Final Results

Masawara plc ("Masawara" or the "Group")

Final Results for the year ended 31 December 2012

Masawara, an investment company focused on acquiring interests in companies based in Zimbabwe and the southern African region, is pleased to announce its audited results for the year ended 31 December 2012.

The Company's Annual Report and Accounts for the year ended 31 December 2012 will be posted to shareholders today and may also be viewed on, or downloaded from, the Company's website at www.masawara.com.

Contact details

Masawara plc

Oliver Lutz/Rutendo Maziva +263 4 751805

Cenkos Securities plc (Nominated adviser and broker)

Nicholas Wells/Max Hartley +44 20 7397 8900

CHAIRMAN'S STATEMENT

Masawara Plc experienced a continued challenging environment during 2012, impacted by a significant slowdown in the rate of economic growth in Zimbabwe. Current estimates of real GDP growth for 2012 are 4.4% as compared to 2011 real GDP growth of 9.4%.

The slow-down in economic growth reflected various factors. Mineral and agricultural output was below forecasts, and concern over the country's political future has heightened in the run up to the constitutional referendum held in March 2013 and the impending general elections. A predictable consequence of this anxiety was a slow-down in foreign direct investment, and local financial markets experienced further tightening in liquidity. This resulted in local businesses experiencing difficulty in securing funding for capital expenditure and working capital on reasonable terms.

Current consensus suggests that economic growth rates in 2013 are likely to turn out lower than initially predicted, particularly in the mining and infrastructure sectors. That said, the economy in Zimbabwe continues to recover, and the country is endowed with a number of strategic advantages which should facilitate the realisation of above average growth rates in the years ahead.

More positive features of the Zimbabwe development scene should be noted. Paramount has been the peaceful adoption of the new Constitution in March 2013, which will facilitate the general elections later this year. In addition, the lifting of most European Union targeted sanctions in March 2013 was a welcome development that hopefully will further improve Zimbabwe's relations with the international community, and improve the flow of capital into Zimbabwe from regional and international markets at competitive rates, thereby providing a catalyst to economic growth.

Masawara Plc's financial performance has been below expectations, with the Group incurring an after tax loss for the year of $9.3 million. Significant losses were incurred in Telerix Communications (Private) Limited, which launched its retail broadband network at the end of June 2012. Masawara Plc will continue to provide support to this business during 2013, as it grows and increases its share of the retail broadband market in Zimbabwe. Full details of the Group's financial performance are included in the Directors' Report.

We expect 2013 to be a year of consolidation which will reflect continuing restructuring and optimisation of our investment portfolio to unlock value and provide a solid platform for future growth.

David Suratgar

Chairman

28 June 2013

DIRECTORS' REPORT

The Directors present the audited financial statements of the Group for the year ended 31 December 2012.

Principal Activities

Masawara Plc is an investment company focused on acquiring interests in companies based in Zimbabwe and the Southern African region. The portfolio comprises of:

·; an interest in Joina City, a premium, multi-purpose property, located in Harare's Central Business District, providing rental property for retail, entertainment and office space;

·; an interest in TA Holdings Limited ("TA Holdings"), a diversified investment company that holds stakes in insurance, agro-chemical and hospitality businesses across sub-Saharan Africa and is listed on the Zimbabwe Stock Exchange;

·; an interest in Zuva Petroleum (Private) Limited ("Zuva"), a long established importer and distributor of petroleum products in Zimbabwe;

·; an interest in Telerix Communications (Private) Limited ("Telerix"), a Zimbabwean broadband internet service provider which rolled-out a WiMAX network in Harare during the year; and

·; an interest in iWayAfrica Zimbabwe (Private) Limited ("iWayAfrica"), a broadband internet service provider.

Investment Strategy

Masawara Plc invests in businesses and assets primarily located in Zimbabwe. To the extent that value opportunities exist and attractive returns can be achieved, investments will also be considered elsewhere on the African continent.

In the identification of investment opportunities, emphasis is placed by Masawara Plc on identifying value propositions, with a view to finding, unlocking and extracting embedded real value. The Investment Advisor, Masawara Zimbabwe (Private) Limited (a subsidiary of the company), advises the Board on opportunities, acquisitions and sales, exit strategies and manages the Group's portfolio of investments in Zimbabwe on a day-to-day basis, with a view to achieving the Group's investment objective and strategy.

Business preference

The investment criteria adopted are:

·; ability to influence the business at a board level, with the Group's executives adding structuring and financing expertise to the management of the business, as well as significant industry relationships and access to finance;

·; ability to work alongside a strong management team to maximize returns through revenue growth, accretive acquisitions, and the optimization of cost control;

·; investing in businesses with a clear growth potential;

·; focusing on the creation of intrinsic value through the restructuring of the investment or a merger

with complementary businesses; and

·; emphasis on investment in cash generative businesses.

The Group will continuously assess its portfolio of investments in the light of further opportunities and the mix of investments.

Business Review

Principal risks and uncertainties

The Group's business activities together with the factors likely to affect its future development, performance and position are set out below. Note 26 to the financial statements includes the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; its exposures to credit risk and liquidity risk; and other risks.

The principal risks and uncertainties affecting the business relate to the political, economic and regulatory environment of Zimbabwe, where the investments are predominantly held. There is a further risk that investments made by the Group will not result in the envisaged cash generation or capital appreciation which might pose a risk of that the investment components may not be able to repay amounts advanced to them by the Group. This risk is managed by the careful evaluation of all proposed investments, with detailed due diligence work being undertaken, before any investments are made. The senior management of the Investment Advisor collectively has over 70 years of experience in identifying and concluding good transactions.

There is a risk that a change in laws and regulations in Zimbabwe where the investments are predominantly held, will materially impact a business, sector or market. A change in laws or regulations made by the government or a regulatory body can increase the costs of operating a business, reduce the attractiveness of investment and/or change the competitive landscape.

There is a risk that the illiquidity of the Zimbabwean capital market may affect the valuation of the Group's investment in investment property in the short to medium term. Significant judgments, estimates and assumptions made when valuing the investment property are detailed in Note 6.1 and Note 15. The illiquidity of the Zimbabwean capital market may also affect the valuation of the Zuva Petroleum (Private) Limited properties in the short to medium term.

There is a further risk that should the Group decide to sell its shares in TA Holdings Limited on the Zimbabwe Stock Exchange, that it will not realise a good return on the investment, due to the illiquidity on the stock exchange.

Related to the investment in Telerix Communications (Private) Limited, which launched its WiMAX network in June 2012, there is a risk that the slow WiMAX customer uptake may lead to changes to the initial forecasts and the competitive and economic environment may result in higher capital expenditure, lower revenues and lower investment returns for the Group which in turn could impact the carrying value of Masawara's investment in this associate. Due to losses incurred by Telerix and cash flow constraints, there is also a risk that the investment in Telerix, debentures and preference shares subscribed in this associate may be further impaired in the future.

The losses and cash flow constraints experienced by Telerix Communications (Private) Limited ("Telerix") cast doubt on the ability of Telerix to continue as a going concern without financial support from its shareholders. Accordingly based on the 12 month cashflow projections of the business to 30 June 2014, the Telerix shareholders provided letters of support pledging that they will, and are in a position to, at the request of Telerix, place sufficient funds up to a specified limit for Telerix to meet its obligations as and when they fall due during that period. Masawara Plc's share of the pledge to support Telerix was limited to $1.4 million and it was granted on 25 June 2013 for a twelve month period from the grant date. There is a risk that the amounts pledged by the Telerix shareholders may not be adequate due to unfavorable changes to the initial cash flow forecasts, the economic environment and increased competition which in turn may negatively affect the going concern of Telerix and hence the ability of Masawara Plc to recover the amounts it is owed by Telerix (i.e. the preference shares, debentures and loan).

There is also a risk that amounts granted to investee companies as loans may not be recoverable. The Group assesses the recoverability of loans granted to investee companies at each reporting date and where appropriate an impairment loss is recognized against loans that are deemed to be irrecoverable or those that will be recoverable over extended periods i.e. periods that are longer than the periods as per the original agreement

The Group's financial risk management objectives and policies are discussed in Note 26 to the financial statements.

