FIDELITY LIFE ASSURANCE OF ZIMBABWE LIMITED AND ITS SUBSIDIARIES

ABRIDGED AUDITED GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

ABRIDGED GROUP STATEMENT OF CASH FLOWS ABRIDGED GROUP STATEMENT OF FINANCIAL POSITION for the year ended 31 December 2013 as at 31 December 2013 Audited Audited Audited Audited 31 Dec 2013 31 Dec 2012 31 Dec 2013 31 Dec 2012 US$ US$ US$ US$ The operating environment was difficult characterized by liquidity shortages, company closures and increasing informalisation of the economy. Consequently the economic ASSETS growth for 2013 was 3.4% down from 10.6% in 2012. The slowdown in economic CASH FLOWS FROM OPERATING ACTIVITIES Non-current assets activity affected all the sectors of the economy in general and the insurance sector in Profit before tax 2,893,663 4,430,014 Property, vehicles and equipment 7,235,418 7,006,281 particular where uptake of products was lower whilst remittances of premiums was Investment property 21,223,082 15,700,386 negatively affected by liquidity challenges in the economy. Low disposable incomes Adjustments: 3,028,537 543,005 Intangible assets 342,245 382,908 and company closures resulted in policyholders surrendering their policies. The Changes in working capital 1,342,235 (1,688,586) Deferred acquisition costs 1,143,306 1,414,293 growing informalisation of the economy requires insurance companies to be innovative Cash generated from operations 7,264,435 3,284,433 Investments in equity accounted joint venture 41,829 Income taxes paid (508,697) (269,725) Other receivables 1,600,348 459,035 in coming up with products that appeal to the informal market. NET CASH FROM OPERATING ACTIVITIES 6,755,738 3,014,708 31,586,228 24,962,903 In terms of financial performance, the Group did reasonably well, with gross written CASH FLOWS FROM INVESTING ACTIVITIES (4,012,167) (10,454,236) Current assets premiums increasing by 3% to US$14,9 million (2012:US$14.4 million). Total revenue Inventories 3,275,905 2,310,554 at US$24.6 million was 9.5% lower than 2012 due to the condition of the economy in CASH FLOWS FROM FINANCING ACTIVITIES 1,039,427 7,504,433 Trade and other receivables 8,883,933 8,213,369 general and as a result of two main factors at Group level: Held for trading investments 6,066,013 7,311,603 NET INCREASE IN CASH AND Money market investments 7,791,782 2,980,882 a) The Group slowed down sales of developed residential stands at Fidelity Life Park in CASH EQUIVALENTS 3,782,998 64,905 Bank and cash balances 1,031,159 1,960,461 Manresa with the intention of holding the stands as a strategic land bank for future 27,048,792 22,776,869 use. CASH AND CASH EQUIVALENTS AT b) The Malawi Kwacha depreciated against the US dollar by close to 33% thus BEGINNING OF YEAR 4,939,943 4,875,038 Assets in disposal group classified as held for sale 241,228 241,228 drastically reducing the value of income earned from that geographical segment. CASH AND CASH EQUIVALENTS AT END OF YEAR 8,722,941 4,939,943 Total assets 58,876,248 47,981,000 The Groups total comprehensive income registered a 19% growth to US$4.8 million. EQUITY AND LIABILITIES NOTES TO THE ABRIDGED GROUP FINANCIAL STATEMENTS Equity attributable to owners of the parent Review of business units for the year ended 31 December 2013 Share capital 1,089,233 1,089,233 Share premium 1,185,317 1,185,317 Insurance cluster 1 ACCOUNTING POLICIES Non distributable reserve 174,461 174,461 The same accounting policies and methods of computation as per the previous Currency translation reserve 980,470 (450,830) financial year end h ave been followed in preparing these abridged Group financial Fidelity Life Assurance Revaluation reserve 1,036,170 165,171 statements. The company recorded an increase in gross premiums written by 23% from US$8.8 Retained earnings 8,371,008 6,598,789 million in 2012 to US$10.8 million. Total revenue at US$15 million was 15% lower than 12,836,659 8,762,141 Basis of preparation prior year largely due to lower stand sales at Fidelity