IAS 27 "Consolidated and Separate Financial Statements", investments in subsidiaries are accounted for under IAS 39 "Financial Instruments: Recognition and Measurement" as investments designated at fair value through profit or loss.

g) Interest income and expense

Interest income and interest expense are recognised on an accruals basis, using the effective interest method, in line with contractual terms. Interest is accrued on a daily basis.

h) Dividend income and expense

Dividend income and expense are recognised in the Statement of Comprehensive Income on the dates on which the relevant securities are listed as "ex-dividend". Dividend income is shown gross of any non-recoverable withholding taxes, which are disclosed separately in the Statement of Comprehensive Income, and net of any tax credits.

i) Expenses

All expenses, including performance fees and management fees, are recognised in the Statement of Comprehensive Income on an accruals basis.

Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

k) Foreign currency translation

i) Functional and presentation currency

Items included in the Group's financial statements are measured and presented using the currency of the primary economic environment in which it operates (the "functional currency"). This is the US dollar, which reflects the Group's primary activity of investing in US dollar securities and derivatives.

ii) Foreign currency transactions

Monetary assets and liabilities and financial instruments categorised as at fair value through profit or loss, denominated in currencies other than the US dollar are translated into US dollars at the closing rates of exchange at the date of the Statement of Financial Position. Transactions during the year, including purchases and sales of securities and income and expenses are translated at the rate of exchange prevailing on the date of the transaction. Foreign currency transaction gains and losses are included in realised and unrealised gains and losses on financial assets and liabilities designated at fair value through profit or loss.

Cash and cash equivalents comprise of cash balances with a maturity date of up to three months from the date of acquisition. They are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant changes in value and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

Amounts due from and to brokers represent receivables for securities sold and payables for securities purchased that have been contracted for but not yet settled or delivered on the date of the Statement of Financial Position.

n) Taxation

The Company is resident for tax purposes in the Isle of Man and its profits are subject to Isle of Man corporate income tax at the current rate of 0%.

The Group is exempt from all forms of taxation in the Cayman Islands, including income, capital gains and withholding taxes.

Provided the relevant investments meet the criteria of the participation exemption, the Group will not incur any taxes in the Netherlands. To date, the Group has not incurred a liability to Dutch tax.

The Group suffered withholding taxes on dividends received from foreign sources in the current and prior year.

o) Share capital

The Company's founder shares are classified as equity in accordance with the Company's Articles of Association.

p) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December 2011. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date control ceases. The financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full on consolidation.

q) Segment reporting

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board of Directors in order to allocate resources to the segment and assess its performance.

The investment strategy of the Group is focused on entities that operate in or have an exposure to Kazakhstan and the Investment Countries, which represent one geographical segment. Accordingly, the Directors are of the opinion that the Group is engaged in a single segment of business, being investment business, in one geographical area, being Kazakhstan and the Investment Countries.

r) Share-based payments

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, from the date that they are issued. The equity-settled transactions were fully vested on the date of their issue.

For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the fair value of the liability determined at each date of the Statement of Financial Position with any changes in fair value recognised in profit or loss for the year.

4. Derivative Contracts

Typically, derivative contracts serve as components of the Group's investment strategy and are utilised primarily to structure and hedge investments to enhance performance and reduce risk to the Group (the Group does not designate any derivatives as hedges for hedge accounting purposes as described under IAS 39). The derivative contracts that the Group holds or issues are over-the-counter ("OTC") options and futures.

The Group records its derivative activities on a mark-to-market basis. Fair values are determined by using quoted market prices. For OTC contracts, the Group enters into master netting agreements with its counterparties, therefore, assets represent the Group's unrealised gains less unrealised losses for OTC contracts in which the Group has a master netting agreement. Similarly, liabilities represent net amounts owed to counterparties on OTC contracts.

A breakdown of the fair value of the derivatives held as at 31 December 2011 and 31 December 2010 can be found in note 3 to the financial statements above.