Going concern

Management prepared cash flow forecasts indicating there is adequate operating cash for the period to 30 June 2014, and the existing short-term facilities will be utilised to fund any operating cash flow deficit that may arise during the period. In assessing the ability of the Group to continue as a going concern, management carried out sensitivity analysis on the cash flow assumptions to reflect a range of other reasonably possible outcomes and concluded that Masawara will be able to continue as a going concern. The Directors reviewed the cash flow forecasts prepared by management when assessing the ability of the Group to continue operating as a going concern. The cash flow forecasts were based on the assumption that the $2 million loan facility from Afrasia Bank Limited ("Afrasia") that the Group secured in June 2013 will be renewed in June 2014 (Note 31). The company will open renewal negotiations with the bank before the last quarter of the expiry of the facility term and the Directors have a reasonable expectation that the facility will be renewed. The Directors believe that the Group will have sufficient resources to continue to trade as a going concern for a period of at least 12 months from the date of approval of these financial statements and accordingly, the financial statements have been prepared on the going concern basis.

Results for the year

The results for the year are set out in the financial statements on pages 19 to 77.

Performance

The Group incurred a loss after tax of $9.3 million compared to a profit after tax of $7.0 million achieved in the previous year. This decline in profitability from the prior year was mainly attributable to:

·; The $9.2 million gain on the bargain purchase of Zuva Petroleum (Private) Limited, that was recognised in the consolidated statement of comprehensive income in 2011, was one-off in nature;

·; A decrease in the gain on bargain purchase of additional shares in TA Holdings Limited from $1.5 million in 2011, to $398,000 in 2012. The gain on bargain purchase in the current year was lower than that which was recorded in the previous year because the Group purchased fewer TA Holdings Limited shares during 2012, 2.4 million shares, in comparison to the 12.7 million shares purchased in the previous year;

·; An increase in the Group's share of losses incurred by associate Telerix Communications (Private) Limited ("Telerix") from a loss of $1.6 million in 2011 to a loss of $3.4 million in the current year;

·; Impairment loss on financial assets amounting to $541,000 recognized in the current year on the investments in preference shares, debentures in Telerix and the short term loan granted to Telerix;

·; A fair value gain on investment property was not recognized in the current year. Refer to Note 15 for more details; and

·; An increase in other operating expenses as a result of the share options expense recognized in the current year of $387,000.

TA Holdings Limited

Masawara Plc increased its shareholding in TA Holdings Limited "TA Holdings" from 37.73% at 31 December 2011 to 39.22% at 31 December 2012.

TA Holdings Limited achieved a 238% increase in operating profit from $1.7 million in 2011 to $5.6 million in the year ended 31 December 2012. The strong operating performance was as a result of the significant improvement in underwriting profits in the Zimbabwe and Uganda insurance companies, increases in Revenue Per Available Room (RevPARs) at all hotels, and a reduction in corporate costs as a result of the restructuring exercise in the prior year.

The increase in operating profit was however not carried through to the bottom line resulting in TA Holdings achieving a profit after tax of $3.3 million (Group's share, profit of $524,000) in 2012 compared to a profit after tax of $6.3 million (Group's share, profit of $1.6 million) achieved in the prior year.

TA Holdings Limited

The decrease in TA Holdings' group profit after tax compared to the same period last year was primarily due to the following:

·; Losses incurred by the associates Sable Chemicals Industries Limited and Zimbabwe Fertiliser Company Limited amounting to $2.7 million compared to a breakeven position recorded in the prior year;

·; A decline in investment income from $5.7 million in the prior year to $2.2 million in 2012. The prior year investment income included unrealized fair value gains of $3.8 million arising from the revaluation of an investment property;

·; A loss of $1.3 million as a result of the full impairment of TA Holdings' equity investment in PG Industries Zimbabwe Limited; and

·; A $426,000 decrease in profit before tax of the insurance businesses from the previous year.

Joina City

The Joina City was 73% occupied as at 31 December 2012 (2011: 63%) and this translated to increased Group's share of revenue by 26% from US$1.2 million in 2011 to US$1.5 million in 2012. The increased occupancy had an impact of increasing the Group's share of profit in respect of Joina City for the year to $100,790 (2011: Group's share of loss of ($74,791)).

The debtors in respect to Joina City increased to $104,277 as at 31 December 2012 (2011: $53,099) as some tenants struggled to honour their rental payments due to the illiquidity challenges experienced in Zimbabwe. Strategies to increase leasing and improve debt collection will be adopted in the coming year.

The carrying amount of the investment property was $32.9 million (2011: $32.8 million), which was not a significant change from prior year, as the Directors took a decision to discount the valuation of the property as determined by the professional valuers by 9% in order to reflect the Directors' best estimate of the building's fair value in light of the current state of debtors (tenants are slow paying) and leasing progress (the building occupancy level only increased by 10% to 73% from the previous year).

Masawara Energy (Mauritius) Limited

Masawara Energy (Mauritius) Limited ("MEM") is a joint venture and the Group's share of MEM's loss after tax for the period amounted to $2.3 million (2011: profit of $8.1 million). Included in MEM's profit after tax for the prior year is a gain that arose on bargain purchase of Zuva Petroleum (Private) Limited ("Zuva") by MEM, of which Masawara Plc's share of the gain was $9.2 million.

Zuva's total sales volumes during the period increased by 8% compared to the same period last year, despite a 52% decline in aviation volumes. Aviation volumes declined due to the main customer, Air Zimbabwe, not embarking on international flights for the significant part of the current year. Air Zimbabwe volumes started to increase towards the end of the year as scheduled flights resumed on some key routes.

The increase in volumes however did not result in an increase in operating profit mainly due to the following factors:

·; Zuva assumed the costs and risks associated with operating 28 retail sites on a proprietary basis. Zuva took over the management of these retail sites that were previously being run by operators, during the second half of 2011, and operating costs of these sites increased overheads by $2.6 million in the current year. Operating costs, excluding costs related to running company operated sites, reduced slightly compared to the previous year.

·; Despite the higher volumes achieved in the current year, high stock losses were experienced ($1.0 million) as Zuva assumed the risk of product exposure at retail sites, where the operator would ordinarily have done so.

·; $1.0 million was spent on rebranding six strategically located sites in Harare, which generate approximately 60% of Zuva's retail volumes in the city.

·; Zuva resolved a number of human resource challenges during the year, which resulted in a 9% increase in staff costs compared to the prior year.

Telerix Communications (Private) Limited

During the year, Masawara Plc subscribed for debentures in Telerix Communications (Private) Limited ("Telerix") worth $4.5 million. $1.7 million of the $4.5 million debenture related to a loan that was converted into a debenture and the remaining $2.8 million related to actual cash invested by Masawara Plc during the year. Refer to Note 14.1 for more details.

2012 was a pivotal year for Telerix, which saw its entry into the home and small business retail broadband internet market, albeit a number of months behind schedule. Following a six-month testing period, the WiMAX network was publicly launched on 20 June 2012 under the brand "uMax", offering Zimbabweans new payment facilities including real-time online payment where uMAX was the first merchant on the Zimswitch vPayments platform.

During the year ended 31 December 2012 Telerix incurred a loss of $4.9 million (2011: loss of $3.2 million) which was due to fixed operating expenditure incurred for the WiMAX network, and costs related to the testing, marketing and launching of the network. The Group's share of loss was $3.4 million (2011: $1.6 million), which included a write down of previously recognized deferred income tax assets at Telerix, in order to align with the Group's policy to only recognize deferred income tax assets in respect of tax losses when a company with a history of tax losses, starts making profits. In preparation for the new service offering, there was a 66% increase in the staff base of Telerix in 2012, which increased the ongoing operating expenses. The growth in the wholesale bandwidth and corporate sales side of the business was ahead of budget, with a 40% increase in the number of corporate customers compared to the previous year. The delays experienced in the launch of the network resulted in the business experiencing cash constraints, which was compounded by the lower than projected customer acquisition rate on the uMAX network. Refer to the business review section in this report that discusses the fact that the losses incurred by Telerix and the cash constraints Telerix is experiencing cast doubt on its ability to continue as a going concern without financial support from its shareholders.