Life Park in Manresa. The abridged Group financial statements are based on statutory records maintained Non-controlling interest 1,331,588 941,730 under the historical cost convention as modified by the revaluation of held for trading Vanguard Life Assurance investments and investment property. The Malawi based subsidiary had premium income of US$2.8 million and a profit after Total equity 14,168,247 9,703,871 tax of US$0.85 million. Had it not been for the depreciation of the Malawi Kwacha The abridged Group financial statements for the year ended 31 December 2013 Non-current liabilities against the US dollar, the company would have registered a higher profit. have been prepared in accordance with International Financial Reporting Standards Insurance liabilities 33,909,603 28,864,142 (IFRS). The financial statements are also prepared in accordance with the Zimbabwe Deferred tax 226,803 135,317 Stock Exchange (ZSE) Listing Rules, the Companies Act (Chapter 24:03) and the Non insurance subsidiaries 34,136,406 28,999,459 Insurance Act (Chapter 24:07). The micro finance company made a profit of US$0.18 million whilst the medical aid unit Audited Audited contributed US$0.16 million to the Groups profit. The asset management company Current liabilities 31 Dec 2013 31 Dec 2012 performed well buoyed by the positive stock market performance to register a profit for Trade and other payables 7,105,265 4,127,115 US$ US$ the year of US$0.18 million. Borrowings 2,833,626 4,452,897 Current tax liabilities 13,508 177,062 2 SIGNIFICANT TRANSACTIONS The non insurance subsidiaries led by the micro finance unit made reasonable Bank overdraft 100,000 1,400 contributions to the Groups profit. Micro finance continues to do well especially from 10,052,399 8,758,474 2.1 Additions to investment property 3,547,565 5,625,596 salary based loans. The asset management companys profitability though modest, is still commendable given the low propensity of the economy to save and low disposable Liabilities in disposal group classified as held for sale 519,196 519,196 2.2 Fair value gains on investment property 1,609,004 5,962,130 incomes. Total liabilities 44,708,001 38,277,129 2.3 Property development costs capitalised to inventories 1,065,055 1,470,183 Dividend Total equity and liabilities 58,876,248 47,981,000 2.4 Deferred income from sale of residential stands 2,450,793 The Directors have recommended a dividend of 0.3443 cents per share. This level of dividend which is the same as in the previous year, seeks to balance the desire to 2.5 Gross premiums written 14,878,786 14,434,369 reward shareholders as well as to conserve cash resources for the Fidelity Southview ABRIDGED GROUP STATEMENT OF PROFIT OR LOSS AND OTHER Park Development project. 3 EARNINGS PER SHARE COMPREHENSIVE INCOME for the year ended 31 December 2013 Profit from continuing operations attributable to Outlook the parent company 2,147,243 3,838,183 Audited Audited The Groups major thrust for 2014 is the development of over 5,800 stands at 31 Dec 2013 31 Dec 2012 Southview Park along Masvingo Road. To date, Local Authority and Environmental Number of shares used in US$ US$ calculating earnings per share Management Agency approvals have been secured. Topographical and cadastral Revenue Shares in issue 108,923,291 108,923,291 surveys have been completed and procurement of earth moving equipment has begun Gross written premiums 14,878,786 14,434,369 Weighted average shares in issue 108,923,291 108,923,291 in earnest with the bulk of the necessary equipment having been ordered and being Outward reinsurance premiums (425,763) (353,327) Net premiums earned 14,453,023 14,081,042 delivered. Significant work on site will commence once rains subside. Basic earnings per share Fees from fund management and investment contracts 309,373 244,435 Basic earnings per share are calculated by dividing the profit attributable to ordinary Investment return 5,739,298 6,854,017 In our other traditional markets, focus will