Final Results

Masawara Plc

08 May 2012

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

Final Results for the year ended 31 December 2011

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 2011. 

Highlights

·; The Group achieved a profit of $7 million. A significant element in this result was the gain achieved by the purchase of Zuva Petroleum on a bargain basis.

·; The turn around achieved at TA Holdings. A loss of $5 million in 2010 has been followed by a profit of $6 million in 2011. We believe the appointment of a new CEO has had a positive impact.

·; Performance at Zuva Petroleum during 2011 has proved disappointing but the company is in the process of establishing a solid footing.

·; Progress is under way at Joina City and the first, excellent tenants moved into the office town during the last two quarters of 2011.

·; The management team at Telerix Investments is being strengthened as the performance was below our expectations with the roll out of the Wimax network subject to delay. This is now scheduled to take place in 2012.

·; The Group welcomed a new member to our Board - Yvonne Deeney, who joined in October 2011.

Looking forward, the Group sees some significant prospects and notable development. These include the following:

·; The new leaderships at Zuva and Joina City are expected to yield positive results.

·; The Group has undertaken a rebranding of the former BP and Shell sites - introducing the new Zuva brand.

·; The Group is looking forward to the launch of the Wimax network during the second half of this year.

·; The Group remains actively involved with the help of the Investment Advisors in seeking good investment opportunities for the group.

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 is now in its second year since formation, having listed on AIM in August 2010. Since this milestone I believe that we have achieved a lot, albeit in a continually challenging environment. The environment in Zimbabwe remains complex, particularly on the back of political uncertainty and mixed messages being delivered by policy makers. In some respects, business conditions worsened during the last quarter of 2011, which was accentuated by liquidity challenges in the financial sector. This continues to place strain on a number of businesses that are unable to access reasonably priced financing with which to sustain and grow their operations.

Our team of Investment Advisors is on the ground in Zimbabwe, and is continually on hand to provide guidance, consultation and support to management at each of the companies in which we have invested. Our close-knit team remains passionate about Masawara and is committed to maximising the performance of our investments, and of the group as a whole.

In the latter part of the year we also welcomed Yvonne Deeney to the Board of Directors of Masawara. Yvonne has over 15 years of experience in senior executive positions, particularly in the financial services sector, and I look forward to her contribution to Masawara.

As regards Masawara's financial performance during 2011, the results are relatively pleasing. Full details of the underlying financial performance has been provided in the Directors' Report, although the following key features are worth noting:

·; The Group achieved a profit after tax of $7.0 million. A significant element in this result was the gain on bargain purchase of Zuva Petroleum.

·; The turnaround achieved at TA Holdings Limited. A loss of $5.2 million in 2010 (Masawara's share was a loss of $1.9 million) has been followed by a profit of $6.3 million in 2011 (Masawara's share was a profit of $1.6 million). We believe the appointment of a new CEO at the beginning of 2011 has had a positive impact.

·; The post acquisition transition of Zuva Petroleum (Private) Limited proved difficult, and the 2011 financial performance was disappointing. However, the company is in the process of consolidating its position following the appointment of a new Chief Executive Officer in March 2012 and will establish itself on a solid footing through, among other initiatives, aggressive cost reduction and the rebranding exercise to be launched in the second quarter of 2012.

·; Occupancies at Joina City continue to improve, and the first tenants moved into the office tower during the last quarter of 2011. The prospects for Joina City's performance in 2012 are encouraging.

·; The management team at Telerix Communications (Private) Limited is being strengthened as the performance was below our initial expectations following a delayed roll out of the WiMAX network. However, this is now on track and we remain excited about the prospects of the business.

Masawara was the subject of significant press coverage in Zimbabwe over recent months following various allegations regarding Masawara's status as an indigenous investor in Zimbabwe. In this regard, we are fully cooperating with Zimbabwe's Ministry of Youth, Indigenisation and Economic Empowerment in the process to confirm that Zuva Petroleum (Private) Limited is majority-owned by Masawara, a company classified as an indigenous Zimbabwean company in accordance with the laws of the country. We are confident that the matter will be resolved satisfactorily in due course.

