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Lifting the lid on Woodford's controversial Zimbabwe fund holding

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.

‘A good fund should have strong statements about what it will and will not invest in.’

Woodford, who heads investment at Invesco Perpetual and runs the group’s £9.2 billion High Income and £7.1 billion Income funds, last month bought a 29.5% stake in Masawara, which according to its prospectus is domiciled in Mauritius and unregulated by the Financial Services Authority.

Invesco Perpetual declined to comment on the investment.

Masawara owns 40% of the capital Harare’s largest commercial property development and nearly a third of TA Holdings, another investment company with stakes in agriculture and mining which is run by Zimbabwean businessman Shingai Mutasa.

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