PEARL PROPERTIES (2006) LIMITED Audited Financial Results

for the year ended 31 December 2013

a member of FIRST MUTUAL HOLDINGS LIMITED

Chairmans Statement
Financial Performance Highlights
Revenue Net Property Income (NPI) NPI After Administration Expenses Profit After Tax 2.18% 1.91% 1.00% 8.80% Property Expenses Administration Expenses Investment Properties Shareholders' Equity 3.38% 5.56% 6.55% 8.41%

Consolidated Income Statement

For the year ended 31 December 2013

Notes to the Consolidated Financial Results (continued)

For the year ended 31 December 2013 Note 2013 9,022,322 (1,683,164) 7,339,158 (3,364,339) 3,974,819 708,985 4,683,804 8,018,754 12,702,558 (2,878,970) 9,823,588 9,823,588 9,823,588 0.793 1,238,157,310 2012 8,830,138 (1,628,197) 7,201,941 (3,187,110) 4,014,831 736,377 4,751,208 8,917,304 13,668,512 (4,639,675) 9,028,837 9,021,284 7,553 9,028,837 0.729 1,238,157,310 6 Investment Properties All figures in USD At 1 January Improvements to existing properties Reclassication to Inventory Additions to properties under development Fair value adjustments At 31 December 2013 120,266,000 294,313 (480,000) 8,061,687 128,142,000 Lettable Space m2 Dec 2013 Dec 2012 37,239 39,277 24,652 7,683 11,468 120,319 37,239 39,277 24,652 7,683 11,468 120,319 2012 109,737,515 243,497 1,262,452 9,022,536 120,266,000