Looking forward, we see some significant prospects and notable developments. These include the following:

·; The new CEOs at Zuva Petroleum (Private) Limited and at the Joina City property management company are expected to yield positive results.

·; The process of rebranding the former BP and Shell sites to Zuva Petroleum has commenced, and the process should be well underway during the second quarter of 2012.

David Suratgar

Chairman

4 May 2012

DIRECTORS' REPORT

The Directors present the audited financial statements of the Group for the year ended 31 December 2011.

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, and 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.

During the year the Group acquired an interest in Telerix Investments (Private) Limited, a Zimbabwean Internet Service Provider with plans to construct and roll-out a WiMAX network in Harare, an interest in iWayAfrica Zimbabwe (Private) Limited, a broadband internet service company and an interest in Zuva Petroleum (Private) Limited (formerly BP and Shell Marketing Services (Private) Limited), a long established importer and distributor of petroleum products in Zimbabwe. Further details of the acquisitions are included in Note 7.

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 (formerly known as FMI 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.

Return

The Group targets investments that it considers likely to generate a minimum project IRR of 25%.

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 and customer issues;

·; 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 27 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.

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. 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 65 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 16. 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. Significant judgments, estimates and assumptions made when valuing the Zuva Petroleum (Private) Limited properties are detailed in Note 7.1.

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 realize a good return on the investment, due to the illiquidity on the stock exchange.

Related to the investment in Telerix Communications (Private) Limited, which is yet to launch its WiMAX network, is the risk that delays in the launch may lead to changes to the initial forecasts, competitive and economic environment which will result in higher capital expenditure, lower revenues and lower investment returns for the Group.

The Group's financial risk management objectives and policies are discussed in Note 27 to the financial statements.

Going concern

Management prepared cash flow forecasts indicating there is adequate operating cash for the period to June 2013 and short-term facilities will be utilized to fund any operating cash flow deficit that may arise post June 2013. The Directors reviewed the cash flow forecasts prepared by management when assessing the ability of the Group to continue operating as a going concern. Based on the review of the Group's cash flow forecasts, 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.

Overview

On 24 March 2011, Masawara Plc through its wholly owned subsidiary, FMI Energy Zimbabwe (Private) Limited, concluded the acquisition of 100% of the shares in Zuva Petroleum One (Private) Limited (formerly known as BP Zimbabwe (Private) Limited) and Zuva Petroleum Two (Private) Limited (formerly known as Shell Zimbabwe (Private) Limited) which collectively own Zuva Petroleum (Private) Limited, (formerly known as BP and Shell Marketing Services (Private) Limited) for $32.7 million. The transaction was financed through the cash resources of Masawara Plc as well as a funding arrangement with a third party, which thereby established joint control over Masawara Energy (Mauritius) Limited, which holds the investment in FMI Energy Zimbabwe (Private) Limited.

Masawara Plc also concluded the acquisition of a 50% share in Telerix Communications (Private) Limited ("Telerix") for $5 million on 3 January 2011. Telerix's plans to construct and roll-out a WiMAX network in Harare are underway, with the WiMAX network launch expected to take place at the end of the second quarter of 2012.

Masawara Plc, through its wholly owned subsidiary Masawara Communications (Mauritius) Limited, acquired a 15.03% shareholding in iWayAfrica Zimbabwe (Private) Limited ("iWayAfrica"), effective 31 October 2011, for $225,000. iWayAfrica is an internet service provider based in Harare (Note 7.3).

Another significant event during the year was the successful placing of 24,102,564 new Ordinary Shares at a price of 97.5 US cents per share, raising approximately $23.5 million before expenses.

The Group increased its shareholding in TA Holdings Limited from 30% as at December 2010 to 37.73% as at 31 December 2011.