The primary difference in the risk associated with OTC contracts and exchange-traded contracts is credit risk. The Group has credit risk from OTC contracts when two conditions are present (i) the OTC contracts have unrealised gains, net of any collateral and (ii) the counterparty to the contract defaults. The credit risk related to exchange-traded contracts is minimal because the exchange ensures that their contracts are always honoured.

The Group purchases or sells put and call options through the OTC markets. Options purchased by the Group provide the Group with the opportunity to purchase (call options) or sell (put options) the underlying asset at an agreed-upon value either on or before the expiration of the option. The Group is exposed to credit risk on purchased options only to the extent of their carrying amount, which is their fair value.

Options written by the Group provide the purchaser of the option the opportunity to purchase from or sell to the Group the underlying asset at an agreed-upon value either on or before the expiration of the option.

Premiums received from writing options are mark-to-market in accordance with note 2 (e) and the resulting gains or losses are recorded in the Statement of Comprehensive Income.

5. Fair Value of Financial Instruments

The Group categorises its investments in accordance with IFRS 7 - Financial Instruments: Disclosures ("IFRS 7") and values investments in accordance with IAS 39 - Financial Instruments: Recognition and Measurement. IFRS 7 defines fair value and establishes a framework for measuring fair value. The fair value of financial assets and liabilities are calculated in accordance with the accounting polices disclosed in note 2 (e) to the financial statements

Financial instruments included in each category are as follows:

Level 1 - Quoted market price: Public equities and contracts for difference

Level 2 - Market observable inputs: Debt instruments and options

Level 3 - Non-market observable inputs: Private investments and debt instruments

The following tables show an analysis of financial instruments recorded at fair value, between those whose fair value is based on quoted market prices (level 1), those involving valuation techniques where all the model inputs are observable in the market (level 2) and those where the valuation technique involves the use of non-market observable inputs (level 3).

As at 31 December 2011, the breakdown was as follows:

As at 31 December 2010, the breakdown was as follows:

The following is a reconciliation of the movement in financial assets for which non-market observable inputs (level 3) were used to determine fair value as at 31 December 2011 and 31 December 2010:

Net realised and unrealised gain on investments is recognised as investment income in the Statement of Comprehensive Income. The valuation of the private investments is subject to inherent uncertainty. Further details can be found in note 18. There were no transfers into or out of level 3 during the year.

6. Amounts Due from Brokers

Morgan Stanley & Co International Plc provides a leverage facility for the Group, which fluctuates according to the liquidity of the financial instruments in the Group's portfolio at the valuation date. The limits of leverage can change due to portfolio structure changes, changes in market value of securities and in the portfolio's liquidity. The Group pays the margin debit interest at the beginning of each month at a rate of LIBOR plus 65bps based on the settlement debit balances at the end of the previous month. The leverage facility provided is repayable on demand. This leverage facility was not in use at the year end.

7. Cash and Cash Equivalents

8. Fees and Expenses

Investment management fees

The Investment Manager is entitled to receive from the Group an investment management fee equal to 2% per annum of the net asset value of the Group. The Group will pay the investment management fee semi-annually in advance.

In addition to the above, the Group bears the third party and other out-of-pocket expenses reasonably incurred in the performance of the duties of the Investment Manager, provided that the amount of the expenses shall not exceed the annual cap of US$500,000.

The investment management fee for the year was US$3,391,434 (2010: US$3,076,295) of which US$Nil (2010: US$Nil) was outstanding as at 31 December 2011.

Performance fees

The Investment Manager is also entitled to receive a performance fee if the net asset value of the Group as at 31 December in the relevant year is greater than or equal to the Group's high water mark.

No performance fees were earned for the year ended 31 December 2011 or 31 December 2010.

The Administrator is entitled to receive a fixed fee of £6,250 each calendar quarter.

The Sub-Administrator is entitled to receive a monthly fee for the provision of administration and accounting services of US$3,000 plus an additional fee at the following rates:

(a) 0.08% of the first US$100 million of average net assets;

(b) 0.06% of the next US$100 million of average net assets;

(c) 0.04% of the next US$100 million of average net assets; and

(d) 0.03% of the average net assets in excess of US$300 million.