The Economy The business environment was characterised by liquidity challenges, high unemployment and general economic decline across most sectors of the economy. The economy continues to shrink as evidenced by low and declining capacity utilisation across the productive sectors and an increase in incidences of companies being liquidated or going into judicial management. Against a backdrop of a shrinking economy and tight liquidity, companies generally require recapitalisation. In the instances where the nancial sector can advance loans to the productive sector, the interest rate was prohibitively high. These constraints remain major factors inhibiting meaningful economic growth. The Property Market The general economic decline characterised by liquidity challenges, limited mortgage nance and high unemployment will curtail any meaningful activity in the real estate sector. The property market continues to face challenges with nominal property transactions being recorded especially in the lower end of the market. Some limited property developments were undertaken during the year, especially in low income residential housing development schemes and other self-nancing, cooperative-type residential developments. In the absence of signicant economic upturn, and in light of increasing costs of occupancy such as municipal rates, electricity and other property service charges, sustaining current rental rates and occupancy levels is going to be tough going forward. A number of companies continue to face viability challenges due to unfavourable business conditions characterised by high input costs such as labour, service charges and old equipment. Incidences of credit losses on tenant rental and operating cost balances are increasing while the slow legal process has hampered eorts to accelerate the collection measures. As a result, the business continues to face rising property expenses and stagnating occupancy levels. Financial Results Revenue for the year ended 31 December 2013 increased by 2.18% to $9.022 million (2012: $8.830 million) as a result of increases in rental income and other income from property services rendered to third parties. Rental income increased by 2.06% to $9.012 million (2012: $8.83 million) driven by an increase in the contribution of turnover-based rental income. The average rental per square metre increased by 1.22% to $8.28 (2012: $8.18) as planned rental reviews were deferred. Rental yield eased to 7.80% (2012: 8.60%) as a result of the slower growth in rental income relative to increase in values of investment properties. Property expenses grew by 3.38% to $1.683 million (2012: $1.628 million) due to higher property maintenance costs, specic and general provision for credit losses and landlords expenses on vacant space. Net property income before administration costs increased by 1.91% to $7.339 million (2012: $7.202 million) while the 5.56% increase in administration expenses resulted in a 1.00% decline in net property income after administration expenses to $3.975 million (2012: $4.015 million). Administration expenses increased by 5.56% to $3.364 million (2012: $3.19 million) due to increases in sta costs and group shared services. The Group will continue to explore opportunities to enhance internal eciencies and accelerate cost containment in order to improve operating margins. Operating prot before tax and fair value adjustment declined by 1.42% to $4.684 million (2012: $4.751 million) due to slower growth in fair value of investments properties. The market value of investment properties grew by 6.55% to $128.142 million (2012: $120.266 million) underpinned by improving quality of the refurbished space and rezoning to commercial of land previously zoned for residential use. Property Management The occupancy level declined by 3.30% to 76.30% (2012: 78.90%) due to voluntary tenant space surrenders and evictions. Rent and operating cost arrears grew to 14.56% (2012: 9.06%) reecting operational challenges some tenants are facing. Collection eorts aimed at reducing arrears to sustainable levels continue through tenant engagement for negotiated payment plans, eviction of defaulting tenants and rightsizing of space held to ensure sustainable rental levels. The Group also expects higher levels of rent default in view of the tight liquidity in the economy and the general economic downturn. During the year, the Group committed a total of $0.309 million (2012: $0.204 million) towards property maintenance. Property maintenance is aimed at improving the quality of lettable space in order to retain existing tenants and also attract new tenants to improve occupancy levels. The Mabvuku Supermarket commenced trading on the 27th of November 2013 with OK Zimbabwe as the tenant. Property Development The number of units at the Kamnsa cluster housing scheme that are at roof level stand at thirteen. Focus is on bringing the remaining 25 units to slab level in order to pave way for external works. This housing project is expected to be completed by the rst quarter of 2015. Property Refurbishment The Group embarked on the refurbishment of the air conditioning system at 99 Jason Moyo at a total cost of $0.700 million with commissioning scheduled for the rst quarter of 2014. Property Investment The Group acquired holiday cottages and land located in Nyanga at a total cost of $0.285 million, and a property in the Harare Central business district for $0.220 million. Acquisition of the Remainder of Lot 57, Mount Pleasant land In December 2013, the Group concluded negotiations for the acquisition of the remainder of Lot 57, Mount Pleasant land measuring 24.0664 hectares (approximately 59.47 acres) for a purchase price of $9.600 million.The acquisition was funded through a combination of internal resources and external borrowings. The current planned use of the land is for the development of housing units, a shopping complex and medical facilities. The acquisition is expected to form a major part of the Groups property development initiatives in the medium term. Human Capital Development The Group embarked on an organisational transformation exercise aimed at realigning its human capital to revised operating structures to enhance operational eectiveness and efficiency. The Group continues to support permanent sta members pursuing relevant academic and professional studies with aordable study loans. Continued investment in human capital development is premised on the need to improve employee productivity. Dividend Your Board has deemed it prudent not to declare a dividend for the year ended 31 December 2013 in light of the signicant cash outlay associated with the acquisition of the remainder of Lot 57, Mount Pleasant land as previously described. There is also need to allocate cash for the completion of the Kamnsa housing project. Directorate Mr Munyaradzi Dube was appointed to the Board on the 5th of March 2013 while Mr Andreas Mlalazi resigned from the Board with eect from the 31st of December 2013. Outlook Your Board remains optimistic about Zimbabwes long term economic outlook. We believe that the economic challenges currently prevailing in the country are of a short term nature or at most, they should resolve in the medium term. We hope that all stakeholders will commit to the recent policy pronouncements made by the government aimed at tackling the macroeconomic framework. The successful implementation of the macroeconomic blue print is expected to create opportunities for the productive sectors of the economy, including the real estate industry. Acknowledgements On behalf of your Board, I appreciate the invaluable support received from stakeholders including our tenants, employees and service providers. God Bless,

All figures in USD Revenue Property expenses Net property income Administration expenses Net property income after administration expenses Other income Operating profit before tax and fair value adjustment Fair value adjustments Profit before tax Tax Profit for the year Profit attributable to: Equity holders of the parent Non-controlling interest Profit for the year Basic and diluted earnings per share (USD cents) Weighted average number of shares in issue

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Sector Industrial CBD Offices Office Parks Suburban Retail CBD Retail Total 7. Vehicles and Equipment All figures in USD At 1 January Additions Disposals Depreciation At 31 December 8. Financial Assets Available-for-Sale At 1 January Disposals Fair value on available-for-sale investments At 31 December

% of portfolio Dec 2013 Dec 2012 30.95% 32.64% 20.49% 6.39% 9.53% 100.00% 30.95% 32.64% 20.49% 6.39% 9.53% 100.00%

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2013

Profit for the year Other comprehensive income items to subsequently be reclassified to profit or loss Fair value adjustments on available-for-sale equities Available-for-sale reserve reclassied to prot or loss Deferred tax eect Other comprehensive loss for the year, net of tax Total comprehensive income for the year, net of tax Total comprehensive income attributable to: Equity holders of the parent Non-controlling interest Total comprehensive income