Performance

The Group achieved a profit after tax of $7.0 million compared to a loss after tax of $2.2 million incurred in the previous year. This improvement from the corresponding period was mainly attributable to:

·; $9.2 million gain on the bargain purchase of Zuva Petroleum (Private) Limited, that is recognised in the consolidated statement of comprehensive income;

·; Improved performance from the associate TA Holdings Limited, which made an overall profit after tax of $6.3 million (Group's share, profit of $1.6 million) compared to a loss of $5.1 million in the same period last year (Group's share, loss of $1.9 million); and

·; $1.5 million gain on the bargain purchase of additional shares in associate TA Holdings Limited (2010: $222,000).

TA Holdings Limited

TA Holdings Limited achieved a profit after tax of $6.3 million (Group's share, profit of $1.6 million) compared to a loss of $5.1 million in the same period last year (Group's share, loss of $1.9 million). This improvement in the Group profit was primarily due to the following:

·; An increase in underwriting results in all the insurance businesses. Insurance businesses recorded a profit, excluding investment income, of $3.6 million in comparison to a profit of $174,000 achieved in the previous year;

·; Increased revenue per available room in the hotels sector which translated to a $1.1 million profit, a 10% improvement in the results in comparison to prior year;

·; The awarding of a viable electricity tariff to Sable Chemical Industries Limited ("Sable") (an associate of TA Holdings) by the Government of Zimbabwe. Share of loss of Sable was $144,000 which was an improvement from the previous year where the share of Sable's loss was $4.2 million; and

·; Increased investment income mainly due to fair value gains on investment properties held by the Insurance companies in Zimbabwe. Investment income of $5.5 million represents a 72% increase from prior year.

During the year, a number of measures were put in place to ensure sustainable improvement in the results, including the following:

·; Restructuring of the Zimbabwe Insurance businesses in order to reduce the high levels of reinsurance, retaining the right quality of business, and matching costs to revenue, which resulted in retrenchment costs for the TA Holdings Group of $804,000 being incurred.

·; Restructuring at TA Holdings Limited and at the Zimbabwe hotel head offices which resulted in $819,000 retrenchment costs being incurred by the TA Holdings Limited Group, Masawara Plc's share was $309,000.

·; During the year,a decision was made to disinvest from PG Industries (Zimbabwe) Limited and subsequent to year end, a decision was also made to disinvest from Zimbabwe Fertilizer Company Limited.

Joina City

The office tower of the building was fully completed in February 2011 and the first office tower tenant started working on office fittings in May 2011. The office tower was 29% occupied as at 31 December 2011, while the retail section was 90% occupied (2010: 63%), leading to an increase in the Group's share of revenue from $538,000 in 2010 to $1.2 million in 2011. This increase in revenue however, did not translate to an operating profit (excluding fair value gains), as there were higher operating costs in 2011, related to the vacant office tower space, that could not be recovered from tenants, as well as possible bad debts provided for during the year. The Group's share of the results from Joina City is a loss of $117,000 (2010: profit $121,000). The Group's share of the fair value gain on the investment property was $1.0 million (2010: $3.0 million).

Masawara Energy (Mauritius) Limited

Masawara Energy (Mauritius) Limited ("MEM") is a joint venture and the Group's share of MEM's profit after tax for the period amounted to $8.1 million. Included in MEM's profit after tax is a gain of $18 million that arose on bargain purchase of Zuva Petroleum (Private) Limited by Masawara Energy (Mauritius) Limited, Masawara Plc's share of the gain was $9.2 million. For more details refer to Note 7.1

Zuva Petroleum (Private) Limited's ("Zuva") sales volumes during the second half of the year were 22% higher than those of the first six months. This growth occurred primarily during quarter 3, as volumes started to decline during the last quarter of the year, as action was taken on operators at the retail sites that were not operating within their credit limits. The tightening of credit limits, and in some instances withdrawal of credit, resulted in a drop of volumes, as some operators with funding constraints were unable to purchase stock. A provision for possible bad debts amounting to $1.6 million, has been included in the results for the year. For the period since acquisition, Zuva incurred a loss after tax of $1.6 million (Masawara Plc's effective share of loss of Zuva was $836,000). MEM, the Company, incurred a loss of $409,000 (Masawara Plc's effective share of loss of MEM the Company was $209,000).