be on consolidating operations, reducing equity holders of the parent company by the weighted average number of ordinary Income from sale of residential stands 438,658 2,565,409 costs, ensuring premiums are collected and generally maintaining market share. We shares in issue during the period. Other income 3,651,153 3,432,043 are hopeful that all these initiatives will result in sustainable growth for the Group going Total revenue 24,591,505 27,176,946 forward. Headline earnings per share Headline earnings per share are calculated by dividing the headline earnings for the Expenses Board movements period attributable to ordinary equity holders of the parent company by the weighted Claims and benefits (2,154,833) (1,781,342) average number of ordinary shares in issue during the year. Dr. G. Mandishona retired from the board by rotation. Though eligible, he did not offer Reinsurance recoveries 35,789 122,000 himself for re-election. I express my sincere gratitude for his invaluable professional Net claims and benefits incurred (2,119,044) (1,659,342) Headline earnings are calculated as follows: Change in insurance liabilities (9,054,576) (8,015,725) and wise counsel during his tenure as director. I also wish him all the best in his new Profit for the year attribute to ordinary Cost of sales on residential stands (365,593) (2,001,712) endeavors. equity holders of the parent 2,147,243 3,838,183 Fee and commission expenses, Loss/(Profit) on disposal of vehicles and equipment 50,900 (15,725) and other acquisition costs (261,210) (1,071,803) I also welcome to the board, Mr. T. Nyika, Mr. H. Mapara and Mrs. R. Mazula. I am Headline earnings 2,198,143 3,822,458 Other operating and administrative expenses (8,493,131) (8,364,457) elated with the wealth of experience and competencies that they bring to the Group. Total expenses (20,293,554) (21,113,039) 4 GEOGRAPHICAL SEGMENTS Profit from operations 4,297,951 6,063,907 Appreciation Year ended 31 December 2013 I wish to thank our policyholders, clients, the investing community, fellow directors, Zimbabwe Malawi Zambia Total Finance costs (1,404,288) (1,633,893) US$ US$ US$ US$ management, staff and other stakeholders for the support rendered to the Group in Profit before tax 2,893,663 4,430,014 Revenue 2013. We look forward to continuing beneficial relationships. Income tax expense (356,562) (339,717) Total revenue 20,810,579 4,263,465 - 25,074,044 Profit from continuing operations after tax 2,537,101 4,090,297 Inter-segment revenue (482,539) - - (482,539) Discontinued operations Total revenue from external customers 20,328,040 4,263,465 24,591,505 Profit/(loss) from discontinued operations after tax - Profit for the year 2,537,101 4,090,297 Segment profit before tax 1,808,772 1,084,891 - 2,893,663 Other comprehensive income: ................................................. Items that will not be reclassified to profit or loss: S. Tembo Tax expense (122,288) (234,274) - (356,562) Gains on property and equipment revaluation net of tax 870,999 24,272 Profit for the year 1,686,484 850,617 - 2,537,101 CHAIRMAN Items that will or may be reclassified to profit or loss: Exchange differences on As at 31 December 2013 reportable segment assets and liabilities translation of foreign operations 1,431,300 (62,140) Non current assets 27,047,311 4,538,917 - 31,586,228 Other comprehensive income for the year, net of tax 2,302,299 (37,868) Non current assets held for sale - - 241,228 214,228 Total comprehensive income for the year 4,839,400 4,052,429 DIRECTORS RESPONSIBILITY STATEMENT Current assets 24,367,222 2,681,570 - 27,048,792 The directors are required by the Companies Act (Chapter 24:03) and Insurance Act Liabilities 39,812,084 4,376,721 44,188,805 Profit for the year attribuatable to: (Chapter 24:07) to maintain adequate accounting records and are responsible for the Discontinued operation Equity holders of the parent 2,147,243 3,838,183 content and integrity of the abridged Group financial statements