9,823,588 8.1 8.1 8.1 (207,299) 2,072 (205,227) 9,618,361 9,618,361 9,618,361

9,028,837 (310,607) (205,114) 5,585 (510,136) 8,518,701 8,511,148 7,553 8,518,701

2013 649,321 45,753 (29,168) (204,136) 461,770

2012 632,488 281,252 (51,093) (213,326) 649,321

Consolidated Statement of Changes in Equity

For the year ended 31 December 2013

622,759 (207,299) 415,460

1,181,282 (247,916) (310,607) 622,759

All figures in USD As at 1 January 2012 Prot for the year Other comprehensive loss Acquisition of non-controlling interest Dividend As at 31 December 2012 Prot for the year Other comprehensive loss Total comprehensive income As at 31 December 2013 Ordinary Share Capital 1,238,157 Reserves 105,286,323 9,021,284 (510,136) 156,218 (851,852) 113,101,837 Shareholders Equity 106,524,480 9,021,284 (510,136) 156,218 (851,852) 114,339,994 9,823,588 (205,227) 9,618,361 123,958,355 NonControlling Interest 1,047,299 7,553 (1,054,852) Total Equity 107,571,779 9,028,837 (510,136) (898,634) (851,852) 114,339,994 9,823,588 (205,227) 9,618,361 123,958,355

The fair value of the quoted equity shares is determined by making reference to published price in an active market. The shares are listed on the Zimbabwe Stock Exchange. All investments that were set aside for property development in accordance with the objectives of the Initial Public Oer of 2007 were designated as nancial assets available-for-sale.

1,238,157

9,823,588 (205,227) 9,618,361 1,238,157 122,720,198

8.1 Fair Value Reconciliation: Available-for-Sale Reserve At 1 January Unrealised loss Reclassied to prot or loss Deferred tax At 31 December 9. Financial Assets at Fair Value through Profit and Loss At 1 January Acquired during the year Disposals Fair value adjustment on nancial assets at through prot and loss At 31 December

136,548 (207,299) 2,072 (68,679)

646,684 (310,607) (205,114) 5,585 136,548

Consolidated Statement of Cashflows

For the year ended 31 December 2013

All figures in USD Profit before tax Adjustment for non-cash items Working capital adjustments Tax paid Net cash flows from operating activities INVESTING ACTIVITIES Improvements to existing properties Additions to properties under development Purchase of vehicles and equipment Purchase of equity stocks Finance income received Proceeds from sale of investments Proceeds on disposal of property, plant and equipment Dividend received Net cash flows used in investing activities FINANCING ACTIVITIES Purchase of non-controlling interest Dividend paid Net cash flows from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December

Note

2013 12,702,558 (8,234,292) (5,232,060) (1,295,158) (2,058,952) (294,313) (45,753) 457,853 5,554 2,697 126,038 (1,932,914) 2,250,495 317,581

2012 13,668,512 (9,242,020) 261,233 (857,485) 3,830,240 (243,497) (1,262,452) (281,252) (3,008) 221,300 934,716 5,627 11,783 (616,783) (898,634) (851,852) (1,750,486) 1,462,971 787,524 2,250,495

342,577 (42,933) 299,644

1,105,908 3,008 (661,107) (105,232) 342,577

6 6 7

10. Inventory Property held for trading Work-In-Progress: Kamnsa Cluster Houses Consumables At 31 December 11. Cash and Cash Equivalents Short-term investments Bank and cash on hand At 31 December 12. Other Current Assets Net trade debtors Prepayments Other receivables First Mutual Holdings Limited loan Other loans & receivables At 31 December