As a result the Directors assessed the recoverability of the preference shares, the debentures and short term loans granted to Telerix and recognized an impairment loss of $541,000 in the statement of comprehensive income (Note 14.1, Note 14.2 and Note 18).

iWayAfrica Zimbabwe (Private) Limited

The Group has a 15.03% interest in iWayAfrica Zimbabwe (Private) Limited ("iWayAfrica"), which incurred a loss of $87,000, of which the Group's share was a loss $13,000 during the year ended 31 December 2012. iWayAfrica was acquired on 31 October 2011, and the results for the two months to 31 December 2011 was a loss of $55,709 (Group's share a loss of $8,000). During the current year, iWayAfrica focused on cost containment measures and growing revenues.

Cash flow for the year

At the beginning of the year, the Group's cash and cash equivalents amounted to $15 million and the net decrease in cash and cash equivalents during the year was $13 million which resulted in a closing balance of $2 million. Cash outflow from operating activities was $3.2 million and a total of $1.8 million was utilized in investing activities. $1.8 million cash utilized in investing activities comprised of the additional investment of $2.8 million in the debentures issued by Telerix Communications (Private) Limited, $357,000 utilized for the acquisition of additional shares in TA Holdings Limited and net loans advanced to related parties of $317,000. The amount used in investing activities was off-set by a cash deposit of $2 million, that was held as a financial asset at 31 December 2011, which was released to cash and cash equivalents upon maturity during the course of the year.

Cash utilised in financing activities of $8.0 million includes the repayment of a $7.5 million loan that had been advanced to the Group for the acquisition of Zuva Petroleum (Private) Limited (Note 24.2), the purchase of the Company's own shares for $333,000, which are held as treasury shares (Note 20), and the settlement of share based payments for $120,000 (Note 22).

Financial position

Non-current assets increased from $87.5 million in 2011 to $88.1 million in 2012, primarily as a result of the additional investment in Telerix Communications (Private) Limited. The prior year Statement of Financial Position was restated, following the restatement of the associate TA Holdings Limited's "TA Holdings" financial statements, which resulted in an $1.1 million increase in the Group's investment in TA Holdings, a $132,000 decrease in retained earnings and a $1.3 million increase in the revaluation reserve (Note 28). Financial liabilities decreased from $13.9 million to $6.0 million due to the repayment of loans (including accrued interest) during the year amounting to $7.8 million.

The Group had cash and cash equivalents of $2.09 million at year-end (2011: $15.04 million). The decrease in shareholders' equity from $89.8 million in 2011 to $82.2 million as at 31 December 2012 was mainly attributable to a $9.0 million loss attributable to ordinary equity holders for the year, share buy-back during the year amounting to $333,000, a $833,000 net increase in other capital reserves and an increase in the revaluation reserve by $935,000. The net asset value per share attributable to equity holders of the parent as at 31 December 2012 was $0.67 (2011: $0.73).

Post balance sheet events

Acquisition of additional shares in TA Holdings Limited

On 31 May 2013, the Group increased its shareholding in TA Holdings Limited (TA Holdings) by 1.82% to 41.04% when it purchased 3,000,000 shares on the Zimbabwe Stock Exchange for $320,452, including brokers fees.

Loan secured

On 31 May 2013, the Group secured a $350,000 loan from BancABC for the purpose of acquiring the 3,000,000 TA Holdings Limited shares disclosed above. The loan will bears interest at a rate of 13% per annum, payable monthly, and the capital portion is repayable on 31 May 2014.

Loan facility secured

On 25 June 2013, the Group secured a $2 million loan facility from Afriasia Bank Limited for the purpose of meeting working capital requirements should the need arise. The loan facility is for a twelve month period from the grant date. Outstanding loan amount will bear interest at a rate of 12% above the 3 Month US$ Libor rate per annum. Interest and capital are repayable on 25 June 2014.

Acquisition of Minerva Holdings (Private) Limited

Subsequent to year end, Masawara (Mauritius) Limited, a wholly owned subsidiary of Masawara Plc, acquired a 100% shareholding in Minerva Holdings (Private) Limited, subject to regulatory approvals in Zimbabwe. The consideration for the acquisition will be based on the underlying earnings of AON Zimbabwe (Private) Limited over a three year period, and will be capped to a maximum of $2.8 million. The consideration is payable over 3 years, with the first payment payable on 30 April 2014. Post completion, it is intended that Minerva Holdings (Private) Limited will own a 45% share of Aon Zimbabwe (Private) Limited. Aon Zimbabwe (Private) Limited has operations in Pensions Consulting and Administration, Insurance Risk Advisory and Reinsurance Broking. For the year ended 31 December 2012, Aon Zimbabwe (Private) Limited reported revenues of $6.9 million and a profit after tax of $529,000.

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Outlook

The improvement in the TA Holdings Limited operating profits is expected to continue in 2013, with all the insurance businesses forecasting increases in premiums and underwriting profits. The recently unveiled conference centre in Harare should lead to higher occupancies being achieved and increased revenues especially during the second half of 2013 following the completion of refurbishments at Cresta Lodge Harare and Cresta Sprayview Victoria Falls.

For Sable Chemical Industries Limited "Sable", the intention had been to change the business model from ammonia production, to full ammonia importation during 2012, in order to move away from the reliance on electricity. However, this was not possible due to an increase in the ammonia price on international markets, which raised the break-even tonnage required above viable limits. Sable has therefore continued to use electrolysis for ammonia production, and management continues to engage the relevant ministries in the Government of Zimbabwe and the electricity authorities in an effort to secure a viable electricity tariff.

At Joina City an additional property-letting agent has been engaged to manage the letting of the vacant office and retail space, in conjunction with the Joina City Property Manager. A lot of attention will be placed on debtors collections and the non-renewal of expiring leases for the retail tenants with a poor payment record, which will result in an increase in voids while suitable replacements are being identified. All these initiatives will unlock cash, and payments to the Joina City Co-owners commenced during 2013.

Zuva Petroleum (Private) Limited will continue with its rebranding exercise during the year, and continue to identify new operators to take over the 28 sites it is currently operating on a proprietary basis. This will not only reduce operating costs ($2.6 million incurred in 2012), it will also reduce the additional management time required to oversee operations at the sites and reduce the risks related to managing stock at a number of different sites. The resumption of daily regional Air Zimbabwe flights and the return of international airlines to Zimbabwe is also expected to increase aviation volumes for the company in the coming year.

2013 will be a challenging year for Telerix Communications (Private) Limited, as the company focuses on managing its cash flows, and consistently growing the uMax subscriber numbers, wholesale and corporate customer base on a monthly basis. Telerix has expanded its corporate service offering outside of Harare to customers in Bulawayo, and continues to look for additional opportunities.

Some potential investment opportunities for the Group are currently in the due diligence phase, as we assess whether they will generate the desired returns.

Share Capital

Authorised:

The authorised share capital of the Company as at 31 December 2012 was as follows:

35,000,000,000 ordinary shares, with a $0.01 par value.

Issued:

The issued ordinary share capital was 123,065,409 (2011: 123,465,409) ordinary shares. The movement in the current year related to shares bought back by the company, and allocated to treasury shares (Note 20).

Dividends

No dividend was declared during the year.

Corporate Governance

The Company's code on corporate practices and conduct is set out in the Statement on Corporate Governance.

Directors

The Directors who served during the year were as follows:

Mr D Suratgar (Chairman)

Mrs M Erasmus

Mr F Daniels

Mr I Rajahbalee

Mr J Harel

Ms Y Deeney

Mr S Mutasa

Mr J Vezey

Auditors

Ernst & Young LLP has expressed its willingness to continue in office and a resolution re-appointing Ernst & Young LLP as auditor of the Company and authorising the Directors to determine their remuneration will be proposed at the forthcoming Annual General Meeting.

By Order of the Board

Masawara Plc

Mr Julian Vezey

28 June 2013

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MASAWARA PLC

We have audited the financial statements of Masawara Plc for the year ended 31 December 2012 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and the related notes 1 to 31. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the European Union.

This report is made solely to the company's members, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditors

As explained more fully in the Directors' Responsibilities Statement set out on page 16, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements

In our opinion the financial statements:

·; give a true and fair view of the state of the Group's affairs as at 31 December 2012 and of its loss for the year then ended;

·; have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union; and

·; have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion:

·; proper accounting records have not been kept, or proper returns adequate for our audit have not been received from branches not visited by us; or

·; the financial statements are not in agreement with the accounting records and returns; or

·; we have not received all the information and explanations we require for our audit.