Zuva has started a process of retrenchments in order to cut costs and has been identifying new dealers for some of the sites that are currently being run by the company. Retrenchment costs amounting to $880,000 were incurred by Zuva for the year ended 31 December 2011, Masawara Plc's share was $449,000.

Telerix Communications (Private) Limited

Delays were experienced in the launch of the WiMAX network, with additional time being required to set up and test the network to ensure a smooth public launch. As a result, the company incurred a loss of $3.2 million for the period (Group's share $1.6 million). The loss is attributable to the costs being incurred and fixed operating expenses relating to the ongoing development and testing of the network, which, as at the date of this report, was yet to publicly launch the WiMAX product.

The WiMAX network is live and fully operational, with a number of paying customers connected and accessing the service. The commercial launch to the general public will take place in the coming months. Within one year of launching the WiMAX network, it is expected that the number of customers will increase steadily until the company reaches profitability.

iWayAfrica

The Group acquired a 15.03% interest in iWayAfrica two months before year end and the Group's share of iWayAfrica's results for the two month period ended 31 December 2011 was a loss of $8,373.

Cashflow for the year

$22.3 million was utilized in the Group's investing activities during the year. The major elements in investing activities were the acquisition of Telerix Communications (Private) Limited, the acquisition of Zuva Petroleum (Private) Limited (Note 7), the acquisition of additional shares in TA Holdings Limited as well as the loans advanced to related parties (Note 19).

Cash generated from financing activities of $30.4 million includes net cash raised from the secondary capital raise of $22.5 million and a $7.5 million loan that was advanced to the Group for the acquisition of Zuva Petroleum (Private) Limited. Cash outflow from operating activities was $4.6 million. The Group had $11.5 million of cash and cash equivalents at the beginning of the year, and there was a net increase in cash and cash equivalents of $3.5 million, resulting in a cash balance of $15.0 million at the end of the year.

Financial position

Non-current assets increased from $57.6 million in 2010 to $86.3 million in 2011, primarily as a result of the new acquisitions mentioned above. Financial liabilities increased from $5.8 million to $13.8 million due to loans advanced to the Group during the year amounting to $7.9 million, refer to Note 25 for more details. The Group had cash and cash equivalents of $15 million at year-end (2010: $11.5 million). The $22.2 million share premium on the secondary issue of shares detailed in Note 21, as well as the $6.4 million total comprehensive income for the year resulted in an increase in shareholders' equity from $61 million in 2010 to $90 million as at 31 December 2011. The net asset value per share attributable to equity holders of the parent as at 31 December 2011 was $0.72 (2010: $0.60).

Post balance sheet events

Subsequent to the year end, the Zimbabwean Minister of Youth, Indigenisation and Economic Empowerment ("the Minister") requested FMI Energy (Private) Limited ("FMI Energy") to demonstrate to him that the acquisition of Zuva Petroleum One (Private) Limited and Zuva Petroleum Two (Private) Limited ("Zuva") was in compliance with the Indigenisation and Economic Empowerment Act ("the Act"). FMI Energy has responded to the Minister, and the Directors believe that the response clearly demonstrates that the acquisition of Zuva complies with the Act. The Directors of the Company therefore believe that this matter will ultimately be resolved satisfactorily.

In a related matter, Hughber Petroleum (Private) Limited ("Hughber"), a company that put in a competing bid for the former BP and Shell assets in 2010, filed an application in the High Court of Zimbabwe in February 2012 seeking an order for, inter alia, the nullification of the acquisition of these assets by FMI Energy Zimbabwe (Private) Limited ("FMIE") and for it to be substituted as the purchaser in place of FMIE. FMIE and two other respondents that have been served with papers, that is the National Indigenisation and Economic Empowerment Board and the Minister of Youth Development Indigenisation and Economic Empowerment, are opposing the application. As at 3 May 2012, the other Respondents, BP Africa Limited and The Shell Petroleum Company Limited had not yet been served with the application. The Directors of the Company believe that the court application is fundamentally flawed and has no merit, and that it will ultimately be dismissed by the Court.