The Sub-Administrator is also entitled to receive a monthly fee for its trade support and middle office services at the following rates:

(a) 0.06% of the first US$100 million of average net assets;

(b) 0.04% of the next US$100 million of average net assets; and

(c) 0.03% of the average net assets in excess of US$200 million.

Directors' remuneration

The Directors are entitled to receive by way of fees for their services as Directors, such sum as the Board may determine (not exceeding £400,000 per annum or such other sum as the Group in General Meeting shall determine). Each Director is entitled to be repaid all reasonable travelling, hotel and other expenses properly incurred by him in the performance of his duties as a Director.

The Director's remuneration expense for the year amounted to US$151,584 (2010: US$152,000). During the year end 31 December 2011 Robert Brown, III, Philip Lambert, Philip Scales, Richard Horlick and Michael Sauer received GBP£40,000, GBP£50,000,GBP £10,000, GBP £Nil and GBP £Nil respectively in Director's remuneration.

Operating expenses

The Group meets all its own costs and expenses including the costs and expenses of advisors, consultants and other agents engaged on its behalf, commissions, banking fees, legal expenses, audit fees, listing costs and the costs of distribution of reports and accounts and similar documentation to shareholders.

Audit fees

Fees charged by the independent auditor for the year ended 31 December 2011 were US$85,072 (2010: US$81,407) of which US$62,164 (2010: US$62,626) was outstanding as at 31 December 2011.

The following table shows the breakdown of accounts payable and accrued expenses as at 31 December 2011 and 31 December 2010:

The following table shows the breakdown of operating expenses incurred for the year ended 31 December 2011 and 31 December 2010:

9. Share Capital and Share Premium

The authorised share capital of the Group is £3,502,000 comprising 350,199,998 ordinary shares of £0.01 each and 2 founder shares of £0.01 each. The founder shares carry identical rights and privileges to the ordinary shares of the Group which includes right to receive all dividends and other distributions declared, made or paid. The share capital of the Group has been allocated, called up and fully paid. The shares in issue as at 31 December 2011 and 31 December 2010 were as follows:

There were no capital transactions throughout the years ended 31 December 2011 and 31 December 2010.

10. Related Party Transactions

Michael Sauer, a Director of the Company as listed on page 1, is the CEO of Visor Holding LLP, the parent group of Compass Asset Management JSC, and also the Chairman of Compass Asset Management JSC. Compass Asset Management JSC is the single shareholder of Compass Asset Management Ltd. Compass Asset Management Ltd is the investment manager for Tau Capital Plc.

Michael Sauer also holds a stake in Visor Investment Services Limited.

Philip Scales, a Director of the Company as listed on page 1, is the managing director of IOMA Fund and

Investment Management Ltd, the administrator.

Fee arrangements with related parties and details of Director's remuneration can be found in note 8.

The investment in Teniz Service LLP ("Teniz") completed in September 2008, was made through a mezzanine loan to Contour Caspian Ventures Ltd ("Contour"), a wholly owned subsidiary of Visor Investment Services Limited. The Guarantor of this loan is Visor Holding LLP. Visor Holding LLP is 100% shareholder of the investment advisor of the fund (Compass Asset Management JSC). Contour is a 35% shareholder of Waterford International Holding Ltd ("Waterford"), a consortium owning a 51% controlling equity stake in Teniz. Therefore this transaction is a related party transaction (see note 18).

The investment in Lucent Petroleum LLP, made through a convertible bridging loan to Lucent Oil and Gas (Cyprus) Limited, a wholly owned subsidiary of Visor Investment Services Limited, is a related party transaction (see note 18).

As at 31 December 2011 and 31 December 2010 Philip Lambert and Robert Brown, III each held 500,000 ordinary shares in the Company. These shares were granted in consideration for the provision of services pursuant to their letters of appointment as non-executive Directors.