Cameron Cartmell

for and on behalf of Ernst & Young LLP

London

28 June 2013

Total comprehensive (loss)/income attributable to:

MASAWARA PLC

Consolidated statement of financial position as at 31 December 2012

MASAWARA PLC

Consolidated statement of changes in equity for the year ended 31 December 2012

MASAWARA PLC

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012

1. Corporate information

Masawara Plc ("the Company") is an investment company incorporated and domiciled in Jersey, Channel Islands, whose shares are publicly traded on the London Stock Exchange's AIM. The registered office is located at Queensway House, Hilgrove Street in St Helier, Jersey and it is managed from Unicorn Centre, 18N Frère Felix de Valois Street, Port Louis in Mauritius.

The investment portfolio of the Company includes the Joina City (multi-purpose property situated in Harare that earns rental income), TA Holdings Limited (a diversified investment company that holds investments in insurance, agro-chemical and hospitality businesses), Zuva Petroleum (Private) Limited) (importer and distributor of petroleum products in Zimbabwe), iWayAfrica Zimbabwe (Private) Limited (a broadband internet service company) and Telerix Communications (Private) Limited (a company that has a license that allows it to construct, operate and maintain a public data internet access and Voice Over IP network in Zimbabwe).

The Group financial statements consolidate those of the Company, its subsidiaries, its joint venture and the Group's interest in associates (together referred to as "the Group"). The financial statements of the Group for the year ended 31 December 2012 were authorized for issue in accordance with a resolution of the Directors on 28 June 2013.

2.1 Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU), and in compliance with the requirements of the Companies (Jersey) Law 1991.

The consolidated financial statements have been prepared on a historical cost basis, except for investment properties that have been measured at fair value. The consolidated financial statements are presented in United States Dollars and all values are rounded to the nearest dollar ($), except when otherwise indicated.

Prior year restatement

During the year, TA Holdings Limited ("TA Holdings") discovered errors in its investment in associates opening balance. TA Holdings comparative information was consequently restated and Masawara Plc also restated its financial statements with its share of TA Holdings prior year adjustments. The notes to the financial statements that have been restated are Note 7, Note 16 and Note 23. (Refer to Note 28 for further details about these errors and the resultant restatements).

Going Concern

Management prepared cash flow forecasts indicating there is adequate operating cash for the period to 30 June 2014, and the existing short-term facilities will be utilised to fund any operating cash flow deficit that may arise during the period. In assessing the ability of the Group to continue as a going concern, management carried out sensitivity analysis on the cash flow assumptions to reflect a range of other reasonably possible outcomes and concluded that Masawara will be able to continue as a going concern. The Directors reviewed the cash flow forecasts prepared by management when assessing the ability of the Group to continue operating as a going concern. The cash flow forecasts were based on the assumption that the $2 million loan facility from Afrasia Bank Limited ("Afrasia") that the Group secured in June 2013 will be renewed in June 2014 (Note 31). The company will open renewal negotiations with the bank before the last quarter of the expiry of the facility term and the Directors have a reasonable expectation that the facility will be renewed. The Directors believe that the Group will have sufficient resources to continue to trade as a going concern for a period of at least 12 months from the date of approval of these financial statements and accordingly, the financial statements have been prepared on the going concern basis.

Principal risks and uncertainties

The Group's business activities together with the factors likely to affect its future development, performance and position are set out in the Directors' Report. Note 26 to the financial statements includes the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk.

2.1 Basis of preparation (continued)

Principal risks and uncertainties (continued)

The principal risks and uncertainties affecting the business relate to the political and economic environment of Zimbabwe, where the investments are predominantly held. There is a further risk that investments made by the Group will not result in the envisaged cash generation or capital appreciation. This risk is managed by the careful evaluation of all proposed investments, with detailed due diligence work being undertaken, before any investments are made and ongoing monitoring of existing investments. The senior management of the Investment Advisor collectively has over 70 years of experience in identifying and concluding good transactions and also monitoring of existing investments.

There is a risk that the illiquidity of the Zimbabwean capital market may affect the valuation of the Group's investment in investment property in the short to medium term. Significant judgments, estimates and assumptions made when valuing the investment property are detailed in Note 6.1 and Note 15.

The illiquidity of the Zimbabwean capital market may also affect the valuation of the property, plant and equipment of Zuva Petroleum (Private) Limited, a 100% owned subsidiary of Masawara Energy (Mauritius) Limited "MEM", in the short to medium term which may affect the carrying amount of the investment in MEM . Note 6.6 details the procedures carried out to test the carrying amount of the investment for impairment.

Telerix publicly launched its WiMAX network during the year. There is a risk that the slow WiMAX customer uptake may lead to changes to the initial forecasts and the competitive and economic environment may result in higher capital expenditure, lower revenues and lower investment returns for the Group which in turn could impact the carrying value of Masawara's investment in this associate. Due to losses incurred by Telerix and cash flow constraints, there is a risk that the investment in Telerix, debentures and preference shares subscribed in this associate and the short term loan granted to it may be further impaired in future. Refer to Note 14.1, Note 14.2 and Note 18 for the debentures, preference shares and short term loan impairment analysis respectively.

The losses and cash flow constraints experienced by Telerix cast doubt on the ability of Telerix to continue as a going concern without financial support from its shareholders. Accordingly, the Telerix shareholders provided letters of support pledging that they will, and are in a position to, at the request of Telerix, place sufficient funds up to a specified limit for Telerix to meet its obligations as and when they fall due. Masawara Plc's share of the pledge to support Telerix was limited to $1.4 million and it was granted on 25 June 2013 for a twelve month period from the grant date. There is a risk that the amounts pledged by the Telerix shareholders may not be adequate due to unfavorable changes to the initial cash flow forecasts, the economic environment and increased competition which in turn may negatively affect the going concern of Telerix and hence the ability of Masawara Plc to recover the amounts it is owed by Telerix (i.e. the preference shares, debentures and loan).

There is also a risk that should the Group decide to sell its shares in TA Holdings Limited ("TA") on the Zimbabwe Stock Exchange, it will not realize a good return on the investment, due to the illiquidity on the stock exchange and also due to the fact that the TA share price has declined significantly over the last two years. Refer to Note 16.1 for more details on the assessment carried out to determine whether the Group's investment in TA is impaired. The Group's financial risk management objectives and policies are discussed in Note 26 to the financial statements.

2.2 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Group, its associates, joint venture and subsidiaries as at 31 December 2012.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, income and expenses, unrealised gains and losses and dividends resulting from intra-group transactions are eliminated in full. Total comprehensive income within a subsidiary is attributed to the non-controlling interest even if that results in a deficit balance.

3 Summary of significant accounting policies

3.1 Investment in associates

An associate is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint venture. The Group's investment in its associates is accounted for using the equity method of accounting except when the investment in held for sale in which case it is accounted for in accordance with IFRS 5 Non-current assets held for sale and discontinued operations. Refer to Note 3.3 for more details on equity method of accounting.

3.2 Interests in joint ventures

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control (i.e. when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control). The Group's investment in its joint ventures is accounted for using the equity method of accounting except when the investment is held for sale in which case it is accounted for in accordance with IFRS 5 Non-current assets held for sale and discontinued operations. Refer to Note 3.3 for more details on equity method of accounting.

3.3 Equity method of accounting 

Under the equity method, the investments in the associates and joint ventures are carried on the statement of financial position at cost plus post acquisition changes in the Group's share of net assets of the associate or joint venture respectively less any impairment in the individual investments. Goodwill relating to an associate or joint venture is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. If an acquisition of an additional interest in an associate or joint venture is made in which control does not change such that it becomes a subsidiary, the additional purchase price paid is added to the existing carrying amount of the associate or joint venture and the existing interest in the associate or joint venture is not remeasured.

Any excess of the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in the statement of comprehensive income.

The statement of comprehensive income reflects the Group's share of the results of operations of the associates and joint ventures. In the case of associates this is profit attributable to equity holders of the associates and therefore is profit after tax and non-controlling interest in the subsidiary of the associates. When there has been a change recognized directly in other comprehensive income or equity of the associates or joint ventures, the Group recognises its share of any changes and discloses this, when applicable, in other comprehensive income or in the statement of changes in equity. Unrealised profits and losses resulting from transactions between the Group and the associates or joint ventures are eliminated to the extent of the interest in the associates or joint ventures.