and related financial Liabilities - - 519,196 519,196 Non-controlling interests 389,858 252,114 information included in this report. It is their responsibility to ensure that the abridged Total profit for the year 2,537,101 4,090,297 Year ended 31 December 2012 Group financial statements fairly present the state of affairs of the Group as at the end Zimbabwe Malawi Zambia Total Total comprehensive income attributtable to: of the financial year and the results of its operations and cash flows for the year then US$ US$ US$ US$ Equity holders of the parent 4,449,542 3,800,315 ended, in conformity with International Financial Reporting Standards. Non-controlling interests 389,858 252,114 Revenue 4,839,400 4,052,429 AUDITORS STATEMENT Total comprehensive income for the year Total revenue 24,077,940 3,682,139 - 27,760,079 These abridged Group financial statements should be read in conjunction with the Inter-segment revenue (583,133) - - (583,133) complete set of financial statements for the year ended 31 December 2013, which Total revenue from Continuing operations have been audited by BDO Zimbabwe Chartered Accountants and an unmodified external customers 23,494,807 3,682,139 - 27,176,946 Basic earnings per share (cents) 1.97 3.52 audit opinion issued thereon. The auditors report on the Group financial statements is Diluted earnings per share (cents) 1.97 3.52 Segment profit available for inspection at the companys registered office. Headline earnings per share (cents) 2.02 3.51 before tax 3,809,961 620,053 - 4,430,014 Tax expense (297,276) (42,441) - (339,717) ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2013 Profit for the year 3,512,685 577,612 - 4,090,297 Non Curency Attributable to Non Share Retained Revaluation distributable translation shareholders controlling As at 31 December 2012 reportable segment assets and liabilities Share capital premium earnings reserve reserves reserve of parent interest Total equity US$ US$ US$ US$ US$ US$ US$ US$ US$ Non current assets 20,373,520 4,589,383 - 24,962,903 Non current assets Balance at 31 December 2011 1,089,233 1,185,317 3,110,606 1,018,728 730,102 (388,690) 6,745,296 689,616 7,434,912 held for sale - - 241,228 241,228 Current assets 15,759,570 7,017,299 - 22,776,869 Dividend paid - - (350,000) - - - (350,000) - (350,000) Liabilities 31,396,534 6,361,399 - 37,757,933 Discontinued operation Total comprehensive income for the year - - 3,838,183 24,272 - (62,140) 3,800,315 252,114 4,052,429 liabilities - - 519,196 519,196 Transfer of assets to policyholders - - - (877,829) (555,641) - (1,433,470) - (1,433,470) 5 CYCLICALITY OF OPERATIONS A significant portion of the Groups revenue is derived from life assurance premiums, Balance at 31 December 2012 1,089,233 1,185,317 6,598,789 165,171 174,461 (450,830) 8,762,141 941,730 9,703,871 pensions administration and fund management fees. Due to the nature of the Groups income, there is no defined pattern of cyclicality or seasonality of operations Dividend paid - - (375,024) - - - (375,024) - (375,024) and profitability. Total comprehensive income for the year - - 2,147,243 870,999 - 1,431,300 4,449,542 389,858 4,839,400 6 EVENTS AFTER THE REPORTING DATE Balance at 31 December 2013 1,089,233 1,185,317 8,371,008 1,036,170 174,461 980,470 12,836,659 1,331,588 14,168,247 Repayment of borrowings The Group settled borrowings amounting to US$787,822 after the reporting date. The shareholders of Fidelity Funeral Assurance Company passed a resolution during the Annnual General Meeting of the subsidiary company held on 28 June 2013 authorising management to transfer the assurance services business to Fidelity Life Assurance of Zimbabwe Limited effective 30 June 2013. CHAIRMANS STATEMENT It gives me great pleasure to present the results of the Fidelity Life Group for the year ended 31 December 2013. Directors: S Tembo (Chairman), SB Chapereka (Managing)*, Dr H Chikova, PS Madzonga, Dr GC Mataka, L Tamayi, T Nyika, R Mazula, H Mapara, G Mushoma*, *Executive