As at 31 December 2011 and 31 December 2010, Richard Horlick held 22,600,000 ordinary shares.

As at 31 December 2011 and 31 December 2010, both Spencer House Capital Management, LLP and Compass Asset Management Ltd held one founder share each.

11. Financial Instruments and Associated Risks

Introduction

In accordance with the Company's accounting policy for investments in subsidiaries (note 2f), these are designated at fair value through profit or loss. Since the Group's underlying net assets are owned by its subsidiaries and are carried at fair value, the disclosures in this note relating to financial instruments and associated risks are the same for both the Company and the Group.

Risk is inherent in the Group's activities but is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls. The process of risk management is critical to the Group's continuing profitability. The Group is exposed to market risk (which includes currency risk, interest rate risk and other price risk), credit risk and liquidity risk arising from the financial instruments it holds.

Risk management structure

The Board of Directors is ultimately responsible for identifying and controlling risks. However, it is the Investment Manager who manages and monitors risks on an ongoing basis.

Risk measurement and reporting system

The Group's risks are measured using a method which reflects both the expected loss likely to arise in normal circumstances and unexpected losses, which are an estimate of the ultimate actual loss based on statistical models. The model makes use of the probabilities derived from historical experience, adjusted to reflect the economic environment.

Monitoring and controlling risks is primarily performed based on limits established by the Board. These limits reflect the business strategy and market environment of the Group as well as the level of risk that the Group is willing to accept. In addition, the Group monitors and measures the overall risk bearing capacity in relation to the aggregate risk exposure across all risk types and activities.

Risk mitigation

The Group has investment guidelines that set out its overall business strategies, its tolerance for risk and its general risk management philosophy and have established processes to monitor and control economic hedging transactions in a timely and accurate manner. The Group uses derivatives and other instruments for trading purposes and in connection with its risk management activities.

Excessive risk concentration

Concentration arises when a number of counterparties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentration indicates the relative sensitivity of the Group's performance to developments affecting a particular industry or geographical location.

Market risk

Market risk is the risk that the fair value, or future cash flows of a financial instrument, will fluctuate because of changes in market prices and includes interest rate risk, foreign currency risk and "other price risks", such as equity and commodity risk.

The Group's strategy on the management of investment risk is driven by its investment objective as outlined in note 1 to the financial statements. Details of the Group's financial instruments outstanding at the date of the Statement of Financial Position can be seen in the Schedule of Investments (unaudited) on pages 46 to 47.

Equity price and private investment risk

Equity price risk is the risk that the fair values of equities decrease as a result of changes in the levels of equity indices and the value of individual stocks. The equity and private investment price risk exposure arises from the Group's investment portfolio. The Group manages this risk by investing on different stock exchanges and in different sectors.

Price movements are influenced by, among other things, changing supply and demand relationships, monetary and exchange control programs, policies of governments, political and economic events, and policies and emotions of the marketplace.

The Investment Manager considers the asset allocation of the portfolio in order to minimise risks whilst achieving the Group's investment objectives. The Group maintains a diversified portfolio both in terms of the number of positions, their geographic location and industry sector (as detailed in the Schedule of Investments (unaudited) on pages 46 to 47).

The following table shows the breakdown by industry sector as at 31 December 2011:

The following table shows the breakdown by industry sector as at 31 December 2010:

The Investment Manager manages market positions on a daily basis and seeks to mitigate this risk by applying the following restrictions to the portfolio of investments:

(i) the Group acquires only minority stakes in public investments;

(ii) where the Group secures a substantial minority stake or a controlling stake in a private company, it obtains appropriate board representation;

(iii) the Group will not invest more than 15% of the net asset value of the Group in a single company or single affiliated group of companies; and

(iv) the Group will not invest more than 40% of the net asset value of the Group in any one sector.

The Group's overall market positions are monitored on a quarterly basis by the Board of Directors during Board meetings.