140,150 1,152,034 36,009 1,328,193

140,150 22,710 162,860

189,649 127,932 317,581

400,788 1,849,707 2,250,495

11 11

Notes to the Consolidated Financial Results

For the year ended 31 December 2013 1. Corporate Information Pearl Properties (2006) Limited is a public Group incorporated and domiciled in Zimbabwe and its shares are publicly traded on the Zimbabwe Stock Exchange. The principal activities of the Group are property investment, development and management. The consolidated nancial results of the Group for the year ended 31 December 2013 were authorised for issue in accordance with a resolution of the directors at a meeting held on 4 March 2014. The registered oce is located at Ground Floor, First Mutual Park, 100 Borrowdale Road, Borrowdale, Harare, Zimbabwe. Basis of Preparation The consolidated nancial results of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The nancial results are based on statutory records that are maintained under the historical cost convention except for investment properties, nancial assets available-for-sale and nancial assets at fair value through prot or loss that have been measured at fair value. The nancial results have been prepared in compliance with the Companies Act [Chapter 24:03]. Reporting Period and Currency The reporting period is 1 January 2013 to 31 December 2013. The nancial results are presented in the United States dollars being the functional and reporting currency of the primary economic environment in which the Group operates. Audit Opinion The Group external auditors, Ernst & Young Chartered Accountants Zimbabwe have expressed an unqualied opinion on the Groups nancial results. The signed Annual Report is available for inspection at the companys registered office. Segment Reporting Year ended 31 December 2013
All figures in USD Revenue Property expenses Segment results Fair value adjustment Investment property Segment profit Administration expenses Fair value through prot or loss Dividend and other income Interest on overdue accounts Interest on short-term investments Profit before tax Office 4,446,236 (1,018,687) 3,427,549 6,831,695 10,259,244 10,259,244 Retail 3,425,981 (318,552) 3,107,429 3,023 3,110,452 3,110,452 Industrial Adjustment 1,125,412 24,693 (289,663) (56,262) 835,749 (31,569) 1,076,969 1,912,718 1,912,718 150,000 118,431 (3,364,339) (42,933) 56,344 199,951 452,690 (2,579,856) Total 9,022,322 (1,683,164) 7,339,158 8,061,687 15,400,845 (3,364,339) (42,933) 56,344 199,951 452,690 12,702,558

1,237,075 5,214,685 991,724 977,022 378,720 8,799,226

828,518 109,667 584,423 1,937,598 3,460,206

An amount of $0.977 million relates to the loan placed with First Mutual Holdings Limited, the ultimate parent company. The loan is administered under the following terms: Type of facility: Short term facility Interest rate: 13% per annum The loan which was scheduled to be fully repaid by 30 September 2013 was renewed on the same terms until 30 September 2014 at a Board meeting held on the 22 November 2013.

2.

3.

13. Deferred Tax Arising on vehicles and equipment Arising on investment properties Arising on assessed losses Arising on nancial assets through prot or loss Arising on available for sale investments At 31 December 14. Trade and Other Payables Tenant payables Sundry creditors Provisions Trade creditors At 31 December 15. Taxes Current tax Deferred tax

86,377 14,990,708 (114,962) 2,996 4,155 14,969,274

65,283 12,889,851 3,425 6,227 12,964,786

4.

5.

56,577 277,403 64,866 404,228 803,074

25,570 167,878 73,963 118,486 385,897

872,408 2,006,562 2,878,970

856,703 3,782,972 4,639,675

16. Events after Reporting Date 16.1 Equity Investments The value of equities held by the Group has been aected by market uctuations since year end. Set out below is an analysis of the changes in the carrying amount of quoted available-for-sale investments after year end: Equity investments Financial assets available-for-sale Financial assets at fair value through prot or loss Total equities 25 Feb 2014 389,823 128,669 518,492 31 Dec 2013 415,460 299,644 715,104

Reconciliation of Segment Assets for 2013

All figures in USD Assets Investment property Trade receivables Segment assets Other non-current assets Other current assets Total asset Liabilities Capital expenditure Office 93,862,000 1,211,038 95,073,038 37,557 95,110,595 505,536 71,188 Retail Industrial Adjustment Total

19,230,000 12,210,000 532,530 697,745 19,762,530 12,907,745

2,840,000 128,142,000 (217,312) 2,224,001 2,622,688 130,366,001

E.K. Moyo Chairman 4 March 2014

16,466 1,122,850 1,176,873 8,221,000 8,221,000 19,778,996 12,907,745 11,996,538 139,763,874 42,883 14,906 93,684 194,143 4,362,000 836,246 4,448,094