The Group's share of profit/loss of the associates and joint ventures is shown on the face of statement of comprehensive income. This is profit/loss attributable to equity holders of the associates or joint ventures and therefore is profit after tax and non-controlling interests in the subsidiaries of the associates or joint ventures. Losses of an associate or a joint venture in excess of the Group's interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate or joint venture) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.

The financial statements of the associates and joint venture are prepared for the same reporting period as the Group. Where necessary, adjustments are made to bring their accounting policies in line with those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognize an additional impairment loss on the Group's investment in associates and joint ventures. The Group determines at each reporting date, whether there is any objective evidence that the investment in the associates and joint ventures is impaired.

3.3 Equity method of accounting (continued)

If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associates or the joint venture and its carrying value and recognises the amount in the "share of profit/loss of an associate or share of profit/loss of joint venture" in the statement of comprehensive income.

Upon loss of significant influence over the associate, the Group measures and recognises any retaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognized in the statement of comprehensive income.

Upon loss of joint control the Group measures and recognises its remaining investment at its fair value. Any difference between the carrying amount of the former joint controlled entity upon loss of joint control and the fair value of the remaining investment and proceeds from disposal is recognised in the statement of comprehensive income. When the remaining investment constitutes significant influence, it is accounted for as an investment in an associate.

3.4 Foreign currency translation

The Group's financial statements are presented in United States Dollars ($), which is the functional and presentation currency of the Company. The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency) in terms of IAS 21. In respect of transactions and balances:

·; Transactions in currencies other than the entity's functional currency are initially recorded at the rates of exchange prevailing on the dates of the transaction.

·; At each reporting date, monetary items denominated in foreign currencies are translated at the rates of exchange prevailing on the reporting date.

·; Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in statement of comprehensive income for the period. As at the reporting date non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the initial transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rate when the fair value was determined.

3.5 Classification of financial instruments as debt

A financial instrument is classified as debt if it has a contractual obligation to:

·; Deliver cash or another financial asset to another entity; or

·; Exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavorable to the Group.

If the Group does not have an unconditional right to avoid delivering cash or another financial asset to settle its contractual obligation, the obligation meets the definition of a financial liability.

3.6 Conversion of debt to equity

It is the Group's policy that when there is a conversion of debt to equity and the creditor is a shareholder acting in its capacity as such, then the equity issued is recorded at the carrying amount of the financial liability extinguished.

3.7 Financial liabilities

Initial recognition and measurement

All financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus directly attributable transaction costs.

The group's financial liabilities include trade and other payables, shareholders loans and bank loans.

Subsequent measurement

Obligations for loans and borrowings (including shareholders loans) are recognised when the Group becomes party to the related contracts and are initially recognised at the fair value of consideration received less directly attributable transaction costs.

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

Derecognition of financial liabilities

Financial liabilities are derecognised when the obligation under the liability is discharged, cancelled or expired. When the existing liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the statement of comprehensive income.

3.8 Investment income

Interest income

Interest income is accrued on a time basis, using the effective interest rate method, by reference to the principal outstanding and effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

Rental income

Rental income receivable from operating leases, is recognized on a straight-line basis over the term of the lease, except for contingent rental income which is recognized when it arises. Revenue is recognized when it is probable that the economic benefits will flow to the Group.

Incentives for lessees to enter into lease agreements are spread evenly over the lease term, even if the payments are not made on such a basis. The lease term is the non-cancellable period of the lease, together with any further term for which the tenant has the option to continue the lease, where at the inception of the lease, the Directors are reasonably certain that the tenant will exercise that option.

Amounts received from tenants to terminate leases or to compensate for dilapidations are recognised in the income statement as they arise.

Service charges and expenses recoverable from tenants

Income arising from expenses recharged to tenants is recognized in the period in which the expense can be contractually recovered. Service charges and other such receipts are included gross of the related costs in revenue, as the Directors consider that the Group acts as principal in this respect.

3.9 Realised gains and losses

Realised gains and losses recorded in profit or loss on investments include gains and losses on financial assets.

Gains and losses on the sale of investments are calculated as the difference between net sales proceeds and the carrying amount and are recorded on occurrence of the sale transaction.

3.10 Finance cost

Imputed interest on interest free loans is recognised in profit or loss as it accrues and is calculated by using the effective interest rate method. Accrued interest is included within the carrying value of the interest bearing financial liability.

3.11 Events after the reporting date

The financial statements are adjusted to reflect events that occurred between the reporting date and the date when the financial statements are authorised for issue, provided they give evidence of conditions that existed at the reporting date. Events that are indicative of conditions that arose after the reporting date are disclosed, but do not result in an adjustment of the financial statements themselves.

3.12 Financial assets

Initial recognition and measurement

All financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition.

All financial assets are recognised initially at fair value plus, in the case of investments not at fair value through profit and loss, directly attributable transaction costs.

The Group's financial assets include cash and short-term deposits, trade and other receivables, derivative financial instruments and debenture investments.

 Subsequent measurement

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance income in the income statement. The losses arising from impairment are recognized in the income statement in finance costs.

Impairment of financial assets

The Group assesses at each reporting date whether there is any objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred 'loss event') and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

Impairment of financial assets (continued)

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Derecognition of financial assets

A financial asset (or, when applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

·; The rights to receive cash flows from the asset have expired

·; The Group retains the right to receive cash flows from the asset, or has assumed an obligation to pay them in full without material delay to a third party under a 'pass-through' arrangement and either:

·; The Group has transferred substantially all the risks and rewards of the asset, or

·; The Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Embedded derivatives

Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value though profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.

3.13 Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less in the statement of financial position. For the purpose of the consolidated cash flow, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

3.14 Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.

Impairment losses of continuing operations are recognised in profit or loss in those expense categories consistent with the function of the impaired asset.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group makes an estimate of recoverable amount. A previous impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase.

3.15 Provisions

General

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.

Onerous contracts

A provision is recognised for onerous contracts in which the unavoidable costs of meeting the obligations under the contract exceed the expected economic benefits expected to be received under it. The unavoidable costs reflect the least net cost of exiting the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfill it.

3.16 Equity movements

Ordinary share capital

The Group has issued ordinary shares that are classified as equity.

Dividends on ordinary share capital

Dividends on ordinary shares are recognised as a liability and deducted from equity when they are approved by the Group's shareholders. Interim dividends are deducted from equity when they are paid. Dividends for the year that are approved after the reporting date are dealt with as an event after the reporting date.

Share premium

The difference between the issue price and the par value of ordinary share capital, is allocated to share premium. The transaction costs incurred for the share issue are accounted for as a deduction from share premium, net of any related income tax benefit, to the extent they are incremental costs directly attributable to the share issue that otherwise would have been avoided.

Treasury shares

Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group's own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognized directly in equity. Voting rights related to treasury shares are nullified for the Group and no dividends are allocated to them. Share options exercised during the reporting period are satisfied with treasury shares.

Non-distributable reserves

Non-distributable reserves represent the equity of the Masawara Zimbabwe (Private) Limited sub-group that arose on the change of the functional currency to United States Dollars effective from 1 January 2009.

Revaluation reserve

The revaluation reserve is the Group's share of the associate's revaluation reserve. The Group accounts for all impairments and revaluation surpluses accounted for by the associate, in this reserve.

Group restructuring reserve

The group restructuring reserve arose on consolidation, under the pooling of interests method.

Distributions

Under Jersey Law, distributions can be made against any equity account with the exception of the share capital account or any capital redemption account 

3.17 Property, plant and equipment

Recognition

Plant and equipment is initially stated at cost, excluding the costs of day-to-day servicing, and subsequently, less accumulated depreciation and accumulated impairment losses.

Replacement or major inspection costs are capitalised when incurred and if it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably.

Depreciation is provided on a straight line basis over the useful lives of the following classes of assets:

·; Computers: 3 years

·; Office furniture and equipment: 5 -10 years

The assets' residual values, and useful lives and methods of depreciation are reviewed and adjusted if appropriate at each financial year-end.