Management's best estimate of the effect on net assets and profit due to a reasonably possible change in significant equity indices, with all other variables held constant as at 31 December 2011 is as follows:

Management's best estimate of the effect on net assets and profit due to a reasonably possible change in significant equity indices, with all other variables held constant as at 31 December 2010 was as follows:

Management's best estimate of the effect on net assets and profit due to a reasonably possible change in private investments of a decrease of 10%, with all other variables held constant as at 31 December 2011 is US$5,756,623 (2010: US$6,355,789)

In practice the actual trading results may differ from this change and the difference could be material.

Currency risk

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.

The Group invests in assets denominated in currencies other than its presentation currency, the US dollar. Consequently, the Group is exposed to risks that the exchange rate of the US dollar, relative to other currencies, may change in a manner which has an adverse effect on the reported value of that portion of the Group's assets which is denominated in currencies other than the US dollar.

The Group's currency risk is managed on a daily basis by the Investment Manager through a review of the portfolio. The Group's overall currency risk is monitored on a quarterly basis by the Board of Directors during Board meetings.

At 31 December 2011 the Group's exposure to foreign currency was as follows:

At 31 December 2010 the Group's exposure to foreign currency was as follows:

The analysis below discloses management's best estimate of the effect of a reasonably possible movement in currency rates against the US dollar, with all other variables held constant on the Statement of Comprehensive Income (due to the fair value of currency sensitive trading monetary assets and liabilities) and Statement of Financial Position (due to the change in fair value of currency swaps and forward foreign exchange contracts). A negative amount in the table reflects a potential net reduction in total comprehensive income or net assets, while a positive amount reflects a net potential increase as at 31 December 2011.

In practice the actual trading results may differ from this change and the difference could be material.

The analysis below discloses management's best estimate of the effect of a reasonably possible movement in currency rates against the US dollar, with all other variables held constant on the Statement of Comprehensive Income (due to the fair value of currency sensitive trading monetary assets and liabilities) and Statement of Financial Position (due to the change in fair value of currency swaps and forward foreign exchange contracts). A negative amount in the table reflects a potential net reduction in total comprehensive income or net assets, while a positive amount reflects a net potential increase as at 31 December 2010.

In practice the actual trading results may differ from this change and the difference could be material.

Interest rate risk

The majority of the Group's financial assets and liabilities are non-interest bearing. As a result, the Group is not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates. Any excess cash and cash equivalents are invested at short-term market interest rates.

The Group's interest rate risk is managed on a daily basis by the Investment Manager and is monitored on a quarterly basis by the Board of Directors during Board meetings.

Liquidity risk

Kazakhstan and the Investment Countries have less liquid and developed securities markets than the United States of America and Western Europe. The public equities which are listed on KASE or a stock market in the Investment Countries may be less liquid and may carry a higher risk than an investment in shares listed on markets in the United States of America and Western Europe.

Given that organised securities markets in Kazakhstan and the Investment Countries have been established relatively recently, the procedures for settlement, clearing and registration of securities transactions may be subject to legal uncertainties, technical difficulties and delays. Although significant developments have occurred in recent years, the sophisticated legal and regulatory frameworks necessary for the efficient functioning of modern capital markets have yet to be fully developed in Kazakhstan and the Investment Countries. In particular, legal protections against market manipulation and insider trading are less well developed in Kazakhstan and the Investment Countries, and less strictly enforced, than in the United States of America and Western European countries, and existing laws and regulations may be applied inconsistently with consequent irregularities in enforcement. In addition, less information relating to the proposed target entities and certain of the investments may be publicly available to investors in securities issued or guaranteed by such entities than is available to investors in entities organised in the United States of America or Western European countries.

The Group's liquidity is managed on a daily basis by the Investment Manager. The objective of the Group is to establish portfolio positions on the merits of the investment case for the stock. The Investment Manager takes care to note the liquidity of a company before investing. The Investment Manager builds significant positions where it sees significant upside potential, sometimes in cases where there is limited liquidity, believing that the liquidity will improve as the market perceives better value in the company. The portfolio has a spread of investments in both semi-liquid and very liquid companies which diversifies its exposure across sectors and markets.

