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Lifting the lid on Woodford's controversial Zimbabwe fund holding

by Sarah Miloudi on Aug 19, 2010 at 09:57

Documents obtained by Citywire have helped lift the lid on Neil Woodford’s Zimbabwean investment.

Masawara, the Jersey incorporated fund investing in the African nation, has proved a controversial bet for Woodford in his Invesco Perpetual Income funds.

This week the fund was admitted to the Alternative Investments Market (AIM) in London, where it has raised $24.6 million (£15.5 million) through the issue of 30 million ordinary shares. It aims to deliver long-term capital growth for investors, buying into Zimbabwean mines, oil companies, property, agriculture and telecoms, as well as taking part in the privatisation of state-owned assets and the anticipated recovery in the region’s fragile economy.

But while Masawara’s prospectus touts Zimbabwe, ruled by Robert Mugabe pictured above with prime minister Morgan Tsvangirai, as a country ripe for investment, with significant capital growth within five years the reward for adventurous investors, it also underscores the region’s reputation as a territory laden with risk and the threat of crime and corruption.

‘The group, and companies in which it invests, may in the future be the subject of government investigations and other accusations of corrupt practices or illegal activities, including improper payments to individuals,’ the prospectus said. It advised that the fund cannot guarantee that rules designed to prevent this will be adhered to, as well as warning that crime could materially damage its finances.

The prospectus also highlights the extent to which Zimbabwe’s volatile regulatory environment could affect the company. In particular, it highlights the need to seek approval from the authorities before removing or repatriating any Zimbabwean assets out of the country.

It warns: ‘The company cannot guarantee that it will be permitted to have its investment capital returned outside of Zimbabwe, or converted into its operating currency, US dollars, upon divestment of an interest in a Zimbabwean company.’

Eiris, an independent research group that assesses the ethical performance of companies, said that all reputable funds should outline firmly their investment policies.

Zimbabwe, under the control of the coalition Government of National Unity, currently features in Eiris’s Countries of Concern list.

‘Our Countries of Concern list takes into account "human rights risks", including such issues as respect for political rights and civil liberties, political instability, workers’ rights, women’s economic rights and physical integrity rights,’ an Eiris spokesman said.

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4 comments so far. Why not have your say?

Gillian Colsell

Aug 19, 2010 at 12:21

Of the 29.5% stake what percentage does this form In Neil Woodford's income funds? If this is a small percentage then it would appear not to be too great a concern. However, I should appreciate an account of his justification for this holding as I am aware that it is very difficult, if not impossible, to get assets out of Zimbabwe. Will Citywire be interviewing Neil Woodford?

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Michael Middleton

Aug 19, 2010 at 14:17

Contrarian investor or just contrary?

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Aug 19, 2010 at 16:01

The article says the firm raised £15m and Woodford took a 29.5% stake. He runs £22bn, so about 0.02% of his total assets....

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Anonymous 1 needed this 'off the record'

Sep 14, 2010 at 09:47

What is the benefit of this,if any, to this type of invesment in these prestigious funds, does it not give an entirely "wrong" impression of Mr. Woodford himself - an explanation would be greatly appreciated.

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