Impairment reviews are performed when there are indicators that the carrying value may not be recoverable. Impairment losses are recognised in the statement of comprehensive income as an expense.

Derecognition

An item of plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.

3.18 Investment property

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the statement of comprehensive income in the period in which they arise. Fair values are evaluated annually by an accredited external, independent valuer, applying a valuation model recommended by the International Valuation Standards Committee.

Investment properties are derecognised when either they have been disposed of, or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal.

Any gains or losses on the retirement or disposal of an investment property are recognised in the statement of comprehensive income in the year of retirement or disposal. Gains or losses on the disposal of investment property are determined as the difference between net disposal proceeds and the carrying value of the asset in the previous full period financial statements.

Transfers are made to investment property only when there is a change in use evidenced by the end of owner-occupation or commencement of development with a view to sell. For a transfer from investment property to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use.

If owner occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of the change in use.

3.19 Share-based payment transactions

Employees (including senior executives) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments.

In situations where equity instruments are issued and some or all of the goods or services received by the entity as consideration cannot be specifically identified, the unidentified goods or services received (or to be received) are measured as the difference between the fair value of the share-based payment transaction and the fair value of any identifiable goods or services received at the grant date. This is then capitalised or expensed as appropriate.

The cost of equity-settled transactions is recognised, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in staff costs.

No expense is recognised for awards that do not ultimately vest except for awards where the vesting is conditional upon a market condition where they are treated as vesting irrespective of whether the market condition is met. Where the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. All cancellations of equity-settled transaction awards are treated equally.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share (Note 12).

3.20 Taxation

Current tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income.

Current tax

Current income tax relating to items recognised directly in other comprehensive income or equity is recognised in other comprehensive income or equity and not in statement of comprehensive income.

Deferred tax

Deferred income tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences, except:

·; Where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

·; In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:

·; Where the deferred income tax assets relating to the deductible temporary difference arise from the  initial recognition of an asset or liability in a transaction that is not a business combination and, at time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

·; In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred income tax relating to items recognised directly in other comprehensive income or equity is recognised in other comprehensive income or equity and not in the statement of comprehensive income. Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

3.21 Value Added Tax (VAT)

Revenue and expenses are recognised net of the amount of VAT except:

·; When the VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the VAT is recognised as part of the cost of acquisition of the assets or as part of the expense item as applicable; and

·; For receivables and payables that are stated with the amount of VAT included.

The net amount of VAT recoverable from, or payable, to the taxation authorities is included as part of receivables or payables in the statement of financial position.

4. Changes in accounting policies

New and amended standards and interpretations

The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2011, except for the following new and amended IFRS effective as of 1 January 2012:

·; IAS 12 Income Taxes (Amendment) - Deferred Taxes: Recovery of Underlying Assets

·; IFRS 1 First-Time Adoption of International Financial Reporting Standards (Amendment) - Severe Hyperinflation and Removal of Fixed Dates for First-Time Adopters

·; IFRS 7 Financial Instruments : Disclosures - Enhanced Derecognition Disclosure Requirements

The adoption of the standards or interpretations is described below:

IAS 12 Income Taxes (Amendment) - Deferred Taxes: Recovery of Underlying Assets

The amendment clarified the determination of deferred tax on investment property measured at fair value and introduces a rebuttable presumption that deferred tax on investment property measured using the fair value model in IAS 40 should be determined on the basis that its carrying amount will be recovered through sale. It includes the requirement that deferred tax on non-depreciable assets that are measured using the revaluation model in IAS 16 should always be measured on a sale basis. The amendment is effective for annual periods beginning on or after 1 January 2012 and has had no effect on the Group's financial position, performance or its disclosures.

IFRS 1 First-Time Adoption of International Financial Reporting Standards (Amendment) - Severe Hyperinflation and Removal of Fixed Dates for First-Time Adopters

The IASB provided guidance on how an entity should resume presenting IFRS financial statements when its functional currency ceases to be subject to hyperinflation. The amendment is effective for annual periods beginning on or after 1 July 2011. The amendment had no impact on the Group.

IFRS 7 Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements

The amendment requires additional disclosure about financial assets that have been transferred but not derecognised to enable the user of the Group's financial statements to understand the relationship with those assets that have not been derecognised and their associated liabilities. In addition, the amendment requires disclosures about the entity's continuing involvement in derecognised assets to enable the users to evaluate the nature of, and risks associated with, such involvement. The amendment is effective for annual periods beginning on or after 1 July 2011. The Group does not have any assets with these characteristics so there has been no effect on the presentation of its financial statements.

5. Standards issued but not yet effective

Standards issued but not yet effective up to the date of issuance of the Group's financial statements are listed below.

This listing of standards and interpretations issued are those that the Group reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. The Group intends to adopt these standards when they become effective.

IAS 1 Presentation of Items of Other Comprehensive Income - Amendments to IAS 1

The amendments to IAS 1 change the grouping of items presented in other comprehensive income (OCI). Items that could be reclassified (or 'recycled') to profit or loss at a future point in time (for example, net gain on hedge of net investment, exchange differences on translation of foreign operations, net movement on cash flow hedges and net loss or gain on available-for-sale financial assets) would be presented separately from items that will never be reclassified (for example, actuarial gains and losses on defined benefit plans and revaluation of land and buildings). The amendment affects presentation only and has no impact on the Group's financial position or performance. The amendment becomes effective for annual periods beginning on or after 1 July 2012, and will therefore be applied in the Group's first annual report after becoming effective.

IAS 27 Separate Financial Statements (as revised in 2011)

As a consequence of the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. The Group does not present separate financial statements. The amendment becomes effective for annual periods beginning on or after 1 January 2014.

IAS 28 Investments in Associates and Joint Ventures (as revised in 2011)

As a consequence of the new IFRS 11 Joint Arrangements, and IFRS 12 Disclosure of Interests in Other Entities, IAS 28 Investments in Associates, has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. The revised standard becomes effective for annual periods beginning on or after 1 January 2014. The amendment has no impact on the Group.

IAS 32 Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32

These amendments clarify the meaning of "currently has a legally enforceable right to set-off". The amendments also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. These amendments are not expected to impact the Group's financial position or performance and become effective for annual periods beginning on or after 1 January 2014.

IFRS 1 Government Loans - Amendments to IFRS 1

These amendments require first-time adopters to apply the requirements of IAS 20 Accounting for Government Grants and Disclosure of Government Assistance, prospectively to government loans existing at the date of transition to IFRS. Entities may choose to apply the requirements of IFRS 9 (or IAS 39, as applicable) and IAS 20 to government loans retrospectively if the information needed to do so had been obtained at the time of initially accounting for that loan. The exception would give first-time adopters relief from retrospective measurement of government loans with a below-market rate of interest. The amendment is effective for annual periods on or after 1 January 2013. The amendment has no impact on the Group.

IFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities - Amendments to IFRS 7

These amendments require an entity to disclose information about rights to set-off and related arrangements (e.g., collateral agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on an entity's financial position. The new disclosures are required for all recognised financial instruments that are set off in accordance with IAS 32 Financial Instruments: Presentation. The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with IAS 32. These amendments will not impact the Group's financial position or performance and become effective for annual periods beginning on or after 1 January 2013.

IFRS 9 Financial Instruments: Classification and Measurement

IFRS 9, as issued, reflects the first phase of the IASB's work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard was initially effective for annual periods beginning on or after 1 January 2013, but Amendments to IFRS 9 Mandatory Effective Date of IFRS 9 and Transition Disclosures, issued in December 2011, moved the mandatory effective date to 1 January 2015. In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the Group's financial assets, but will not have an impact on classification and measurements of financial liabilities. The Group will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued.

IFRS 10 Consolidated Financial Statements

IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also addresses the issues raised in SIC-12 Consolidation - Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled and therefore are required to be consolidated by a parent, compared with the requirements that were in IAS 27. The Group is currently assessing the impact that this standard will have on the financial position and performance, but based on the preliminary analyses, no material impact is expected. This standard becomes effective for annual periods beginning on or after 1 January 2014.

IFRS 11 Joint Arrangements

IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities - Non-monetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. The application of this new standard will not have an impact on the financial position of the Group as investments in joint ventures are equity accounted as opposed to proportionately consolidated. This standard becomes effective for annual periods beginning on or after 1 January 2014.