As at 31 December 2011, the Group held private investments with an estimated total fair value of US$57,566,228 (2010: US$63,557,895) which represents 39.88% (2010: 35.50%) of the Group's net assets. These investments are considered to be illiquid as there is no active market for the purchase and sale of these investments (see note 18).

The table below analyses the Group's financial liabilities as at 31 December 2011 and 31 December 2010 into relevant maturity groupings based on the remaining period at the date of the Statement of Financial Position to the contractual maturity date. The amounts in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

As at 31 December 2011

As at 31 December 2010

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Group resulting in a financial loss to the Group. It is the Group's policy to enter into financial instruments with a range of reputable counterparties. Therefore, the Group does not expect to incur material credit losses on its financial instruments.

Financial assets, which potentially expose the Group to credit risk, consists principally of cash due from brokers. The Group's cash balances are primarily with high credit quality, well-established financial institutions. The extent of the Group's exposure to credit risk in respect of these financial assets approximates their carrying value as recorded in the Group's Statement of Financial Position.

With respect to derivative financial instruments, credit risk arises from the potential failure of counterparties to meet their obligations under the contract or arrangement.

The Group also invests in two types of financial assets, principally those that are equity in nature and listed and those that are private and unlisted and these can be in the form of loans which include an interest element. All transactions in listed securities are settled/paid for upon delivery using approved brokers. The risk of default is considered minimal, as delivery of securities sold is only made once the broker has received payment. Payment is made on purchases once the securities have been received by the broker. The trade will fail if either party fails to meet its obligation.

Transactions are only concluded with counterparties which have an investment grade as rated by a well known rating agency. All publicly held assets are held under a Prime Brokerage relationship with either Morgan Stanley & Co International plc, operating as a subsidiary of Morgan Stanley plc, Subsidiary Bank HSBC Kazakhstan Joint Stock Company operating as a subsidiary of HSBC plc or Renaissance Capital.

At 31 December 2011 the brokers had the following ratings:

The following table shows the value of net assets held with each Prime Broker as at 31 December 2011:

The following table shows the value of net assets held with each Prime Broker as at 31 December 2010:

The Group may be adversely impacted by an increase in its credit exposure related to investing, financing and other activities. The Group is exposed to the potential for credit-related losses that can occur as a result of an individual, counterparty or issuer being unable or unwilling to honour its contractual obligations. These credit exposures exist within financing relationships, commitments, derivatives and other transactions. These exposures may arise, for example, from a decline in the financial condition of a counterparty, from entering into derivative contracts under which counterparties have obligations to make payments to us, from a decrease in the value of securities of third parties that the Group holds as collateral, or from extending credit through guarantees or other arrangements. As the Group's credit exposure increases, it could have an adverse effect on the Group's business and profitability if material unexpected credit losses occur.

The Investment Manager manages the Group's credit risk through regular monitoring of the counterparty's creditworthiness, with particular reference to ratings checks, third party research and the counterparty's reputation in the market. The Group's credit risk is monitored on a quarterly basis by the Board of Directors.

Private investments risk

The main risks related to private investments that the Group is exposed to, are liquidity risk, credit risk and pricing risk. These risks are correlated: since private investments are not traded in organised markets there are no guarantees that a buyer for these investments will materialise or repayment of loans and associated interest will happen in line with expectations, in particular if there is an expectation set forth in terms of investment realisation/loan repayment. A lack of an organised market might also cause a significant difference between the carried or expected valuation and the actual price obtained at realisation for those investments or the timing and method of the repayment (see note 18 for further details).

12. Exchange Rates

The following exchange rates were used to translate assets and liabilities into US dollars at 31 December 2011 and 31 December 2010:

13. Distributions

Subject to the provisions of the Articles, the Company may by ordinary resolution, declare that out of profits available for distribution, in accordance with Isle of Man law, dividends be paid to members according to their respective rights and interests in the profits of the Company. However, no dividend shall exceed the amount recommended by the Board. There is no fixed date on which an entitlement to a dividend arises.