16.2 Acquisition of Land On the 9th of January 2014, the Group acquired land measuring 24.0664 hectares being the remainder of Lot 57, Mount Pleasant situated in the District of Salisbury under Deed of Transfer number 3251/88 at a cost of $9.600 million excluding transfer fees. The acquisition was funded through a combination of internal cash ows and a ve (5) year loan secured from a local nancial institution. The acquisition costs of the land are broken down as follows: Date 30 December 2013 9 January 2014 Total Acqusition Price Transfer fees [Including Rates] Total Cost Source of Funds Internal cash ows External borrowing All figures in USD 4,100,000 5,500,000 9,600,000 519,246 10,119,246

Consolidated Statement of Financial Position

At 31 December 2013
All figures in USD ASSETS Non-current assets Investment properties Vehicles & equipment Financial assets available-for-sale Financial assets at fair value through prot or loss Total non-current assets Current assets Inventory Cash and cash equivalents Other current assets Total current assets TOTAL ASSETS EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Ordinary share capital Available-for-sale reserves Retained earnings Total Shareholders Equity LIABILITIES Non-current liabilities Deferred tax Total Non-current liabilities Current liabilities Tax payable Trade and other payables Total current liabilities TOTAL EQUITY AND LIABILITIES Note 6 7 8 9 10 11 12 2013 128,142,000 461,770 415,460 299,644 129,318,874 1,328,193 317,581 8,799,226 10,445,000 139,763,874 1,238,157 (68,679) 122,788,877 123,958,355 14,969,274 14,969,274 33,171 803,074 836,245 139,763,874 2012 120,266,000 649,321 622,759 342,577 121,880,657 162,860 2,250,495 3,460,206 5,873,561 127,754,218 1,238,157 136,548 112,965,289 114,339,994 12,964,786 12,964,786 63,541 385,897 449,438 127,754,218

Year ended 31 December 2012

All figures in USD Revenue Property expenses Segment results Fair value adjustment Investment property Segment profit Administration expenses Investment income Dividend and other income Interest on overdue accounts Interest on short-term investments Fair value through prot or loss Profit before tax Office 6,067,834 (997,501) 5,070,333 4,811,794 9,882,127 9,882,127 Retail 1,520,089 (373,877) 1,146,212 2,470,254 3,616,466 3,616,466 Industrial Adjustment 1,223,265 18,950 (146,212) (110,607) 1,077,053 (91,657) 1,360,488 2,437,541 2,437,541 380,000 288,343 (3,187,110) 230,806 (105,232) 55,582 159,307 290,682 (2,267,622) Total 8,830,138 (1,628,197) 7,201,941 9,022,536 16,224,477 (3,187,110) 230,806 (105,232) 55,582 159,307 290,682 13,668,512

The $4,100,000.00 from internal cash ows paid on the 30th of December 2013 was accounted for under prepayments. The loan facility sourced from a local nancial institution and will be administered under the following terms; Facility Amount Tenure Security $5,500,000.00 5 Years Immovable property, title 0004163/2007, being Stand 18259 Harare Township of Stand 14908 Salisbury Township called First Mutual Park in the name of First Mutual Park (Private) Limited registered and stamped to cover $6,500,000.00 Base Rate minus 3% per annum [Base Rate at drawdown 13% per annum] Commitment fee of 1.00% Fees Arrangement fee of 1.00% Management fee 0.5% per annum

Reconciliation of Segment Assets for 2012

All figures in USD Assets Investment property Trade receivables Segment assets Other non-current assets Other current assets Total asset Liabilities Capital expenditure Office 83,920,000 895,612 84,815,612 84,815,612 197,005 68,206 Retail Industrial Adjustment Total

8.1

13

20,390,000 11,130,000 339,381 356,609 20,729,381 11,486,609 20,729,381 11,486,609 90,520 1,390,355 56,545 62,512

4,826,000 120,266,000 2,693 1,594,295 4,828,693 121,860,295 1,614,657 1,614,657 4,279,266 4,279,266 10,722,616 127,754,218 105,368 (15,124) 449,438 1,505,949

Interest Rate

14

*Executive Directors: E. K. Moyo (Chairman), F. Nyambiri* (Managing Director), C. U. Hokonya (Dr), D. Hoto, N. J. Mugabe (Mrs), J. K. Gibbons, R. B. Ncube (Ms), J. P. Travlos, M. J-R Dube Ground Floor, First Mutual Park, 100 Borrowdale Road, Borrowdale, Harare, Zimbabwe, Tel: +263 4 886 121 4 or +263 772 134 112-20, Fax +263 4 885 081, Email: info@pearl.co.zw. Website: www.pearlproperties.co.zw