IFRS 12 Disclosure of Interests in Other Entities

IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity's interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required, but this standard has no impact on the Group's financial position or performance. This standard becomes effective for annual periods beginning on or after 1 January 2014.

IFRS 13 Fair Value Measurement

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The Group is currently assessing the impact that this standard will have on the financial position and performance, but based on the preliminary analyses, no material impact is expected. This standard becomes effective for annual periods beginning on or after 1 January 2013.

Annual Improvements May 2012

These improvements will not have an impact on the Group, but include:

IFRS 1 First-time Adoption of International Financial Reporting Standards

This improvement clarifies that an entity that stopped applying IFRS in the past and chooses, or is required, to apply IFRS, has the option to re-apply IFRS 1. If IFRS 1 is not re-applied, an entity must retrospectively restate its financial statements as if it had never stopped applying IFRS. This standard becomes effective for annual periods beginning on or after 1 January 2014.

IAS 1 Presentation of Financial Statements

This improvement clarifies the difference between voluntary additional comparative information and the minimum required comparative information. Generally, the minimum required comparative information is the previous period.

IAS 16 Property Plant and Equipment

This improvement clarifies that major spare parts and servicing equipment that meet the definition of property, plant and equipment are not inventory.

IAS 32 Financial Instruments, Presentation

This improvement clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with IAS 12 Income Taxes.

IAS 34 Interim Financial Reporting

The amendment aligns the disclosure requirements for total segment assets with total segment liabilities in interim financial statements. This clarification also ensures that interim disclosures are aligned with annual disclosures.

These improvements are effective for annual periods beginning on or after 1 January 2013.

6. Significant accounting judgments, estimates and assumptions

The preparation of financial statements in conformity with IFRS requires the use of certain accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. Changes in assumptions may have a significant impact on the financial statements in the period the assumptions are changed. Management believes that the underlying assumptions are appropriate and that the Group's financial statements therefore fairly present the financial position and results.

The estimates and underlying assumptions are reviewed on an ongoing 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.

The areas involving a higher degree of judgments or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in the relevant notes to the financial statements.

The following are the critical judgments, estimates and assumptions that management has made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

6.1 Valuations of property

Investment property is valued at the Directors' best estimate of the property's fair value. The starting point in the determination of the Directors' best estimate of the fair value of the investment property was the valuation of the property as determined by independent real estate valuation experts. The valuation determined by the independent real estate valuation experts was then discounted by 9%, in light of the current state of debtors (tenants are slow paying) and the leasing progress (the building occupancy level only increased by 10% to 73% from the previous year), in order to arrive at the Directors' best estimate of the fair value of the investment property.

The determination of the fair value of investment properties requires the use of estimates such as future cash flows from assets (such as lettings, tenants' profiles, future revenue streams, capital values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair and condition of the property) and discount rates applicable to those assets. These estimates are based on local market conditions existing at the reporting date.

The continuing volatility in the global financial system is reflected in the turbulence in commercial real estate markets across the world. Joina City is the newest development in the Harare CBD and the only one of its kind built in the last ten years in the Zimbabwean market. It is therefore difficult to get comparable data for similar properties. The lack of liquidity in the Zimbabwean market also means that, if it was intended to dispose of the property, it may be difficult to achieve a successful sale of the investment property in the short term. Therefore, in arriving at their estimates of market values as at 31 December 2011 and 31 December 2012, the valuers have used their market knowledge and professional judgment and have not only relied solely on historic transactional comparables.

In these circumstances, there is a greater degree of uncertainty than which exists in a more active market in estimating market values of investment property.

The significant methods and assumptions used by the valuers in estimating the fair value of investment property are set out in Note 15.

Technique used for valuation of investment property

The investment property had an occupancy level of 73% as at 31 December 2012 (31 December 2011: 63%). The valuation of the building by the independent valuer has been based on the assumption that the building was fully occupied at 31 December 2012.

In arriving at the market value of the property, the valuer used the Implicit Investment Approach based on capitalization of income. This method is based on the principle that rents and capital values are inter-related. Hence given the estimate of income produced by a property, its value can be estimated.

This approach requires careful estimation of future benefits and the application of investor yield or return requirements. The rental estimates were based on comparable rentals, inferred from retail and office spaces within the locality of the property in the Harare central business district and surrounding areas.

Masawara's share of the valuation of the building determined by CB Richard Ellis (Private) Limited Zimbabwe "CBRE" was $36 million. However, the Directors were of the opinion that the best estimate of the building's fair value is the valuation of the building as determined by CBRE discounted by 9%, in order to reflect the current state of debtors (tenants are slow paying) and the slow leasing progress (the building occupancy level only increased by 10% to 73% from the previous year).

6.2 Financial instruments at amortised cost

The value of financial assets and financial liabilities held at amortised cost are based on the expected cash flows under consideration of a market interest rate. The judgments include considerations of inputs such as expected cash flows, amortisation period, market interest rate applied and also whether or not the financial assets are recoverable. Refer to Note 6.7 for details of judgments applied in respect of the recoverability of amounts granted to related parties.

6.3 Significant influence in an associate

Masawara Plc accounts for iWayAfrica Zimbabwe (Private) Limited ("iWayAfrica") as an associate even though it owns less than 20% of the issued share capital because it has significant influence in iWayAfrica arising from the fact that it has one representative on the iWayAfrica Board of Directors which is made up of five members.

6.4 Negative goodwill

Negative goodwill on acquisition of additional interest in an associate

Negative goodwill on acquisition of additional interest in TA Holdings Limited ("TA") arose due to the fact that the additional interest in TA was acquired at less than the fair value of net assets acquired. The Directors believe that the net assets are equal to the fair value. The best estimate of the fair value of net assets acquired was determined as TA's audited net assets value at 31 December 2011 plus profit/(loss) up to the date of acquisition of the additional interest multiplied by the additional interest acquired during 2012.

Negative goodwill on acquisition of joint venture

Negative goodwill on acquisition of Masawara Energy (Mauritius) Limited ("MEM") recorded in prior year arose due to the fact that MEM was acquired at less than the fair value of its net assets. Significant assumptions used in the determination of the fair value of MEM net assets were detailed in the 2011 financial statements.

6.5 Functional currency

Management used its judgment to determine the functional currency that most accurately represented the economic effects of the underlying Group transactions, events and conditions. As part of this approach, management considered the following information relating to the Group:

·; The currency that mainly influences sales prices for goods and services;

·; The currency that mainly influences labour, material and other costs of providing goods or services; and

·; The currency in which receipts from operating activities were normally retained.

The United States Dollar was determined to be the functional currency of the Company.

6.6 Impairment assessment of investments in associates and joint ventures

The Group determines at each reporting date, whether there is any objective evidence that the investment in the associates and joint venture is impaired. This requires an estimation of recoverable amount of the investment in associate or joint venture by reference to the value in use. A value in use calculation requires the Group to make an estimate of the expected future cash flows from the associate or joint venture and also to choose a suitable discount rate in order to calculate the present values of those cash flows.

Impairment assessment of investment in Telerix Communications Private Limited ("Telerix")

In addition to the standard impairment assessment procedures carried out on the joint venture and associates, the Group applied a further judgement when carrying out an impairment test of Telerix assets. Deferred tax assets in Telerix, that arose due to unutilized tax losses, were reversed as the Group estimated that it is not probable that taxable profits will be available against which the unused tax losses will be utilized due to the fact that Telerix is in its start up phase. Refer to Note 16.2 for more details.

6.7 Recoverability of loans granted to investee companies

The Group assesses the recoverability of loans granted to investee companies at each reporting date and where appropriate an impairment loss is recognized against loans that are deemed to be irrecoverable or those that will be recoverable over extended periods i.e. periods that are longer than the periods as per the original agreements.

The Group reviews the investee company's financial performance and also reviews the capital as well as interest payment pattern by the investee company in order to come up with estimations of how much of the loans granted will be recoverable and also over what time frame. There were significant judgments involved in determining the Telerix Communications (Private) Limited ("Telerix") cash flow forecasts due to the fact that Telerix is in a start up phase, consequently impairment computations related to Telerix are very judgmental. Refer to Note 14.1, Note 14.2 and Note 18 for the detailed impairment tests on investment in Telerix debentures, preference shares and the short term loan granted to Telerix respectively.