No dividends were paid during the years ended 31 December 2011 and 31 December 2010.

14. Soft Commissions

During the year, the Investment Manager and connected persons have not entered into soft commission arrangements with brokers in respect of which certain goods and services used to support investment decision making were received.

15. Commitments and Contingent Liabilities

As at 31 December 2011, the Group has no further commitments to Lucent Oil and Gas (Cyprus) Limited (31 December 2010: US$10.5m).

16. Valuation of the Group

The Net Asset Value ("NAV") of the Group as at 31 December 2011 and 31 December 2010, as reported at the time (based on last traded prices of underlying investments), differs from the financial statements. In accordance with IAS 39, long positions in the financial statements are valued at bid prices and short positions at offer prices.

During the year ended 31 December 2010, following a review of the interest rate calculation methodology adopted for Teniz (use of daily compounding rather than simple accrual) an adjustment of US$2,143,044 was made. No similar adjustment has been made during the year ended 31 December 2011.

17. (Loss)/Earnings per Share

Basic earnings per share is calculated by dividing the consolidated net profit or loss attributable to shareholders by the weighted average number of ordinary shares outstanding during the year.

There is no difference between the fully diluted earnings per share and basic earnings per share.

18. Private Investments Designated at Fair Value Through Profit or Loss and Associated Interest Receivable

At the financial year end, the Group's private investment portfolio comprised three investments as follows:

The directors have valued these investments on advice of the Investment Manager and using the guidance laid down in the International Private Equity and Venture Capital Valuation Guidelines (August 2010).

(i) Stopharm LLP ("Stopharm")

Stopharm is a wholesale pharmaceuticals distributor operating in Kazakhstan. On 1 September 2010, the Group announced the closing of a US$21.5 million investment in Stopharm comprising a 24.00% equity stake in Stopharm acquired for US$12.8 million and a fully secured convertible bridge loan of US$8.7 million provided to one of the shareholders of Stopharm with implied equity on conversion representing an additional 16.35% stake. The conversion into equity of this loan was subject to approval by the Anti Monopoly Committee of the Republic of Kazakhstan which was received on 25 November 2011. The conversion subsequently took place on 27 December 2011. As such, at the year end, Tau held a 40.35% equity stake in Stopharm.

(ii) Lucent Petroleum LLP ("Lucent")

Lucent is a Cyprus based oil and gas exploration company that in turn has a 99% equity stake in a Kazakhstan based subsidiary that owns rights to a block located in the pre Caspian basin, and in close proximity to several major producing oilfields. On 22 September 2010, the Group announced an investment in Lucent with total commitments of US$15 million, with an initial US$4.5 million drawdown on that date. The investment is structured as a convertible bridge loan to Lucent Oil & Gas (Cyprus) Limited, an indirect holding company of Lucent. Conversion of the loan is subject to grant of approvals by the Government of the Republic of Kazakhstan.

On completion of the operational milestones established in the Lucent business plan, on 15 July 2011, Tau provided the final tranche of financing in the shape of a convertible loan for a consideration of US$4m. After the final tranche was made, the total investment in Lucent increased to US$15 million. The conversion of US$15 million into the 6.18% stake in Lucent Oil & Gas (Cyprus) Ltd equity is subject to grant of approvals by the Government of the Republic of Kazakhstan. This approval was received on 3 November 2011. (See note 23 - events after the date of the Statement of Financial Position).

(iii) Alem Communications Holding LLP ("Alem")

Alem is a telecom holding company operating within the territory of the Republic of Kazakhstan. At 31 December 2011 Tau has an indirect stake of 12.29% in Alem through a secured senior profit participating loan ("SSPPL") in DTV Investment Holding LLP ("DTVI") which has a direct holding in the shares of Alem. During the year ended 31 December 2011 the shareholder capital of Alem was increased by Midas, the majority shareholder, while Tau/DTVI did not participate. Tau's investment in Alem is valued at US$21,066,228 as at 31 December 2011 based on the price of the most recent investment transaction which related to a sale of Alem shares to a third party that closed on 18 August 2011, as per IPEVCA guidelines.