Outlook

The improvement in the TA Holdings Limited results is expected to continue in 2012, as all the insurance businesses have forecast increases in underwriting profits, and the investment portfolios have been restructured. Refurbishments in the hotels should lead to higher revenue per available room being achieved, and the new hotel acquired in February 2012 in Lusaka, Zambia should contribute positively to the group's overall results.

The improvement in the TA Holdings Limited results is expected to continue in 2012, as all the insurance businesses have forecast increases in underwriting profits, and the investment portfolios have been restructured. Refurbishments in the hotels should lead to higher revenue per available room being achieved, and the new hotel acquired in February 2012 in Lusaka, Zambia should contribute positively to the group's overall results. For Sable Chemical Industries Limited, the focus this year will be on the change in business model from ammonia production, to full ammonia importation, in order to move away from reliance on electricity, while waiting for the coal gasification project to come online. The coal gasification feasibility study was completed during 2011, and the study shows that the project is feasible and economically viable. Due to the significant amounts of capital required for this project, Sable Chemical Industries Limited will be looking for a technical and investment partner together with reliable long term lines of credit.

A new leader joined the Joina City Property Manager's team in March 2012, and we expect significant improvements in a number of areas, including the management of tenant debtors and a review of current tenants, better management of the property operating costs and an increase in the occupancy rates in the office space.

A new Chief Executive Officer has recently joined Zuva Petroleum (Private) Limited, and is expected to drive the growth of the business and strengthen the company's position in the market. The company has de-branded its retail sites from BP and Shell, and will be embarking on a rebranding exercise during the second quarter of this year. The management team will focus on striking a balance between managing credit limits and increasing volumes, especially since not many of the operators will have access to finance from the banks at the moment. Costs will continue to be closely monitored, with a view of reducing them further.

The public launch of the Telerix Communications (Private) Limited WiMAX network will take place in the coming months. The delay in the launch has resulted in additional funding of $3 million being required by the business in order for the roll-out to take place, which will be made by the shareholders as well as sourced from third party financiers.

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

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 2011 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 29. 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 2011 and of its profit 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.

Total comprehensive income/(loss) attributable to:

MASAWARA PLC

Consolidated statement of financial position as at 31 December 2011

MASAWARA PLC

Consolidated statement of changes in equity for the year ended 31 December 2011

MASAWARA PLC

MASAWARA PLC

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011

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 Property (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 (formerly known as BP & Shell Marketing Services (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 2011 were authorized for issue in accordance with a resolution of the Directors on 20 April 2012.

2.1 Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS), 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.

Going Concern

Management prepared cash flow forecasts indicating there is adequate operating cash for the period to June 2013 and short-term facilities will be utilized to fund any operating cash flow deficit that may arise. The Directors reviewed the cash flow forecasts prepared by management when assessing the ability of the Group to continue operating as a going concern. Based on the review of the Group's cash flow forecasts, 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 27 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.

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. The senior management of the Investment Advisor collectively has over 65 years of experience in identifying and concluding good transactions.

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 2011.

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

The Group's investment in its associates is accounted for using the equity method of accounting. An associate is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint venture.

Under the equity method, the investment in the associate is carried in the statement of financial position at cost plus post acquisition changes in the Group's share of net assets of the associate. Goodwill relating to an associate 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 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 and the existing interest in the associate is not remeasured.

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 results and assets and liabilities of joint ventures are incorporated in these financial statements using the equity method of accounting as permitted by IAS 31 Interests in Joint Ventures , except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Consequently, the Group's statement of comprehensive income reflects the share of the joint ventures results after tax. Under the equity method, investments in joint ventures are carried in the consolidated statement of financial position at cost as adjusted for post-acquisition changes in the Group's share of the net assets of the joint venture, less any impairment in the value of individual investments. Losses of a joint venture in excess of the Group's interest in that joint venture (which includes any long-term interests that, in substance, form part of the Group's net investment in the joint venture) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture.

3.3 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.

·; 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.

3.4 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.

3.5 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.