6.8 Rent and other receivables

Rent and other receivables are recognized at their original invoiced value and when it is probable that the economic benefits will flow to the Group. Where the time value of money is material, receivables are carried at amortised cost. Provision is made when there is objective evidence that the Group will not be able to recover balances in full. Balances are written off when the probability of non-payment is assessed to be more likely than not. There is a risk that the illiquidity of the Zimbabwean capital market may affect the valuation of the Group's rent and other receivables in the short to medium term.

6.9 Accounting for the investment in Masawara Energy (Mauritius) Limited as a joint venture

Masawara Plc, through its subsidiary Masawara Energy Zimbabwe (Private) Limited owns 100% of the shares in Zuva Petroleum (Private) Limited ("Zuva"). The transaction was financed through the cash resources of Masawara Plc as well as a funding arrangement with a third party (Alveir Management Limited), which thereby established joint control over Masawara Energy (Mauritius) Limited ("MEM"), which holds the investment in Masawara Energy Zimbabwe (Private) Limited. The Directors concluded that MEM is a joint venture and has therefore equity accounted for 51% of MEM's results for year.

6.10 Measurement period adjustments - iWayAfrica Zimbabwe Private Limited ("iWayAfrica") acquisition accounting

The initial accounting of iWayAfrica in the 2011 financial statements was based on provisional fair values of identifiable assets and identifiable liabilities. In accordance with IFRS 3 Business Combinations, the Directors of Masawara Pc have assessed the appropriateness of the provisional fair value of the identifiable assets and identifiable liabilities for final acquisition accounting.

The Directors considered the pertinent factors and events that took place after the acquisition date (October 2011) and arrived at the conclusion that the fair values of identifiable assets and identifiable liabilities used in the initial accounting of iWayAfrica are appropriate as final fair values.

The following table explains the assumptions used in reaching the conclusion that initial accounting fair values will be adopted as final fair values:

Comments

a. Property, plant and equipment values are based on a Director's valuation as at 31 October 2011, which was performed using the depreciated replacement cost method. The carrying amounts of the items of property, plant and equipment has been deemed to estimate its fair value.

b. No inventory items that existed at the date of acquisition were written off subsequent to the acquisition date which indicates that no adjustments to inventory fair value are required.

c. Trade and other receivables were stated net of provision for bad debts. There is no information that came to the Directors' attention that suggests that the initial fair value should be adjusted.

d. Income tax asset relates to an overpayment of tax to the tax authorities. It is expected that this will be utilized in the future when the entity becomes profitable and no adjustment has been made to this amount.

e. Trade and other payables and balances owed to related parties were stated at fair value i.e. at the agreed invoice or contract amounts. Subsequent to acquisition date, there has been no disputes regarding the balances payable that existed at the acquisition date and consequently the Directors did not adjust the fair values used for initial accounting.

6.11 Treatment of potential voting rights in Telerix Communications (Private) Limited

The 45,041 Telerix convertible debentures "the debentures" represent potential ordinary shares that have potential voting rights. Detailed disclosures on the convertible debentures are included in Note 14.1. The Directors considered whether the debentures are currently exercisable as that would determine whether Masawara Plc controls Telerix or if it only exerts significant influence. The provisions of the Telerix shareholders' agreement stipulate that all Telerix shareholders have an equal opportunity to participate in the conversion of the debentures into ordinary shares, in order to avoid dilution. Based on the aforementioned factors stipulated in the Telerix shareholders' agreement, the Directors concluded that although the debentures are currently exercisable, Masawara Plc does not control Telerix because it does not only consider its potential voting rights but also considers the potential voting rights of the other shareholders in Telerix i.e. if Masawara Plc exercised its rights, then the other shareholders would also exercise their rights to avoid dilution. Consequently, Masawara Plc continues to account for Telerix as an associate as it does not control Telerix.

7. Segment information

For management purposes, the Group is organised into business units based on their products and services and has five reportable segments as follows:

·; The Investment Property segment leases retail and office space at the Joina City building partly owned by the Group.

·; TA Holdings Limited, an associate, is a diversified investment company that holds stakes in insurance, agro-chemical and hospitality businesses across sub-Saharan Africa and is listed on the Zimbabwe Stock Exchange.

·; Telerix Communications (Private) Limited, an associate, is a company that is licensed to construct, operate and maintain public data internet access and Voice Over network in Zimbabwe.

·; iWayAfrica Zimbabwe (Private) Limited, an associate, is a broadband internet service company in Zimbabwe.

·; Energy segment, which incorporates Masawara Energy (Mauritius) Limited with a wholly owned subsidiary, Zuva Petroleum (Private) Limited, a long established importer and distributor of petroleum products in Zimbabwe. Masawara Energy (Mauritius) Limited is a joint venture of the Group.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on segment profit or loss, and is measured consistently with operating profit or loss in the consolidated financial statements.

Segment assets for the Investment Property segment represent the Group's share of the Joina City building

($ 32,915,728), debenture investment ($ 1,742,193), tenant receivables ($ 104,277) and other assets ($ 192,827).

Geographical information

Investment property

The Joina City building is situated in Harare and therefore all revenues and assets are from Zimbabwe.

Telerix

Telerix Communications (Private) Limited is situated in Harare and only offers services in Zimbabwe, therefore all revenues and assets are from Zimbabwe.

iWayAfrica 

iWayAfrica Zimbabwe (Private) Limited is situated in Harare and only offers services in Zimbabwe, therefore all revenues and assets are from Zimbabwe.

Energy

Masawara Energy (Mauritius) Limited's significant assets that generate revenue are located in Zimbabwe through its wholly owned subsidiary, Zuva Petroleum (Private) Limited. Zuva Petroleum (Private) Limited imports and distributes petroleum products across Zimbabwe hence all revenues and assets of the energy segment have been deemed to be from Zimbabwe.

TA Holdings Limited

TA Holdings Limited has operations in Zimbabwe, Botswana, South Africa and Uganda. The Group's share of TA Holdings Limited's revenues and non-current assets is split as follows:

8. Operating leases

Group as lessor

The Group has entered into leases on its property portfolio. The commercial property leases typically have lease terms of three years and include clauses to enable bi-annual upward revision of the rental charge. Future minimum rentals receivable under non-cancellable operating leases were as follows:

Operating lease commitments - Group as lessee

The Group entered into a 5 year lease relating to the rental of its corporate office space on 1 June 2011. There are no restrictions placed upon the Group by entering into this lease.

Future minimum rentals payable under the non-cancellable operating lease as at 31 December are as follows:

9. Other operating expenses  

2012 staff costs and directors fees include share option expense amounting to $ 387,823. For more details refer to Note 22.

10. Finance costs and income

10.1

10.2

10. Finance income

Interest on bank deposits and other short term loans comprise of interest on bank deposits amounting to $86,000, interest on short term loans granted to Zuva Petroleum (Private) Limited amounting to $149,000, Dandemutande Investments (Private) Limited ($93,000), TA Holdings Limited ($13,000), Turklane Investments Private Limited ($23,000) and staff ($26,000).

11. Income taxes

The major components of income tax expense for the years ended 31 December 2012 and 31 December 2011 were:

Statement of comprehensive income

Previously, Masawara Plc was tax resident in both Jersey (standard tax rate is 0%) where the Company is incorporated and Mauritius (standard tax rate is 15%) where the Company was controlled and managed. However, in the current year, Masawara Plc is only tax resident in Jersey which explains why income tax was levied at 15% in the previous year and at 0% in the current year. Income tax expense for associates and the joint venture has been taken into account in Group's share of post tax profit or loss from associates and joint venture.

The Group has tax losses of $2,464,796 which arose in Zimbabwe. Deferred tax assets have not been recognized in respect of these losses as they may not be used to offset taxable profits elsewhere in the Group and they have arisen in subsidiaries that have been making losses for some time. Permanent differences represent net income/(loss) that is not taxable.

12. Earnings per share

Basic earnings per share amounts are calculated by dividing net profit or loss for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

The performance conditions for the 8,333,916 share option scheme disclosed in Note 22 had not been met as at year end. Consequently, 8,333,916 share options will only have a dilutive effect in future when the performance conditions are met.

There were no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.

13. Property, plant and equipment

14. Financial assets