(iv) TenizService LLP ("Teniz")

Teniz is an oil and gas services company operating in Kazakhstan. On 5 September 2008, the Group provided a loan of US$19.5 million to Contour Caspian Ventures Limited ("Contour" or "the Borrower") which through a back to back loan to Waterford International Holdings Limited ("Waterford") was utilised by Waterford to acquire share capital in Teniz. The interest was accrued at a rate of 18% per annum.

There was an option to convert the interest receivable to shares in Waterford under the terms of the loan agreement. However, following the Investment Manager's advice, a Board decision was made on 29 June 2011 not to convert interest accrued on the loan into the equity of Waterford on the expiration of the loan on 4 September 2011. As a result the Group received the full loan amount of US$19.5 million plus US$10.57 million of accrued interest from Contour on 6 September 2011.

As stated in note 2(d) where valuation of investments is dependent on non-market observable inputs a degree of judgement is required on estimating fair values. Accordingly the valuation of the private investments is subject to inherent uncertainty.

19. Investments in Subsidiaries

Tau SPV 3 Cooperatief was dissolved on 9 February 2010.

The values of the subsidiaries at 31 December 2011 and 31 December 2010 were as follows:

20. Off-Balance Sheet Risk

Securities sold short and options written represent obligations of the Group to deliver the specified security at the contracted price, and thereby create a liability to repurchase the security in the market at prevailing prices. Accordingly, these securities may result in off-balance sheet risk as the Group's satisfaction of the obligations may exceed the amount recognised in the Statement of Financial Position.

21. Share-Based Payments

The following share-based payment arrangement was in existence with Numis Securities Limited, the Company's Nominated Adviser and Broker, at 31 December 2011 and 31 December 2010. This arrangement was conditional upon admission of the ordinary share capital of the Company to the Alternative Investment Market operated by the London Stock Exchange

The Directors have determined that the fair value of the options granted (which were fully vested at the date of grant) could not be reliably measured at the measurement date (the date of grant). Therefore in accordance with IFRS 2: Share Based Payments, the intrinsic value method has been used to determine the value of the share-based payment transaction. As at the measurement date and the current financial year-end, the intrinsic value is nil as the exercise price is greater than the market price.

22. Capital Management

The Group's objectives for managing capital are:

·; To invest the capital in investments meeting the description, risk exposure and expected return indicated in its offering memorandum.

·; To achieve consistent returns while safeguarding capital by investing in accordance with their investment strategy.

·; To maintain sufficient liquidity to meet the expenses of the Group.

·; To maintain sufficient size to make the operation of the Group cost-efficient.

Refer to "Financial Instruments and Associated Risks" (note 11) for the policies and processes applied by the Group in managing its capital. See note 9 for the Company's share capital as at 31 December 2011.

23. Events After the Date of the Statement of Financial Position

In January 2012, following the receipt by Lucent Petroleum LLP of the official letter from the Ministry of Oil and Gas of Kazakhstan providing a State Waiver of its right to purchase new shares of the company, and approval for the issuance of an additional 86 shares to Tau, the Convertible Bridge Loan originally provided by Tau to Lucent has been converted into equity.

As announced on 2 May 2012, the Company has entered into an irrevocable Sale-Purchase Agreement for the full sale of its interest in Alem Communications Holding LLP for KZT 2,888 million (approximately US$19.56 million). Completion is expected by 31 May 2012.

During the period from 1 January 2012 to 18 April 2012 the following share buy backs took place:

There were no other significant events subsequent to the date of the Statement of Financial Position.

24. Approval of Financial Statements

The Annual Report and financial statements were approved by the Directors on 3 May 2012.

Additional Information: Schedule of Investments as at 31 December 2011 (unaudited)